Lufthansa confident of meeting target for profits despite high fuel costs

Deutsche Lufthansa has announced that it expected to meet its target for operating profits in 2008 despite record-high prices of aviation fuel.

Deutsche Lufthansa, the flag carrier of Germany and Europe’s second-biggest airline, has announced that it expected to meet its target for operating profits in 2008 despite record-high prices of aviation fuel.

At its investor conference in Munich, Germany, on June 25, 2008, the management of Lufthansa said the company expects full-year operating earnings to reach the  record level of 1.38 billion euros ($2.1 billion) that it attained in 2007.

Lufthansa’s board of management is expecting that fuel costs will be about 5.6 billion euros and that the higher costs can be offset by increase in efficiency, cost savings and fuel surcharges.

The airline said at the Munich meeting that it plans to continue growing organically as well as through alliances and partnerships, such as the planned joint venture with United Airlines, Continental Airlines and Air Canada.

Lufthansa is a founding member of the Star Alliance, the world’s biggest airline grouping.

Even while admitting that present conditions – particularly high prices of fuel – pose an enormous challenge to the aviation industry, Lufthansa said in a statement that it is still confident that “the demand for mobility will grow further and that air traffic will grow despite current fluctuations.”

In the statement, Deutsche Lufthansa, based in Cologne, Germany, said it is imposing restrictions on hiring and planning to freeze administrative spending to 85% of the previous year’s level.

In addition, Lufthansa will study on how much seating to offer in the winter schedule of 2008 and seek to raise earnings with fuel surcharges. These steps,  the Lufthansa statement added, will help enhance earnings to 150 million euros in 2008.

Lufthansa says it hopes to save about 200 million euros yearly through measures such as shifting to electronic documents from paper records by 2010, improved plane-engine maintenance and stricter real-estate management.

The International Air Transport Association, the international industry trade group of airlines headquartered in Montreal, Quebec, Canada, had said in a report released on June 2, 2008, said  that airlines worldwide may report combined losses of $6.1 billion in 2008 – the worst since 2003 – on account of prohibitive costs of fuel as well as a slump in economic growth.