Lufthansa sees strong quarterly bookings despite inflation woes

Deutsche Lufthansa AG predicted demand for travel will remain strong in coming months as the desire to travel in the wake of the pandemic outweighs concerns about higher cost of living and the uncertain economic future.

The airline group said demand for flights in the fourth quarter looks strong, adding it also expects a robust performance for its maintenance and cargo divisions in the period. Bookings for the final quarter are running ahead of the levels seen for the same quarter in 2019, just before the pandemic tipped global aviation into an unprecedented downturn.

“The Lufthansa Group has economically left the pandemic behind and is looking optimistically into the future,” Chief Executive Officer Carsten Spohr said in a statement.

The carrier’s upbeat commentary during what is normally one of the most muted booking periods of the year suggests the industry is “confounding fears of a macro-driven slowdown even as Europeans turn the heating on,” said Bernstein analyst Alex Irving. Lufthansa rose as much as 3%, or 20 cents, to 6.85 euros in Frankfurt trading. The stock has gained 10% this year.

Lufthansa spent much of the peak holiday season battling disruption at its hubs as bookings surged, yet cancellations due to strikes and staff shortages pushed up ticket prices, lifting margins. Yields, a measure of airline profitability, rose 23% in the third quarter compared to the same period 2019, hitting a record.

The airline’s strong bookings come despite mounting signs of a slowdown in the company’s home European markets. A blend of high inflation and rising interest rates, as well as concerns over Russia’s war in Ukraine have dented consumer and business confidence.

The company already raised guidance earlier this month. Germany’s flagship carrier now expects adjusted earnings before interest and taxes this year of more than €1 billion ($981 million). That compares with previous guidance of above €500 million. Despite the usual seasonal slowdown in the fourth quarter, Lufthansa said it plans to achieve an operation profit in the period. 

Adjusted earnings before interest and tax in the third quarter amounted to 1.1 billion euros, Lufthansa said today.