Nationwide strikes currently crippling transport services in Germany will likely cause higher-than-expected operating losses for Lufthansa Group in the year’s first quarter, the European airline giant revealed during an earnings call on Thursday (7 March) as it posted its 2023 full-year earnings.
The group reported an operating profit of €2.7 billion for 2023, but has adjusted its 2024 operating margin down from 8 per cent to 7.6 per cent as it battles ongoing labour disputes that, this week alone, will likely affect half a million passengers.
Deutsche Lufthansa chief financial officer Remco Steenbergen, said the impact of strikes in the first two months of 2024 have cost the group €100 million and, as a result, adjusted EBIT (earnings before interest and taxes) loss in the first quarter is expected to be higher than the previous year.
“We face fierce international competition and need economic success - not only for good employment conditions, but also to invest in more fuel-efficient aircraft, new seats and cabin interiors or digital services,” said Michael Niggemann, chief human resources officer and labour director of Deutsche Lufthansa.
“We want to grow. However, this is only possible if we are competitive overall and also in terms of labour costs. The uncompromising strikes by the trade union Verdi are damaging our guests, the company and ultimately our employees… Verdi must suspend strike action and be prepared to enter into constructive negotiations without preconditions," he added.
Positive 2023 result
Full-year 2023 revenue for the group increased to €35.4 billion (up from €30.9 billion in 2022) and profits rose to €2.7 billion from €1.5 billion the previous year, largely driven by high demand and increased capacity.
Passenger yields in 2023 also increased six per cent year-on-year, powered by “continued strong demand” in the leisure travel segment, while business travel “continued to recover at a slower pace”.
Despite high cost inflation, adjusted EBIT of the passenger airlines segment improved “significantly” year-on-year as all airlines in the group – Lufthansa, Swiss, Austrian Airlines, Brussels Airlines and Eurowings – reported an operating profit.
The group also stated that more than a million customers have purchased its ‘green fares’, which were launched in early 2023 and include “full offsetting” of carbon emissions within the ticket price.
The fares were recently extended to long-haul routes to Asia and the US as part of an initial testing phase.
Additionally, the group said “more and more” corporate customers are looking to offset their travel-related emissions after more than 1,500 companies invested in SAF (sustainable aviation fuel) with the group in 2023.
Stability in 2024?
Looking ahead into 2024, the aviation giant said it will focus on “ensuring stable flight operations” and, despite supplier shortages, anticipates capacity to return to 94 per cent of 2019 levels, which represents a year-on-year growth of 12 per cent.
While low-cost carrier Ryanair recently warned of a hike in fares due to aircraft delivery delays, Lufthansa Group CEO and executive board Carsten Spohr, said ticket prices across the group will “remain stable” for the upcoming summer season.
The airline group said it also expects the EU Commission to approve its proposed acquisition of Italian carrier ITA Airways “over the course of this year” and is “working closely and constructively” with the antitrust regulator to “achieve a swift conclusion and subsequent implementation of the transaction”.