10/24/2013

Lufthansa: good or bad news?

Reactions to the predictions from Lufthansa, which combines with Swiss, of profits higher this year than last, were mixed.


This newspaper reported yesterday, 23 October, that Lufthansa expect profits this year to be between 600 and 700 million euros, which compares favourably with the 524 million of last year. An associated reaction of Lorenzo Stoll, director of Swiss for our French-speaking area of Switzerland, was to confirm that Swiss expect to develop more direct regional connections to and from Geneva, rather than via Zurich.

So how did the stock markets react to Lufthansa's announcement? The headline in the paper version business section of the Daily Telegraph of the same day read

Airlines nosedive after Lufthansa's disappointing update unsettles sector

whilst in the on-line version the comment headline was

Airlines lose altitude as FTSE 100 climbs

easyJet and British Airways parent IAG are among the day's heaviest FTSE 100 fallers

which was followed by a photo of an orange-painted easyJet aircraft and the sub-headline

Shares in easyJet suffered some of the heaviest losses in the FTSE 100, while the broader market was buoyed by US jobs data

The explanation of this was given as

Hitting investor sentiment towards all major European airline shares was a disappointing update from Lufthansa. Germany’s flagship carrier cautioned that it expected to post full-year operating profit of between €600m (£509.4m) and €700m, guidance that was far below market expectations.

A mischievous interpretation of what one might call the "half-full or half-empty" choice might be that in Switzerland, and especially in Geneva, bad news about aviation in general and Lufthansa, Swiss or easyJet in particular tends to be glossed over.

Whatever you believe, if you read the TdG half-full article and rushed to your stockbroker to buy associated airline shares, you might now be sitting on a loss. However, if you had bought easyJet shares when the company was floated, you would be sitting on a healthy profit.

As in many sports, the secret is good timing!

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