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Lufthansa sees major profit increase

Lufthansa on Thursday posted second quarter net profits of more than €300 million, a 55.2 percent rise on the same period last year when Iceland's volcanic eruption hit the industry.

Published: 28 July 2011 11:29 CEST

Lufthansa sees major profit increase

Photo: DPA

Lufthansa reported a net profit of €301 million ($432 million) for the three months from April through June, a company statement said.

Operating profit was 44.7 percent higher at €230 million, a sum that nonetheless fell well below an average analyst forecast compiled by Dow Jones Newswires of €318 million.

Obstacles faced this year included the Japanese earthquake, tsunami and nuclear disaster, and political unrest in North Africa, the airline noted.

Shares in Lufthansa plunged in early Frankfurt trading, showing a loss of 2.83 percent to €14.065, while the DAX index on which they are listed was 1.07 percent lower overall.

“Lufthansa remains among the profitable airlines in the world even after six months of strong headwinds,” finance director Stephan Gemkow was quoted as saying.

The airline expects the situation in Japan to improve but saw additional challenges in high oil prices and “competitive pressure in certain markets.”

Charges related to hedging its fuel costs had forced Lufthansa to post a net loss of €507 million in the first quarter of the year.

It reiterated Thursday however its full-year forecast for higher sales and operating profit than in 2010, citing “the prospect of a positive development of business during the coming six months.”

On Wednesday Lufthansa had reported a net loss of €206 million for the first half of 2011 but said it did manage to turn a small operating profit of €3 million over the period.

The group, which also includes Swiss, Austrian Airlines and BMI, had posted a net loss of €104 million in the corresponding period in 2010.

The company’s €3 million operating profit in the first half stood in contrast to an operating loss of €174 million a year earlier.

Sales were €14.1 billion over the same period, a gain of 11.4 percent.

The Local/AFP

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How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year.

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’, Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn.

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment?

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024 about 1 percent below the estimated structural level.

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending?

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”. The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”.

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025.

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023.

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write.

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers.

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”

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