As costs rise, Lufthansa drops 2024 operating margin target to 7.6%

Lufthansa reported on Thursday an operating profit of 2.7 billion euros for 2023 as expected, adjusting its outlook for its 2024 operating margin down to 7.6 per cent from a goal of 8 per cent as the German airline struggles with costly labour disputes.

The impact of strikes and a drop in logistics profits will lead to a higher expected operating loss in the first quarter than in earlier years, the company said, offsetting strong post-COVID travel demand.
 

"The group remains committed to its goal of generating a sustainable adjusted EBIT margin of at least 8 percent," the company said in a statement.

Europe's airlines have benefited from unprecedented demand following the pandemic, allowing them to hike prices, but higher labour and maintenance costs have limited earnings growth.
 

Lufthansa in particular has agreed to new, higher pay deals to end strikes, which analysts and investors say threatens its 2024 operating margin target.
 

On Wednesday, its cabin staff voted by a majority to go on strike as they seek a 15 per cent wage hike, a potential harbinger of further profit erosion.
 

The results come almost two weeks after the airline announced the surprise departure of respected Chief Financial Officer Remco Steenbergen, which knocked its share price and rattled investor confidence.

Operating profits for 2023 were up from 1.23 billion euros in 2022. Revenues of 35.4 billion were lower than the 36.3 billion euros expected in a company-issued poll, compared with 32.7 billion in 2022.