Deutsche Lufthansa AG ((DLAKY)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for Deutsche Lufthansa AG painted a picture of robust operational performance and revenue growth, albeit amidst some challenges. The sentiment was largely positive, driven by strong sales and strategic investments in staff and fleet renewal. However, the company is also facing cost pressures and uncertainties in third-quarter bookings, which tempered the overall optimism.
Record Sales and Revenue Growth
Lufthansa achieved a milestone by recording sales exceeding EUR 8 billion for the first time, marking a 10% growth in the first quarter. This achievement underscores the company’s strong market position and its ability to capitalize on increased demand.
Operational Excellence and Staff Investment
The airline reached its highest operational performance levels in a decade, focusing on regularity and punctuality. Significant investments were made in recruiting, training, and qualifying additional operational staff, which is expected to sustain this excellence.
Strong Demand and Capacity Increase
Lufthansa increased its capacity by 5% compared to the same quarter last year, with improved passenger load factors. Notably, North Atlantic passenger numbers rose by over 7%, reflecting strong demand in this key market.
Lufthansa Technik and Cargo Performance
Lufthansa Technik saw a 14% revenue growth, reaching EUR 2 billion, while Lufthansa Cargo achieved an adjusted EBIT of EUR 62 million. Both divisions benefited from high volume growth and improved yields, contributing significantly to the group’s overall performance.
Positive Cash Flow and Liquidity
The company reported an adjusted free cash flow of EUR 835 million, well above last year’s level, and an increase in total liquidity by approximately EUR 350 million, highlighting its strong financial health.
Impact of Cost Increases
Despite the positive financial metrics, Lufthansa faced rising costs, with material expenses excluding fuel up by almost 16% and personnel expenses growing by 5%. These cost pressures are a concern for the company’s financial stability.
Third Quarter Booking Uncertainty
The company noted early signs of booking softness for the third quarter, especially for U.S. destinations in lower fare classes, which could impact future revenue.
Adjusted EBIT Loss and Tax Impact
Lufthansa reported a negative adjusted EBIT of EUR 722 million, with net income below last year’s level due to a temporary tax accounting effect, indicating areas for improvement.
Strikes and Inflation Effects
Strikes at German airports added approximately EUR 30 million in extra costs, while general cost inflation contributed an additional EUR 280 million in expenses, further straining the financial outlook.
Forward-Looking Guidance
Looking ahead, Lufthansa is optimistic about maintaining its positive trend through the first half of the year. The company plans to continue focusing on strategic initiatives to enhance resilience and operational performance. While pre-booking levels for the second quarter are promising, the company is prepared to adjust growth plans if necessary, having already reduced winter growth expectations.
In conclusion, Deutsche Lufthansa AG’s earnings call reflected a strong operational performance and revenue growth, supported by strategic investments and robust demand. However, challenges such as rising costs and booking uncertainties remain. The company is optimistic about the future, with plans to enhance resilience and operational performance, ensuring it remains a key player in the aviation industry.