Lufthansa Struggles with Competition, Restructuring in First Half

The European recession, fuel costs, competitive low cost carriers on short haul routes in Europe, aggressive competition on its long haul routes from Middle Eastern carriers and its ongoing and painstaking restructuring gave Lufthansa AG (Lufthansa, Austrian, SWISS and GermanWings) a net loss of €204 million ($270.01 million) in the first six months of 2013.

In the same period last year Lufthansa earned €50 million. Speaking in Cologne on Friday, Lufthansa AG’s Chief Financial Officer Simone Menne noted a second quarter operating profit that was down 27 percent to Euro 431 million, far short of the Euro 599 million that had been projected.

Restructuring programs are going on in many European airlines. In its goal of controlling costs, Lufthansa’s SCORE restructuring program, which was launched in 2012, will eliminate 3,500 jobs.

According to Menne, Lufthansa expected to meet its goal for profits this year even though the first half of 2013 saw the carrier’s total revenue fall 0.3 percent to €14.46 billion and the number of passengers fall 0.4 percent to 49.5 million as the number of flights fell 5.1 percent.

The airline’s hedging strategy helped it reign in a rise in fuel costs somewhat at 1.3 percent despite the oil market’s price swings. In the second quarter, net profit fell 43 percent to €255 million as the company endured strike action from its employees. Revenue fell 0.7 percent to €7.83 billion.

Source: Travel Pulse, http://www.travelpulse.com/lufthansa-struggles-with-european-doldrums-competition-and-restructuring-in-first-half.html