(Bloomberg) -- Deutsche Lufthansa AG shares, which have been trading near their lowest level in four years, are at risk of dropping out of Germany's benchmark DAX Index as the airline battles low-cost competitors, labor unions and a shaky credit rating.
Lufthansa's market value now ranks 40th among DAX members, down from 35th place in April, according to data published by Deutsche Boerse AG on Thursday. Companies that fall below a certain threshold must leave the index, putting Lufthansa at risk when the stock exchange operator next reviews the DAX composition on Dec. 5. Membership is reserved for Germany's 30 biggest publicly listed companies, which Deutsche Boerse determines based on a combination of market value and trading volumes.
Shares in Germany's biggest airline have lost 35 percent this year and fell 0.9 percent to 9.56 euros at 3:06 p.m. in Frankfurt trading, bringing the company's market value to 4.4 billion euros ($4.9 billion). That compares with 99.9 billion euros for SAP SE, the biggest DAX member, and 14.9 billion euros at Ryanair Holdings Plc, Europe's largest carrier by market value. Lufthansa shares fell below 10 euros last month for the first time since September 2012.
Chief Executive Officer Carsten Spohr, who took over at Lufthansa in 2014, has issued three profit warnings amid increased competition from discount airlines and escalating union disputes. Britain's decision to leave the European Union has exacerbated Lufthansa's woes as rivals such as EasyJet Plc and Ryanair add German flights to reduce their dependence on the U.K.
In addition, Lufthansa's credit rating is in jeopardy of falling to junk after S&P Global Ratings last month cut its outlook to negative amid concerns about the company's ability to plug its record-high pension deficit. Cabin crew union UFO on Thursday threatened to call strikes as early as next week at the carrier's low-cost Eurowings arm, after competing labor group Ver.di already staged a warning strike at the unit last month. Lufthansa also made little progress with its pilots union in recent years over a range of issues, including pay and pension benefits.
While Lufthansa's market value is already the smallest among the 30 DAX companies, it has retained its membership because Deutsche Boerse also takes number of shares traded into account. Lufthansa is ranked 20th by 12-month average trading volumes. Dropping below 45th place by market value, however, leads to an exit regardless of turnover. The stock exchange will base its Dec. 5 decision on data gathered in November.
A total of 13 investors are short-selling Lufthansa shares, Bloomberg data show. That's the highest number for any DAX member. Firms short stocks to bet on falling share prices, or to protect other investments. Short positions in Lufthansa stock are valued at 564 million euros, second only to Volkswagen AG's 608 million euros.
Lufthansa shares are rated “sell” by 17 of 29 analysts tracked by Bloomberg, a record low for the airline and the worst among major European and American carriers.
Lufthansa has been a member of the DAX 30 since the list was created in 1988. Being forced to leave could put more pressure on Lufthansa shares, as fund managers tracking a benchmark index are required to sell securities that are no longer included.
To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net. To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Dalia Fahmy, Tom Lavell
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