S&P lowers Deutsche Lufthansa view to negative

S&P said it revised the outlook on Deutsche Lufthansa AG to negative from stable.

The agency also said it affirmed the company’s BBB- long-term and A-3 short-term corporate credit ratings.

S&P also said it affirmed the ratings on all of the debt instruments issued by Lufthansa.

The outlook revision reflects a view that the trading outlook for Lufthansa has deteriorated, underpinned by the company's recent statement about significantly lower advance bookings and its revision of EBIT guidance for 2016, the agency explained.

Lufthansa was expected to target operating performance in 2016 moderately above its results of one-year earlier, S&P said.

But the agency said it believes that weak demand conditions, including a decline in the long-haul traffic due to terrorist attacks in Europe and political and economic uncertainty, will weigh on the company’s financial performance.

The company’s passenger volumes are expected to be less than the company's targeted seat capacity growth of 5.4% in 2016, which combined with softer ticket prices will result in a likely drop of unit revenue by 7% to 8% compared to the previous year, S&P said.

But Lufthansa's ongoing cost-saving initiatives and efficiency measures could help its unit-cost position, the agency said.

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