Lufthansa Expects Strong Demand to Continue as Record Performance Boosts Revenues

by Warren Seah

Shares in Deutsche Lufthansa have soared following the airline’s announcement that it expects robust demand for air travel to extend into the fourth quarter. Building on its impressive summer performance, the Cologne-based carrier reported a record revenue of €10.3 billion ($11 billion) for the third quarter, reflecting an 8% surge. The notable increase in passenger numbers and higher fares significantly contributed to Lufthansa’s impressive financial performance.

Share Price Surge

On the back of these achievements, shares in Frankfurt-listed Lufthansa experienced a 7% rise on Friday, accumulating a 13% increase for the week. Despite this recent success, the year-to-date performance of Lufthansa shares has seen a slight decrease of just over 2%.

Europe’s Second Largest Airline

As Europe’s second largest airline, after low-cost giant Ryanair, Lufthansa’s record-breaking revenues have successfully met analysts’ net income expectations of €1.6 billion. During the third quarter of 2022, Lufthansa transported a total of 38 million passengers, surpassing the previous year’s figure of 33 million.

Positive Outlook Amidst Challenging Times

Despite a stagnating German economy, Lufthansa remains optimistic about future demand levels. The airline predicts that demand will elevate to 91% of pre-COVID levels in the fourth quarter, compared to 88% in the previous quarter. It is worth noting that Lufthansa has already received bookings from 80% of its anticipated passengers for the next three months.

Lufthansa CEO Carsten Spohr expressed confidence in the airline’s future prospects, stating, “Even though the geopolitical situation remains challenging, our booking outlook gives us reason to be positive — not only for a very good Group result this year, but also beyond.”

Lufthansa’s strong financial performance and positive outlook highlight the resilience of the airline amidst a challenging industry landscape.

Lufthansa Airlines Rebounds with Increased Ticket Prices and Passenger Numbers

Lufthansa Airlines experienced a boost in revenues amid higher air ticket prices, resulting in a 2% increase in revenues per kilometer traveled compared to 2022. Furthermore, this increase was an impressive 25% higher than the pre-pandemic year of 2019, showcasing the recovery of the travel industry after the impact of COVID-19.

This surge in ticket prices managed to offset a 14% rise in the airline’s costs. These increased costs were primarily due to Lufthansa’s decision in November 2022 to raise the pay for its 19,000 cabin crew members following negotiations with the flight attendants union.

While Lufthansa saw success in its airline segment, its maintenance arm, Lufthansa Technik, experienced a slight dip in revenues. Additionally, the cargo business of the airline suffered from weak demand in both markets, leading to a decrease in earnings.

Despite these challenges, Lufthansa reported that its passenger numbers in the third quarter of this year reached 88% of pre-COVID rates. This marked a significant 13% increase compared to the same period in 2022. The airline is optimistic about the future, with expectations that passenger numbers will return to 95% of pre-pandemic levels by 2024.

However, Lufthansa’s CEO, Spohr, highlighted that the recovery of business travel has been slower compared to private travel. As a result, this discrepancy is likely to impact the performance of Lufthansa in the fourth quarter, particularly considering the heavier reliance on business travel during the winter months.

In conclusion, Lufthansa Airlines demonstrates resilience and progress as it adapts to the evolving landscape of the travel industry. Its increased ticket prices and growing passenger numbers signify a positive trajectory for the company’s recovery, although challenges in the business travel sector remain.

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