A tight grip on costs has helped Lufthansa beat analysts’ expectations with better than forecast earnings for 2016.
Net profits at Europe’s biggest legacy airline group by revenues rose 4.6 per cent to €1.78bn despite a 1.3 per cent decline in revenues to €31.7bn. The group, which includes Austrian Airlines, Swiss, Brussels Airlines and Eurowings as well as the core German flag-carrier, recorded the improved results despite a Europe-wide glut in airline capacity that drove a key revenue measure down 6 per cent. Lufthansa shares rose almost 5 per cent after the news on Thursday morning. The figures were published a day after Lufthansa announced a settlement with its pilots of a long-running pay dispute that cost the group €100m during 2016. However, it warned that adjusted earnings before interest and tax (ebit) — a measure that excludes the effect of some changes in pension accounting — for 2017 would be “slightly below” the €1.75bn figure for 2016. Carsten Spohr, chief executive, said the group was in a stronger position than a year ago. “In a very demanding market environment, we successfully kept the Lufthansa group’s margins at their record prior-year levels, through consistent capacity and steering measures and, above all, through our effective cost reductions,” Mr Spohr said. Like other European airline groups, Lufthansa is grappling with the effects of continued, industry-wide growth in capacity that is outstripping demand. The phenomenon is pushing down fares — Lufthansa’s revenue per available seat kilometre, a key metric, declined to 7.8 euro cents, from 8.3 in 2015. The year’s performance was driven by the core passenger airline group, where adjusted ebit grew 1.5 per cent to €1.53bn, on revenue down 2.5 per cent to €23.9bn. But the group recorded an adjusted ebit loss of €50m on revenue down 11 per cent to €2.08bn in logistics, where the group continues to suffer from a glut in air cargo capacity and lacklustre traffic growth. The group said it expected to cut costs excluding fuel during 2017 at the same rate as during 2016 but that it expected rising oil costs to push up its annual fuel bill by €350m. It forecast organic capacity growth of 4.5 per cent and that the airline would benefit from the integration of Brussels Airlines from the start of this year. Lufthansa also expects a net benefit from a deal arranged during 2016 to lease many of the aircraft of struggling German airline Air Berlin.