* Warns on Japanese yen and Indian rupee weakness
* Growth slows from year-earlier quarter
* Pins hopes on radical restructuring programme
* Cuts 2013 cargo outlook
* Shares fall 3.3 percent vs flat German blue-chip index
By Marilyn Gerlach
FRANKFURT, Oct 31 Lufthansa warned that weakness
in Asian currencies would weigh on revenue growth at its
passenger airline business this year and that a grindingly slow
market recovery was set to dent profit at its cargo unit.
The German flag carrier said the weak Japanese yen and
Indian rupee in particular weighed on third-quarter revenues at
the passenger division, its biggest business.
Lufthansa shares dropped 3.3 percent, underperforming a flat
blue-chip DAX index.
"The Passenger Airline Group is now forecasting for 2013 a
revenue on par with previous year," it said on Thursday. The
previous forecast had been for a moderate increase in revenue.
Lufthansa, however, stuck to a stronger operating profit
outlook at the passenger division, pinning its hopes on its
SCORE restructuring programme, which helped cut costs by 0.9
percent over the last nine months when sales growth was flat.
Other European airlines such as Ryanair and Finnair
have trimmed profit expectations, citing lower demand
and the impact of volatile exchange rates, while Air France-KLM
said the sharp rise in the euro against the dollar had
weighed on quarterly revenue.
The German carrier said that while advance bookings were
slightly up on the year in terms of volumes, the negative trend
in exchange rates would persist.
Lufthansa is in its second year of a radical restructuring
programme, aiming to boost operating profit to 2.3 billion
euros, up 1.5 billion from 2011. The revamp includes 3,500 job
cuts, the expansion of discount unit Germanwings, as well as
outsourcing and procurement bundling.
CAUTIOUS ON CARGO
Lufthansa Cargo, where nine-month operating profit dropped
35 percent to 43 million euros, will see earnings fall again,
despite early signs of market recovery for the fourth quarter.
"Given market developments in the year to date, the company
no longer expects to be able to match last year's result.
Lufthansa Cargo now expects to close the year 2013 with a result
in the high double-digit million euro range," it said.
It had previously estimated this year's cargo profit would
be higher than last year's 104 million euros.
Air France said low growth and high oil prices meant
medium-haul and cargo activities will see a "significant
reduction" in losses in 2014, without enabling them to break
even as first hoped.
Lufthansa Finance director Simone Menne told reporters that
while a cargo upswing was absent in January to September, there
are signs now that cargo's pre-Christmas business had started
earlier than last year.
"We are seeing positive signs" in the cargo business in
general coming mainly from China and North America, she said.
Analyst Donal O'Neill of Goodbody Research said the revenue
development was "a little disappointing" but understandable
given the exchange rate movements.
"In terms of Cargo, we welcome comments that there is a
pick-up coming in Q4, but we are somewhat sceptical about how
sustainable that is through to FY14," he said.
Lufthansa's average yield - a measure of pricing - tumbled
8.2 percent in its Asia-Pacific division, where the airline has
155 flights weekly. Out of that, 18 percent are to Japan, 20
percent to China and 30 percent to India.
The yen has fallen about 33 percent against the euro since
late last year, while the Indian rupee has fallen by about 24
percent year-on-year as of end-September.