Lufthansa further increased its 2010 fuel cost estimate, adding that it now expects a fuel bill of EUR5.2 billion in 2010 (Dow Jones, 05-May-2010). The carrier had previously forecast EUR4.9 billion in fuel costs for 2010, an increase from EUR3.7 billion in 2009. The carrier added that the rise in jet fuel prices, combined with renewed industrial action by staff (which cost the carrier nearly EUR50 million) and repeated closures of airspace due to volcanic ash clouds, could jeopardise its forecast for improved operating earnings in 2010. However, the carrier has reiterated it expects 2010 operating earnings to be improved from the EUR130 million achieved in 2009. Newly integrated airlines, Austrian Airlines and bmi, accounted for a third of the carrier's 1Q2010 loss and are expected to also weigh on earnings for FY2010.
Lufthansa raises fuel cost estimate to EUR5.2bn
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SWISS made almost half Lufthansa Passenger Group operating profits 2009-2015, but trend slowing
From 2009 to 2015 SWISS accounted for 47% of the operating profits produced by all the airlines in the Lufthansa Passenger Airline Group, and 29% for the Lufthansa Group overall. It has also consistently been the Group's most profitable airline in margin terms. In 2015 it even managed to post a higher margin than Lufthansa's MRO business – traditionally a much more robust and profitable activity than most airlines.
Nevertheless, SWISS seems now to be struggling to maintain these achievements. Its passenger load factor, while still the highest in the group, is on the decline. Revenue is falling and SWISS suffered a drop in margin in 1Q2016. The seasonally weak 1Q may not say too much about prospects for the full year, but Lufthansa expects SWISS to report a slightly lower adjusted EBIT in 2016 relative to 2015.
With four new Boeing 777-300ER aircraft now in SWISS' long haul fleet and the first Bombardier C Series due to join its short haul fleet imminently, SWISS is not standing still.
Lufthansa cuts 1Q2016 operating loss, but mainly thanks to one-offs and fuel. Cost focus still key
The Lufthansa Group narrowed its operating loss in the seasonally weak 1Q2016, in spite of a fall in revenue. A weak pricing environment was more than offset by a reduction in unit costs. This was principally thanks to lower fuel costs, but there was also a welcome fall in underlying ex fuel CASK at constant currency.
However, although Lufthansa Passenger reported higher profits than in 1Q2015, there was a decline for SWISS, Eurowings, Cargo, MRO and Catering. For LCC Eurowings, this was partly due to start-up costs in long haul and at Vienna, but it also reflected strong LCC competition in Germany. Lufthansa is still considering whether to add Brussels Airlines to its Eurowings operation. Austrian only improved its result because of a one-off gain and, moreover, it seems that the improvement in operating profit at the Group level compared with 1Q2015 was due to one-off items.
Lufthansa still expects to post a slightly higher adjusted EBIT result in 2016 than in 2015. Nevertheless, its 1Q2016 report demonstrates that, for all its restructuring progress, it is not achieving results that are consistent with the broader cyclically high margins of the global airline industry. Further CASK reduction remains the focus.