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Lufthansa Examines ITA Airways As Finance Data Opens To Bidders; Sees Return To Profit This Quarter

Published on May 6 2022 1:56 PM in General Industry tagged: Lufthansa / MSC / ITA Airways

Lufthansa Examines ITA Airways As Finance Data Opens To Bidders; Sees Return To Profit This Quarter

Lufthansa LHAG.DE and its partner MSC have been looking at financial data opened up by state-owned ITA Airways to see if the Italian airline would make a good strategic acquisition, the German carrier's chief executive said on Thursday 6 May.

Details

Prospective bidders for ITA Airways have had access to its finance data room for about 72 hours, chief executive Carsten Spohr told a news conference.

The Italian government wants to clinch an ITA privatisation deal by mid-June, sources told Reuters in March.

"When it comes to investments, we are only interested in restructured airlines, and we believe ITA is one of them. We are now checking the information available in the data room to confirm that this is the case," the Lufthansa CEO said.

Spohr said Italy was already Lufthansa's most important market in Europe, and globally its second largest after the United States, as it is the biggest intercontinental carrier for both Italians and people travelling to the country from abroad.

"The purchasing power there is high," he said, adding that the exchange of goods between Germany and the Italian region of Lombardy was equivalent to that of Germany and Japan.

He said a hub in southern Europe would make a good addition to Lufthansa's existing strong network in the north.

ITA started flying in October, after replacing Italy's 75-year-old carrier Alitalia which was finally grounded after years of losses and failed rescue attempts.

In January, shipping group MSC expressed interest in buying a majority stake in ITA with Lufthansa. The partners asked for exclusive talks but Rome chose an open procedure.

Other bidders which can also access the data room are the US Certares fund in cooperation with Delta DAL.N and Air France AIRF.PA, alongside Wizz Air WIZZ.L investor Indigo Partners, sources have said.

Lufthansa Sees Return To Profit This Quarter As Air Travel Rebounds

The above news followed news that Germany's Lufthansa LHAG.DE is looking to return to an operating profit this quarter as demand for travel rises with the easing of COVID-19 curbs and the airline raises ticket prices to offset higher costs.

The group, which owns the German airlines Lufthansa and Eurowings as well as Swiss, Austrian and Brussels Airlines, doubled sales in the first quarter as more people started travelling again after two years of lockdowns and travel restrictions, although an overall first-quarter operating loss was bigger than analysts had expected.

"As the pandemic subsides, families, friends and business partners around the world are travelling to meet each other again. And I think the world is also coming to realize how important friendly personal contacts are," chief executive Carsten Spohr told a news conference.

The airline reported that first quarter revenue doubled from a year earlier to €5.36 billion, exceeding analysts' average forecast for sales of €5.12 billion, though it was not able to reduce losses as much as expected due to skyrocketing fuel prices amid Russia's war in Ukraine.

Lufthansa's adjusted loss before interest and taxes (EBIT) narrowed to €591 million in the first quarter, from a loss of 1.05 billion euros for the same period of 2021.

Analysts had on average expected the loss to narrow to €558 million according to a company-provided consensus.

However, the airline hopes to be able to pass some of the rising costs to customers with flight ticket price hikes.

"I don't see any problem with price increases affecting demand. Over the last six months, we have already pushed through a couple of price hikes. I think it's four already along the way," finance chief Remco Steenbergen told the conference.

"We live in a world where we see incredible inflation and price increases. We see that in commodities, hotels, rental cars. And I think price increases are significantly more in those other industries than for us," the CFO added.

The group also said its Swiss unit would terminate its 1.5 billion Swiss franc ($1.53 billion) state credit line ahead of time, closing another chapter in the state support that helped Lufthansa survive the impact of the pandemic.

Lufthansa's Franco-Dutch rival Air France-KLM AIRF.PA reported a first-quarter core profit ahead of its own forecasts, citing successful oil price hedging in addition to the recovery in ticket sales.

London-based rival IAG ICAG.L, which owns airlines including British Airways, is due to publish first-quarter results on Friday 6 May.

Lufthansa Sees No Impact Of Boeing 777X Delays On Its Capacity

All of the above news followed news that Lufthansa LHAG.DE said on Thursday 5 May that the delayed delivery of Boeing BA.N 777X planes is leading to prices being renegotiated and has no impact on the German carrier's capacity as it was talking to the US company to get other types of plane.

"Let's assume that we get paid for our patience. Behind all delays are negotiations, sometimes renegotiations," Chief Executive Carsten Spohr said in a news conference when asked about the impact of delays Boeing announced in late April.

"Even if we talk with Boeing about other aircraft, old or new, it is all about discounts, and delays are always reflected in the prices," Spohr said.

Boeing had said on 27 April that it was halting production of the 777X through 2023 due to certification problems as well as weak demand for the wide-body jet, and disclosed $1.5 billion in abnormal costs related to the program.

Fuel Costs Hurt Lufthansa's Q1

All of the above news followed news that Germany's flag carrier, Lufthansa LHAG.DE, reported a bigger-than-expected quarterly loss on Thursday 5 May as rising fuel costs cancelled out revenue gains from booming travel demand after lifted COVID-19 restrictions.

The airline's adjusted loss before interest and taxes (EBIT) narrowed to €591 million in the first quarter from the loss €1.05 billion it reported for the same period of 2021.

Analysts had on average expected the loss to narrow to €558 million according to a company-provided consensus.

However, the company confirmed its forecast for an improvement of its adjusted EBIT in 2022 compared to 2021.

"The current level of bookings gives us confidence that our financial results will further improve in the coming quarters. We must pass through rising costs to customers," finance chief Remco Steenbergen said in a statement.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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