The airline group expects continued strong demand for air travel in the coming months, especially during the Christmas season, and another positive result in the fourth quarter. The MDAX group confirmed the annual forecast.
CEO Carsten Spohr thanks customers and employees for a record summer. “All airlines in our group and Lufthansa Technik contributed to this with double-digit profit margins,” said Spohr, according to the statement. The group was able to reduce unit costs per seat despite higher fuel costs.
In the period from July to September, sales rose 8 percent to 10.3 billion euros. Although this was less than analysts expected at 10.8 billion euros, it was, according to the announcement, the quarter with the highest sales in the company’s history. Adjusted earnings interest and taxes (EBIT) jumped by 31 percent to 1.47 billion euros. The corresponding operating margin improved by 2.5 percentage points to 14.3 percent. Group profit improved by 47 percent to 1.192 billion euros. The Lufthansa Group earned 1.00 euros per share, after 68 cents in the same period last year
Analysts had unanimously expected an adjusted EBIT of 1.43 billion with a margin of 13.2 percent and a consolidated profit of 1.04 billion euros.
For 2023, Lufthansa continues to expect adjusted EBIT of more than 2.6 billion euros, a significant increase from 1.5 billion euros in the previous year.
For 2024, the company continues to expect an increase in capacity to around 95 percent of the pre-crisis level. The adjusted EBIT margin should reach at least 8 percent.
Growing air traffic brings Lufthansa Technik record profits
Lufthansa’s maintenance subsidiary is expecting another record profit in 2023 thanks to the strong increase in travel worldwide. “The aviation industry is recovering much faster than expected,” said Lufthansa Technik CFO William Willms on Thursday when presenting figures for the first nine months. “We benefit from this because, thanks to the great commitment of our employees, we are able to take advantage of many of the resulting opportunities.”
The global market leader in maintenance, repair and overhaul of aircraft achieved a record in 2022 with operating earnings before interest and taxes (EBIT) of 554 million euros, adjusted for special effects. After originally expecting a value at the same level, “an even better result is now expected for the full year 2023,” it said. After nine months, 459 million euros were recorded, 7 percent more than in the previous year, reported the Lufthansa subsidiary, which presented its figures in parallel to the parent company. Lufthansa Technik increased its sales by 20 percent to 4.8 billion euros. By the end of September, the company had concluded more than 580 new contracts in 2023 and around 700 in 2022.
In order to achieve its goals, Lufthansa Technik announced in March that it would hire around 4,000 new employees, 2,000 of them in Germany. The airline’s maintenance subsidiary had reduced its workforce by a fifth from around 25,000 worldwide to 19,500 due to the slump in the corona pandemic. A lot of progress has been made in terms of new hires. The number of employees has now risen to 22,290, around 800 more than three months ago.
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Engine recall will keep several Lufthansa jets grounded in 2024
A global engine recall is expected to ground 20 Airbus jets from the Lufthansa Group every day next year. In total, the group has 64 aircraft with the affected geared turbofan engine from the manufacturer Pratt & Whitney, said CEO Carsten Spohr in a conference call on the quarterly figures in Frankfurt on Thursday. Including replacement engines, 146 turbines in the Lufthansa Group would have to be serviced as a result of the recall. Spohr relies on the company’s subsidiary Lufthansa Technik. It is intended to significantly shorten maintenance times.
The RTX subsidiary Pratt & Whitney announced an extensive recall of geared turbofan engines in the summer. The reason is a problematic metal powder that Pratt & Whitney used in the production of the turbine disks. The engine type is used in around every second jet from Airbus’ most popular A320neo model series worldwide.
Spohr hopes to get the affected engines serviced faster than Pratt & Whitney and its German partner MTU. It is assumed that each engine will be out of operation for up to 300 days, also due to long waiting times for workshop appointments and spare parts. Spohr hopes to achieve this 100 days faster at Lufthansa Technik. He also expects the maintenance wave to generate sales for the subsidiary. Ultimately, almost all of the more than 3,000 geared turbofan engines delivered worldwide to date are affected by the problem.
When ordering its medium-haul jets from the Airbus A320neo family, Lufthansa only relied half on the geared turbofan and also ordered the Leap competitor engine from CFM, a joint venture between SAFRAN and General Electric. According to Spohr, only ten aircraft with Leap engines have been delivered to the Lufthansa Group so far.
Small earnings surprise stops Lufthansa’s decline
A lucrative summer business and the prospect of a good winter helped Lufthansa shares recover on Thursday. After the German airline’s stock fell to its lowest level in over a year the day before, investors now took advantage of the low price level.
The Lufthansa share temporarily jumped 7.14 percent to 7.06 euros in XETRA trading. At least the share was now able to jump over the 21-day moving line again, which is currently just under EUR 6.95.
After the share’s recent weak run, the quarterly figures should reassure investors, commented analyst Jarrod Castle from the Swiss bank UBS. Analysts unanimously pointed to the adjusted earnings before interest and taxes, which were slightly above expectations and, according to JPMorgan expert Harry Gowers, were due to surprisingly good cost control.
According to him, the confirmed targets for 2023 and 2024 should also be received positively, even if they are unlikely to change much in terms of average analyst estimates for these indicators. “Demand will remain robust into the winter,” said analyst Alexander Irving from Bernstein Research, among others. And analyst Ruairi Cullinane from the Canadian bank RBC viewed the decline in Lufthansa’s pension obligations as encouraging.
Despite the gains this morning, there is still a long way for Lufthansa shares to reach their annual high of 11.16 euros, which they reached at the beginning of March. The stock had been falling steadily since the spring, which meant a loss of around 42 percent up to its low the day before. The loss so far this year is currently 9 percent.
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