RYAAY Ryanair Holdings PLC

German carrier Deutsche Lufthansa AG on Wednesday said third-quarter sales and adjusted earnings fell at a time when European airlines are grappling with multiple headwinds.

Lufthansa's closely watched adjusted earnings before interest and taxes fell 6.5% to €1.15 billion ($1.27 billion) as sales retreated about €111 million to €8.8 billion.

Net profit for the July-through-September period rose 79% to €1.4 billion, Germany's largest airline said. The net result was principally padded by a one-time settlement with some employee groups on pension plans.

Lufthansa, which like other European airlines this year has been facing repeated air-traffic control strikes, overcapacity and softened demand from terrorism, also has had to contend with considerable labor turmoil as unions resist the carrier's efforts to become more cost competitive.

Cabin crew at discount units Eurowings and Germanwings grounded nearly 400 flights last Thursday in a protracted contract dispute. The two sides have resumed talks to avoid further disruptions. Lufthansa also is in talks with pilots union Vereinigung Cockpit.

Pressure on Lufthansa and the group's intra-European flights is mounting. Ryanair Holdings PLC, Europe's largest budget carrier, is rapidly expanding in Germany to steal customers from the incumbent carrier.

"We are responding to the pricing pressures in the air transport sector with consistent capacity and cost discipline," Lufthansa Chief Executive Carsten Spohr said.

Lufthansa is cutting more capacity in the fourth quarter, with 8.7% growth planned now compared with 9.7% growth planned a year ago. Full-year capacity will rise 5.2% compared with an earlier plan for 5.4%.

The situation isn't quite as bad, though, as Lufthansa feared midyear after terrorist attacks in Europe spooked passengers and hurt bookings. The carrier last month issued preliminary third-quarter earnings and raised its full-year forecast. It partially backtracked on a profit warning issued only three months earlier though remaining behind expectations for profit growth at the start of the year. Full-year adjusted earnings before interest and taxes this year are expected to be roughly on par with last year's €1.8 billion.

Lufthansa benefited from better-than-expected short-term business travel bookings in September. The airline warned about continued volatility.

"Despite the volatility of our business and despite the difficult market environment, we are looking ahead with confidence to 2017," Mr. Spohr said.

Capital expenditure this year will be slightly lower than expected because of delays in some planes deliveries this year. Canada's Bombardier Inc. has had to postpone shipment of its CSeries narrow-body jet to Lufthansa's Swiss International Air Lines unit because of delays from its engine supplier, United Technologies Corp. Lufthansa said those planes should arrive next year, raising capex levels beyond plans. Capital outlays thereafter should be lower than planned as the airline tightens its belt.

Lufthansa last month also approved the purchase of 55% of Brussels Airlines it doesn't already own.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

November 02, 2016 04:05 ET (08:05 GMT)

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