Solid Lufthansa figures but could there be troubles ahead?

Soaring fuel costs and weakening core market demand are set to push earnings at Lufthansa lower this year, the German carrier has said.Lufthansa turned in a robust set of quarterly figures, with revenues rising by 19.5% year-on-year to €12.06bn (£9.49bn), including traffic revenues of €9.72bn (£7.65bn), up 25.6%. However operating profits at its German passenger operations shrink 34% to €209m as record fuel prices and global economic troubles start to bite.

Stephan Gemkow, Finance Director, said Lufthansa would reduce capacity expansion from just over 7% to just over 6% this year and was considering different options for idling aircraft over the coming winter.

He said the high oil prices and the slowing world economy could yet force sharper measures and he warned that a strike by maintenance and ground workers, now in its third day, could also harm full-year results.

The announcement came amid a strike that has brought the airline virtually to a standstill. Lufthansa was forced to cancel 78 flights today - including long-haul flights from Frankfurt to New York, Calcutta and Calgary - after cancelling 70 the day before. At least nine aircraft are now idle for lack of standard maintenance.

Some 48,000 workers, almost half the Lufthansa Group workforce, want a 9.8% annual pay rise to reflect last year’s record result. Lufthansa is offering 6.7%, to run over 21 months, arguing that tough times are ahead for airlines.

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Despite the problems in its home market, Mr Gemkow indicated Lufthansa still saw itself as a consolidator in the European airline sector. He again expressed an interest in Austrian Airlines, should the government in Vienna sell its controlling stake.

result of the ongoing wage negotiations.
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