Lufthansa expects 'noticeable' operating loss in 2012

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Lufthansa Group plans to introduce new cost-cutting measures after most of its subsidiaries recorded lower year-on-year operating profits for the first nine months of 2012.

Lufthansa, Swiss International Air Lines and Austrian Airlines registered a combined operating profit of €345 million ($449 million), down 2.5% from the same period last year.

But at passenger airline Lufthansa operating profits fell markedly further, declining 53.6% to €64 million. The carrier expects a "noticeable" operating loss for the full year.

Swiss' operating profit was down 33.2% to €163 million, while Austrian's result grew from a €34 million operating loss in the first nine months 2011 to a €73 million profit.

Austrian's better performance was largely due to transferring its flight operations to the lower cost regional subsidiary Tyrolean Airways in July, claims the German group.

Lufthansa plans a similar transfer for much of its short-haul network, with all European flights outside its long-haul hubs in Frankfurt and Munich being taken over by low-cost subsidiary Germanwings on 1 January 2013.

Operating profit at Lufthansa's logistics division - which includes Lufthansa Cargo and the AeroLogic joint venture with DHL Express - was down nearly 62% to €66 million.

The group cites high fuel costs in combination with the euro's depreciation as the main reason for its lower results. Additionally, it blames "continued high pressure" from low-cost carriers in the short-haul segment and Gulf airlines on long-haul routes, as well as higher costs arising from Germany's aviation tax and the EU's Emissions Trading System.

The company therefore says it will increase cost-cutting measures as part of its 'Score' efficiency improvement programme. It says that while Score has already delivered some improvements, the results "are not quite yet as visible we would like".

Chief executive Christoph Franz says: "We don't yet have the level of profitability we need to be able to make the required investments. So we will have to intensify our efforts. This applies in particular to the airlines which are directly exposed to these external factors, but also to our service companies."

The group still expects a full-year "mid three-digit million euro" operating profit, which will be largely driven by the MRO, catering and IT subsidiaries. However, this figure excludes costs for the 3,500 planned job cuts across administrative posts.

Lufthansa says that these additional expenses could be up to €100 million.