The German flagship airline, like peers such as Air France-KLM, is restructuring as it struggles to remain profitable despite cut-throat competition and soaring costs.

The German flagship airline said it saw its full-year operating profit rising to between 600 million and 700 million euros ($820-960 million) from 524 million in 2012, including about 300 million of restructuring and project costs.

That compares with a previous outlook for a year-on-year rise but is well below the consensus for 917.5 million euros, according to Thomson Reuters StarMine SmartEstimates, which weight analysts’ estimates according to their track record.

Declines in particular by the Japanese yen and Indian rupee against the euro are hurting Lufthansa’s earnings, finance chief Simone Menne told journalists during a conference call.

Lufthansa flies to Japan 28 times per week and to India 48 times. Menne declined to quantify the exchange rate effects on earnings before the company publishes full nine-month results on Oct. 31.

Pricing Pressure

Lufthansa is cutting 3,500 jobs and has merged its European short-haul services with discount unit Germanwings as part of a program that aims to boost annual operating profit to 2.3 billion euros in 2015.

But soaring fuel prices, pricing pressure and negative exchange rate effects are making it difficult to reach that target, which could force it to deepen cuts.

In addition, the unexpected departure of Chief Executive Christoph Franz, announced last month, has put Lufthansa under pressure to find a new leader to help it stay on course.

CFO Menne said she expected to see further negative effects on yields, a gauge of the average fare paid per kilometre flown, in the fourth quarter, especially in Asia.

“If we talk about yields without currency (effects) we have a development that is not bad, so it’s mainly the currency impact,” she said.

Air freight business Lufthansa Cargo also fell short of expectations in terms of pricing, Menne said. “What we see is that the (cargo) market is not catching up,” she said.

In the first nine months of 2013, the Lufthansa group’s operating profit dropped 27 percent to about 660 million euros, missing consensus of 749 million.

Excluding restructuring and project costs, among other for new business class seats on long-haul planes, operating profit came to about 860 million euros, Lufthansa said, and revenue was stable at 22.8 billion euros. (Reuters)