Lufthansa pares growth plans after fare war weighs on profit

Bloomberg

Deutsche Lufthansa AG cut its growth plans after a slide in fares and higher fuel costs weighed on 2018 earnings.
The stock fell the most in 4 1/2 months after the German carrier said it will slow capacity increases to 1.9 percent this summer from the 3.8 percent previously planned in an effort to bolster prices and cope with limited room for extra flights at airports.
Lufthansa is putting a brake on expansion as it focuses on profitability after a year in which an industry-wide glut in seats combined with severe weather and air traffic control strikes to erode margins. European rivals have warned that a fare war will make for a tough summer, with Ryanair Holdings Plc, the region’s top discounter, cautioning last month that conditions could get tougher.
Chief Executive Carsten Spohr said earnings had been held back despite the best revenue performance in Lufthansa’s history. Capacity growth across the sector should slow to 3 percent in Europe this summer, providing some relief for yields, a measure of fares. Scope for German expansion is limited any way as air traffic controllers are recruited too slowly to cope with demand, he said.
Lufthansa dropped as much as 6.7 percent, the most since October 30, and was 5.2 percent lower at 21.66 euros as of 10:41 am in Frankfurt. That pares gains this year to 10 percent after the shares fell almost 36 percent in 2018.
The carrier’s adjusted earnings before interest and tax fell 7 percent to 2.8 billion euros ($3.2 billion) last year, versus an average analyst estimate of 2.75 billion euros. The figure was boosted by a 122 million-euro accoun-ting gain from capitalising engine overhauls.