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Lufthansa Maintains Full-Year Guidance

German airline operator Lufthansa (LHA.FR) reiterated its full-year guidance on Tuesday as it posted worse-than-expected earnings in the fiscal second quarter, which were impacted by a price war in Germany and Austria on short-haul flights.

The company reported revenue of 9.63 billion euros ($10.74 billion) in the second quarter. This was up from 9.3 billion euros in the corresponding quarter of the prior year and ahead of the consensus estimate of analysts polled by Capital IQ for 9.57 billion euros.

Feeding into the results was a strong performance in the group’s long-haul business in the first half of 2019 while on short-haul routes in Europe, the company said that a “price war” in Germany and Austria, in particular, had a negative impact on earnings.

Earnings per share came in at 0.48 euro cents, down from 1.59 euro cents a year earlier and also below the Street’s forecast for 0.60 euro cents.

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“Our earnings are feeling the effects of tough competition in Europe and sizeable overcapacities, especially on our short-haul routes out of Germany and Austria,” Ulrik Svensson, chief financial officer of Deutsche Lufthansa AG, said. “We are responding to this by further reducing our costs and increasing our flexibility. And with the turnaround plan which we recently presented, we also intend to make Eurowings a sustainably profitable airline.”

For the full year, the group is now expecting an adjusted earnings before interest and tax margin for the Network Airlines unit of between 7% and 9% in 2019, down from earlier guidance for 7.5% to 9.5%. The group is now expecting an adjusted earnings before interest and tax margin for Eurowings, its low-cost carrier, of between negative 4% and negative 6% in 2019, compared to earlier guidance for around 0%.

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