Lufthansa in the red due to higher fuel bill, drop in unit revenues

Despite a 3 percent increase in revenue to 7.9 billion euros (8.8 billion U.S. dollars), net loss for the Lufthansa Group was 336 million euros in the first quarter of 2019, Germany’s largest airline announced on Tuesday.

The Lufthansa Group includes Swiss Air and the budget airline Eurowings.

“Overcapacities in Europe have significantly impacted the quarterly result,” said Lufthansa’s chief financial officer (CFO) Ulrik Svensson.

Lufthansa also said that the decline in earnings were due to an increase in fuel costs of over 200 million euros in 2018 and a decline in unit revenues in Europe.

Rising in oil prices would continue to put pressure on profits this year, according to Lufthansa, which is expecting fuel costs to climb to 6.8 billion euros.

In mid-April, Lufthansa had already announced that it was expecting a weaker result when it presented preliminary results for 2018.

The German airline nonetheless remained “confident that our unit revenues will rise again in the second quarter” due to a good booking situation in the coming months, said Svensson.

For 2019 as a whole, the Lufthansa Group is expecting revenue growth “in the mid-single-digit range” as ticket prices are expected to rise again in the second quarter.

“The high price pressure on short-haul flights” in Europe had particularly affected Lufthansa’s budget airline Eurowings, as short-haul flights “account for an above-average proportion” of Eurowings’ revenues.

As a consequence, after strong expansion in 2018, Eurowings would no longer increase its offer in the summer of this year, Lufthansa announced. Capacity growth at Eurowings was thus expected to be zero percent, down from an initial forecast of two percent. (1 euro = 1.12 U.S. dollars)