Lufthansa cuts 2008 profit target

Germany's top airline Lufthansa cut its 2008 operating profit target to €1.1 billion ($1.4 billion) on Tuesday owing to "record" fuel costs, weaker demand and the global financial crisis.

Lufthansa’s board “has adjusted the profit expectations to the economic slowdown and the ongoing uncertainties regarding the implications of the financial market crisis,” it said.

In 2007, the biggest German carrier posted an operating profit of €1.38 billion and it had expected to reach the same level this year. Commerzbank analyst Frank Skopzik was quoted by Dow Jones Newswires as saying that the profit warning was not a huge surprise in light of slowing air travel demand but that he was surprised by how weak the results were.

In the nine months to September, Lufthansa’s operating profit came to €984 million, down 9.3 percent from a year earlier, “due to record levels in fuel costs which could not be fully compensated (for) in the increasingly difficult environment,” the company said.

Net profit tumbled to €551 million from €1.6 billion, well below the average analyst forecast of €730 million.

The year-earlier figure “was marked by booked gains from portfolio activities and a one-off tax effect” linked to Lufthansa’s acquisition of the airline Swiss, and the sale of holdings in British travel group Thomas Cook. Sales in the nine-month period came in at €18.6 billion, roughly in line with analyst forecasts. Further details were to be provided on Wednesday.

“We’ve expected a profit warning in our estimates but are surprised how weak the third quarter figure came in,” said Skopzik of Commerzbank. Lufthansa shares have lost more than half of their value over the past year owing to sharply rising fuel costs and signs of weakening demand for air travel.

On Tuesday, they shed 8.71 percent to €9.43, while the DAX index of leading German shares soared 11.28 percent, in large part owing to another spectacular gain by auto giant Volkswagen.