Airlines' profit forecasts nosedive
July 21, 2016
Germany's flagship carrier Lufthansa downgraded its core earnings forecast for this year on Thursday, saying they would be lower than last year's 1.8 billion euros ($2 billion).
Although Lufthansa did not specify how much less it expected to earn, analysts from Credit Suisse predicted Lufthansa's profit would shrink to 1.5 billion euros.
The company cited increasing political and economic uncertainty since the end of the first quarter as reasons bookings were down.
Tour groups staying home
"We're missing out on advanced bookings for intercontinental flights, like by tour groups from Asia," a spokesperson from Lufthansa said.
While Lufthansa CEO Carsten Spohr expressed hope at the beginning of the month that tourists would maybe make long-haul bookings within a more short-term timeframe and pay higher prices, that hasn't happened.
"A complete recovery is a development that the board no longer considers probable," Lufthansa said in a statement.
The German airline has also scaled back a target to increase capacity by 6 percent to 5.4 percent. Still, it has managed to increase its half-year operating profits by 13 percent to 529 million euros.
Lufthansa shares nosedived 7.5 percent on Thursday on the news of the downgraded forecast. But it wasn't the only carrier that suffered at the stock exchanges - British budget airline EasyJet saw its own shares fall 6 percent after it said it would not be able to release an earnings forecast. Its share price has lost a third of its value since the Brexit vote last June 23.
EasyJet unable to release proft outlook
"More recently currency, volatility as a result of the U.K.'s referendum decision to leave the EU as well as the recent events in Turkey and Nice continue to impact consumer confidence," EasyJet CEO Carolyn McCall said in a statement.
The events in Nice and Turkey would affect its fourth quarter reporting, but EasyJet did not say by how much. Analysts expect EasyJet's pretax profit for the fiscal year ending on Sept 30 to decline by 14 percent to 592 million pounds (710 million euros, $782 million).
The Brexit vote has caused the British sterling pound to fall 10 percent, which makes travel abroad more expensive for Britons, who are EasyJet's most important target market.
Other commercial airlines in Europe are also anticipating pain amid global uncertainty.
EasyJet's chief competitor, Irish budget carrier Ryanair, is still expecting 13 percent profit growth for the fiscal year until March 2017. It carries a lot less risk to its profits than EasyJet, since Ireland is part of the EU. But Ryanair, too, has seen its shares slump 17 percent since the Brexit vote.
jd/cjc (AFP, dpa, Reuters)