Lufthansa experiences profit surge, leads to share volatility
Lufthansa, the German airline giant, is set to operate ten new Boeing 787 aircraft by the end of 2025, featuring the Allegris product. This ambitious expansion forms part of the airline's transformation agenda, which extends to 2025.
The second quarter of 2023 saw Lufthansa's adjusted operating profit surge by 27% year-on-year to €871 million. This significant increase was accompanied by a revenue boost of €315 million, bringing the total to €10.3 billion. All airline groups under Lufthansa, including Swiss, Austrian Airlines, Brussels Airlines, and Ita Airways, reported profits.
Lufthansa's 2023 outlook anticipates an adjusted operating profit significantly higher than the previous year's €1.6 billion, with a seat capacity growth of about 4%. This expansion is supported by a 4% increase in the flight program, driven by fleet renewal and modernization efforts.
However, aircraft delivery delays and certification issues have posed challenges to the pace of this expansion. Despite these hurdles, Lufthansa remains optimistic about the current business year due to sustained high ticket demand and decreased fuel costs.
The management, led by CEO Carsten Spohr, has confirmed the forecast to significantly exceed the adjusted operating profit of the previous year. The trend towards short-term bookings has strengthened, but Lufthansa remains optimistic about its outlook.
Investors are advised to exercise patience in the short term. DER AKTIONÄR, a free daily newsletter from Germany's leading financial magazine, continues to be optimistic about its ongoing recommendation for Lufthansa. The publisher Börsenmedien AG, which holds positions in Lufthansa's financial instruments, may also benefit from potential price developments resulting from the publication about Lufthansa.
The new aircraft are next-generation, fuel-efficient models meant to replace older ones. Lufthansa was able to recover from the strike-related burdens of the previous year's quarter in Q2. The increase in net profit was boosted by positive currency effects from the US dollar and a tax refund, with the net profit doubling to around €1 billion in Q2.
As Lufthansa continues to prioritize operational stability and capacity expansion to drive profits, high ticket demand, decreased fuel costs, and operational progress are expected to have a positive long-term impact on the share price. However, investors should keep in mind the ongoing uncertainties and delays affecting delivery schedules and operational timelines.
[1] Lufthansa Group 2023 Outlook
[2] Lufthansa Group 2025 Interim Results and Outlook Reaffirmation
- Given the substantial increase in Lufthansa's adjusted operating profit and revenue in the second quarter of 2023, it is evident that the finance sector has played a crucial role in supporting the growth of the airline industry, as evidenced by the profits reported by all airline groups under Lufthansa.
- As part of its transformation agenda extending to 2025, Lufthansa is investing in the acquisition of new, fuel-efficient aircraft, which falls under the business strategy of fleet renewal and modernization, aiming to enhance the company's performance in the competitive airline industry.
