Why has Lufthansa already lost over 300 million euros this year?
For the first three months of 2019, Lufthansa lost 336MN EUR (~ $380MN USD). Blaming rising fuel costs and overcapacity in Europe, the German airline swung to loss after reporting a 52MN EUR profit during the same period last year. The loss was worse than analysts expected, sending Lufthansa’s stock price down (though it has since rebounded).
Of course the circumstances last year were different. Air Berlin had collapsed the previous October and Lufthansa greatly benefited from the sudden loss of capacity. Furthermore, fuel prices were 202MN EUR lower over the same period in 2018. Finally, Easter was earlier last year, leading to a bump in Q1 bookings.
While the carrier expects a better second quarter and a full year profit margin of 6.5 – 8%, the overcapacity problem is a concerning one.
One analyst told Bloomberg,
This is a much bleaker picture than consensus expectations. It is unclear to us what the material changes over the past five weeks could have been to prevent a clearer guidance by the company.
The 202MN EUR increase in fuel price was no surprise. Thus, the unexpectedly poor numbers were either already anticipated (but held back) by the carrier or truly the result of intense competition, as Lufthansa claimed.
I would think the elimination of WOW Air, Flybmi, Germania, Primera Air, and Cobalt would help rather than hurt overcapacity. But Lufthansa has engaged in “fare wars” with full-service rivals that have hurt overall numbers.
It is always concerning to see loss reported during periods of relative calm like the era we are in. While Q1 is always historically the weakest quarter for northern hemisphere airlines, the numbers illustrate a continuing dilemma for Lufthansa. While wanting to maintain its market share and not cede routes based upon price, there still may be too much capacity in Europe if disciplined and organized Lufthansa is losing money.