Air Freight News

Lufthansa gives upbeat outlook as travel demand stays strong

Deutsche Lufthansa AG forecast profit will keep rising in coming months amid a boom in demand, even as staffing shortages prompt airports to limit capacity.

Europe’s biggest airline group said Thursday it expects a “significant increase” in earnings in the third quarter compared to the second. That’s after high ticket prices and bumper profits at the company’s cargo division more than offset increases in fuel costs in the second quarter. 

The shares rose as much as 5.3% in early German trading.

Lufthansa also provided a clearer outlook for full-year profit, predicting adjusted earnings before interest and taxes of more than 500 million euros ($509 million), which compares with the 585 million-euro estimate of analysts. The airline previously said only that it expected an improvement in 2022 compared with last year.

While travelers across Europe are grappling with disrupted flights amid the staffing crunch and a wave of strikes, the region’s airlines are making money again as travel rebounds from the Covid crisis. Capacity caps introduced to avoid late cancellations may have crimped passenger tallies, but they’ve also lifted fares in a business where demand was already close to matching supply.

Having reduced its workforce during the pandemic, Lufthansa said it will hire some 10,000 new employees over the next 18 months, a move aimed at smoothing disruptions to travel.

Lufthansa has canceled around 7,000 flights for the busy summer season due to a shortage of staff and strikes from its ground crew union. The airline’s pilots’ union has voted in favor of walkouts, but hasn’t yet decided whether to hold them as pay talks continue. 

“Together, we have steered our company through the pandemic and thus through the most severe financial crisis in our history,” Chief Executive Officer Carsten Spohr said in a statement. “Now we must continue to stabilize our flight operations.” 

Lufthansa posted adjusted earnings before interest and taxes of 393 million euros for the second quarter, after saying last month that the figure would total between 350 million euros and 400 million euros.

Rivals Air France-KLM and British Airways parent IAG SA last week posted positive earnings for the first time since global travel was roiled by the pandemic. The former plans to hike capacity close to pre-coronavirus levels in the final three months of 2022, while IAG predicts higher earnings this quarter and a positive full-year result.

Lufthansa didn’t give an update on asset sales, which its management has said are needed to cut debt. The airline plans to sell its international catering business and its AirPlus corporate travel payments unit. 

“We are concerned that these become challenging to execute at acceptable valuations in a down equity market,” Bernstein analyst Alex Irving said in an note.

Bloomberg
Bloomberg

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© Bloomberg
The author’s opinion are not necessarily the opinions of the American Journal of Transportation (AJOT).

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