Lufthansa under stress amid revamp struggle

Bloomberg

Deutsche Lufthansa AG said passenger fares are set to erode further this year as it grapples with unions over a restructuring of European operations aimed at stemming the flow of customers to discount rivals. The stock fell as much as 7.1 percent.
Lufthansa’s yield, a measure that reflects average ticket prices, suffered the biggest drop in at least four years in the first quarter, while airline revenue declined almost 4 percent, the German carrier said in a statement last week.
Europe’s third-largest airline, which is seeking to build its Eurowings discount arm into a rival for low-cost leaders Ryanair Holdings Plc and EasyJet Plc, said the intensity of competition and price pressure shows no sign of easing. It reiterated that earnings will rise only “slightly” this year as weaker fares erode the bulk of 1 billion euros in savings from lower fuel expenses.
“We’re looking into every single cost item and also ongoing projects,” Chief Financial Officer Simone Menne said on a conference call, adding that Lufthansa also has “less visibility” over second-quarter bookings as people delay travel in the aftermath of the Brussels terror attacks. Union talks have been more constructive recently, though there has been no breakthrough yet, she said.
Shares of Lufthansa fell as much 97 cents to 12.76 euros and were trading down 6.6 percent in Frankfurt, extending their decline this year to 12 percent and valuing the group at 5.92 billion euros.
Lufthansa has split airline operations into two, separating its generally profitable network brands from the short-haul flights it aims to turn around with the expansion of Eurowings.
Labour groups have stood in the way of that plan, with walkouts holding back group profit for nearly past two years.
A 237 million-euro fuel saving linked to the lower oil price helped the company pare its adjusted loss before interest and tax to 53 million euros ($61 million) in the first quarter, from 167 million euros a year earlier.