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Lufthansa sees return to full-year profit as travel picks up
Global Banking & Finance Review®
Company
By Ilona Wissenbach and Maria Sheahan
FRANKFURT/BERLIN (Reuters) – Germany’s Lufthansa said on Thursday it expected demand for short-haul flights in Europe to drive growth at its passenger airlines this year, forecasting a return to group operating profit for the full year, pushing its shares higher.
Travellers have returned to the skies following COVID-19 pandemic-related travel restrictions in 2020 and 2021, helping airlines, such as Lufthansa, Air France-KLM and British Airways-owner IAG to return to profit this summer.
Lufthansa said bookings for August to December were now at an average of 83% of the pre-pandemic level, and it hoped that business travel bookings would reach 70% in the fourth quarter.
Chief Executive Carsten Spohr said the airline group was seeing more and more wealthy people who were willing to spend money on hotels, rental cars, expensive restaurants as well as air tickets.
“These people are less sensitive to economic up- and downturns,” he said.
Lufthansa now expects to generate full-year adjusted operating profit (EBIT) of more than 500 million euros ($510 million), bouncing back from last year’s 2.3 billion euro loss.
Analysts are even more optimistic, on average predicting 569 million euros, according to a consensus published on Lufthansa’s website. Shares in the carrier jumped more than 5% on Thursday.
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The airline industry, particularly in Europe, has struggled to cope with the rapid rebound in demand, with huge queues building at many airports because of staff shortages, prompting last-minute cancellations and travellers’ frustration.
The travel chaos has led airlines to trim capacity, with Lufthansa cancelling more than 2,000 flights this summer. It said it expected to offer about 80% of pre-crisis capacity in the third quarter, less than previously planned, and 85-90% in 2023.
That should, however, help it markedly improve quarterly adjusted earnings before interest and tax (EBIT) compared with the second quarter, it said. Lufthansa reported adjusted EBIT of 393 million euros for the three months through June thanks to booming demand for air cargo flights, up from a year-earlier loss of 827 million euros.
Its passenger airline business reported an adjusted loss before interest and tax of 86 million euros in the quarter because of costs related to flight disruptions.
Lufthansa still faces uncertainty, though, from possible walkouts by its workers. Management was in talks on Thursday with ground staff, whose one-day strike last week forced the airline to cancel more than 1,000 flights.
One day of strikes costs Lufthansa 30 to 35 million euros in lost revenues.
The carrier is also due to hold talks next with pilots, who have already voted in favour of industrial action.
($1 = 0.9841 euros)
(Reporting by Ilona Wissenbach; Writing by Maria Sheahan; Editing by Christian Schmollinger, Mark Potter and Tomasz Janowski)
Operating profit is the income generated from normal business operations, excluding costs associated with non-operational activities. It reflects the profitability of the core business.
Short-haul flights are flights that cover relatively short distances, typically less than 1,500 kilometers (approximately 930 miles), often connecting regional or domestic destinations.
Business travel refers to travel undertaken for work-related purposes, such as attending meetings, conferences, or other professional engagements, often funded by an employer.
Adjusted EBIT (Earnings Before Interest and Taxes) is a financial metric that measures a company's profitability by excluding certain non-recurring expenses, providing a clearer view of operational performance.
Flight cancellations occur when an airline decides to not operate a scheduled flight, often due to operational issues, weather conditions, or other unforeseen circumstances.
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