Lufthansa Lifted by Falling Fuel Costs

LONDON—Deutsche Lufthansa AG on Thursday reported a sharp rise in full-year earnings aided by lower fuel costs, while signaling the pace of improving financial results would slow in 2016.

Net profit for the year rose to €1.7 billion ($1.9 billion) from €55 million, Germany's largest airline said. The year-earlier figure was heavily affected by several one-time items. The loss in the traditionally weak fourth quarter fell to €50 million from a €427 million loss a year earlier.

Lufthansa's more closely watched adjusted earnings before interest and taxes rose 55.2% to €1.82 billion. The company had forecast adjusted earnings of €1.75 billion to €1.95 billion. Sales increased 6.8% to €32.1 billion.

Lufthansa is in the midst of a restructuring program to lower costs and restore competitiveness in the face of aggressive rivals. It has been losing market share in its short-haul business to budget carriers Ryanair Holdings PLC and easyJet PLC, while suffering a flight of long-haul passengers to Middle East carriers such as Emirates Airline and Qatar Airways on routes to Asia.

Lufthansa's efforts to lower costs, such as moving flights to its own discount unit Eurowings, have met union opposition triggering strikes. Earnings in the fourth quarter suffered a €100 million hit from strike costs, the airline said. Even so, Eurowings delivered a slight operating profit last year, ahead of plan.

"We will consistently press ahead with the further development of the Lufthansa Group throughout 2016," airline Chief Executive Carsten Spohr said, adding that "as long as we can further align our cost structures to market levels, the Lufthansa Group has great prospects in all its business segments."

A prolonged slump in oil prices has been a boon to airlines, cutting the size of one of their largest costs. Chief financial officer Simone Menne said fuel would be a financial tailwind also this year. Still, she said, "cost discipline remains one of our paramount tasks. We must lower the unit costs at our hub airlines."

Lufthansa said it expected adjusted earnings to rise "slightly" this year, with unit costs falling excluding fuel and currency effects. Earnings should rise at mainline Lufthansa and at Austrian Airlines, though fall for Swiss International Air Lines because of the strong local currency. Budget unit Eurowings is expected to make a loss amid expansion efforts.

The carrier proposed a dividend of €0.50 a share

Write to Robert Wall at [e-mail]

(END) Dow Jones Newswires

March 17, 2016 03:05 ET (07:05 GMT)

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