Lufthansa profits up on lower costs; tougher times ahead

FRANKFURT: German airline Lufthansa said Tuesday that it saw net profit fall for the first six months of the year, mainly due to a large one-off boost to earnings in the year-earlier period.

But the airline said earnings improved once such one-time effects were excluded, thanks to cost discipline and lower fuel prices.

The company repeated its earlier warning that terrorism fears would weigh on bookings and profits in the second half of the year.

Net profit was 429 million euros ($480 million), compared to 954 million euros in the year-earlier period, when profits were boosted by 503 million euros through the early conversion of a convertible bond.

Adjusted earnings before interest and taxes — the company's usual profit gauge — rose 61 million euros, to 529 million euros.

The airline credited strict management of seat capacity for an increase of 3.8 percentage points in profit margin at its passenger airline business, to 5.2 percent.

Lufthansa's cargo business saw a fall of 95 million euros in first-half earnings due to "massive market overcapacities" and said that yields from air freight had fallen to levels last seen during the financial crisis in 2009.

CEO Carsten Spohr said in a statement that the company achieved "a solid result" in the first half, but warned that "our industry has to prepare for a difficult second half-year."

"The terrorist attacks in Europe and also the increasing political and economic uncertainties are having a tangible impact on passenger volumes," he said, particularly on forward bookings for long-distance flights to Europe.

The company has had to abandon its earnings forecast for the full year, saying it expects profits that are below last year's, instead of slightly above.