Germany’s Lufthansa Group has detailed its latest plans to drastically cut expenses following the publication of the airline’s first-quarter results (1Q2024) which were tarnished by costly industrial action and the resulting disruption to its flying program.
The airline group saw its adjusted negative earnings before interest and taxes (EBIT) fall to -€849 million ($909 million) while its net loss fell to €734 million ($785.8 million). These numbers represent drops of 211% and 57% year-on-year respectively.
Lufthansa Group had already advised analysts that its 1Q2024 results would be deeply affected by strikes brought by several workers groups, including ground handling employees (represented by United Services Trade Union (Vereinigte Dienstleistungsgewerkschaft, ver.di) and Lufthansa’s flight attendants, which collectively fall under the banner of the Independent Flight Attendants’ Union (Unabhängige Flugbegleiter Organisation, UFO).
Labor disputes cost the airline more than €350 million ($374.6 million) in the first quarter alone, an impact that Chief Financial Officer Remco Steenbergen described as “significant” in a statement.
Yet, it was not all bad news for the Lufthansa Group, as its total revenues increased to €7.3 billion ($7.8 billion) representing a 5% year-on-year increase. The member airlines in the Group (Lufthansa, SWISS, Austrian, Brussels Airlines, and Discover) carried a total of 24.3 million passengers during the quarter, an increase of 12% over the same period in 2023. Capacity, measured in available seat kilometers (ASK) also increased year-on-year by 12%.
In the fallout of the results, the Lufthansa Group has committed to reduce operating costs, put a stop to unveiling new projects, and undertake a review of the numbers of administrative staff to help bolster the flagship Lufthansa brand.
“We cannot be satisfied with the operating result for the first quarter,” Steenbergen said. “In the coming months, we will work intensively to compensate for the effects of rising costs.”
Looking ahead
Despite the poor financial performance in 1Q2024, Lufthansa has said that the outlook for the summer 2024 season was looking “very good,” with forward bookings for the peak summer 2024 travel season being 16% higher than the same period in 2023.
“The company is now leaving the quarter behind and is at a turning point having reached long-term wage agreements with several unions,” said Carsten Spohr, the Chairman of the Executive Board and Chief Executive Officer (CEO) of Lufthansa Group. “This means planning certainty and clarity for the coming years. We are still seeing strong demand, which is even significantly higher than last year for the summer.”
Spohr explained that the Group airlines are all continuing to add more capacity to their networks, with flights enjoying higher load factors overall.
The CEO also noted that higher-yielding business travel has continued to recover in the first quarter, with the group now focusing on enhancing its premium offering, particularly with the roll-out of the new Allegris onboard product, as exclusively previewed by AeroTime in the recent article linked below.