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Aviation

Lufthansa warns on profits as overcapacity and strikes take toll

German carrier Lufthansa has reduced its forecast for operating profits because of weaker passenger and freight demand and a pilots' strike earlier this year. The news has caused shares in the airline to nosedive.

Lufthansa has reduced its 2014 operating profit forecast to 1 billion euros ($1.36 billion) from an earlier estimate of between 1.3 billion and 1.5 billion euros, Germany's flagship airline announced Wednesday.

In addition, the 2015 operating profit forecast had to be cut back to 2 billion euros from 2.65 billion euros, the airline said.

Lufthansa warns of unfair business practices

The primary reason for the lowered expectations was a shortage of passengers and cargo, leading to an overcapacity of seats and space on its European and US flights. That led to a drop in prices on those routes, the airline said.

A pilots' strike in early April, the airline added, further reduced Lufthansa results this year by 60 million euros, with bookings having recovered to normal levels only recently. Moreover, the airline lost another 60 million euros so far because of currency controls in Venezuela that prevent sales in the local bolivar from being repatriated.

As a result, Lufthansa suspended ticket sales in Venezuela for a short time in May, joining other airlines that have reduced routes, sales and capacity in the South American country.

Lufthansa Chief Financial Officer Simone Menne said earlier warnings about threats to the airline's revenue and earnings had “unfortunately materialized". In response, the airline will reduce its capacity in winter and step up a cost-cutting plan, which she said should allow the carrier to double its operating profits in 2015.

The profit warning drove down Lufthansa shares almost 13 percent in trading on Wednesday, to about 17.40 euros a share.

uhe/njz (AP, dpa)

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