Sun | Aug 20, 2017

European airlines warn of turbulence

Published:Friday | July 22, 2016 | 7:00 AM

It's time for European airlines to fasten their seat belts.

Two of the region's top carriers have warned that demand for flights is being weighed down by extremist attacks, shocks like Britain's vote to leave the European Union, Turkey's attempted military coup, strikes and severe weather.

Germany's biggest carrier, Lufthansa, warned its profits would be lower than expected as "advance bookings, especially on long-haul routes to Europe, have declined significantly, in particular due to repeated terrorist attacks in Europe and to greater political and economic uncertainty". Its shares slumped 5.6 per cent to €10.47 (US$11.53) on Thursday.

It's not only long-haul flights being affected. British low-cost airline easyJet, which mainly flies between European countries, said industrial actions such as strikes by air traffic controllers in some countries as well as bad weather like floods, had made business difficult.

"More recently, currency volatility as a result of the UK's referendum decision to leave the EU as well as the recent events in Turkey and Nice continue to impact consumer confidence," easyJet CEO Carolyn McCall said in a statement. Shares in the company fell 5.3 per cent to 1,067 pence in London.

The attack in the French seaside city of Nice, which left 84 dead when an extremist drove a truck through a crowd gathered for a national holiday celebration, was the third major attack to hit France since early last year.

EasyJet said it nevertheless managed to increase the number of passengers it carried by almost six per cent, but that seemed because of incentives such as discounting, as the revenue per seat fell almost eight per cent.

As a result of the heightened uncertainties, Lufthansa said it had to lower its earnings forecast for this year. It said its adjusted earnings before interest and tax would be below the previous year's, against a previous target of slightly above that level. For the first six months of 2016, that measure of profits was €529 million.

The weaker earnings come even as the price of oil, a major cost factor for airlines, is down compared with last year.