Business

Lufthansa expects earnings to rise as travel demand continues

German carrier says holidays to Mediterranean countries will be particularly strong this summer

Lufthansa said it will buy 22 new wide-body aircraft from Airbus and Boeing as the carrier aims to meet rising long-term demand for intercontinental travel

Fri Mar 3 2023 - 09:07

Deutsche Lufthansa expects earnings to rise significantly in 2023 as travel demand continues to swing back from the coronavirus pandemic.

Europe’s biggest airline group said it expects a “significant improvement” on the €1.5 billion adjusted earnings before interest and taxes result it reported for 2022. Summer holidays to Mediterranean countries and travel on North Atlantic routes will be particularly strong, the carrier said.

“Based on the current booking situation, the company expects yields to remain high,” Lufthansa said in its earnings statement.

The global aviation industry has enjoyed a robust comeback since most countries lifted their coronavirus restrictions and people resumed travel for business and leisure.

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Airbus said last month that it’s increasing the rate of production on its largest aircraft to meet rebounding long-haul demand, and budget carriers such as Ryanair has said that summer bookings point to a strong summer season.

Capacity will rise to between 85 per cent to 90 per cent compared with pre-pandemic levels. At the same time, Lufthansa cautioned that persistent bottlenecks in the European aviation system will limit capacity to about 75 per cent in the first quarter.

The airline said it expects to make further progress this year toward hitting its earnings margin target of a minimum of 8 per cent by 2024. Chief executive Carsten Spohr has said the target is required to cut debt Lufthansa incurred during the pandemic, when the airline group was bailed out by the government.

The previously high earnings at cargo division, which boomed during the pandemic, are set to fall back in 2023 as air freight rates decline. The division reported a record €1.6 billion in adjusted earnings for 2022.

The German carrier on Thursday said it will buy 22 new wide-body aircraft from Airbus and Boeing in an order valued at $7.5 billion at list price, as the carrier aims to meet rising long-term demand for intercontinental travel.

Lufthansa said preparations for a possible partial divestiture of its Lufthansa Technik division are proceeding according to plan, adding talks with select investors have begun. The company also said it remains in exclusive talks with Italian officials about its pursuit of Italy’s ITA Airways.

Lufthansa is the last major European airlines to report earnings for last year, joining Air France-KLM and British Airways parent IAG in predicting a recovery approaching pre-pandemic levels in 2023. While European household and company budgets continue to get squeezed by high inflation, demand for business travel and summer getaways in particular has remained robust.

Lufthansa rose as much as 48 cents, or 4.9 per cent to €10.34, the highest since early 2020. The stock has gained 32 per cent this year, after advancing 26 per cent in 2022. – Bloomberg

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