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Earnings

Lufthansa eyes cost cuts as bookings hit by attacks

BERLIN (Reuters) - Lufthansa LHAG.DE said it will focus on reducing costs this year after attacks deterred travelers from booking trips and resulted in a profit warning for the German airline group.

Planes of the Lufthansa airline stand on the tarmac in Frankfurt airport, Germany, March 17, 2016. REUTERS/Kai Pfaffenbach/File Photo

The carrier two weeks ago lowered its profit target for the year and trimmed growth plans after bookings on long-haul routes to Europe were down after a series of attacks in Europe and political turmoil following Britain’s vote to leave the European Union and a failed coup in Turkey.

“We don’t have any visibility on how people are booking, and we’re losing group bookings from Asia and the United States due to travel warnings,” Chief Financial Officer Simone Menne told journalists after the carrier reported full second-quarter results.

Other major European airlines have been knocked by attacks and the Brexit vote and have cut back on planned growth as a result of pressure on prices.

Last week Air France-KLM AIRF.PA said it was concerned about the attractiveness of France, warning attacks would hit revenue, while British Airways owner IAG ICAG.L gave a cautious outlook for the year and said corporate travel demand remained subdued following the Brexit referendum.

Lufthansa said on Tuesday that it aimed to reduce unit costs, excluding fuel and currency, by between 2 and 3 percent in the second half of the year.

“We expect the high pricing pressure to continue... This is why we will push on our efficiency increases even more consistently,” CEO Carsten Spohr said in a statement.

In the first half of the year, unit costs fell 1.3 percent. Lufthansa has agreed a new pay and pensions deal with cabin crew and on Monday said it was extending talks on pay and conditions with its pilots.

Lufthansa expects 2016 adjusted earnings before interest and tax (EBIT) to be below that of last year, when it made just over 1.8 billion euros ($2.01 billion).

But it said it still expected to be able to pay a dividend for this year, because EBIT should be above last year, partly thanks to the cabin crew deal that will help reduce its pension costs.

“The key performance figures show we will be technically capable of making a payout,” Menne said, though added the final decision was up to the supervisory board.

($1 = 0.8947 euros)

Reporting by Victoria Bryan; Editing by Christoph Steitz and Maria Sheahan

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