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ECONOMY

German business mood up slightly despite Ukraine war

The business climate in Germany improved slightly in April as Europe's largest economy absorbed the initial shock of the war in Ukraine, an economic think-tank said on Monday.

A construction site in Berlin Germany
A construction site in Berlin, Germany. Photo: picture alliance/dpa | Carsten Koall

“The German economy has shown its resilience,” Ifo president Clemens Fuest said after the closely watched index rose to 91.8 points from 90.8 points in March.

Companies were less pessimistic about the outlook for the economy, after the mood plunged in March following the Russian invasion of Ukraine, Ifo said.

The overall indicator lost almost eight points in March, while forecasts took a bigger knock than at the start of the coronavirus pandemic two years ago.

The assessment of current conditions was “minimally better”, Fuest said, adding that sentiment among businesses had “stabilised at a low level”.

“The initial shock of the war seems to have abated somewhat, but given the multitude of risks, it is too early to start talking about a turning point,” said Elmar Voelker, an analyst at LBBW bank.

The continuing impact of the conflict in Ukraine was “hard to estimate”, including the possibility of Russian gas supplies being cut off, Voelker said.

Germany, like many European countries, is highly dependent on deliveries of natural gas from Russia to meet its energy needs.

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In the chemicals sector, where the impact of the taps being turned off could be significant and lead to production stops, expectations worsened, according to the Ifo survey.

Confidence in the construction sector also plunged against the overall trend to its lowest level since May 2010, as the sector wrestled with persistent disruptions to supply.

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TOURISM

German airline Lufthansa optimistic for 2022 as tourist demand bounces back

German national carrier Lufthansa on Thursday reported it slashed its losses in the first quarter and set its sights on a record summer for tourist traffic as demand recovers from the pandemic.

German airline Lufthansa optimistic for 2022 as tourist demand bounces back

The airline group’s net loss over the first three months of 2022 came to €584 million ($620 million), down from one billion euros in the same quarter last year.

The improved result owed in part to the pick up in air traffic as coronavirus-related restrictions were rolled back in many countries and fears over the Omicron variant ebbed.

READ ALSO: Omicron wave forces German airline Lufthansa to axe 33,000 flights

The number of passengers on Lufthansa flights “more than quadrupled” in the first quarter to 13 million, from three million in 2021, when travel restrictions in many markets were more severe.

“New bookings are increasing from week to week,” Lufthansa CEO Carsten Spohr said in a statement, with demand rising particularly strongly among leisure travellers.

“More people are expected to fly on holiday” with the group than ever before this summer, Lufthansa said in a statement.

For business travel, the recovery was slower, with the group expecting traffic to reach “around 70 percent” of its pre-coronavirus level by the end of the year.

In all, Lufthansa expected to offer “around 75 percent” of its pre-crisis capacity over the year.

The group’s cargo division had a “record result” in the first quarter, Lufthansa said, as demand for freight remain high amid turmoil in global supply chains.

The segment recorded an operating profit of €495 million, up from €315 million in the first quarter of 2021.

Europe’s largest airline group – which includes Eurowings, Austrian, Swiss and Brussels Airlines – struggled at the outbreak of the pandemic and was saved from bankruptcy by a government bailout.

In response to the pandemic, Lufthansa bosses embarked on a major job-cutting programme which has seen over 30,000 positions shed since 2020, out of 140,000 jobs globally. The company said late last year it still had plans to get rid of 3,000 more jobs.

Lufthansa expected its financial performance “further improve in the coming quarters”, chief financial officer Remco Steenbergen said.

But people flying with the airline will face higher prices for tickets. 

The group said it would have to “pass through rising costs to customers”, Steenbergen said.

“Extreme changes in the price of kerosene” as energy costs surge in the wake of the Russian invasion of Ukraine could have an unpredictable effect on the end of year result, Lufthansa said.

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