Lufthansa half-year loss spurs deeper capacity cuts

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Lufthansa Group generated an operating loss of €20 million ($24.5 million) during the first six months of 2012 after achieving a €114 million operating profit during the same period last year. However, the company's net loss was cut from €206 million in H1 2011 to €168 million this half.

Revenues increased 6% to €14.5 billion, but profitability came under pressure from increased fuel costs, "sustained" price pressure, air passenger taxes in Germany and Austria, and the European Union's Emissions Trading System (ETS), the airline says. Its operating margin dropped from 1.2% in 2011 to 0.2% this year.

The group generated a €361 million operating profit during the second quarter, which almost compensated for the losses between January and March 2012. As indicated in March, Lufthansa still expects higher full-year sales than in 2011 and a "medium three-digit" operating profit across the group this year.

However, this will not include costs for the Score restructuring programme, warns Lufthansa, which it estimates at €100-200 million for the current year. The group plans to improve its operational result by at least €1.5 billion a year by the end of 2014.

First half revenue increases were recorded at the company's subsidiaries for maintenance, catering and IT services, while the passenger and cargo carriers performed weaker.

Operational losses in the passenger airline segment - comprising Lufthansa, Austrian Airlines and Swiss International Air Lines - increased 79% to €179 million year-on-year. Lufthansa's operating loss more than doubled from €146 million during the first half of 2011 to €300 million this half, while Swiss's operating profit fell from €104 million to €48 million.

Austrian's €64 million loss during the first half of 2011 turned into a €26 million operating profit this half. However, this was due to one-off effects as a result of transferring flight operations to its regional subsidiary Tyrolean Airways. Without that measure, Austrian would have generated a €55 million loss, says Lufthansa.

The group has also decided to make capacity cuts beyond those it initially outlined last year. By retiring additional aircraft, the winter 2012/13 schedule will now see a 2.5% reduction in available seat kilometres (ASKs). This will trim the capacity increase for the whole of 2012 to 0.5%.

Lufthansa Cargo's half-year operating profit was down nearly 65% to €47 million. The airline says this is due to weaker customer demand, high fuel prices, and the night flying ban at its main hub in Frankfurt. The group's fuel bill increased 22% to €3.6 billion.