Germany's Lufthansa slashes 2024 profit target for a second time
Business
Germany's Lufthansa slashes 2024 profit target for a second time
LONDON/FRANKFURT (Reuters) - Deutsche Lufthansa (LHAG.DE), opens new tab slashed its 2024 earnings guidance for a second time this year and issued a profit warning on Friday for its second quarter as one of Europe's top airlines struggles with low yields and operations problems.
The warning will reinforce worries about a weaker than expected quarter for the industry as airlines struggle with high labour and operating costs and pressure on ticket prices which are hurting yields, or average revenues per passenger.
Shares in Lufthansa fell as much as 3.8% on the news, which also knocked down the stock of British Airways-owner IAG (ICAG.L), opens new tab, Easyjet and Air France-KLM (AIRF.PA), opens new tab.
Lufthansa now expects adjusted 2024 earnings before interest and taxes (EBIT) between 1.4 billion euros ($1.5 billion) and 1.8 billion, down from a previous target of about 2.2 billion, it said in a statement.
It added that the group's second-quarter adjusted EBIT fell by more than a third to 686 million euros. It reports second-quarter results on July 31.
"A comprehensive turnaround program is being launched," affecting its core Lufthansa brand and regional carrier Cityline, the company said, adding that its core brand was particularly hit by negative market trends.
"A market-related decline in yields in all traffic regions – especially in Asia – had a negative impact," it said.
It also cited "inefficiencies in the flight operations" of Lufthansa and Cityline and delayed aircraft deliveries.
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UNSURPRISING
Equity analysts said Lufthansa's decision was not surprising, given its cost challenges linked to strikes earlier this year and delivery delays from plane manufacturers Airbus (AIR.PA), opens new tab and Boeing (BA.N), opens new tab that have impacted the whole aviation sector.
In a letter sent to staff earlier this week, Lufthansa flagged operational cost cuts as it struggles with a more competitive landscape and as lower corporate travel erodes unit revenue.
