COLOGNE: Deutsche Lufthansa AG, Europe’s second-biggest airline, said 2006 earnings jumped 77% as taxes fell, the carrier flew more passengers and a surcharge on tickets helped make up for fuel costs.
Net income surged to about 800 million euros ($1.05 billion), Germany’s Cologne-based Lufthansa said in a statement on 19 February. Sales rose 9.3 % to 19.8 billion euros. Earnings beat the 534 million-euro average of 15 estimates compiled by Bloomberg.
Traffic rose 2 % last year, led by European routes, and the carrier said on 25 January that it will add capacity in 2007 as demand grows. Lufthansa said it achieved a three- year goal of cutting 1.2 billion euros in costs by the end of 2006, with effective measures in place after a record loss in 2003. The airline, which reported full 2006 figures 8 March, said in December that net income would be helped by a German corporate-tax law change.
“Lufthansa is well-managed and is benefiting in general from a positive environment,” said Florence Tassan, an analyst at Societe Generale in Paris with a “hold” recommendation on the carrier’s shares. “If the conditions in the industry remain favourable, there’s no reason that Lufthansa won’t be able to deliver good news for the rest of the year.”
The airline plans to add 5% to seating this year, more than last year’s 1.8 % increase in capacity. Traffic, or the number of passengers multiplied by the distance flown, grew 8.1 % within Europe in 2006 after Lufthansa offered discounted tickets to compete with low-fare airlines such as Ryanair Holdings. Soccer’s World Cup, held in 12 German cities in June and July, also boosted passenger figures.
Lufthansa’s fuel fees have been higher than its rivals. The carrier increased the surcharge five times, most recently in May, since implementing it in 2004. While Lufthansa reduced the intercontinental surcharge by 16 % in October to 52 euros a flight as oil prices fell, there are no plans to cut the fee further, Stefan Lauer, Lufthansa’s personnel chief, said on 5 February.
Air France-KLM Group, Europe’s biggest carrier, reduced its surcharge on 3 February to 44 euros per long-haul flight, following British Airways’ 12 January decrease to 30 pounds ($59).
The fees, along with more first- and business-class passengers, helped Lufthansa’s yields, a measure of fares, rise 9% in the first nine months of last year.
Full-year operating profit, or sales minus operating expenses and costs from asset disposals, rose 46 % to 845 million euros, Lufthansa said . The figure surpassed the airline’s own 750 million-euro forecast from December.
A number of German companies are posting net income increases this year due to a change in the law governing corporate tax credits that Germany’s upper house passed 24 November.
Lufthansa also benefited last year by reorganizing struggling units like the LSG Sky Chefs catering company, Swiss International Air Lines Ltd. and the Thomas Cook tourism operator, which the airline sold this month to German retailer KarstadtQuelle AG.
Lufthansa said it plans to increase the dividend to 70 cents a share from 50 cents.
“The dividend is good,” said Juergen Pieper, an analyst with Bankhaus Metzler in Frankfurt with a “sell” recommendation on the company’s shares. “Lufthansa is giving about half their earnings back, which is high.”