(Bloomberg) -- Deutsche Lufthansa AG cut its profit outlook for the full year and warned that breaking even at its namesake German unit will be “increasingly challenging” as it grapples with higher unit costs and falling ticket prices.
Adjusted operating profit will be in the range of €1.4 billion ($1.5 billion) to €1.8 billion, down from a previous guidance of about €2.2 billion, Lufthansa said in a statement on Friday. Adjusted cash flow will be significantly less than €1 billion, compared with a previous goal of at least €1 billion, the company said.
Airlines around the world have taken a more gloomy view as they head into the busy summer travel period. Delta Air Lines Inc. warned on Thursday that US domestic carriers are struggling to fill planes, dragging down ticket prices in a fare war that’s weighing on profits. Low-cost specialist Norwegian Air Shuttle ASA said earlier on Friday that it’s experiencing delivery delays of Boeing Co. aircraft, hurting its growth prospects this year.
Lufthansa said it will initiate a “comprehensive turnaround program,” without providing details. Earlier this week, the airline warned employees in a letter that it would need to cut costs further because stiff competition is driving down fares and corporate travel has not rebounded sufficiently, in what it called a “new reality.”
The airline is due to report full earnings on July 31. According to preliminary numbers, adjusted operating profit fell to €686 million in the second quarter from €1.1 billion a year earlier. The main Lufthansa airline lost €427 million in the first half, the company said, singling out Asia as a region that experienced a particular decline in yields.
“Lufthansa Airlines is particularly affected by the challenges posed by the negative market trend and by inefficiencies in the flight operations of Lufthansa and Cityline, also due to delayed aircraft delivery,” the company said.
Aircraft delays have become a significant headache for the airline industry, as both Boeing and Airbus SE struggle to ramp up output and deliver aircraft. Airbus warned late last month that it wouldn’t meet its delivery targets this year and that its planned production rate increase for the A320 model would be slower than previously guided.
Lufthansa shares lost as much as 3.9% after the revision. The stock has lost about 29% in value this year, the worst performer on the Bloomberg World Airlines Index of 30 members.
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