Lufthansa labour strikes spoil first quarter earnings

Deutsche Lufthansa said earnings will not advance in 2024 and that the first-quarter loss will widen from last year as the company grapples with strike disruptions and the ebbing of a cargo boom that took hold during the pandemic.

Europe’s largest airline group reported adjusted earnings before interest and tax of €2.68 billion last year, compared with €1.52 billion a year earlier, giving the company an operating margin of 7.6 per cent – close to its target margin of 8 per cent.

Lufthansa will pay a dividend of 30 cents a share, saying it wants to pay out 20 – 40 per cent of profit to shareholders.

The German airline group has seen operations disrupted by waves of strikes, including a two-day walkout this week that disabled flights across Europe’s largest economy. The renewed flare-up of labour disputes is reminiscent of lengthy battles that Lufthansa waged for years with groups like pilots before the pandemic, as employees once again demand a greater slice of profits derived from resurgent demand.

Lufthansa was little changed in Frankfurt trading on Thursday. The stock has dropped 12 per cent so far this year, making it the worst European airline in the Bloomberg world Airlines Index in the period.

Lufthansa is still trying to clinch the purchase of a stake in ITA Airways, the Italian successor to Alitalia, an endeavour held up by competition reviews in Brussels. The Italian airline would add to the group’s growing holding of national airlines, which include carriers in Austria, Switzerland and Belgium.

The company said on Thursday it is still expecting approval of the deal “over the course of this year” and that it is working closely with the European Commission to conclude the transaction

The company said its adjusted operating loss in the first quarter would be higher than in the previous year, when the deficit reached €273 million. At the same time, the load factor for the next three months exceeds last year’s level, highlighting continued demand for tickets.

Average capacity this year will stand at about 94 per cent of 2019 levels, compared with 84 per cent last year, Lufthansa said. That is one percentage point lower than the capacity that Lufthansa had predicted for this year back in November.

The company is the last of the three main European airline groups to report results for 2023. Last week, Air France-KLM and IAG, the parent of Aer Lingus and British Airways, unveiled their numbers. Both companies cautioned that some capacity growth may slow this year as geopolitical tensions deter the flying public and corporate travel remains below pre-pandemic levels.

Last month, Lufthansa announced a wholesale shake-up of its management board, with four of the six members departing, including chief financial officer Remco Steenbergen. – Lufthansa