Airways major Lufthansa slashes 2024 profit target for a second time

Deutsche Lufthansa slashed its 2024 earnings guidance for a second time this year and issued a profit warning on Friday for its second quarter as one of Europe's top airlines struggles with low yields and operations problems.
 

The warning will reinforce worries about a weaker than expected quarter for the industry as airlines struggle with high labour and operating costs and pressure on ticket prices which are hurting yields, or average revenues per passenger.
 

Shares in Lufthansa fell as much as 3.8 per cent on the news, which also knocked down the stock of British Airways-owner IAG , Easyjet and Air France-KLM.
 

Lufthansa now expects adjusted 2024 earnings before interest and taxes (EBIT) between 1.4 billion euros ($1.5 billion) and 1.8 billion, down from a previous target of about 2.2 billion, it said in a statement.
 

It added that the group's second-quarter adjusted EBIT fell by more than a third to 686 million euros. It reports second-quarter results on July 31.
 

"A comprehensive turnaround program is being launched," affecting its core Lufthansa brand and regional carrier Cityline, the company said, adding that its core brand was particularly hit by negative market trends.
 

"A market-related decline in yields in all traffic regions “especially in Asia“ had a negative impact," it said.
 

It also cited "inefficiencies in the flight operations" of Lufthansa and Cityline and delayed aircraft deliveries.
 

UNSURPRISING

Equity analysts said Lufthansa's decision was not surprising, given its cost challenges linked to strikes earlier this year and delivery delays from plane manufacturers Airbus and Boeing that have impacted the whole aviation sector. 
 

In a letter sent to staff earlier this week, Lufthansa flagged operational cost cuts as it struggles with a more competitive landscape and as lower corporate travel erodes unit revenue.
 

"I think that kind of weakness in unit revenue is assumed to continue into the third, fourth quarter, hence this turnaround programme they're planning on," Stephen Furlong, an analyst at Davy, told Reuters.
 

Other carriers, including Ryanair have warned of a slower rise in ticket prices than expected, with Air France-KLM also saying in its first quarter that it was struggling with higher unit costs.
 

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