Lufthansa aims to catch up with BA's, Air France's operating margins UPDATE

Lufthansa aims to catch up with BA's, Air France's operating margins UPDATE

	Published : Thu, 26 Apr 2007 12:05 By : Agencies Print this Story

(updates to add CFO comments on financing of possible takeovers, open skies agreement)

FRANKFURT (Thomson Financial) - Deutsche Lufthansa AG aims to catch up with British Airways' and Air France's operating profit margins and will provide further details on how it will do so in the summer, chief financial officer Stephan Gemkow said.

He declined to give a specific margin target.

The flagship carrier is using more conservative depreciation methods than its rival airlines, Gemkow said, adding that the 10 pct margin BA is currently targeting would equal an 8 pct margin using Lufthansa's depreciation methods.

'There is still a gap we want to close,' he said in a telephone conference with journalists.

He said Lufthansa may not achieve this goal this year.

For the full-year 2006, the company posted an operating profit margin of 4.3 pct.

Turning to possible acquisitions, Gemkow said Lufthansa would be able to finance any given takeover target without a problem thanks to solid liquidity and strong credit ratings.

A possible acquisition needs to be economically sounds, he stressed in a telephone conference with journalists.

Lufthansa earlier this month denied speculation it is considering an offer for Iberia, saying the Spanish airline would be too expensive, although it said it is generally interested in making acquisitions if the right opportunity arises.

A cooperation with private equity firms to buy a rival company is only a 'limited possibility' for Lufthansa.

A tie-up with a private equity investor 'is only of interest to those who both want to and have to utilize those capital sources,' he said.

'We have money ourselves,' he added.

Commenting on the 'open skies' aviation deal, Gemkow said investors should not be overly enthusiastic about the opportunities the agreement bears, as slot capacities are still driving supply.

Under the newly agreed open skies plan, all EU-based airlines will be allowed to fly from any city within the EU to any city in the US, and vice-versa.

He added that Lufthansa's stake in UK airline BMI has become more valuable as the open skies agreement has driven up the value of slots, which are the take-off and landing times allocated to carriers at airports.

BMI holds around 11 or 12 pct of slots in Heathrow, while Lufthansa holds 7 or 8 pct, he said.

Lufthansa may consider raising its stake in BMI from currently 30 pct minus one share, he said.

patrizia.kokot@thomson.com

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