Record sales
Lufthansa has to save money despite the great summer
The Lufthansa Group achieved its highest quarterly sales of all time in the summer. Nevertheless, the company has to save money with the crane.
Despite strong ticket demand and record sales, Lufthansa earned less in the summer than the year before. This is also why CEO Carsten Spohr is taking action on the core brand Lufthansa Airlines: A savings program is intended to improve the division’s operating profit (adjusted EBIT) by 1.5 billion euros gross by 2026. That’s about as much as the entire group wants to generate in the current year.
In the future, Lufthansa passengers will more often have to expect to travel with unknown group companies or in rented aircraft on short- and medium-haul flights. Spohr wants to rent additional jets from the Latvian Air Baltic, which has already helped out with crews this year. In addition, the development of the newly founded flight operations Discover and City Airlines will continue, which will offer feeder flights to the hubs as well as long-distance flights more cost-effectively in the future.
Globally, demand for air travel is growing so strongly that the industry is increasingly having to work at the limit of its capacity, said Spohr. In principle, people are willing to spend a higher proportion of their income on travel. With continued high demand and limited supply, he expects ticket prices to remain stable to slightly increasing. These have become even more expensive in Germany due to the high state-regulated taxes and fees. The group now only generates around a quarter of its revenues on the German market.
Capacity utilization is higher than ever before
In the strong third quarter, group airlines such as Lufthansa, Swiss, Austrian, Brussels, Eurowings and Discover transported a good 40 million passengers, six percent more than a year earlier. Machine utilization climbed to a record 88 percent in August. Sales increased by five percent to 10.7 billion euros – and were therefore higher than ever in a quarter in the company’s history.
However, declining ticket prices, expensive refunds, increased personnel costs and fees initially affected the result: adjusted operating profit (EBIT) in the summer quarter fell by nine percent to 1.3 billion euros. The results from the first half of the year result in a profit after nine months that has almost halved to 830 million euros (2023: 1.6 billion euros).
No further China flights canceled
Prices were particularly under pressure in Asia. After the cancellation of the connection between Frankfurt and Beijing, no further China flights will be removed from the program. The core brand Lufthansa has had to cope with particularly strong declines: in the third quarter, the Kranich Line earned 37 percent less in day-to-day business than a year before. After nine months there was an adjusted operating loss of 20 million euros – also due to several strikes in the first quarter.
The delivery bottlenecks from aircraft manufacturers Boeing and Airbus are forcing Lufthansa to operate older and more fuel-thirsty aircraft for longer than originally planned. According to Spohr, 41 Boeing long-haul jets alone are currently missing, which should have been in service long ago. In times of need, the company has just brought the sixth of eight giant Airbus A380 jets back into operation, after actually having already retired the model.
Ultimately, the Lufthansa Group did not expand its flight offerings in the summer as much as previously planned. The level from before the corona pandemic has still not been reached. The capacity offered in the third quarter was 94 percent of 2019. In July, the board was still aiming for 96 percent. For the year as a whole, instead of 92 percent, it should now only be 91 percent.
Profit expectations dampened
With regard to profit development, Spohr has already reduced expectations in the summer – for the second time this year. He is now sticking to this lowered forecast: He continues to expect an adjusted operating profit of 1.4 to 1.8 billion euros for 2024. For comparison: In 2023, Lufthansa earned almost 2.7 billion euros in daily business.
Dates Announcement Lufthansa Q3/2024 Quarterly Report Deutsche Lufthansa AG Q3/2024
dpa
Source: Stern
