German aviation group Deutsche Lufthansa AG (DLAKY, DLAKF) reported Friday a sharp decline in second-quarter profit, despite slight increase in passenger traffic, while it slipped to a loss in its first half. Going ahead, the company continues to project growth in fiscal 2013 passenger earnings and revenues.
The company said the ongoing sovereign debt crisis in the euro zone and the volatility of foreign currencies adversely have affected the group's result in the first half-year. Despite higher cost for fuel, it had a positive impact as a result of reduced consumption in the second quarter.s
On Frankfurt's Xetra, Deutsche Lufthansa shares are currently trading at 14.92 euros, down 0.52 euros or 3.37 percent.
Net profit attributable to shareholders of the company for the second quarter plunged 42.6 percent to 255 million euros from 444 million euros a year earlier.
Earnings, before, interest, tax, depreciation and amortization or EBITDA dropped 7.9 percent to 861 million euros. EBITDA margin was 11 percent, 0.9 percent points lower than last year. Adjusted operating margin also declined 1.9 percent.
Total revenue for the quarter edged down 0.7 percent to 7.84 billion euros from last year's 7.89 billion euros. Traffic revenues dropped 0.9 percent year-over-year to 6.44 billion euros, while passenger traffic improved 0.6 percent to 27.83 million passengers. The company's passenger load factor was 79.7 percent, 0.3 percentage points higher than last year.
Meanwhile, freight and mail traffic edged down 0.4 percent, and cargo load factor dropped 0.3 percentage points to 67.9 percent. Overall load factor for the quarter was 74.4 percent, higher than prior year's 74.2 percent.
For the first half, the company posted net loss of 204 million euros, compared to last year's profit of 50 million euros. Revenue edged down 0.3 percent to 14.46 billion euros as the traffic figures were down in both the passenger and cargo business.
As part of strict capacity management, the number of flights fell 5.1 percent, while available seat-kilometres remained stable, primarily due to the use of larger aircraft and a higher proportion of Economy Class passengers.
Looking ahead, Lufthansa continues to expect that its Passenger Airline Group will deliver a modest increase in revenue and operating profit for 2013, above last year. Earnings are expected to be hit in the fourth quarter by one-off expenses arising from product related measures.
Chairman of the Executive Board Christoph Franz said, "Looking to the second half-year, we expect the market to remain volatile. Fuel prices remain very unstable, as do exchange rates, and this makes it difficult to plan ahead. Market changes and political upheaval mean that developments vary across the different regions of the world."
Fraz further said, the volatile factors continue to put pressure and the airlines in the Lufthansa Group will continue to pursue restrictive capacity management, thereby stabilising earnings.
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