Lufthansa warns of missed Score target

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Lufthansa is no longer expecting to meet the target for its Score efficiency programme as the German carrier has downgraded its earnings outlook for this year and 2015.

Six weeks after the departure of chief executive Christoph Franz – whose signature Score cost-cutting and revenue-improvement programme was originally aimed at raising the operating profit from €820 million ($1.1 billion) in 2011 to at least €2.3 billion by 2015 – Lufthansa has revealed it expects to deliver earnings of €2 billion next year “provided conditions remain stable”.

The original €2.3 billion target had been upgraded to €2.65 billion in March, following a change in the Star Alliance carrier’s aircraft depreciation policy. However, “the executive board no longer believes that the earnings target for 2015 of €2.65 billion set as part of the Score programme can be achieved”, says Lufthansa.

For this year, the airline has downgraded its operating profit target from €1.3-1.5 billion to €1 billion, citing lower-than-projected sales in its passenger and cargo businesses.

“The revenue risks mentioned when we presented the quarterly figures in early May have unfortunately materialised,” says finance chief Simone Menne.

Carsten Spohr succeeded Franz as the airline group’s chief executive on 1 May.

Low ticket prices due to overcapacity in the airline’s main business areas in Europe and on transatlantic routes to North America have been blamed for the poor performance. The airline is to react with “noticeable” capacity cuts for the winter 2014/2015 schedule, says Menne.

Lufthansa also highlights the growth of the Gulf carriers and their increasing reach in European markets as a major adverse factor in its business.

In addition to capacity cuts, the airline wants to implement “structural measures” under the Score programme at “higher pace” than previously planned, it says. Details of the accelerated plans are to be revealed in July, it adds.

A three-day pilot strike in early April hit earnings to the tune of around €60 million, the airline indicates. The pilots had been at loggerheads with the Franz-led management over future working terms for more than two years.

Lufthansa also identifies losses of “more than €60 million” so far in 2014 arising from the Venezuelan government’s restrictions on taking local-currency monies out of the South American country.