Lufthansa Airlines ‘not there yet’ on profitability, says CEO
BERLIN, Jan 23 (Reuters) – Lufthansa Airlines (LHAG.DE), opens new tab aims to be profitable again but still has a ways to go despite the initial success of its restructuring plan, CEO Jens Ritter told journalists on Wednesday evening.
Lufthansa wants to be the leading premium airline in Europe “and of course be profitable again”, Ritter said.Despite many positive develop
The main Lufthansa brand is currently the Lufthansa Group’s problem child. A restructuring programme is intended to improve earnings by two-thirds through cost reductions and one third through increased sales.
The airline has defined more than 600 measures in all company divisions to bring it back onto the path to profitability.
Reporting by Joern Poltz and Ilona Wissenbach, Writing by Miranda Murray, Editing by Rachel More
Our Standards: The Thomson Reuters TrustLufthansa Airlines, Germany’s flagship carrier, has faced a complex financial landscape in recent years. Despite implementing restructuring initiatives and experiencing a strong demand for air travel, the airline’s journey back to robust profitability remains ongoing. CEO Jens Ritter candidly acknowledged this reality, stating that while the airline aims to be profitable again, it still has a ways to go despite the initial success of its restructuring plan.
Financial Performance Overview
In 2024, the Lufthansa Group reported its highest-ever annual revenue of €37.6 billion, marking a 6% increase compared to the previous year. However, the operating profit (Adjusted EBIT) for the full year declined to €1.6 billion from €2.7 billion in 2023. The fourth quarter of 2024 showed signs of improvement, with a profit increase of €66 million, reaching €468 million.
Challenges Impacting Profitability
Several factors have contributed to Lufthansa’s ongoing profitability challenges:
1. Delayed Aircraft Deliveries: The airline has faced setbacks due to delays in the delivery of new aircraft, particularly the Boeing 777X. These delays have hindered fleet modernization efforts aimed at enhancing operational efficiency and reducing costs.
2. Increased Operational Costs: Rising labor costs, maintenance expenses for aging aircraft, and higher fuel prices have exerted financial pressure on the airline. The first half of 2024 was notably challenging, with a significant decline in operating profit attributed to these increased expenses.
3. Regulatory and Competitive Pressures: The German aviation sector faces regulatory burdens and competition from other carriers. For instance, Lufthansa canceled Frankfurt-Beijing flights due to increased capacity by Chinese carriers.
Strategic Initiatives for Recovery
In response to these challenges, Lufthansa has undertaken several strategic measures:
Acquisition of ITA Airways Stake: Lufthansa acquired a 41% stake in Italy’s ITA Airways for €325 million. CEO Carsten Spohr anticipates that this investment will boost Lufthansa’s profits by hundreds of millions of euros in the coming years.
Fleet Modernization: Despite delays, Lufthansa continues to focus on updating its fleet with more fuel-efficient aircraft to reduce operational costs and environmental impact.
Market Expansion: The airline aims to expand its presence in Southern Europe, Latin America, and Africa to tap into new revenue streams and diversify its market base.
Outlook for 2025
Looking ahead, Lufthansa projects significant earnings growth in 2025, driven by high demand, capacity increases, and the successful implementation of its turnaround strategy. The airline plans moderate capacity growth and anticipates a substantial improvement in earnings.
While Lufthansa Airlines has made notable progress in restructuring and revenue generation, achieving sustained profitability remains a work in progress. The airline’s leadership remains cautiously optimistic, focusing on strategic investments, operational efficiency, and market expansion to navigate the path toward long-term financial stability.
