Arab Spring takes toll on Lufthansa profits
By Shane McGinley
Tuesday, 17 May 2011 11:51 AM
Lufthansa, Europe’s second largest airline, said political uprisings in the Middle East would wipe out around 10 percent of its projected revenues for the year and a “big chunk” of Q1 earnings.
“I think it is not a secret that we were heavily affected like anyone else,” said Joachim Steinbach, vice president of Lufthansa in the Middle East, Africa and Southeast Europe.
“We had an impact in the first three months… but since then we took a couple of decisions that will last for the rest of the year and we anticipate by the end of the year about ten percent of our revenue that we were planned is at stake, missing.
“The region, of course, is still fantastic business… [but] I would say we are missing a big chunk of that.”
A swell of protests for a change of government and better living standards spread from Tunisia and Egypt to Yemen, Syria, Bahrain and Libya, slowing tourism trade to a trickle and slashing air traffic demand.
Egypt and Tunisia experienced traffic levels 10-25 percent below normal for March while military action in Libya virtually stopped civil aviation to, from and within that country.
In Egypt, carriers including British Airways, Air France and Polish carrier LOT have scrapped or scaled back routes in a bid to curb losses.
Lufthansa said Cairo and Bahrain were its worst-hit routes with scheduled flights reduced by around 50 percent. Germany’s flag carrier said it has ceased operations in Libya and slashed capacity on routes to Tunisia, Morocco and Algeria.
“We took 10 to 15 percent of capacity in these countries affected but the major affect was in Cairo where we took 50 percent out,” Steinberg said.
The MENA region accounts for around a tenth of the airline’s global revenue, which amounted to €27.3bn ($40.11bn) last year and is expected to grow by around 11 percent in 2011.
Airbus, the biggest commercial planemaker, said in April unrest in the Middle East and North Africa could cost it as many as 60 orders in 2011, or 40 percent of the total expected from the world’s fastest-growing aviation market.