Economic gloom curbs Lufthansa growth plan

(Reuters) - Deutsche Lufthansa slashed its plans to expand capacity next year, signalling dim prospects for a recovery of the air travel industry.

"The outlook for the world economy has become much gloomier over the course of the year," Europe's biggest airline by market value said on Thursday as it published weaker than expected third-quarter results.

Lufthansa already cut its 2011 outlook last month, saying it no longer expected to improve on last year's operating profit as economic uncertainties stacked up and its passenger airlines unit had a weaker than expected August.

"The booking prospects for the months ahead have deteriorated substantially," the carrier said.

Lufthansa said it will offer only 3 percent more seats on planes in 2012, compared with original plans for 9 percent. It had already cut planned capacity growth for the winter season twice to address sliding demand.

Analysts have been calling for airlines to cut capacity to ease fierce price competition in the European market and improve paper-thin margins.

Lufthansa said it may also make strategic changes at some of the carriers it owns -- which include loss-making Austrian Airlines and Britain's bmi -- but did not provide details.

By 0743 GMT, its shares were up 2 percent at 10.24 euros, while Germany's blue-chip DAX index .GDAXI was up 3.5 percent.

WANING CONFIDENCE

Lufthansa's third-quarter operating profit fell to 575 million euros from 783 million euros, compared with the 584 million euros average analyst estimates in a Reuters poll.

Industry body IATA last month said it expected airlines to suffer a weak end to the year due to waning consumer confidence, sluggish international trade and high fuel prices.

Air Berlin said this week that high fuel prices and Germany's air travel tax led to a 44 percent drop in its third-quarter operating profit.

Lufthansa peer Air France-KLM is due to publish its financial results on November 9. It refused to comment on a BFM radio report on Tuesday that the company was poised to issue a "significant profit warning."

Bucking the trend, International Airlines Group, the owner of British Airways and Iberia, has said it expects to deliver significant full-year profit growth, defying gloom in the airline sector after an uplift in business class travel boosted September traffic.

Analysts see demand for first and business class tickets easing soon, though, as companies hurt by the weak economy slash their spending on business trips and ask staff to book cheaper seats.

http://www.reuters.com