Lufthansa warns of profit risk as jet fuel costs roil sector

Deutsche Lufthansa AG fell the most since 2021 after the airline warned of heightened uncertainty for its full-year outlook as volatility in jet fuel prices and shortened booking cycles complicate efforts to boost profit. Shares in the German-led airline group dropped as much as 11% in intraday trading, leaving them about 2% lower so far this year. Lufthansa said earlier Tuesday that full-year adjusted earnings before interest and taxes will probably be in the range of €1.7 billion ($2 billion) to €2.2 billion. That compares with last year’s €1.96 billion and contrasts with the airline’s previous forecast for earnings to be “significantly above” last year. [caption id="attachment_97291" align="aligncenter" width="910"] (Courtesy/Lufthansa Cargo)[/caption] Lufthansa Group, with airline brands including Swiss, ITA Airways and Brussels Airlines, joined IAG SA in giving up growth plans for this year. The German carrier now forecasts full-year capacity to be in line with 2025, down from a previous estimate of as much as 2% growth. Uncertainties for the second half of the year remain high and making forecasts is increasingly difficult, Chief Financial Officer Till Streichert said. But the airline is confident that cost and capacity discipline, and persistently high demand, will offset a significant portion of the cost increases, he said. In the second quarter, Lufthansa recovered about 60% of the additional fuel burden with the help of higher ticket prices, Streichert said in a call with journalists. The outlook follows a disappointing second quarter that saw profit more than halve to €383 million, missing analyst estimates for about €477 million. That was largely due to a €750 million increase in fuel costs from a year earlier, with price volatility also emerging as a major drag on the bottom lines of airlines including Ryanair Holdings Plc and EasyJet Plc. This year has become progressively more challenging for Europe’s largest aviation group, testing Chief Executive Officer Carsten Spohr’s efforts to boost profitability. Fuel costs have surged due to the Middle East conflict, with Lufthansa predicting it will cost them an extra €1.5 billion this year. The airline has also contended with a series of walkouts by pilots and cabin crew during labor negotiations that cost at least €150 million in the quarter. Lufthansa also revised its capital expenditure lower. It expects to spend about €2.5 billion this year, down from a previous estimate of €2.9 billion due to fewer aircraft deliveries than originally planned. The company only received six out of the eleven jets expected in the second quarter, and it now anticipates forty-one deliveries this year, four fewer than originally planned, Spohr said in a call with journalists. Lufthansa is seeing price-sensitive travelers switching to Gulf carriers offering heavily discounted fares to fill excess capacity, Spohr said. But demand from premium and corporate customers remains resilient because they prefer nonstop flights or are barred by their employer from connecting through Gulf hubs, he said. In response to rising costs, Lufthansa accelerated the shutdown of regional subsidiary CityLine, cut about 20,000 uneconomic short-haul flights and decommissioned older, fuel-guzzling aircraft. It’s also already got plans to cut 4,000 administrative jobs by 2030 and shift capacity from its cost-intensive flagship airline to newer units such as Discover and City Airlines, where crew costs can be as much as 40% lower. For Lufthansa, the cargo business has been a bright spot, with profit rising almost 60% in the second quarter. Lufthansa also said that broader consumer demand remains intact and yields were more than 13% higher than last year’s level on Asian routes. Still, Lufthansa is looking to expand. The airline and Air France-KLM submitted competing binding offers last week to acquire a minority stake in state-owned Portuguese airline TAP SA, a sought-after asset that provides access to markets including Latin America. The proposals are being assessed by holding company Parpública. Cargo Facts Symposium 2026, the premier event for the freighter aircraft and air cargo industries, will take place in Nashville, Tenn., on Oct. 21-23. Find out more and register by Sept. 4 to take advantage of early-bird pricing.

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