By Ilona Wiesenbach, Joanna Plosinska, and Rachel Moore
BERLIN/LONDON (Reuters) – Lufthansa warned on Wednesday of a drop in third-quarter profit as the German airline group faces higher wage costs and pressure on ticket prices, pointing to tougher market conditions in the aviation sector.
Airfare prices in Europe and Asia are starting to stabilize or fall amid signs that the post-Covid-19 travel boom may be losing steam, with many airlines ramping up flights.
Ryanair, Europe’s biggest airline by passenger numbers, and Air France-KLM reported lower profits earlier this month, although easyJet (LON:) performed better.
Lufthansa said it expects third-quarter revenue – a measure of flight profitability – to fall by single digits from 2023 levels, while unit costs are expected to rise by the same amount.
Chief Executive Carsten Spohr said demand remained strong, but “capacity growth in the market has intensified pricing pressures on passenger airlines, causing yields to fall.”
Delays in aircraft deliveries are also disrupting fleet management and increasing repair costs for ageing aircraft, while wages for German employees have risen after strikes cost the group 100 million euros ($108 million) in the second quarter.
Overall, Lufthansa expects adjusted earnings before interest and taxes in the third quarter to be below the 1.5 billion euros of last year, due to challenges facing its main passenger business, Lufthansa Airlines.
Spohr later said by phone that the company would slow capacity growth later in the year, adding that competition from Chinese airlines in particular was hitting the German group with revenues falling for Lufthansa on routes it competes on.
Shares in Lufthansa, which had already cut its full-year profit target earlier this month for the second time this year, were little changed at 0939 GMT. The stock has fallen about 23% over the past six months.
Lufthansa reported a group net result of 469 million euros in the second quarter, down by almost half compared to the same period last year.
Spohr said the restructuring programme could help improve the group’s position, with a focus on modernisation.
(1 dollar = 0.9239 euro)