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Growing instances of strikes by airport personnel are set to hit Lufthansa’s profit growth in 2024, leading the German carrier to lower its full-year outlook on margins.
The Frankfurt-based company on Thursday said it expected this year’s adjusted operating earnings to remain flat at €2.7bn and reduced its guidance on adjusted operating margins to 7.6 per cent, from the previous forecast of 8 per cent.
This came as most flights from Frankfurt were grounded on Thursday and Friday due to strikes by German union Verdi after stalled wage negotiations for roughly 25,000 airport ground staff. Unionised Lufthansa flight attendants on Wednesday also voted to take strike action in future.
Airlines have struggled to attract staff following large-scale lay-offs when flights were grounded during the pandemic. Demand for flying has now returned, allowing carriers to significantly raise prices — but Lufthansa workers have complained they are not getting their share from recent business improvements, despite ongoing shortages of staff causing unusually high workloads.
Lufthansa’s head of human resources, Michael Niggemann, on Thursday hit out at unions, saying the strikes were “damaging our guests” as the company faced costs from needing to invest in fuel-efficient aircraft, new seats and cabin interiors and better digital services.
During previous strikes at Frankfurt airport, roughly 1,000 Lufthansa flights have been grounded a day.
Net profits at the carrier more than doubled to €1.7bn in 2023 as revenues increased 15 per cent to €35.4bn. The company proposed a dividend of 30 cents per share — its first since the pre-pandemic year of 2019.
The results cap a mixed set of earnings for Europe’s three leading long-haul airline groups, which have all profited from a travel boom over the past 12 months. High-paying holidaymakers have filled business and first-class seats to offset the post-pandemic drop in corporate travel.
But Lufthansa, Air France-KLM and International Airlines Group have faced persistent questions from analysts and investors over whether the current high-fare environment can last throughout the rest of the year, particularly as they put more planes in the sky.
Analysts at Bernstein cautioned that yields — a proxy for airfares — “seem to have slightly softened” at Lufthansa, as they stood at 22 per cent above 2019 levels in the fourth quarter, down from 25 per cent higher in the second quarter.
Last week British Airways owner IAG reported record full-year profits, noting that prices were “holding up well”. Air France-KLM also posted strong full-year earnings but swung to a loss in the fourth quarter on higher costs and geopolitical uncertainty.
“We think this is a reasonable update from Lufthansa . . . it appears more solid than Air France-KLM, with the capacity plan intact and, like IAG, there is conviction that respectable 2023 levels of profit and cash generation can be broadly repeated in 2024,” said analysts at Deutsche Bank.
Elsewhere, Australia’s Qantas and Singapore Airlines have both recently warned about pressures on fares, even as travel demand continues to show no sign of slowing.
