Lufthansa narrows operating loss helped by cheaper fuel

[BERLIN] Lufthansa joined European rivals in reporting improved first-quarter earnings helped by cheaper fuel, but said on Tuesday further action was needed to lower costs, especially in light of a rising pension burden and staff-related expenses.

Lufthansa is in a long-running dispute with its pilots over retirement benefits and the expansion of low-cost services. Talks with pilots and strike action were suspended after the crash of one of its Germanwings planes at the end of March.

Like Air France-KLM, which also reported a smaller first-quarter loss last week, Lufthansa is trying to lower costs to better compete with rivals from the Gulf and Turkey and low-cost carriers in Europe.

Budget carrier Ryanair on Tuesday reported a 16 per cent rise in April passenger numbers.

IAG, the parent company of British Airways and Iberia, has cut costs and reported a profit for the first quarter, which is traditionally loss-making for airlines as fewer people travel.

Lufthansa confirmed its target for 2015 adjusted earnings before interest and tax of more than 1.5 billion euros (S$2.23 billion) but said it was unlikely the figure would be significantly exceeded. "We continue to see great pressure to act," Chief Financial Officer Simone Menne said in a statement.

Lufthansa said unit costs rose 2.8 per cent in the quarter, while yields, a measure of ticket prices, dropped 2.9 per cent excluding currency effects.

Lufthansa last week made a new mediation proposal to bring an end to the row with its pilots. Their union has so far not responded to the proposal.

The group, including Swiss and Austrian Airlines, reported a first-quarter adjusted loss before interest and tax of 167 million euros, slightly better than the average analyst forecast for a loss of 172 million.

The quarter at Lufthansa was overshadowed by the March 24 crash of a passenger jet operated by subsidiary Germanwings.

Evidence indicates co-pilot Andreas Lubitz deliberately locked the captain out of the cockpit and steered the plane into a French mountainside, killing all 150 onboard.

The crash affected bookings for a very short time at Germanwings, the airline said.

The crash will have no impact on the company's balance sheet, Lufthansa CFO Menne said, as claims and other costs are being covered by the airline's insurers.

While the euro, which weakened by more than 11 per cent against the dollar in the first quarter, boosted Lufthansa's revenue, it is also reduced the benefit of cheap oil.

Lufthansa now estimates a 2015 fuel bill of 6.2 billion euros, against an earlier estimate of 6 billion.

REUTERS