Shares in Germany's biggest airline Deutsche Lufthansa AG (DLAKY) lost altitude Wednesday after third quarter net profit fell 17% year-on-year to €1.18 billion ($1.39 billion) and despite beating analysts' earnings forecasts and providing a bullish outlook for the rest of the year.
Lufthansa stock traded early on Wednesday at €25.62, down 0.68 or 2.6% on its Tuesday close. Lufthansa shares have more than doubled this year.
Lufthansa posted adjusted third quarter earnings of €1.5 billion, up 32.2% year-on-year, on total revenues of €8.8 billion, up 11.1%, boosted by a 17.7% increase in passenger traffic over the quarter. Much of that gain was due to the consolidation of the recently acquired Brussels Airlines, while demand for Lufthansa flights has also benefited from the collapse of rival low-cost airlines, including British carrier Monarch Airlines and Germany's Air Berlin plc & Co. Luftverkehrs KG.
Lufthansa is poised to pick up further traffic as a result of its competitors woes. The company has already agreed to buy parts of Air Berlin and was recently reported to have approached Italy's struggling flag carrier Alitalia - Cia. Aerea Italiana SpA with an offer of €500 million to acquire planes, airport runway slots and aircrew.
"We achieved another record earnings results in the first nine month of this year," Lufthansa's Chairman Carsten Spohr said in a statement. "That gives us the investment and growth capabilities we need to play an active part in the consolidation of the European airline market, and to continue to invest in the future of our company."
Increased demand for its flights enabled the German carrier to lift its revenue seat-kilometers, a measure of the value of each seat sold, by 11.8% over the third quarter, lifting its adjusted EBIT margin by 2.5%.
Lufthansa painted an optimistic picture for the rest of the year, predicting a slight increase in fourth quarter revenues due to a 5.5% increase in capacity, and tipped unit costs, excluding fuel and currency effects, to dip slightly. Much of those gains will be wiped out by rising fuel costs, which are expected to increase by €50 million in the fourth quarter.
The upshot of that was that the airline left its full year guidance unchanged, noting that EBIT was still expected to be above 2016's total of €1.75 billion.
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