Lufthansa bucks the trend - bullish on growth for 2008 and 2009

Frankfurt: In stark contrast with the rest of the industry, German flag carrier Lufthansa AG has presented a bullish outlook for 2008, saying it expects increased sales and operating profit for the year. It has forecast even better performance for 2009.

Lufthansa is Europe's second-largest airline after Air France-KLM.

The upbeat forecast comes in the face of rising fuel costs and even as Europe's other full-service carriers and budget airlines have experienced weakening load factors toward the end of last year and at the start of this year.

Also, Lufthansa chief financial officer, Stephan Gemkow, said there were no "significant repercussions of the US financial crisis" on the airline's bookings.

According to Gemkow, Lufthansa's broad business model, which includes aviation services, such as maintenance and catering, is responsible for the bullish outlook. Such a model makes the airline less vulnerable to economic downturns.

Also, Gemkow said that Lufthansa's risk management, such as fuel-cost hedging and cost discipline would help counteract rising fuel costs. The airline has already hedged more than 83 per cent of 2008 fuel costs and 27 per cent for 2009.

In 2008, the airline expects fuel costs to rise by another billion euros to €4.9 billion ($7.6 billion), from €3.9 billion in 2007. A further weakening of the US dollar would help to offset the rise in fuel costs, Gemkow said.

The German carrier said last month that net profit in 2007 more than doubled to €1.66 billion from €803 million a year earlier.

Lufthansa's forecast comes even as the International Air Transport Association said last month that it plans to cut its global air-traffic forecast for 2008 following a sharp slowdown in January passenger numbers.

The German flag carrier's forecast also comes in the face of a dire warning from Irish airline Ryanair Holdings Plc, Europe's largest budget airline by passengers carried, last month which said that its earnings could fall by as much as 50 per cent next fiscal because of high fuel costs and pressure on ticket prices from softening consumer demand.

According to Ryanair chief executive, Michael O'Leary, the European airline industry is flying into a cyclical downturn and would get hit by a "perfect storm" of rising oil prices, weakening consumer confidence and currency softness.