* Cuts 2014, 2015 profit targets
* Shares down 14 pct
* New CEO to present restructuring measures in July
* Will review capex plans, plane orders
* Has over 200 planes on order from Airbus, Boeing
(Adds plane orders details, analyst comment, links)
By Victoria Bryan
FRANKFURT, June 11 Lufthansa cut back
its profit targets for the next two years on Wednesday citing
competition from Middle East and low-cost rivals, sending shares
of Europe's biggest-selling airline plunging.
The warnings surprised investors after better-than-expected
results in May and come just over a month after new chief
executive Carsten Spohr took charge.
Spohr will now set out fresh restructuring plans next month,
and the German airline will review its spending plans, including
the possible cancellation or deferral of plane orders from
Airbus or Boeing, Finance Chief Simone Menne
told analysts and reporters.
Lufthansa cut its forecast for 2014 operating profit to 1
billion euros from a forecast of 1.3-1.5 billion and lowered its
2015 earnings target to 2 billion euros from 2.65 billion.
Europe's largest airline by revenue said it was suffering
from competition on European flights as well as on routes across
the Atlantic where demand from business travellers has
traditionally delivered healthy operating margins.
"The main reason for this lower forecast is significantly
weaker than expected revenue development in the passenger and
freight businesses compared to what we anticipated at the
beginning of the year," Menne said.
"There is overcapacity in the North Atlantic," she said,
noting Lufthansa was feeling the heat especially from Gulf
carriers Emirates, Qatar Airways and Etihad, and from
low-cost airlines, such as easyJet and Ryanair.
"The extent of the warning is comparatively big. It's
especially disappointing that the target for 2015 was also
reduced," DZ Bank analyst Dirk Schlamp said.
Lufthansa shares were down 14 percent as of 1443 GMT,
shedding almost 1.5 billion euros ($2 billion) in market value
and poised to mark their biggest ever one-day drop.
The warning dragged down European rivals too, with Air
France-KLM down 7 percent and British Airways owner
IAG off 3 percent.
"We had hoped that the pricing weakness was temporary,"
Menne said, referring to overall trends at the group. "But May
showed negative pricing year on year and for forward bookings in
June and July we see unit revenues are clearly behind last
RBC analyst Damian Brewer said the airline had been the most
aggressive in terms of raising seat capacity this summer even
though the German economy is not growing as fast as others.
"IAG are growing but also the UK economy is heading towards
3 percent GDP growth, not 1 percent or so as is the case in
Germany," he said.
Lufthansa intends to increase capacity by 7.4 percent on
North American routes this summer, Menne confirmed.
She said the cargo business would now likely post a profit
only slightly above last year's 77 million euros, rather than
the significant jump hoped for. Here too, Lufthansa is losing
out to Gulf carriers.
Already in the midst of a major restructuring programme
dubbed Score, Menne said the company remained on track to reduce
unit costs by 4 percent this year.
Menne said the airline, which is spending billions on
upgrading business class seats and a premium economy class to
catch up to rivals, will cut the number of seats it offers in
winter and possibly next year.
She also said Lufthansa will review its capex plans,
including looking at options to potentially delay or cancel
current plane orders.
Lufthansa has 261 planes on order with a list value of 32
billion euros which are due for delivery by 2025. Of the total,
178 are Airbus aircraft while 53 are on order from Boeing.
Any order cancellations would deal another blow to Airbus
after Emirates on Wednesday scratched a $16 billion order for
the A350 airliner.
Lufthansa, Airbus' biggest customer and operator, committed
to buy 25 A350s last year with options to take a further 30 in a
deal worth up to $16 billion at list prices.
Christoph Niesel, a fund manager at Union Investment, one of
Lufthansa's 15 largest shareholders, said the profit warning
signalled that both internally and externally there were a lot
of challenges to meet.
"But with the new targets, Lufthansa even has room to
surprise on the positive side," Niesel said.
($1 = 0.7345 euros)
(Reporting by Victoria Bryan and Peter Maushagen; additional
reporting by Sarah Young and Sabine Wollrab; editing by Ludwig
Burger and Jason Neely)