Lufthansa’s Low-Cost Subsidiary Blunts Profit

Lufthansa is having problems with its low-cost Eurowings unit, blaming it on Tuesday for a fall in earnings.

The European airline giant saw net profit between between January and September fall 6 percent to $2 billion (€1.7 billion.) Revenue during the same period rose 1 percent to $30.6 billion (€26.9 billion.)

The Eurowings unit posted a loss of $74 million (€65 million) during the first nine months, compared with a profit of $164 million (€144 million) in the prior year. The slip into the red was partly a result of integrating parts of the former Air Berlin business.

“In 2017 we seized a historic opportunity in the consolidation of Europe’s aviation sector,” said Lufthansa CEO Carsten Spohr on Tuesday. “And it was the right decision to do so in strategic terms, even if this has given Eurowings a very challenging 2018.”

Lufthansa expects overall costs to go up by more than $1.1 billion (€1 billion) during 2018 mainly as a result of fuel costs and expenses relating to delays and cancelations.

Despite the multiple challenges, Lufthansa is sticking with its profit guidance of a figure “slightly lower” than 2017’s record amount.

“We have achieved solid earnings for the first nine months of this year, and are still on course for our second-best-ever annual EBIT result,” said Ulrik Svensson, Lufthansa’s chief financial officer.