The Lufthansa Group saw earnings drop in the first half of the year, which it blamed on a “price war in Germany and Austria”.

Revenue rose to €9.6 billion in the quarter through June, while adjusted EBIT (earnings before income and taxes) was €754 million.

Net profit for the first-half year period amounted to a €116 million loss, down from a €713 million profit year-on-year, partly due to a revaluation of tax risk in Germany which cost it €340 million.

The Lufthansa Group comprises Swiss, Austrian Airlines and low-cost carrier Eurowings as well as Germany’s Lufthansa.

The full-service airlines reported EBIT of €565 million in the first half of the year, while Eurowings lost €273 million, a drop on a €220 million loss over the same period last year.

In a statement, the group said that “on short-haul routes in Europe, the price war in Germany and Austria in particular had a negative impact on earnings.”

Irish budget airline Ryanair yesterday said that its own fall in profits in the German market was due to Lufthansa buying Air Berlin and “selling this excess capacity at below cost prices.”

CFO Ulrik Svensson today commented: “Our earnings are feeling the effects of tough competition in Europe and sizeable overcapacities, especially on our short-haul routes out of Germany and Austria.

“We are responding to this by further reducing our costs and increasing our flexibility. With the turnaround plan which we recently presented, we also intend to make Eurowings a sustainably profitable airline.”

In June, Lufthansa announced that Eurowings would withdraw from the long-haul market, with its long-haul operations – which included links to Thailand and the US – transferred to other group airlines.

CEO Thorsten Dirks said Eurowings will concentrate on high-revenue routes out of cities such as Dusseldorf and Hamburg, and become more like low-cost carriers Ryanair and Easyjet, with a greater emphasis on ancillary fees.

Meanwhile, the group says it is enjoying “continuing strong performance in its long-haul business … particularly on its key North American and Asian routes.”

It recently said it wants to further invest in the Chinese market and bring its latest products to the region.

Group carriers will also expand their codeshare agreements with Hong Kong flag carrier Cathay Pacific.