Lufthansa plan to operate over 700 aircraft in 2023, however, supply chain issues and late deliveries of new aircraft will create capacity shortages in the coming years.
"Overcapacity issues which our industry have seen before the pandemic, won't be around any time soon“, Lufthansa Group CEO Carsten Spohr said during the third quarter financial results call, which I joined on Oct. 27.
For the full year, Lufthansa Group expects the offered capacity at the passenger airlines is 75% of 2019 levels on average. “We had more than 600 aircraft in operation in a super strong summer“.
"Lufthansa reached a billion in EBIT. In all modesty, we have left the crisis modus behind us. However, Bottlenecks will limit the reconstruction of our industry."
Carsten Spohr, Lufthansa Group CEO
Increase in Ticket Price
The head of Europe's largest airline group added, there are several factors that will limit capacity worldwide, but also increases ticket prices.
Besides late deliveries of new aircraft, supply chain issues also affect maintenance. “We have significantly fewer aircraft in operation than we would like to have. For example there are no Boeing 787 cockpit windows available worldwide, which keeps several aircraft on the ground“.
Lufthansa Group expects to take delivery of around 200 aircraft before 2030, 80 of which are going to Lufthansa German Airlines, the core brand
Spohr said the shortage of employees like airports or pilots has pressure on capacity as well. “In the U.S. there is a shortage of 15.000 pilots“. Also, high fees will have an impact on capacity expansion. "However, this shortage results in high load factors and healthy fares“.
Lufthansa Group Result
Lufthansa Group sees growing demand from business travelers. The CEO remains also confident about leisure traffic.
“One summer has been not enough to fulfill the desire for traveling. This topic of traveling remains high on the agenda."
Carsten Spohr, Lufthansa Group CEO
Lufthansa revenues for the traditionally high-traffic third quarter (Q3) of 2022 rose 93% year-on-year to €10.1 billion ($10.21 billion). Net income increased significantly in the third quarter to €809 million, compared to a loss of €72 million a year earlier.
Spohr commended the strong results that have been achieved without closed markets like Asia. “Now Japan is coming along, and in part, perhaps to a limited extent, China too in the future“.
He said the global organization of the Group allows flexibility. "Three of four Lufthansa tickets will be sold outside of Germany. We never had this before“. Transatlantic has a major share of it. Revenues in the U.S. increased by 15% by operating at 20% less capacity.
Talking about upcoming Q4 bookings, passengers in Lufthansa´s premium classes, reached a level like before COVID-19. “Passengers continue to book on short notice“, he said.
Lufthansa was able to operate 99% of its planned flights, with punctuality of more the 70%.
“We achieved an 11.2% margin, 33 million passengers have flown between July and September, and all Business units are positive. Lufthansa Group expects to generate an Adjusted free cash flow of over 2 billion euros in 2022."
Carsten Spohr, Lufthansa Group CEO
Lufthansa also increase the number of its employees to 115.000 by the end of 2023. “Therefore we hire 1.000 employees per month“, Spohr said.
Subsidiaries Outperforming
“Lufthansa Technik, benefits from a global demand in aircraft maintenance“, Spohr said. The volume of business was already back at around 90% of the pre-crisis level. Lufthansa Technik generated an Adjusted EBIT of €177 million in the third quarter (previous year: €149 million), the best quarter ever for the company.
In the first nine months, Lufthansa Cargo has thus already achieved an operating profit of €1.3 billion (€943 million a year earlier) and is on course for a full-year result even above last year's record €1.5 billion euros.
“Lufthansa Groups subsidiaries Austrian Airlines and Brussels Airlines outperforming as well“, CFO Remco Steenbergen said. "Our thanks go to the governments of Austria and Belgium for helping us to stabilize the companies to survive economically“, Spohr said. Austrian Airlines will repay the remaining €210 million of the total loan, and in Belgium, Brussels Airlines will repay €290 million. This means that all stabilization measures will end prematurely at the end of 2022.
Austrian Airlines returned to profitability in Q3 and achieved an adjusted EBIT of €110 million. The fleet will grow with four Airbus A320neo to a total of 64 aircraft by spring 2023.
Brussels Airlines posts Adjusted EBIT of €51 million, the airlines’ revenue also increased during the third quarter, amounting to €436 million. The Belgian airline will expand its fleet in 2023 with four medium-haul aircraft, to a total of 36 medium-haul and nine long-haul aircraft.
With favorable market conditions in the summer months and efficiency gains through its restructuring activities, Swiss International Airlines (SWISS) reports a Q3 operating profit of SFR 220.5 million, compared to SFR 22.7 million a year earlier.