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Lufthansa shares dive on profit warning

Article By: ,  Financial Analyst
June 11, 2014 4:45 PM

The share price of German airline Lufthansa collapsed today (June 11th) after the company issued a profit warning to investors.

It was revealed by the airline that its profit targets for the next two years are going to be missed and this led to heavy losses for the firm's stocks.

Operating profits of around one billion euros (£806 million) are now being forecast by the company for this year, which is a considerable drop on the previous estimated given of 1.3 billion to 1.5 billion euros.

Lufthansa also stated that its 2015 earnings target has now been cut to two billion euros from 2.65 billion euros, with a three-day pilot strike in April blamed for the loss of 60 million euros.

Revenue risks

Chief financial officer Simone Menne said: "The revenue risks mentioned when we presented the quarterly figures in early May have unfortunately materialised.

"We will therefore noticeably reduce our capacities during the winter timetable period. We are achieving a sustainable reduction of our unit costs and now aim to stabilise the revenue trends, in order to counteract an ever intensifying competitive situation."

Lufthansa blamed currency restrictions in Venezuela that prevented airlines from repatriating revenues from ticket sales for a further 60 million euros loss in its latest financial results. Ms Menne also pointed out that more seats are being offered by rival airlines and this has had a major impact on Lufthansa's financial situation in the last few months.

Shares in the airline fell heavily throughout the day despite a mini-revival in the morning session, but by 14:25 BST, they were over 14 per cent down compared to the start of the day. Almost three points have been wiped off the share price of the company, although stocks remain a considerable distance above the firm's 52-week low for its stocks. Shares are currently trading at around the 17.03 mark, but they have fallen to as low as 12.54 in the last year.

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