German airline Lufthansa (Frankfurt: LHA) warned on profits this morning, after it reported falling sales at its budget carrier brand, Eurowings and rising fuel costs. The share price fell by more than 10%.
In effect, competition between short-haul operators in Europe, combined with a less forgiving oil price backdrop, has made life a lot tougher for the airline, which now expects profit growth for the year to come in at 5.5%-6.5%, versus previous expectations for 6.5% to 8%.
It's hardly the only travel group to find the going tough right now tour operators TUI and Thomas Cook have both warned on profits this year. We've also seen the collapse of airlines including Monarch and Flybmi.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Budget carrier easyJet has seen its share price fall hard in the last year or so down by about 45% while rival Ryanair and British Airways owner International Consolidated Airlines have each lost around a third of their value.
Are there any bargains in the sector yet? On a dividend of more than 5% and a forward price/earnings ratio of around ten, budget carrier easyJet (LSE: EZJ) which was recently kicked out of the FTSE 100 and now trades within the FTSE 250 is starting to look interesting.
But given the current brutal competition and significant overcapacity in the sector, combined with the potential for more Brexit over-reaction panics later in the year, I'm not convinced that either it or its slightly pricier rival Ryanair are "buys" quite yet.
-
Water companies blocked from using customer money to pay “undeserved” bonusesThe regulator has blocked three water companies from using billpayer money to pay £1.5 million in exec bonuses
-
Will the Bitcoin price hit $100,000?With Bitcoin prices trading just below $100,000, we explore whether the cryptocurrency can hit the milestone.
-
Avoid easyJet shares – there are better airlines to invest inTips EasyJet used to be one of Europe’s most impressive airlines. But now it is facing challenges on all fronts and losing out to the competition. Rupert Hargreaves explains why you shouldn’t buy easyJet shares.
-
Easyjet profits fall as it bids to become the world’s first “zero carbon” airlineFeatures EasyJet reported a fall in profits today, after a “difficult” year, but is hoping to become the first “zero carbon” airline by offsetting its carbon emissions at a cost of £25m a year.
-
Low-cost flights hit air pocketFeatures A ferocious price war has killed off the weaklings in the airline sector. But the survivors are well placed to thrive. Chris Carter reports.
-
EasyJet hits turbulenceFeatures The no-frills airline was a rare success in a cut-throat business, but headwinds are building fast, says Ben Judge.
-
Business flyers are flocking to EasyJetFeatures EasyJet reported a loss in its half-year results, but the airline is winning the battle for business passengers.
-
Companies in the news: Sainsbury's and EasyJet
Features Sainsbury's and EasyJet recently reported some very encouraging figures. Phil Oakley looks in to whether you should buy, hold or sell.
