Lufthansa cuts profit targets

Lufthansa cut profit targets for the next two years citing competition from Middle East and low-cost rivals, sending shares plunging.

The warnings surprised investors after better-than- expected results in May and come just over a month after new chief executive Carsten Spohr took charge.

Spohr will now set out fresh restructuring plans next month, and the German airline will review its spending plans, including the possible cancellation or deferral of plane orders from Airbus or Boeing, finance chief Simone Menne told analysts and reporters.

Lufthansa cut its forecast for 2014 operating profit to €1bn from a forecast of €1.3 to €1.5bn and lowered its 2015 earnings target to €2bn from €2.65bn.

“The main reason for this lower forecast is significantly weaker than expected revenue development in the passenger and freight businesses compared to what we anticipated at the beginning of the year,” Menne said.

“There is overcapacity in the North Atlantic,” she said, noting Lufthansa was feeling the heat especially from Gulf carriers Emirates, Qatar Airways, and Etihad, and from low-cost airlines, such as easyJet and Ryanair.

“The extent of the warning is comparatively big. It’s especially disappointing that the target for 2015 was also reduced,” DZ Bank analyst Dirk Schlamp said.

— Reuters