Lufthansa joined major European airline companies in predicting an earnings boost this year, as travel demand continues to swing back from the pandemic.
“Lufthansa is back,” chief executive officer Carsten Spohr said. “In just one year, we have achieved an unprecedented financial turnaround.”
Europe's largest airline group, which recently made headlines after seven passengers were injured due to turbulence, said it expects a “significant improvement” on the €1.5 billion ($1.6 billion) it reported in adjusted earnings — before interest and taxes — for 2022. Summer vacations to Mediterranean countries and travel on North Atlantic routes will be particularly strong, the carrier said.
Lufthansa is the last major European airline to report earnings for last year, joining Air France-KLM and British Airways parent IAG in predicting a recovery approaching pre-pandemic levels in 2023. While European household and company budgets continue to get squeezed by high inflation, demand for business travel and summer getaways in particular has remained robust.
The global aviation sector as a whole has enjoyed a comeback since most countries lifted their coronavirus restrictions. Airbus said last month that it’s increasing the rate of production on its largest aircraft to meet rebounding long-haul demand, and budget carriers like Ryanair have said that summer bookings point to a strong summer season.
Capacity is expected to reach up to 90 per cent of pre-pandemic levels. However, Lufthansa also cautioned that persistent bottlenecks in the European aviation system will limit capacity to about 75 per cent in the first quarter.
The airline said it expects to make further progress this year toward hitting its minimum earnings margin target of 8 per cent by next year. Spohr said the target is required to cut debt Lufthansa incurred during the pandemic, when the airline group was bailed out by the government.
While analysts expect Lufthansa to compete on short-haul flights, they also point out that two-thirds of the airline's short-haul business is transfer traffic, meaning passengers can easily switch to the likes of British Airways or Air France — increasing pressure on the airline to maintain its standards.
On Thursday, the German carrier announced it will buy 22 new widebody aircraft from Airbus and Boeing in an order valued at $7.5 billion, as the carrier aims to meet rising long-term demand for intercontinental travel.