Lufthansa’s Q2 profit takes a dive amid rising costs
Investing.com – Lufthansa Group (ETR:LHAG) on Wednesday reported its second quarter results with an Adjusted EBIT of EUR 686 million.
The Group's revenue rose by 7% to EUR 10 billion, driven by an 11% expansion in flight program capacity and strong performance in the Lufthansa Technik segment. However, Adjusted EBIT fell to EUR 686 million from EUR 1.1 billion year-over-year. The net result also decreased to EUR 469 million from EUR 881 million.
“Lufthansa's 2Q results confirm a weak quarter for Passenger airlines,” said analysts at RBC Capital Markets in a note.
The Group faced an increase in operating expenses by 10% due to higher passenger flight operations and inflation-related cost increases. Despite stable unit costs (excluding fuel and emissions), unit revenues declined due to normalization of air fares and higher seat capacity.
Yields declined by 3.7% across all markets, with North America experiencing the least impact (-2.6%) and Asia Pacific facing the steepest decline (-9.9%), said analysts at UBS Global Research in a note.
In the second quarter alone, about 36 million passengers flew with the Group, up from 33.3 million a year earlier. Capacity increased by 11%, with a seat load factor of around 82%, close to the prior-year level.
Lufthansa maintained its FY24 adjusted EBIT guidance of €1.4-1.8 billion, below consensus and UBS estimates of around €2 billion.
UBS values Lufthansa shares based on a 2025e EV/EBITDA multiple. However, the airline industry is known for its volatility, and the company faces significant risks, including economic downturns, fuel price fluctuations, geopolitical events, and competition.
While RBC Capital Markets rates the stock as “Sector Perform,” they flag certain risks associated with Lufthansa's current valuation. They note that, despite this, other European airlines present more attractive prospects in terms of margins and returns.
Shares of Lufthansa were trading flat on Wednesday.
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