Deutsche Lufthansa AG ((DLAKY)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Deutsche Lufthansa AG painted a balanced picture of the company’s current standing. While there were notable achievements in operational and financial areas, such as capacity growth and fleet modernization, these were tempered by challenges including yield pressures, external costs, and tariff impacts in the Maintenance, Repair, and Overhaul (MRO) sector.
Capacity and Revenue Growth
Global capacity for Lufthansa grew by 3.2% compared to the previous year, resulting in a total revenue increase of EUR 500 million, reaching EUR 11.2 billion. This growth was primarily driven by moderate capacity expansion and strong demand, particularly in the North Atlantic region.
Operational Stability and Customer Satisfaction
Lufthansa reported significant improvements in operational stability, with a regularity rate of 99% and a more than 10 percentage point increase in departure punctuality. These operational enhancements have led to an 8 percentage point rise in customer satisfaction compared to the previous year.
Cargo and MRO Divisions
Lufthansa Cargo’s adjusted EBIT rose to EUR 49 million, marking an EUR 11 million increase from the previous year. Additionally, Lufthansa Technik experienced a 10% revenue growth, largely driven by a 28% increase in third-party business.
Fleet Modernization
The company is on track to receive over 50 next-generation aircraft by the end of next year. This fleet renewal is expected to enhance Lufthansa’s premium product offerings and improve operational efficiency.
Yield Softness and Currency Impact
The Passenger Airline business faced a 2.2% decline in unit revenues due to yield softness in competitive markets and a weak U.S. dollar. However, when adjusted for currency effects, unit revenues remained stable.
External Cost Pressures
Rising external costs posed challenges for the industry, with fees and charges increasing by 9% and Air Traffic Control (ATC) costs rising by 17%. These pressures offset some of the benefits gained from lower fuel costs.
Tariff Challenges in MRO
Lufthansa Technik’s adjusted EBIT saw a decline of EUR 31 million due to tariffs, supply chain disruptions, and currency effects, which negatively impacted the division’s profitability.
Forward-Looking Guidance
Looking ahead, Lufthansa provided a positive outlook for the remaining months of the year. Key performance indicators show improvements, with total revenue for Q3 increasing by EUR 500 million to EUR 11.2 billion and an adjusted EBIT of EUR 1.3 billion. The company plans to continue its growth on North Atlantic routes and cautiously expand in Asia, with promising demand from Japan, South Korea, and India. Lufthansa remains optimistic about its future, supported by ongoing high demand, fleet renewal, and operational stability.
In summary, the earnings call for Deutsche Lufthansa AG highlighted a balanced performance with significant achievements in capacity and operational stability, albeit with challenges in yield and external costs. The forward-looking guidance remains optimistic, with the company poised for continued growth and improvement in key markets.