In the search for comparatively cheap airline tickets Lufthansa customers will soon have even harder to find what they are looking for. As Lufthansa CEO Carsten Spohr announced yesterday, Europe's largest airline wants to raise ticket prices in the near future. The reason given by Spohr was the further increase in the price of oil this year, which is also driving the kerosene calculation of the Lufthansa Group upwards. "We have to better reflect the oil prices in the ticket prices," emphasized the CEO. "A flight can not be so cheap at an oil price of $ 80 as it is at an oil price of $ 30." He said it was "about the lower price range," as he executed on request of this newspaper. "If you fly from Frankfurt to Majorca, you pay less for the two hours on the plane than for having your car in the parking garage at Frankfurt Airport for the same two hours," Spohr complained in a conference call. "In my view, that has no future."
Currently, the price of oil for the leading North Sea Brent Crude is quoted at around $ 76. Although the barrel of oil costs significantly less than at the beginning of October, when about 84 dollars were due. But a year ago, the price was $ 56 and two years ago $ 50. The Lufthansa Group's kerosene calculation – even after adjusting for the increased number of flights offered – has risen sharply: in 2017 by seven percent to 5.2 billion euros; According to Lufthansa, this year fuel will rise by a further 850 million to almost 6.2 billion euros; and in the coming year, management expects the kerosene calculation to be an additional 900 million euros higher. Traditionally, the fuel consumption of an airline is the second highest cost factor – after the personnel expenses. At the reporting date, September 30, the fuel bill at Lufthansa accounted for around one-sixth of the total costs, which stagnated at around EUR 26 billion compared to the same period of the previous year.
2019 lower growth
How much of the 900 million euros the board wants to bring in higher ticket prices, Spohr could not say. "The market will also decide that," said the CEO with regard to the competition. And that was tough in the first nine months, especially in the Europe business. Average yields fell by two percent. Also because of the fact that the group had increased its seat capacities clearly, in order to chase away the market shares of the competitors. But that's the end of it: Spohr announced that Lufthansa would not expand its capacity as clearly as its competitors. Accordingly, in the summer of 2019, the number of seats available will only increase by 3.8 percent; For the full year, it should be five percent compared to about eight percent increase this year. That means: Profit goes before market share.
From January to September, overall profitability has fallen. Sales rose slightly by one percent to 26.9 billion euros. Adjusted earnings before interest and taxes (EBIT) fell by eight percent to 2.36 billion euros. But apart from the fact that after the record profit in 2017, this figure represents the second highest operating result in the history of the Group, the decline is not only due to the more expensive kerosene.
In the office struck with 170 million euros and the bumpy integration of 77 acquired Air Berlin aircraft in the budget subsidiary Eurowings. And the company had to fork out 350 million euros for passenger compensation, transport and hotel costs as a result of the unusually large number of flight cancellations in this country in the summer. He had to cope with about 18,000 flight cancellations. The airline group – consisting of the Lufthansa brand, the low-cost platform Eurowings, the Swiss and Austrian Airlines (AUA) – flies around 4400 times a day.
Spohr yesterday confirmed the forecast that adjusted EBIT would remain "slightly below" the 2017 record this year. But investors were still disappointed: The share price rushed by up to nine percent to 17.13 euros down, and thus at the lowest level since May last year.
Particularly disappointing was the development at the Cologne subsidiary Eurowings: Due to the integration costs and the cost of flight cancellations slipped Eurowings with minus 65 million euros in the loss – last year there had still been a profit of 145 million. Thanks to the strong first half of the year, network airlines Lufthansa, Swiss, AUA managed to keep their earnings at a total of 1.96 billion euros. The relatively small but fine Swiss compensated for the decline in profits of the big Lufthansa and the AUA.
Sale of the caterer LSG?
After a restructuring program, the Frankfurt freight subsidiary Lufthansa Cargo made a significant profit jump: Ebit rose from 98 to 153 million euros. The catering subsidiary LSG Sky Chefs, also based in Rhein-Main, was also successful: The Ebit of the division, whose European business is currently undergoing a hard slimming cure, climbed from 66 to 99 million euros. With a margin of 4.1 percent, the caterer is still far less profitable than the business with the network airlines. And that's obviously the reason why the board of management is considering selling at least a stake in the LSG Sky Chefs. "We have to see if there is a better ownership structure than 100 percent Lufthansa," said Spohr on demand. The LSG makes only a quarter of its business with Lufthansa.