Lufthansa sees challenging second half, prices still under pressure

BERLIN: German airline Lufthansa said it saw no let-up in pressure on ticket prices due to competition from low-cost rivals and the second half year would be more challenging than the first, even as lower fuel costs boosted quarterly profit.

Europe's largest aviation group by revenue is in the midst of a restructuring as it tries to remain competitive against fast-growing budget rivals in Europe as well as carriers such as Emirates and Turkish on long-haul routes.

Lufthansa has introduced a new fare structure that brings tickets more into line with the likes of Ryanair and easyJet, meaning passengers pay extra depending on the amount of luggage they have, whether they wish to book a seat in advance, and if they need a flexible ticket.

However, plans by Ryanair to slash winter fares could bring more pain for Lufthansa, which has seen yields, a measure of pricing, fall over the last 18 months. Yields fell 5.7 percent in the second quarter alone, Lufthansa said on Thursday.

"We do not see any relief on prices," Chief Financial Officer Simone Menne told journalists.

"The competitive situation in Germany, as you can see from our rivals, is getting tougher, and the pressure in Asia is not easing."

Still, Lufthansa confirmed a target for 2015 adjusted earnings before interest and tax of over 1.5 billion euros ($1.7 billion) for 2015, excluding the effects of strikes, against 1.17 billion for 2014.

Also on the positive side, a long-running row with pilots over reducing costs and low-cost expansion may be nearing an end after pilots' union Vereinigung Cockpit last week made concessions on pay and retirement age.

Cabin crew union UFO has also said it expects its own pay talks to come to a swift end once management has reached a deal with pilots.

Rival Air France-KLM, struggling with its own high costs, said last week it would have to scrap some long-haul routes if pilots did not reach a productivity agreement by the end of September.

For the second quarter Lufthansa reported adjusted EBIT of 635 million euros, higher than a company-supplied consensus of 524 million. For 2015 it estimated a fuel bill of 6 billion euros, compared with a previous forecast of 6.2 billion.