Feb. 3 (Bloomberg) -- Deutsche Lufthansa AG said 2008 operating profit beat forecasts after fuel prices declined last quarter, making the airline the only one among Europe’s top three network carriers to say earnings improved.
Earnings excluding gains or costs from asset disposals totaled about 1.3 billion euros ($1.69 billion), compared with a target of 1.1 billion euros, Cologne, Germany-based Lufthansa said today in a statement. The carrier said it will “react with necessary measures” to shore up profit this year as business is “afflicted by higher than usual risks” by the recession.
Airlines worldwide are struggling to fill seats as the global financial crisis causes business executives and tourists to put off travel. Air France-KLM Group, Europe’s biggest carrier, and third-ranked British Airways Plc both said last month that they would post losses for the three month ended Dec. 31. SAS Group said today its fourth-quarter loss widened.
“We’ve seen profit warnings by Air France-KLM and British Airways, and Lufthansa wanted to take the uncertainty out of the market,” said Uwe Weinreich, an analyst at UniCredit Markets & Investment Banking in Munich, who recommends buying the German company’s shares. “Lufthansa has done quite well in the current situation. However, 2009 is going to be a very difficult year.”
Shares Rise
Lufthansa rose 74 cents, or 7.8 percent, to 10.13 euros in Frankfurt trading, the biggest gain since Nov. 24. That pared the stock’s decline this year to 9.5 percent, valuing the carrier at 4.64 billion euros.
The International Air Transport Association predicts the global recession will cause industry passenger numbers to fall 3 percent in 2009 and airlines to log combined losses of $2.5 billion. Lufthansa said Jan. 12 that passenger numbers dropped by 3.7 percent to 3.98 million in December.
The economic slowdown has also reduced air-freight shipments as carmakers and other manufacturers shutter plants. Lufthansa’s cargo unit said Jan. 30 that it’s reducing work hours for 2,600 employees after freight volumes dropped 21 percent from a year earlier in December and industry cargo handling fell 23 percent.
“The market environment has evolved poorly,” with “overall demand persisting at lower levels,” Lufthansa said today. The airline is scheduled to report 2008 earnings details on March 11. Operating profit in 2007 was 1.38 billion euros.
SAS Loss Widens
Lufthansa’s profit outlook for the year contrasts with results at Stockholm-based SAS, owner of Scandinavian Airlines, which today reported a 6.26 billion-krona ($749 million) net loss for 2008 as the fourth-quarter loss widened to 2.77 billion kronor from 596 billion kronor. SAS announced plans to eliminate as many as 9,000 jobs, partly by selling divisions based outside the Nordic region, as well as a 40 percent route-network cutback.
The price of oil, trading at $40.35 a barrel today, tumbled 56 percent in the final quarter of 2008, at one point to less than $33 a barrel, as the recession reduced demand for energy.
Lufthansa typically uses contracts to fix the price of about 85 percent of fuel needs each year, according to Claudia Lange, a spokeswoman in Frankfurt for the airline. That proportion fell to 72 percent in 2008 following the collapse on Sept. 15 of Lehman Brothers Holdings Inc., the bank that handled the carrier’s fuel- price hedging agreements.
The airline estimated that its fuel bill was 5.4 billion euros in 2008, and that it will spend 3.7 billion euros this year, according to a presentation posted on its Web site.
To contact the reporter on this story: Steve Rothwell in London at srothwell@bloomberg.net; Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.
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