Lufthansa (ETR:LHA) revealed on Thursday a wary revenue and profit guidance for this year after reduced fares and higher fuel prices dampened its 2018 earnings.
The German carrier said that it will slow capacity increases to 1.9% over the summer period. This reduced figure compares to the 3.8% previously predicted, and is an attempt to strengthen prices.
Overall, the group has set its operating margins forecast at 6.5-8%. Additionally, revenue is expected to grow by 4-6%.
The company has said that it will be focusing on achieving sustainable quality growth in 2019.
The stock dropped the most in 4.5 months on Thursday on the back of the announcement.
Last year, adjusted earnings before tax dropped 7% to €2.8 billion, just above the average estimate by analysts of €2.75 billion. The €2.8 billion figure is slightly less than the €3 billion recorded the year before. Lufthansa has said that rising fuel costs and expense incurred through delays and cancellations weighed the figure down.
Germany’s biggest airline also revealed a 1.9% increase in its February passengers when compared to the month prior.
With Boeing’s 737 MAX aircraft grounded across the world following last week’s Ethiopian Airlines crash, Lufthansa will avoid disruption as it does not fly the model.
“We continue to work on further reducing our unit costs year by year,” Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG said. “We managed to do so in 2018 for the third year in a row. We are well equipped to invest in profitable growth and simultaneously further enhance our cost efficiency in the future, too.”
Low-budget carrier Ryanair (LON:RYA) recently warned last month that conditions could get worse. The biggest discounter in region revealed that average fares fell and cost rose, driving a €19.6 million loss during its third quarter.
Many of these costs were attributed to higher fuel costs. Lufthansa warned on Thursday that it expected its fuel costs to rise by €650 million. Its cost reduction is a significant attempt to offset the additional fuel costs it expects to incur.
At 15:22 CET Thursday, shares in Lufthansa (ETR:LHA) were trading at -6.61%
