Lufthansa to scrap payout as profits slip

City A.M. Reporter
LUFTHANSA posted a 2009 operating profit that was better than expected yesterday after the German flagship carrier started slashing costs to become more lean and compete with low-cost carriers and Asian rivals.

Its operating profit dropped to €130m (£118.1m) in 2009 from €1.3bn a year earlier – beating the €31m analysts had forecast – Lufthansa said as it unexpectedly published key earnings figures yesterday.

“The positive operating result of Lufthansa in 2009 despite the disastrous market environment is clearly a good signal to the market,” said DZ Bank analyst Robert Czerwensky.

Lufthansa’s sales dropped by about 10 per cent to €22.3bn. It posted a net loss for the year of €112m compared with a year-earlier profit of €542m. The company said it would not pay a dividend for 2009, because of the net loss. It paid a 2008 dividend of €0.70 per share. Airlines are reeling from the aviation industry’s worst year ever, in which demand dropped faster than capacity could be cut, and Lufthansa has been fighting the downturn by cutting the number of flights it runs and trying to reduce its costs. It aims to cut €1bn of costs by next year, moving passengers from pricey business class seats to cheaper ones at the back of the plane amid the economic crisis. In December, global premium travel grew for the first time in more than one-and-a-half years, according to the International Air Transport Association (IATA).

“Lufthansa posted a slightly positive fourth-quarter result in its passenger business, which was positively impacted by lower fuel costs and (the) first results of its cost-cutting programme,” said Unicredit analyst Uwe Weinreich.

Lufthansa is due to report annual results for 2009 on 11 March.