August 2 - Lufthansa's second quarter revenue is hit as the German flag-carrier suffers from growing staff costs and weak demand in Europe, but the airline - like its Spanish rival Iberia, is going through a revamp that should see it emerge stronger. Joel Flynn reports.
It's a difficult time for Europe, and airlines are at the frontline. German flag-carrier Lufthansa has seen second quarter profits drop 27%. Even though it's shedding 3,500 jobs, staff costs have grown -- and continental demand is weak. But Europe's biggest airline by sales says it's on target. Lufthansa CFO Simone Menne. SOUNDBITE: Lufthansa CFO, Simone Menne, saying (English): "The results are covered by one-off effects from last year and a change in accounting rules, IAS 19. But what we see in the revenues reflects our very stringent capacity management and so therefore, we are absolutely happy with the results." Lufthansa is not the only one trying to restructure. IAG says its revamp of Spanish carrier Iberia is starting to bear fruit -- with second quarter losses down to 35 million euros, compared to 93 million last year. Aviation expert Howard Wheeldon says the moves are long overdue. SOUNDBITE: Independent aviation expert, Howard Wheeldon, saying (English): "Iberia didn't adjust, it didn't change, it didn't do anything about its domestic and short haul flights, far too many of them, it was flying empty planes, it was not adjusting to change, and of course the economy in low-cost fliers were biting into it. As far as Lufthansa is concerned, this is a very, very big airline we're talking about. It failed to adjust, it needed to adjust. It needed to start that process five, if not 10 years ago." IAG made a 245 million euro profit thanks to a strong performance from British Airways. Short-haul carriers in recession hit Europe have had it tough. Competition from rivals, high-speed trains, high fuel prices and labour disputes have all cut into profits. But there may yet be good news on the horizon. SOUNDBITE: Independent aviation expert, Howard Wheeldon, saying (English): "It is getting better, we are seeing economic improvements, particularly in North America, that's where it's made a difference, in terms of long haul. South American markets are also pretty good. Europe of course is way, way behind, but I think we've reached the bottom. We've a long way to go, but the outlook is better than it was three months, six months ago." So for Lufthansa and IAG, it seems business is now looking up, not down.