Lufthansa sticks to profit target despite Brexit uncertainty

FRANKFURT (Reuters) - Lufthansa LHAG.DE is sticking by its 2016 profit target despite uncertainty caused by Britain's vote to leave the European Union, the German airline group's CEO said on Monday.

Planes of German air carrier Lufthansa AG are seen on the tarmac at Fraport airport in Frankfurt, Germany, June 7, 2016. REUTERS/Kai Pfaffenbach

Rival IAG ICAG.L, which owns British Airways, Iberia, Vueling and Aer Lingus, lowered its 2016 profit target a day after Britain's June 23 referendum and said it expected weaker demand for business travel as a result of the Brexit vote.

Lufthansa has not seen any changes to business travel in the week after the vote, CEO Carsten Spohr told reporters in Frankfurt, though he conceded that expectations of lower economic activity are not good for any airline.

“We had a buffer from the first few months of the year, so even if we have some weaker months our guidance remains the same,” he said.

Spohr said the company is still aiming for an underlying profit before interest and tax of slightly more than 1.8 billion euros ($2 billion).

Analysts on average expect Lufthansa to report slightly lower EBIT of 1.78 billion euros, Thomson Reuters data shows.

Shares in Lufthansa were up 3 percent at 11.23 euros by 1310 GMT, among the biggest gainers on the German Dax <0#.GDAXI> index.

Spohr added that a drop in advance bookings -- due in part to attacks in cities from Brussels to Paris and Istanbul -- is not necessarily bad news because last-minute bookings tend to be at higher prices.


Lufthansa’s cost-cutting drive to compete with leaner rivals has progressed slowly because of resistance from unions, but it agreed a wide-ranging deal last week on pay and conditions for cabin crew.

Though Spohr said the group will achieve a first reduction in unit costs per passenger and kilometre flown this year, excluding fuel, Liberum analyst Gerald Khoo said that its costs remain uncompetitive.

“Lufthansa may be doing what it can, and management seems to recognise that more needs to be done, but it is unclear how the extra improvements could be delivered,” Khoo said.

Lufthansa is also under pressure from Ryanair as the Irish carrier makes a push for market share in Germany.

“That’s something the UK Brexit vote could see accelerated in the coming years as Ryanair potentially focuses more resources away from the UK market,” said independent aviation consultant John Strickland.

On consolidation, Spohr said its Eurowings brand had been set up so that it could also be merged with another carrier, which would mean Lufthansa relinquishing sole ownership.

Asked about Lufthansa's reported interest in acquiring Condor, Spohr said there was no reason to restrict any potential talks to Thomas Cook's German airline only TCG.L.

“(Thomas Cook Airlines) is also active in Scandinavia, Britain and Belgium -- those are all interesting markets for us,” he said.

($1 = 0.8978 euros)

Reporting by Victoria Bryan and Peter Maushagen; Editing by Greg Mahlich and David Goodman