DAVY VIEW

Despite a strong performance in long haul, the price deterioration in Europe caused by market-wide overcapacities and aggressively growing low-cost competitors has led to Lufthansa lowering guidance. Lufthansa now expects the group’s adjusted EBIT margin to reach 5.5% to 6.5% (previously: 6.5% to 8.0%), resulting in group adjusted EBIT amounting to €2-2.4bn in 2019 (previously €2.4-3bn, Davy €2.7bn). The outlook factors in a fuel cost increase of €550m (previously +€650m) despite the recent decline in the oil price, hence weaker yields are the main contributor. We are likely to reduce our forecasts to approximately the mid-point of the revised guidance range.