Lufthansa posted a surprise profit in the third quarter as cargo demand boomed and said a reopening of the US border to Europeans will keep earnings positive through year-end.
The German group reported adjusted earnings before interest and tax of €17 million for the three months through September, its first profit since the start of the Covid-19 pandemic. Analysts had predicted a loss of €169 million, based on a Bloomberg survey.
Lufthansa said it should be able to at least halve its full-year loss after previously predicting only that it would be narrower than last year’s level.
The buoyant outlook, following positive results from Air France-KLM, signals that the travel recovery is extending to large network airlines. Both European carriers got a boost from cargo operations over summer, with prices remaining high even as capacity returns. While Lufthansa’s passenger operations posted a loss, the US will reopen to foreign visitors next week, releasing pent-up demand for corporate and family trips over the holidays.
“With rising demand for business travel and a record result at Lufthansa Cargo we have mastered another milestone on our way out of the crisis,” Chief Executive Officer Carsten Spohr said in the release.
Passenger bookings are now back to four-fifths of pre-crisis levels, Lufthansa said, with the group set to offer more than 70 per cent of its usual capacity in 2022.
The cargo division posted a €301 million-profit in the third quarter, its best-ever performance, as a structural shift to air freight during the pandemic spurred demand. The group’s full-service airlines had a €304 million loss, overwhelmingly from Lufthansa’s own-brand operations, with the Swiss, Austrian and Belgian arms recording small profits.
Eurowings Boost
The Eurowings discount brand was also profitable following a revival in short-haul European travel, with Bernstein analyst Alex Irving calling the performance “particularly impressive” and indicating the strength of the leisure recovery.
Lufthansa said it’s nearing its target of cutting the payroll to 100,000 people from almost 140,000 before the crisis, with 3,000 staff yet to agree their departure. A new voluntary exit plan has begun for cabin crew.
Full-service competitor Air France-KLM posted a return to profit last week and predicted its 12-month result would be slightly positive.
Irving said in a note that Lufthansa “arguably faces a tougher battle” than its rival given a greater reliance on corporate travel versus Air France’s more leisure-centric network.
IAG SA, Europe’s third major airline group and the owner of British Airways, is due to report quarterly figures Friday. – Bloomberg