Lufthansa before the “travel boom” – and customers pay the price for it
Germany’s largest airline is expecting the most successful year in the company’s history. This is mainly due to the ticket prices, which are 19 percent more expensive than before Corona. The prices can be pushed through because two factors are driving demand.
DThe Lufthansa Group posted an operating loss of 273 million euros in the first quarter. The industry-typical minus at the beginning of the year is actually a success story for the largest airline group in Europe. Because the losses were significantly lower than in the previous year and were even below the level of the pre-Corona period. The worst aviation crisis in post-war history seems to be over for Lufthansa. However, at a high price for their customers.
Lufthansa boss Carsten Spohr was in the best spring mood when his business figures were published on Wednesday. Easter was successfully over and over the holidays, with four million passengers, twice as many customers were transported as in the previous year.
New aircraft, new cabin interiors and modernized lounges are intended to improve the customer experience, which has recently been somewhat strained. “The Lufthansa Group is back on track,” says Spohr. “We are facing the summer with the highest sales in the history of the Group.”
The numbers appear to support the boss’s optimism. The group turned over seven billion euros in the first three months, compared to five billion in the previous year. The result was twice as good or half as bad as in the previous year, the operating margin improved from minus 11.5 to minus 3.9 percent.
And this despite the fact that the effects of various strikes at the airports, in which Lufthansa was not a party to the collective bargaining agreement but suffered, weighed on the result. According to CFO Remco Steenbergen, the outstanding payments and the IT glitch, when an excavator severed a line and cut off the group from the Internet, cost the company 17 million euros.
However, these problems were apparently overcompensated by sustained high demand for air travel. The need to catch up after Corona still seems high, especially when it comes to private travel.
While business travelers are still absent, demand on short and medium-haul tourist routes is already exceeding the level of 2019, the record year before the pandemic. The CEO was correspondingly optimistic. After the good first quarter, “a travel boom is expected in the summer and a new record in traffic revenue for the year as a whole”.
The fact that Lufthansa is in good financial shape is not least due to the fact that tickets have become significantly more expensive. Driven by strong demand and slower growth in flight capacity, the airlines have been able to push through high prices this year.
The average revenues reported by Lufthansa in the first quarter were a whopping 19 percent above the level of 2019. On long-haul routes, revenue per ticket was even a quarter (25 percent) higher than before the pandemic. However, strong demand for premium classes also contributed to this.
Airplanes are missing due to delivery difficulties
It is to be hoped from the group’s point of view and to be feared from the customer’s point of view that this development will continue. Over the year as a whole, the group and its passenger airlines want to offer a capacity of 85 to 90 percent of the pre-corona level. In order to avoid flight chaos like last year, Lufthansa had canceled 1000 flights for the summer as a precaution.
In addition, delivery difficulties at aircraft and engine manufacturers mean that aircraft are missing. The consequence of the limited supply with high demand is likely to be persistently high flight prices. Due to the good booking situation, it is assumed that average yields in the coming quarter will rise to up to 25 percent of the pre-corona level, according to Lufthansa. Spohr welcomes this: “We have a shortage of offers that this industry is now recovering from after many years of cheap tickets.”
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