Lufthansa raises outlook as Q3 profit triples

AP News
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Posted: Oct 28, 2010 4:33 AM
Lufthansa raises outlook as Q3 profit triples

Air traffic's strong rebound from the economic crisis and cost-cutting efforts have helped Deutsche Lufthansa AG, Germany's biggest airline, triple third-quarter earnings and raise its outlook.

The carrier reported Thursday net earnings of euro628 million ($866 million) for the July-September period, compared with euro209 million a year earlier.

Revenue rose 27.5 percent to euro7.57 billion from euro5.94 billion, while operating profit _ which excludes taxes and some one-off charges _ rose to euro783 million from euro218 million.

The company raised its full-year earnings outlook, saying it now expects a "significant" increase in revenue and operating earnings of more than euro800 million. It had previously predicted an unspecified increase in operating profit.

Global air freight is recovering at a "robust clip," Lufthansa said. It added that "the premium segment, consisting of first and business class, which is important for the group's passenger airlines, is also recovering, especially on long-haul routes."

Lufthansa was troubled earlier this year by a now-resolved pay dispute with pilots and by airspace closures that followed the eruption of an Icelandic volcano.

However, it said it turned from a first-half operating loss to an operating profit of euro612 million for the first nine months _ up from euro226 million a year earlier. Nine-month net earnings rose to euro524 million from last year's euro31 million.

The company said it benefited from cost-cutting efforts across its business and from "realized synergy potentials" within the Lufthansa group.

The group includes Swiss International Airlines, Austrian Airlines, budget offshoot Germanwings and Britain's BMI. The company also holds stakes in Brussels Airlines and JetBlue of the U.S.

"We neither expect any change with regard to the highly intense global competition, nor any relief with regard to extreme price pressure in the short-haul segment," CEO Wolfgang Mayrhuber said.

"All of the airlines in the passenger airline group shall therefore continue to implement their respective cost-cutting programs," he added.

Lufthansa pointed to possible risks ahead from another economic slowdown, increasing fuel prices and "the possible negative influence" of an air traffic tax being levied by the German government starting in January on passengers departing the country.

For this year's first nine months, Lufthansa said its operating expenses rose by 20.6 percent to euro21.5 billion.

It pointed to the costs of consolidating units, as well as a 26.3 percent increase in fees and charges, but in particular a 47.7 percent increase in fuel costs, which rose to euro3.9 billion.

Lufthansa shares were up 0.8 percent at euro15.56 in morning Frankfurt trading.