German airline group Lufthansa has forecast only slightly higher profits in 2016, despite lower fuel prices. As Sonia Legg reports, it's warning of cut-price competition and falling average fares as it ramps up its Eurowings budget business.
2015 was a turbulent year for Lufthansa. Strikes, attacks on popular destinations and the Germanwings crash in France just some of the challenges The German carrier is still forecasting slightly higher profits for 2016. But considering the boost from low oil prices it still has much work to do. (SOUNDBITE) (English): COMMERZBANK, GLOBAL FINANCIAL ECONOMIST, PETER DIXON, SAYING: "The airline business seems to be almost always in a constant state of flux. The larger carriers have been attacked by the smaller, lower-cost entrants into the market and that makes life very difficult for the big players. But I think over the years we have seen that the new players do seem to be fairly nimble in their response to these threats." Lufthansa is restoring a dividend. But Europe's low-cost carriers like Ryanair and easyJet are making it hard for the airline's new budget operation Eurowings. (SOUNDBITE) (English): COMMERZBANK, GLOBAL FINANCIAL ECONOMIST, PETER DIXON, SAYING: "They are not going to be helped by the economic slowdown, particular in Europe, that's going to crimp their efficacy to improvement to some extent but I am pretty confident they can turn the corner." Lufthansa is still struggling to reach an agreement with staff on new pay and pension deals. Last year strikes by pilots and cabin crew cost them 231 million euros in lost earnings. A one billion euro drop in its fuel bill for 2016 couldn't have come at a better time.