Europe: Lufthansa profit warning spooks European airline sector

Lufthansa sent shockwaves through the European airline sector on Monday as it cut its full-year profit forecast, with lower prices and higher fuel costs compounding the effect of losses at its budget subsidiary Eurowings. The warning follows gloomy comments last month from Irish budget airline Ryanair, which vies with Lufthansa for top spot in Europe in terms of passengers carried. Air France-KLM also reported a widening quarterly loss last month. “Yields in the European short-haul market, in particular in the group’s home markets, Germany and Austria, are affected by sustained overcapacities caused by carriers willing to accept significant losses to expand their market share,” it said. European airlines are locked in a battle for supremacy, with a surfeit of seats holding down revenues and higher fuel costs adding to the pressure. A number of smaller airlines have collapsed over the past two years. Shares in Lufthansa hit a two-year low of 15.40 euros for their highest intraday loss in three years. They were down 12% at 15.55 euros by 0900 GMT. Rivals were also caught up in the turbulence, with shares in Ryanair, British Airways owner IAG, Wizz Air, Air France and Easyjet falling by up to 4.4%.<br/>