Ruinous price war in the sky – Airlines serve greed and irresponsibility of consumers

Quickly and cheaply jetting somewhere has serious consequences/photo:, Munich Airport, Terminal 2


Serving the irresponsibility and the greed of consumers for ever cheaper ticket offers, to quickly jet somewhere at the weekend, to fly domestic routes, has further dramatic not only ecological but also economic consequences for the airlines itselves.

On the morning of 30 July, the Lufthansa share fell by up to seven per cent to its lowest level for two years. The discount battle with airline tickets will probably continue in the rest of 2019, as a Lufthansa spokesman summed up the morning after the announcement of the company’s figures for the second quarter. In particular, the price war with low-cost airlines in the European business has put the group’s results on a leap. Especially in Germany and Austria, competition with the expanding low-cost airlines is fierce. According to Lufthansa CFO Ulrik Svensson, there are also “high overcapacities” in the market.

The airline was even able to increase its revenues by four percent to 9.6 billion euros. However, the earnings yield clearly shows the traces of price dumping in recent months. At 754 million euros, the company earned around a quarter less before taxes and interest (EBIT) than in the same period last year. In addition to the tough competitive situation, “normal” effects such as higher kerosene prices and engine overhauls also played a role. Due to an already announced tax provision, the surplus even dropped by 70 percent to 226 million euros.

Management has maintained its lowered forecast for the current full year since the profit warning six weeks ago: the EBIT margin is expected to be between 5.5 and 6.5 percent, a decline of 14 to 28.5 percent compared with 2018.

Eurowings as a loss-maker

The most severe losses in the past quarter were suffered by the low-cost subsidiary Eurowings. It posted a loss of 273 million euros in the quarter, significantly more than in the previous year. In addition to very favourable ticket prices, the integration of the business units acquired by Lufthansa from the bankrupt Air Berlin in 2017 also had a negative impact. Eurowings is now prescribed an austerity program, but there will be no layoffs.

The Lufthansa share has slumped sharply in recent months, as has the entire airline industry. Over the past three months, the share has lost around 35 per cent in value, and there could be further losses today.

Politicians are afraid of loss of votes and power

But all this is the devastating result of an irresponsible consumer behaviour towards the environment, too, wanting to get everywhere as cheaply as possible. The personal ecological footprint, which thus becomes oversized, does not seem to matter, despite the climate catastrophe. The airlines participate, serve this greed and ruin themselves in the process.

Politicians are reluctant to impose meaningful bans in order to put a stop to madness. All parties pay lip service to this, because the fear of losing votes and power is in the foreground, unfortunately – poor planet, we have only this one.

Johanna Wenninger-Muhr

Sources: Bö, Mirror online, Lufthansa

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