Lufthansa profits plunge despite revenue hike amid rising fuel costs

The Lufthansa Group reported “strong demand” for the three months to June but its profits for the quarter fell to €123 million from €1 billion the previous year despite revenue rising 8% year on year to just over €11 billion.

The group’s ‘adjusted’ operating profit for the quarter more than halved year on year from €870 million to €383 million amid “significantly higher” fuel costs – up by €750 million on the previous year.

Chief executive and group chair Carsten Spohr described the quarter as “challenging” and “once again marked by multiple geopolitical crises” and warned “uncertainties for the full year remain high”.

He said: “The continued strong global demand for air travel – primarily in premium classes – had a positive impact.” 

But he noted: “Despite further improvement in load factor and a significant increase in yield, we were unable to fully offset the considerable rise in fuel costs.”

The group incurred a further €150 million in costs through six days of strike action at Lufthansa in April.

Spohr reported yields on routes to and from Asia were up more than 13% year on year owing to disruption to traffic via the Gulf.

The group operated 3% less capacity in the quarter than the previous year, in part by axing the operations of regional carrier CityLine.

Spohr described a turnaround programme at Lufthansa as “taking effect”, with “numerous productivity and efficiency measures”, and reported unit revenues rose 6.4% year on year “driven in particular by the premium segment and by Asian routes”.

He also reported “strong intra-European demand” at subsidiaries Eurowings and at Sun Express, Lufthansa’s joint venture with Turkish Airlines.

Group operating cash flow fell by about €600 million euros in the first half of the year to €2.3 billion euros amid lower advance ticket payments “owing to shorter booking cycles”.

Chief financial officer Till Streichert reported “our balance sheet remains consistently strong” but noted: “The second quarter was characterized by exceptionally high fuel costs and heightened geopolitical uncertainty.

“Nevertheless, thanks to robust demand, rising yields and the strong performance of Lufthansa Cargo, we were able to achieve a positive result.”

He argued: “Uncertainties for the second half of the year remain high, [but] we are confident that . . . cost discipline, network optimisations and persistently high demand will offset a significant portion of the cost increases.

“However, the growing volatility of fuel prices, as well as the considerably shorter booking cycles in the passenger airline business, are making forecasting increasingly difficult.”
Lufthansa now expects its full-year capacity “to be in line with the prior year”.