In the first quarter of 2023, the German Lufthansa (LH) Group witnessed a substantial increase in its performance compared to the previous year, primarily due to the continued surge in demand for flight tickets, particularly in the private travel sector.
The pent-up demand caused by the COVID-19 pandemic is still high. As indicated by the significant inflow of bookings for the summer season during the first quarter.
Lufthansa First Quarter 2023 Results
Although the Lufthansa Group’s result for the year’s first quarter is still negative, this is mainly due to normal seasonality.
Seasonality is even more pronounced this year due to the private travel segment’s faster recovery than the business travel segment.
The earnings were also impacted by the costs of the planned expansion of flight operations in the summer, investments in operational stability, and the impact of various strikes at German airports, in which the Lufthansa Group was not involved in negotiations.
However, the Group reduced its operating loss by half compared to the previous year.
In the first quarter of this year, the Group’s revenue increased by 40% to €7.0 billion compared to the previous year’s €5.0 billion.
The Adjusted EBIT reached -273 million euros (compared to -577 million euros in the previous year). This result is significantly better than the first quarter of 2019, where the Adjusted EBIT was -336 million euros.
Accordingly, the Adjusted EBIT margin improved to -3.9% (compared to -11.5% in the previous year). Further, the net loss was reduced by 20% to -467 million euros (compared to the last year’s -584 million euros).
CEO Carsten Spohr Comments
Carsten Spohr, CEO of Deutsche Lufthansa AG, expressed his confidence in the airline’s progress, saying, “The Lufthansa Group is making a strong comeback. We had a successful first quarter, significantly improving our financial performance.”
“We anticipate a travel boom this summer and a record traffic revenue for the year. Demand is already surpassing pre-pandemic levels on short- and medium-haul leisure-oriented routes,” Added Mr. Spohr.
He also stated, “Our priority is to offer our customers a consistent premium product experience across all our airlines. We have made numerous improvements on the ground and in flight to enhance the customer experience. As a result, the Lufthansa Group is well-positioned to solidify further its position among the top five global airline groups.”
Lufthansa Cargo and Technik Contribution in Q1 2023
In the first quarter of 2023, Lufthansa Cargo generated an operating profit lower than the previous year’s first-quarter record result due to the normalization of air freight rates in the market.
Last year, due to the disrupted supply chains, there was a crisis-related reduction in air freight capacity and a sharp rise in demand, resulting in record revenue. Lufthansa Cargo’s Adjusted EBIT was 151 million euros in the first quarter. Which was lower than the previous year’s 495 million euros.
On the other hand, Lufthansa Technik’s results improved in the first quarter of 2023 compared to the same period of the previous year. The high demand for air travel increased the need for maintenance and repair services, and revenue rose accordingly.
In the first quarter, Lufthansa Technik generated an Adjusted EBIT of 135 million euros. Which was higher than the previous year’s 129 million euros.
The LSG Group’s revenue increased by 40 percent to 523 million euros. Further, the result for the first quarter was -6 million euros. Which was better than the previous year’s -14 million euros. The recovery of Asian businesses supported this growth.
Deutsche Lufthansa AG signed an agreement with the private equity company AURELIUS on April 5 to sell the LSG Group.
The transaction is expected to close in the third quarter of 2023, and the earnings contributions of the catering segment will be reported as “Result from discontinued operations” until then. They will thus be included in the net result but not in the Group’s Adjusted EBIT.
What’s Ahead for Lufthansa?
Lufthansa Group anticipates a full summer travel season with a high demand for private travel and increasing interest in city breaks and short trips.
Spain remains the top vacation destination in summer, and there is still strong demand for premium classes. In the second quarter, the company aims to increase its capacity to approximately 82 percent of the pre-pandemic level. With expected yields to be up to 25 percent higher than in 2019.
Thus, the Adjusted EBIT in the second quarter of 2023 is expected to surpass the 2019 second-quarter result of 754 million euros.
The company forecasts an average passenger airline capacity of approximately 85 to 90 percent compared to 2019 for 2023.
It confirms its goal of significantly improving Adjusted EBIT for the full year, thereby making substantial progress towards reaching the targets set for 2024.
Lufthansa Group aims to achieve an Adjusted EBIT margin of at least 8 percent. Subsequently, an Adjusted ROCE of at least 10 percent in 2024.
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