After exorbitant profits in the past two years, Lufthansa Cargo has gone from climbing to gliding on a lower level. This is evidenced by the business results for the first quarter of 2023. Although Lufthansa’s logistics unit again generated an operating profit, it was below the record result of the first three months of the previous year. Main reason is the normalization of air freight rates and stiffer competition due to the global growth of transport capacity. Many carriers have reactivated their passenger services, flooding the market with lower deck capacity.
Respectable cargo results
In the first quarter of 2023, Lufthansa Cargo generated an Adjusted Ebit of €151 million, versus €495 million in Q1 of 2022 (down €344 million). By long-term standards, this is still a very respectable result, but a big difference compared to the huge surpluses the freight carrier was achieving following the outbreak of the pandemic in early 2020, when demand skyrocketed and capacity was scarce. Lufthansa Cargo's quarterly results are in line with the global trend. This is characterized by a normalization of supply and demand leading to the leveling out of freight rates, following two exceptional boom years in which cargo carriers made much money.
In addition to the logistics division, Lufthansa Technik also remains a flagship unit of the Group as improved results in Q1, 2023, show compared to the same period of the previous year. The sharp rise in passenger business spurred the demand for maintenance and repair services, with revenue rising accordingly. Lufthansa Technik generated an Adjusted EBIT of €135 million in the first quarter (previous year: €129 million).
Lufthansa’s passenger business recovers
Although the Group’s core business of transporting passengers remains in the red, the unit upped its sales figures remarkably, given the Adjusted EBIT of -€273 million euros (-€577 million euros year-on-year), which is a 53% improvement. Despite renewed losses on the bottom line, CEO, Carsten Spohr spoke of a “good quarter” when commenting on the outcome of Q1, 2023. The positive trend will continue in the coming months due to the very strong demand for air travel, the executive predicted: “We […] expect a travel boom in the summer as well as a new record in our traffic revenue for the entire year. On short and medium-haul leisure-oriented routes, demand is already exceeding 2019 levels. The focus now is on once again offering our guests a consistent premium product experience on all group airlines. Our guests are already benefiting from numerous product improvements, both on the ground and on board. The Lufthansa Group is well positioned to further strengthen its position among the top five airline groups in global competition.”
Stock market reacted skeptically to the Lufthansa results
The Group result for the first three months is still negative. This is mainly due to normal seasonality. This year, seasonality is even exacerbated by the faster recovery in the private travel segment compared to the business travel segment. Costs for the planned expansion of flight operations in the summer, investments in operational stability, and the effects of various strikes at German airports (in which the Lufthansa Group was not a negotiating partner), also weighed on earnings. However, the operating loss was halved compared to the previous year.
Although the Lufthansa Group reduced losses and significantly increased revenue in Q1 thanks to high demand, the stock market reacted with disappointment to the results. The share price fell by around 3% after the announcement of the quarterly figures, to a total of €9.36 per share.
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