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Lufthansa Narrows Loss as Cheaper Fuel Offsets Pension Costs

Published on May 5 2015 6:54 AM in General Industry tagged: Lufthansa

Lufthansa Narrows Loss as Cheaper Fuel Offsets Pension Costs

Lufthansa narrowed its operating loss in the first quarter as lower fuel costs countered the effects of a weaker euro and an increase in pension expenses.

Lufthansa, based in Cologne, reported a loss before interest and tax of €144 million ($160 million) in the quarter ended 31 March, compared with a year-earlier loss of €217 million, in an earnings report Tuesday. That’s better than the average estimate of 14 analysts for a loss of €201 million that the company provided prior to the report.

“We see positive developments in the result and in cash flow,” chief financial officer Simone Menne said in the statement. “This shows we are on the right course. At the same time, we continue to see great pressure to act.”

Lufthansa is still reeling from the deadliest crash in its history, when a co-pilot at its Germanwings unit flew an Airbus A320 into the French Alps, killing all 150 people on board. Even before the disaster, Germany’s biggest airline struggled with fallout from one of the fiercest labour disputes the company has faced as well as pressure from low-cost competitors and carriers in the Persian Gulf attacking on long-haul routes.

Lufthansa pilots staged six days of walkouts this year in a conflict over retirement benefits, and the company last week said it expected €100 million in costs from these strikes while offering the Vereinigung Cockpit union arbitration on a set of collective agreements as it seeks to end strikes that have crippled the airline since last year. The union hasn’t yet said if it will accept the offer.

Sales in the quarter rose 7.9 per cent to €6.97 billion, while the company reported net income of €425 million, compared with a loss of €252 million the year earlier. The effects of exchanging a convertible bond into shares of JetBlue Airways contributed €503 million to the financial result, Lufthansa said.

Expenses for fuel dropped by €209 million in the quarter, Lufthansa said. The pension burden climbed by €3.4 billion as interest rates continued to decline.

Bloomberg News, edited by Hospitality Ireland

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