Lufthansa's profits get cheap fuel boost

AP News
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Posted: Mar 17, 2016 7:14 AM
Lufthansa's profits get cheap fuel boost

FRANKFURT, Germany (AP) — Cheaper fuel and tight control over excess seat capacity helped push full-year profits higher at German airline Lufthansa. However, the company issued a cautious earnings outlook for 2016, which weighed on its share price.

The company said Thursday that its net income jumped to 1.7 billion euros ($1.9 billion) in 2015, way up on the 55 million euros it made the year before. Revenue was also higher, by 6.8 percent to 32.1 billion euros.

Both figures beat estimates among financial analysts as compiled by financial information provider FactSet.

However, shares in the company fell 4.3 percent to 14.62 euros in morning trading after the airline gave a cautious outlook for the rest of this year, saying that operating earnings would increase only "slightly" in 2016.

Lufthansa CEO Carsten Spohr said 2015 was an "emotionally very challenging year" due to the crash of subsidiary Germanwings' Flight 9525 in southern France last March 24. Investigators say co-pilot Andreas Lubitz deliberately crashed the plane, killing 149 others. The airline also endured strikes over its efforts to cut costs and move flights to its new low-cost branch, Eurowings, which is taking over from the Germanwings brand.

Spohr said lower fuel costs and capacity discipline — efforts to reduce flying with empty seats — had paid off. The airline is restructuring to compete with low-cost carriers in Europe and what it says are government-subsidized Gulf carriers such as Emirates Airline, Etihad Airways and Qatar Airways.

Eurowings aims to provide low-cost service on point-to-point routes, including to long-haul vacation destinations in Asia and the United States.

Lufthansa said it would continue to build its own low-cost carrier in the form of Eurowings. It said Eurowings made a narrow operating profit of 8 million euros on 1.9 billion euros in revenues, ahead of its goal of breaking even.