A Triple Dose of Bearishness: Three airlines—two in Europe and one in East Asia—give gloomy assessments of revenue

It was supposed to be a week dominated by financial reports for U.S. airlines. But for all the many developments there, none seemed as eye-popping and head-turning as the doom and gloom emanating from airlines in Europe and East Asia.

Lufthansa, Europe’s largest airline, doesn’t even report until Aug. 2. But it has news to share now. Bad news. In a statement last week, it said to expect Q2 operating margin (excluding special items) to come in somewhere around 7%, which itself sets off no alarm bells. Last year, after all, its Q2 operating margin was also 7%. So what’s the worry? Not the second quarter. That’s already part of the past. It’s the present and future that’s starting to look worrisome.

Due to “increasing political and economic uncertainties,” Lufthansa warned, operating profit for the full year no longer looks likely to be slightly better than last year’s figure. Instead, it’s now expected to be “below the previous year.” Forward bookings for flights departing in the next few months—here’s where the alarm bells begin ringing—have declined significantly, especially on longhaul routes. Lufthansa announced its previous “better than last year” forecast in mid-March. That was before the Brussels terror attacks, before the Egyptair crash, before the Brexit vote, before the Istanbul airport attack, before the coup attempt in Turkey and before the Nice attack. Worse yet, the profit warning itself came before last week’s Munich attack. The situation, in other words, might now be even worse. The airline’s board of directors regards “a complete recovery as not likely anymore.” So to summarize, Lufthansa’s earnings were actually stronger this year than last during the first half but will likely be worse in the second half.

In that first half, unit revenues fell, to be sure, but by just 5%, adjusting for currency movements. The second half, however, should see a drop of between 8% and 9%, according to the airline’s latest forecast. So management is slowing capacity growth, following the lead of its U.S. counterparts. But the reduction amounts to just six-tenths of a percentage point for the full year, and 2016’s ASK growth will still exceed 5%, inflated by extreme growth at Eurowings. Mercifully, Lufthansa expects to pay something like $400m less for fuel in the half, relative to what it paid in last year’s second half. And yes, some of the revenue declines are related to these…

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