Lufthansa profit warning brings turbulence for airline shares

Shares in European airlines have plunged after Lufthansa blamed intense short haul competition for a profit warning.

The German carrier said falling sales at its Eurowings budget arm accounted for much of the woes it was experiencing in Europe, as operators engage in a fare price war.

Rival airlines including easyJet and Ryanair have also come under pressure, as higher fuel costs place margins at risk.

There have been a string of recent casualties with Monarch, Flybmi, Germania, Air Berlin and Wow collapsing.

Tour operators including TUI and Thomas Cook have also issued profit warnings this year - with the latter company confirming a takeover approach a week ago as the pair also battle falling demand partly linked to Brexit uncertainty.

Shares in Lufthansa fell 12% after it downgraded profit expectations for 2019 by up to €1bn (£891m).

The carrier said that its fuel bill could come in €550m (£490m) above last year's total, despite the recent dips in world oil costs.

The news proved toxic for its listed competitors.

In the UK, shares in easyJet were 4% lower while British Airways' parent IAG saw its market value dip by 2%.

Ireland-listed Ryanair closed 4% lower.

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Lufthansa said: "Yields in the European short-haul market, in particular in the group's home markets, Germany and Austria, are affected by sustained overcapacities caused by carriers willing to accept significant losses to expand their market share.

"The group expects the European market to remain challenging at least for the remainder of 2019."