Profit growth at Lufthansa's passenger business slows

FRANKFURT Thu Oct 31, 2013 5:52am EDT

A Lufthansa Airbus A 320 takes off on runway ''Startbahn West'' at Frankfurt airport July 12, 2013. REUTERS/Ralph Orlowski

A Lufthansa Airbus A 320 takes off on runway ''Startbahn West'' at Frankfurt airport July 12, 2013.

Credit: Reuters/Ralph Orlowski

FRANKFURT (Reuters) - Lufthansa's (LHAG.DE) profit from its airline passenger division, its biggest business, grew more slowly in the third quarter as cost cuts only partly offset the impact of the weaker yen and rupee as well as fierce competition in Asia.

Profit at the division, which generated 78 percent of group revenues last year, grew 3.5 percent to 561 million euros ($772.6 million) in the three months to the end of September, compared with 15.4-percent growth in the year-earlier quarter.

Europe's biggest airline also warned that it now expected its cargo business to end 2013 with a result "in the high double-digit million euro range" compared with its previous outlook for operating profit in a three-digit million range.

Lufthansa last week reported a 27-percent slump in group operating profit for the first nine months to about 660 million euros, hurt by currency effects, and issued a 2013 profit outlook that fell short of expectations.

Other European airlines such as Ryanair (RYA.I) and Finnair (FIA1S.HE) have recently trimmed their profit expectations, citing lower demand and the impact of volatile exchange rates.

Air France (AIRF.PA), which also published results on Thursday, posted a 29-percent jump in third-quarter operating earnings despite flat revenue and warned of continued weakness in its medium-haul and cargo businesses.

Lufthansa is in the second year of a radical restructuring program, dubbed SCORE, to boost operating profit to 2.3 billion euros, up 1.5 billion euros from 2011, through 3,500 job cuts, outsourcing, procurement bundling and expanding discount unit Germanwings.

Lufthansa shares have risen by 1.2 percent so far this year, underperforming a 17.2 percent gain by the STOXX Europe Travel and Leisure index .SXTP. IAG (ICAG.L), parent of British Airways and Iberia, has by comparison gained 91 percent while Air France-KLM has risen 11 percent.

Lufthansa's stock eased 0.9 percent to 14.56 euros by 0836 GMT, while Germany's blue-chip DAX index .GDAXI eased 0.2 percent.

(Reporting by Marilyn Gerlach; Editing by Louise Ireland)

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