Lufthansa reins in expansion as crowded skies threaten profit

Bloomberg

Deutsche Lufthansa AG will rein in expansion plans this year as a glut of plane seats depresses ticket prices and travellers delay bookings amid fears of terror attacks.
Capacity growth this year will be below the previously targeted 6 percent, Chief Executive Officer Carsten Spohr said in an interview in Berlin. That marks the second reduction in projected expansion in recent weeks.
“There’s too much capacity in the market, and a better adjustment of capacity and
demand will help us with our profitability,” Spohr said.
The cuts will come on short- and long-haul routes at Lufthansa’s namesake brand, while the Eurowings low-cost arm will continue its expansion, the executive said.
The move, which is partially a response to an increasing proportion of shorter-term bookings, will also help ease a shortage of cabin crew, Spohr said.
While low oil prices have led to record profits at Lufthansa and other airlines and spurred expansion, summer capacity plans failed to take into account the impact of terror attacks in Paris, Brussels and Turkey. Lufthansa still plans to add more capacity that rivals Air France-KLM Group and British Airways-parent IAG SA, even after its yield, a measure reflecting average ticket prices, suffered the biggest drop in more than four years in the first quarter.
Lufthansa shares fell 1 percent to 12.55 euros in Frankfurt. The stock has slumped 14 percent this year, valuing the company at 5.8 billion euros ($6.6 billion). As part of the adjustment, Lufthansa is considering grounding three Airbus Group SE A340 long-haul aircraft stationed in Frankfurt and Munich after the summer, while maintenance schedules could be used to reduce short-haul capacity, Spohr said. Lufthansa had already curtailed its capacity growth plans this month.