Lufthansa sees return to profit as air travel rebounds

Germany’s Lufthansa is looking to return to an operating profit this quarter as demand for travel rises with the easing of coronavirus curbs and the airline raises ticket prices to offset higher costs.

The group, which owns the German airlines Lufthansa and Eurowings as well as Swiss, Austrian and Brussels Airlines, doubled sales in the first quarter as more people started travelling again after two years of lockdowns and travel restrictions, although an overall first-quarter operating loss was bigger than analysts had expected.

“As the pandemic subsides, families, friends and business partners around the world are travelling to meet each other again. And I think the world is also coming to realize how important friendly personal contacts are,” chief executive Carsten Spohr told a news conference.

The airline reported that first quarter revenue doubled from a year earlier to 5.36 billion euros ($5.68 billion), exceeding analysts’ average forecast for sales of 5.12 billion euros, though it was not able to reduce losses as much as expected due to skyrocketing fuel prices amid Russia’s war in Ukraine.

Lufthansa’s adjusted loss before interest and taxes (EBIT) narrowed to 591 million euros in the first quarter, from a loss of 1.05 billion euros for the same period of 2021.

Analysts had on average expected the loss to narrow to 558 million euros according to a company-provided consensus.

However, the airline hopes to be able to pass some of the rising costs to customers with flight ticket price hikes.

“I don’t see any problem with price increases affecting demand. Over the last six months, we have already pushed through a couple of price hikes. I think it’s four already along the way,” finance chief Remco Steenbergen told the conference.

“We live in a world where we see incredible inflation and price increases. We see that in commodities, hotels, rental cars. And I think price increases are significantly more in those other industries than for us,” the CFO added.

The group also said its Swiss unit would terminate its 1.5 billion Swiss franc ($1.53 billion) state credit line ahead of time, closing another chapter in the state support that helped Lufthansa survive the impact of the pandemic.

Lufthansa’s Franco-Dutch rival Air France-KLM reported a first-quarter core profit ahead of its own forecasts, citing successful oil price hedging in addition to the recovery in ticket sales.

London-based rival IAG, which owns airlines including British Airways, is due to publish first-quarter results on Friday.