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Lufthansa first-quarter net loss widens as fuel costs, overcapacity weigh

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By Reuters
Lufthansa first-quarter net loss widens as fuel costs, overcapacity weigh
FILE PHOTO: An Airbus A380 of German air carrier Lufthansa is pulled for technical maintainance at the airport in Frankfurt, Germany, February 12, 2019. REUTERS/Kai Pfaffenbach/File Photo   -   Copyright  Kai Pfaffenbach(Reuters)

FRANKFURT (Reuters) – Lufthansa said its net loss widened nine-fold to 342 million euros (£296 million) in the first three months of the year, hurt by rising fuel costs and excess capacity in Europe.

“We are confident, though, we will see a recovery in our unit revenue as early as the second quarter. Our confidence is based above all on our favourable booking levels for the month ahead,” Chief Financial Officer Ulrik Svensson said.

European airlines are battling overcapacity and high fuel costs, while uncertainty around Brexit has led some travellers to delay booking flights for their summer holidays.

Lufthansa expects the market to grow by 4 percent in summer, compared with a rise of 9 percent seen in winter, while it expects its home market – defined as Germany, Austria, Switzerland and Belgium – to grow by 3 percent.

By contrast, Lufthansa now expects capacity at Eurowings to be flat, compared with previous forecast of 2 percent growth. The carrier is planning to offer 1.9 percent more flights globally.

For 2019, the group still expects to make an adjusted operating profit margin of 6.5-8 percent. Fuel costs are projected to be 700 million euros above the previous year, and 50 million euros more than its previous guidance.

Adjusted earnings in its Other Businesses and Group Functions segment is expected to be 100 million euros below the previous year, compared with a miss by 150 million euros projected earlier.

The first quarter is traditionally the weakest for airlines.

Earlier this month, Lufthansa had said a 200 million euro rise in fuel costs weighed on earnings, while ticket prices took a major dive.

Quarterly return on available seat kilometres was down 8.5 percent at its low-cost carrier Eurowings and 5.2 percent in its other airlines, while costs were reduced 7.2 percent and 0.8 percent, respectively.

The sector has seen a number of recent failures, such as that of Iceland’s WOW, Britain’s Flybmi, German holiday airline Germania and Nordic budget airline Primera Air.

(Reporting by Arno Schuetze; Editing by Thomas Seythal and Sherry Jacob-Phillips)