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Lufthansa cuts profit forecasts

Lufthansa has sent a chill through the European airline industry after it cut profit forecasts for two years and warned over falling fares on its European and American routes.

The German airline, which carried 104 million passengers across a fleet of 622 planes last year, said capacity growth from Middle Eastern carriers such as Emirates or Etihad on its US and European routes was putting pressure on fares amid the increased competition.

The business said it was lowering its operating profit forecast by as much as a third to 1 billion euros (£806 million) for this year and by 24% to 2 billion euros (£1.6 billion) in 2015.

The German airline's profits downgrade knocked UK-listed airlines, putting them among the biggest fallers on the FTSE 100. EasyJet fell more than 3% and International Airlines Group, which owns British Airways and Iberia, slipped almost 5%.

Lufthansa first warned in May that it was facing a series of price pressures that included a pilot's strike and currency fluctuations.

Lufthansa chief officer for finances and aviation services Simone Menne said: "The revenue risks mentioned when we presented the quarterly figures in early May have unfortunately materialised."

The airline added it would cut its capacity during the winter.

The airline said a strike by pilots in April cost it 60 million euros (£48.4 million), while a fall in the value of the Venezuelan Bolivar when translated into euros also hit it by 60 million euros (£48.4 million), so far this year.

Last month International Airlines Group (IAG), which was formed from the merger of British Airways and Iberia in 2011, posted operating losses of 150 million euros (£122.6 million), compared with 278 million euros a year earlier.

IAG has around 430 aircraft in service and employs more than 60,000 people. A restructuring programme at Iberia has seen 2,500 staff leave the airline under a voluntary redundancy programme, while salaries have been reduced.

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