Summary
- Strikes heavily impacted Lufthansa Group’s Q1 2024 results.
- However, during and after the quarter, it signed long-term wage agreements that should ensure stability in the next few years.
- Furthermore, the group expects a strong summer period.
Lufthansa Group, whose airlines were profitable in 2023, began 2024 with an unfortunate quarter, as labor action heavily weighed down its results in Q1 2024. The airline group said that strikes had a negative financial impact of around €350 million ($374.6 million), with Lufthansa still remaining positive about the remainder of the year.
Reaching a turning point
Carsten Spohr, the Chairman of the executive board and chief executive officer (CEO) of Lufthansa Group, said that the company was now leaving the quarter behind and was at a turning point since it had reached long-term wage agreements with several unions.
“This means planning certainty and clarity for the coming years. We are still seeing strong demand, which is even significantly higher than last year for the summer.”
Spohr explained that the group continues to add more capacity to its network, with its planes having high load factors, with the CEO emphasizing that it will be another strong summer for the group. In addition, the executive noted that business travel has continued to recover as well, with the group now focusing on enhancing its premium offering.
To note, Lufthansa has finally introduced the upgrade to its long-haul fleet cabins, titled ‘Allegris,’ to the public. The first aircraft equipped with the new interior, an Airbus A350-900, registered as D-AIXT, was shown to the press when it was ferried between Munich Airport (MUC) and Frankfurt Airport (FRA) on April 26, 2024.
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221% increase in adjusted EBIT losses
Still, the quarter was difficult for the airline financially, with the group primarily blaming the strikes for its lackluster adjusted negative earnings before interest and taxes (EBIT) and net loss, which were -€849 million ($909 million) and €734 million ($785.8 million), respectively. This represents a -211% and -57% change Year-on-Year (YoY), respectively.
The airline group had already warned about the incoming loss on April 16. Then, Lufthansa Group said that its Q1 2024 adjusted EBIT would be -€849 million ($909 million), primarily due to the strikes by several groups, including its ground handling employees at Lufthansa, represented by United Services Trade Union (Vereinigte Dienstleistungsgewerkschaft, ver.di) and Lufthansa’s flight attendants, which are united under the banner of the Independent Flight Attendants’ Union (Unabhängige Flugbegleiter Organisation, UFO).
Photo: Photofex_AUT I Shutterstock
There were some positive signs, still. For example, the group’s total revenue increased by 5% YoY to €7.3 billion ($7.8 billion), with its airlines welcoming a total of 24.3 million passengers during the quarter, an increase of 12% YoY. Its capacity, measured in available seat kilometers (ASK), had also grown by 12%.
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While it will publish its full Q1 2024 results on April 30, the Lufthansa Group has already said that it will incur a massive loss during the quarter.
Positive outlook for the summer
As mentioned by Spohr, the group is still expecting positive developments throughout the remainder of the year. While it has highlighted certain uncertainties, including macroeconomic factors and the wars in Ukraine and the Middle East, that could have an impact on its earnings, it assumes that demand in 2024 will remain strong.
“[…] in addition to the private travel segment, where demand is forecast to exceed its pre-crisis level, a contribution will come from the further recovery in demand in the business travel segment; for this reason, flight capacity is to be expanded further.”
Photo: ajuangon | Shutterstock
As such, Lufthansa Group expects that its yearly ASKs will recover to 92% of its levels in 2019, with the group taking delivery of 30 aircraft. Still, much like every other carrier in the world right now, it should be impacted by aircraft delivery delays, which means its yearly capacity assumptions could still change.
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