Lufthansa cautious for year ahead after boost in 2016

[FRANKFURT] German airline group Lufthansa said Thursday it had met its financial targets in 2016, but offered only modest forecasts for the current year, squeezed between falling prices and higher costs.

The Frankfurt-based firm reported net profit of 1.78 billion euros (S$2.68 billion) for last year in a statement, a 4.6 per cent increase on 2015's figure and in line with its own and analysts' expectations.

"In a very demanding market environment, we successfully kept the Lufthansa Group's margins at their record prior-year levels," chief executive Carsten Spohr commented.

Passenger airlines remained Lufthansa's biggest earner, with improvements in operating profit for its flagship airline and Austrian Airlines.

But low-cost passenger carrier Eurowings suffered an operating loss for the year, as did freight unit Lufthansa Cargo.

The group will have to keep cutting costs in 2017 as intense competition drives down ticket prices even as fuel costs have increased, Mr Spohr said.

At 31.7 billion euros, Lufthansa's revenues in 2016 remained at around the same level as the previous year, when it brought in 32.1 billion.

But it was able to increase operating profit almost 36 per cent to 2.3 billion euros, in part because of a 700-million-euro bonus from a pay and pensions deal struck with cabin crew.

Adjusting for that one-off effect showed operating profit at 1.75 billion, a decrease of 3.6 per cent and slightly shy of its 1.8-billion-euro forecast.

The group plans to offer shareholders a dividend of 50 euro cents per share, the same level as last year's payout.

Looking ahead, Lufthansa said it expects to achieve adjusted underlying profits "slightly below" 2016's result this year.

AFP