Lufthansa blames 2011 earnings slump on loss-making British subsidiary | Business| Economy and finance news from a German perspective | DW | 07.03.2012
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Business

Lufthansa blames 2011 earnings slump on loss-making British subsidiary

Germany's biggest airline flew into the red in 2011 after incurring heavy losses from British Midland. Lufthansa hopes to fly high again in 2012, after shedding the loss-making subsidiary.

German national carrier Lufthansa said it lost 13 billion euros ($17 million) in 2011, despite a rise in revenue of 8 percent to 28.7 billion euros.

The net loss compared to a profit in 2010 of 1.1 billion euros, a statement issued by Lufthansa said, and was largely due to 285 million euros in losses incurred by its subsidiary British Midlands.

In December, the German carrier sold British Midland to International Airlines Group – parent company of British Airways – in a deal worth 207 million euros.

However, the deal is still subject to regulatory approval, forcing Lufthansa to underwrite British Midland losses.

Without them, Lufthansa's operating earnings would have been 820 million euros, the company said.

Cost-cutting underway

Carrying 106.3 million passengers in 2011, Lufthansa group – which includes Austrian Airlines, Swiss, Germanwings and Brussels Airlines – recorded the highest number of passengers in company history.

However, downward pressure on margins, higher fuel costs, as well as an air traffic tax imposed by the German government weighed on 2011 earnings.

A cost-cutting program was introduced aimed at raising profits to 1.5 billion euros by 2014 – funds Lufthansa seeks in order to finance fleet expansion and new products.

There is speculation that Lufthansa might sell off another lossmaker in the group – Austrian Airlines – as part of its drive to lower operating costs.

uhe/gb (dpa, AFP)