Lufthansa AG freezing most investments
Baku, November 25 (AZERTAC). German air carrier Deutsche Lufthansa AG said it will halt most investment in its business for six months to combat rising financing costs in the latest sign of how current economic uncertainty is hurting the airline industry.
The move affects all the group`s divisions but won`t impact investment in its aircraft fleet and necessary operational goods, a spokeswoman said. She didn`t say how much the company aimed to save.
Lufthansa has ordered 202 aircraft through 2018 with a list-price value of EUR19 billion. These are unaffected by the stalled investment.
The company warned at the end of October that persistent economic uncertainty is clouding the aviation industry`s growth prospects and that cost-cutting measures introduced so far won`t be enough to offset weakening demand.
Last week, its German low-cost rival Air Berlin PLC gave a downbeat earnings update, saying it no longer expects to post an operating profit in 2011. It said the outlook was negative for the next year because of persistently high oil prices and increasingly uncertain economic prospects.
It reported a sharp drop in third-quarter profit, which it blamed mainly on Germany`s aviation tax and weak demand for air travel to North African holiday destinations due to political upheaval there.
Pressure on airlines is being felt elsewhere in Europe too. Air France-KLM is preparing an "action plan" that will be announced in the first quarter of 2012 after the company issued a profit warning on Nov. 9. It said that current cost-savings efforts won`t be enough to offset the steep rise in fuel costs, volatile currency movements and the prospect of waning airline traffic in Europe.
It expects to post an operating loss in the three months through Dec. 31 and for all of 2011. However, in September the company decided to go ahead with plans to buy 100 wide-bodied airliners, split evenly between Airbus and Boeing Co. (BA). The airline had EUR3.4 billion of cash at the end of September, as well as credit lines for a total of EUR1.85 billion.
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