By Joanna Plucinska, Ludwig Burger and Ozan Ergenay
LONDON/FRANKFURT, June 21 (Reuters) – Deutsche Lufthansa (ETR:) cut its 2024 profit forecast for a second time on Friday and issued a profit warning for its second quarter, as one of Europe's top airlines struggles with low returns and operational problems.
The warning underscores concerns about a weaker-than-expected quarter for airlines, which are struggling with high labor and operating costs as well as weak average revenue per passenger due to pressure on ticket prices.
Lufthansa shares fell as much as 3.8% and dragged down IAG (owner of British Airways) by 2.7%, easyJet (LON:) by almost 1% and Air France-KLM by almost 2% by 1213 GMT.
Lufthansa expects adjusted earnings before interest and taxes (EBIT) for 2024 of between 1.4 billion euros ($1.5 billion) and 1.8 billion dollars, down from the previous target of around 2.2 billion.
The company said the group's adjusted EBIT in the second quarter fell by more than a third to €686 million. The company will publish its second-quarter results on July 31.
“A comprehensive restructuring programme is being launched” affecting its Lufthansa brand and regional airline Cityline, the company said, adding that its core brand was particularly affected by negative market trends.
“A market-related decline in yields in all traffic regions, especially in Asia, had a negative impact,” he said.
Lufthansa had issued a profit warning for the first quarter in April amid a surge in costs linked to the strike. It also cited “inefficiencies in flight operations” at Lufthansa and Cityline, and delays in aircraft deliveries.
IT IS NOT SURPRISING
Stock analysts said Lufthansa's decision was not surprising given cost challenges and delivery delays at planemakers Airbus and Boeing (NYSE:) that have impacted the aviation sector.
In a letter to staff earlier this week, Lufthansa flagged cuts in operating costs due to a more competitive landscape as lower corporate travel erodes unit revenue.
“That kind of weakness in unit revenue is expected to continue into the third and fourth quarter, hence this recovery program they're planning,” Stephen Furlong, an analyst at Davy, told Reuters.
Other airlines, including Ryanair, have warned of slower-than-expected ticket price increases, and Air France-KLM said in its first quarter that it was struggling with higher unit costs.
(1 dollar = 0.9184 euros)
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