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Abu Dhabi, UAEThursday 15 November 2018

Lufthansa confident on bookings as profit beats estimates

German carrier says it took longer than expected to bring around 77 planes from collapsed rival Air Berlin up to its standards

Lufthansa says it is positive on ticket prices this year. AFP
Lufthansa says it is positive on ticket prices this year. AFP

Lufthansa gave a more upbeat assessment of ticket prices for the rest of the year, benefiting from good demand on German and North Atlantic routes following the demise of rival Air Berlin, and sending its shares higher.

The carrier said on Tuesday it now expected a slight increase in unit revenues, against a previous forecast for the measure of pricing to be stable.

"We have turned more positive on top line performance," chief financial officer Ulrik Svensson said, citing good booking data for the busy third quarter.

While short-haul rivals such as easyJet, Ryanair and Laudamotion have scrambled to fill the gap left by Air Berlin on routes out of Germany and Austria, Lufthansa remains dominant on the more lucrative long-haul routes.

The positive comments on pricing could also be a good signal for IAG, which owns British Airways and Iberia and which reports its results on Friday, Goodbody analysts said.

Lufthansa shares rose as much as 6 per cent on Tuesday, their biggest jump in 30 months years, while IAG and Air France-KLM which reports on Wednesday, rose 2.2 per cent.

Despite the more positive pricing outlook, the costs of expanding its Eurowings budget unit and a higher fuel price mean Lufthansa won't see the benefit in its bottom line.

It maintained its guidance for 2018 adjusted earnings before interest and tax (ebit) to fall slightly from 2017's record level of €2.97 billion (Dh12.78bn).

“With continuing strong demand, we are confident that, despite a challenging prior-year basis for comparison, we will be able to report solid revenue trends for the second half of 2018, too,” Mr Svensson said.

The group also once again reduced its forecast for capacity growth this year, to 8 per cent from 8.5 per cent, mainly due to Eurowings.

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Mr Svensson said it took longer than expected to bring around 77 planes from collapsed rival Air Berlin up to its standards, meaning they spent more time on the ground than expected, thus causing delays and cancellations.

Integration costs for Eurowings reached €120 million in the first half of the year, and it expects a further €50m in the third quarter.

Eurowings will not be profitable this year, but is instead targeting a return to the black next year, Lufthansa said.

Lufthansa reported second-quarter adjusted ebit of €982m, against expectations of €942m.

First half-year Adjusted ebit for Lufthansa Cargo amounted to €125m, a 60.3 per cent improvement on the prior-year period. Net financial debt declined 11.4 per cent from its level at the end of 2017 to €2.6bn.