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Lufthansa CEO Mayrhuber says airline to outperform competition

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Written by editor

Deutsche Lufthansa AG, Europe’s second-largest airline, will beat the earnings performance of rivals this year as it scales back spending and buys smaller carriers, Chief Executive Officer Wolfgang

Deutsche Lufthansa AG, Europe’s second-largest airline, will beat the earnings performance of rivals this year as it scales back spending and buys smaller carriers, Chief Executive Officer Wolfgang Mayrhuber said.

“We expect to be clearly profitable,” Mayrhuber said today at the company’s annual shareholder meeting in Cologne, Germany. “Our major competitors are forecasting losses.”

The CEO said Lufthansa’s full-year earnings will still be “substantially below” last year, when the carrier had net income of 599 million euros ($796 million). The airline industry as a whole will lose $4.7 billion in 2009, the International Air Transport Association estimates.

The German company is buying state-controlled Austrian Airlines AG and closely held Brussels Airlines NV, aiming to expand its network of intercontinental hubs in Europe after the 2007 takeover of Swiss International Air Lines Ltd. European Union regulators are reviewing both transactions.

“Once we have successfully mastered all of the obstacles, our position in — and for — Europe will be stronger,” Mayrhuber said. The Austrian and Belgian carriers have been “hit hard” by the recession, and “further consolidation of airlines in Europe is a prerequisite in order to be able to succeed in global competition.”

Hiring Freeze

A hiring freeze and a reduction in passenger capacity toward the end of 2008 prepared Lufthansa for weak demand that may continue for the rest of 2009, Mayrhuber said.

“Our focus is on securing the result and we will continue to implement strict cost management in all of the business segments,” he said.

The company’s cargo unit, which had a 164 million-euro operating profit in 2008, equal to 12 percent of the group total, will probably lose money this year, the CEO said. The division outlined plans in March to reduce employee hours and ground some of its freighters, and Mayrhuber said the market will remain at an “extremely low level.”

Lufthansa fell 2 cents, or 0.2 percent, to 9.62 euros in Frankfurt trading, valuing the airline at 4.41 billion euros. The stock has dropped 14 percent this year.