March 22 (Bloomberg) -- Deutsche Lufthansa AG, Europe's second-biggest airline, may say fourth-quarter earnings slumped because of rising fuel costs and slowing travel demand.
Lufthansa's fuel bill jumped about 40 percent each quarter last year, more than at Air France-KLM Group, as oil prices rose, according to Penny Butcher, a London-based analyst at Morgan Stanley who rates the stock ``overweight/cautious.'' Traffic increases at Cologne, Germany-based Lufthansa are now lagging behind competitors including Air France, Europe's biggest airline.
The average price of jet fuel in northwestern Europe rose 22 percent in the fourth quarter and 41 percent over the full year. Oil costs already eroded earnings at carriers including Ryanair Holdings Plc and Spain's Iberia Lineas Aereas de Espana SA.
Lufthansa spent 1.8 billion euros on fuel in the first nine months of 2005, about 38 percent more than a year earlier.
Cure From Italy, joined Sep 2005, 227 posts, RR: 0 Reply 1, posted (7 years 3 months 2 hours ago) and read 1761 times:
The title is a bit misleading with respect to the article, which I think is written to describe the critical position of Lufthansa now compared to last year, and perhaps the conclusion coud be that the airline's business plan was a little too optimistic in preventing the effects of rising fuel prices, which jumped for anybody else.
And I will not leave alone that "slowing travel demand"...(reason for which I think being northamerican carriers and LCCs jumping in the german market)...
Let's see the report tomorrow...
Flying-Tiger From Germany, joined Aug 1999, 4115 posts, RR: 39 Reply 3, posted (7 years 3 months 1 hour ago) and read 1663 times:
Should be because the old and very favourable hedging contracts came to an end, and the new ones are/were based on today's price environment. LH has been known to have a very good hedging strategy, but if you're now confronted with such market conditions as today your bills will jump, and will jump more than those of the competition which hasn't hedged as well in the beginning and has thus a small increase in %.
Cure From Italy, joined Sep 2005, 227 posts, RR: 0 Reply 4, posted (7 years 3 months ago) and read 1591 times:
Quoting Flying-Tiger (Reply 3): Should be because the old and very favourable hedging contracts came to an end, and the new ones are/were based on today's price environment.
Does anyone have the figures of LH's fuel contracts, and in particular when are they supposed to expire?
Quoting Flying-Tiger (Reply 3): LH has been known to have a very good hedging strategy, but if you're now confronted with such market conditions as today your bills will jump, and will jump more than those of the competition which hasn't hedged as well in the beginning and has thus a small increase in %.
Every big airline is facing this problem right now, isn't it?
If I had money to invest on an airline, I wouldn't choose LH right now and if I had stocks I'd probably sell them, since I think they can just get worst in the future considering the very good rate they got til now. A reduction of TWO THIRDS of the net income is NOT a very good sign on the base of a year. That's my personal opinion.
Travel demand is slowing for Luftansa, but not in Germany in general I guess, since all over Europe is rising...
I think Lufthansa is starting to face quite big changes: Germany is a very profitable and very interesting market for airlines, as shown by DL, CO and many LCCs, and I guess there will be someone else daring a consistent jump in it. It will be HARDER to compete than it is starting to be, and they (LH) start at the difficult position of a leader: if they save money to the cost of the very good image they have, there will be no potential costumer choosing them before other companies...
Thebry From United States of America, joined Jan 2006, 374 posts, RR: 0 Reply 5, posted (7 years 2 months 4 weeks 1 day 22 hours ago) and read 1486 times:
Quoting A333X (Reply 2): I'm still waiting for the unavoidable reply coming from the other side of the Pond: "... No wonder, since they have A346 in their fleet"...
I'm from "the other side of the pond" and don't believe the A346 is the (only) reason for their increased fuel costs. I'm still laughing at your post, by the way... thought it was hilarious you beat some of the other A-bashing guys to the punch.
anyway...
Quoting Flying-Tiger (Reply 3): Should be because the old and very favourable hedging contracts came to an end, and the new ones are/were based on today's price environment. LH has been known to have a very good hedging strategy, but if you're now confronted with such market conditions as today your bills will jump, and will jump more than those of the competition which hasn't hedged as well in the beginning and has thus a small increase in %.
This is an astute observation, and one I'm inclined to subscribe to. LH has run an extremely solid business -- I'm hoping this fuel issue won't throw a spanner in the works.
BTW -- my first flight ever to Europe was onboard an LH 747-400 from LAX to Frankfurt way back in 1992. LOVED the flight, loved the service and absolutely loved Germany. You've got a great country there, FlyingTiger.
DAYflyer From United States of America, joined Sep 2004, 3807 posts, RR: 4 Reply 6, posted (7 years 2 months 4 weeks 1 day 22 hours ago) and read 1466 times:
Too many fuel thirsty A-340's in the fleet....send them some 777's
Airbazar From United States of America, joined Sep 2003, 6952 posts, RR: 7 Reply 7, posted (7 years 2 months 4 weeks 1 day 21 hours ago) and read 1448 times:
Quoting Cure (Reply 4): Every big airline is facing this problem right now, isn't it?
If I had money to invest on an airline, I wouldn't choose LH right now and if I had stocks I'd probably sell them, since I think they can just get worst in the future considering the very good rate they got til now.
So which airline would you invest in? Every airline will suffer when their long time fuel hedging eventually expires. It just so happens that LH's expired this year.
Thebry From United States of America, joined Jan 2006, 374 posts, RR: 0 Reply 8, posted (7 years 2 months 4 weeks 1 day 21 hours ago) and read 1431 times:
Quoting DAYflyer (Reply 6): Too many fuel thirsty A-340's in the fleet....send them some 777's
I wondered which of my fellow patriots would lob this grenade over the wall then crouch and plug is ears -- true to A333X's prediction. I'm still laughing my ass off
Again, this can't be the ONLY reason why their fuel costs are skyrocketing (there are other cases in this thread that make most sense) but I'm sure everyone who reads the post (maybe just from our side of the Atlantic) will think the same thing -- "It's the A346's! Swap 'em with 777s"
Cure From Italy, joined Sep 2005, 227 posts, RR: 0 Reply 9, posted (7 years 2 months 4 weeks 1 day 18 hours ago) and read 1356 times:
Quoting Airbazar (Reply 7): So which airline would you invest in?
Better BA, or SU (not so worth investing in airlines though - LCCs = different)
Quoting Airbazar (Reply 7): Every airline will suffer when their long time fuel hedging eventually expires. It just so happens that LH's expired this year.
That's wat I was saying, and it will be a hard time: less succeeding investing in LH now.
RJ111 From , joined Dec 1969, posts, RR: Reply 10, posted (7 years 2 months 4 weeks 1 day 18 hours ago) and read 1325 times:
Quoting DAYflyer (Reply 6): Too many fuel thirsty A-340's in the fleet....send them some 777's
Quoting Thebry (Reply 5): I'm still waiting for the unavoidable reply coming from the other side of the Pond: "... No wonder, since they have A346 in their fleet"...
I immediately expected these responses from the less astutue users who failed to notice that the increase was recorded and compared in percentage. Having the 777, or any plane, would have made no difference to the % increase - the 340s won't start burning more when they see the price of fuel go up. Perhaps more to do with LH's policy on buying fuel, or something of that ilk.
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