Lufthansa reports 2025 operating profit beat, 2026 outlook murky due to middle east tension

Lufthansa posts profit beat but Middle East conflict clouds outlook

By Joanna Plucinska

Lufthansa's Financial Performance and Market Impact

2025 Results and Market Reaction

LONDON, March 6 (Reuters) - Lufthansa reported better-than-expected 2025 results on Friday as stricter financial management and fleet renewal helped the airline contain costs and boost profits, but the outlook remained clouded by the war in the Middle East.

The German group's shares rose 3% in early trading.

Impact of Middle East Conflict on Airline Stocks

Airline stocks have been hammered this week as U.S. and Israeli airstrikes on Iran - and retaliatory strikes by Iran across the Gulf - have disrupted long-haul flights and sent oil prices soaring.

"The war in the Middle East proves once again how exposed air traffic is and how vulnerable it remains," Lufthansa Chief Executive Carsten Spohr said in a statement.

Shifts in Demand and Strategic Response

However, the airline said it had seen substantially more demand on routes to and from Asia and Africa since the conflict began on Saturday, adding it was sticking with its strategy of expanding its long-haul offering.

Cost Pressures and Fuel Prices

While carriers face costs for rescheduling and rerouting services, the biggest impact for those outside the Middle East is likely to come from surging fuel costs. Brent crude oil futures have jumped 17.2% this week.

Resilience and Profitability

RESILIENCE

European carriers, including Lufthansa, benefited from slightly lower fuel bills in 2025, bolstering earnings as passenger demand stayed strong. Lufthansa's fuel bill fell 7%.

"Last year we were able to significantly increase the Group's operating profit and achieved the highest revenue in our history. Our results demonstrate the resilience and stability of the Group," Spohr said.

Operating Profit and Margin Growth

Lufthansa reported an adjusted operating profit of 2 billion euros ($2.3 billion), compared with 1.9 billion euros forecast in a company-compiled analyst poll and up from 1.6 billion euros in 2024. The group also posted an operating margin of 4.9%, up from 4.4% a year earlier.

Lufthansa aims to lift operating margins to 8%-10% between 2028 and 2030 from 4.4% in 2024, but strikes by workers, including the most recent on February 12, have made it harder to boost profitability.

Analyst Perspectives and Segment Performance

Bernstein analyst Alex Irving said ongoing weakness in the passenger airline segment persisted, but added that strong performances in Cargo and Lufthansa Technik helped bolster profits.

Future Outlook and Projections

The carrier said the outlook for 2026 was unclear due to geopolitical uncertainty. It projected capacity growth of 4%, alongside increased revenue and profit margin.

($1 = 0.8610 euros)

(Reporting by Joanna Plucinska. Editing by Mrigank Dhaniwala and Mark Potter)