Air Berlin scraps routes
FRANKFURT, May 29 (Reuters) – German carrier Air Berlin has abandoned its full-year profit goal and says it will scrap unprofitable routes from its network as it tries to weather soaring fuel costs.
The airline still expects to achieve an operating profit for the full year based on current jet kerosene prices but it has dropped its forecast for 2008 earnings before interest and tax (EBIT) of 73 million to 120 million euros ($114-$187 million).
“As a result of the current difficult market environment, in particular the high fuel prices, it is anticipated that operating income will be adversely affected during the further course of the year, making it difficult to obtain the envisaged EBIT corridor,” Air Berlin said in a statement on Thursday.
Air Berlin had already slashed its 2008 EBIT forecast on March 31 from 140-160 million euros.
The airline said it now expected fuel costs this year to be some 80 million euros more than it had forecast in March.
Chief Executive Joachim Hunold declined to give a new target EBIT range and told a news conference that any new range could not be taken seriously, given market conditions.
Shares in Air Berlin were 1.8 percent lower at 7.30 euros by 0945 GMT on Thursday after earlier falling as low as 7.11 euros.
The head of EADS, the parent of European planemaker Airbus, told the ILA Berlin Air Show this week he was worried about the impact of the high oil price on airline finances. Oil prices have roughly doubled in the last year.
Airbus was bracing for more delays and even cancellations to plane orders after U.S. carrier JetBlue Airways blamed the cost of fuel for deciding to defer delivery of 21 Airbus A320s for up to five years.
Air Berlin’s Hunold said the airline was reviewing all of its long-haul routes and would also seek to pass fuel costs on to passengers through ticket prices. But it was too early to talk about delaying orders for new planes, he said.
The carrier has hedged 88 percent of its fuel needs for this year and 24-35 percent for the first three quarters of next year, Hunold said, as it tries to control the impact.
Europe’s biggest low-cost airline, Ryanair, said earlier this month that rising oil prices were hurting profits and admitted “calling the oil market wrong”. It was just 2.5 percent hedged for the next 12 months.
Air Berlin reported on Thursday that its first-quarter EBIT loss narrowed to 67.7 million euros from 85 million a year earlier as sales increased 4 percent to 654.5 million.
Analysts in a Reuters poll had on average forecast an EBIT loss of 71 million euros on sales of 649 million.
The net loss narrowed to 59 million euros from 66.4 million.