Shares in Lufthansa Rise As Premium Passenger Demand Pushes Q3 Earnings Higher

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Shares in Lufthansa Rise As Premium Passenger Demand Pushes Q3 Earnings Higher
Credit: © Reuters.

By Scott Kanowsky -- Shares in Deutsche Lufthansa AG (ETR: LHAG ) rose on Thursday after the German airline declared that it had successfully recovered from the COVID-19 slowdown in travel following a surge in third-quarter income.

Adjusted earnings before interest and taxes at the carrier grew by 351% in the July to September period to 1.1B euros, in line with its preliminary profit unveiled earlier this month. An increase in passenger demand, particularly for premium business and first-class seating, helped offset more than 300M euros in charges from strikes and air traffic disruptions.

More than 33 million customers flew Lufthansa during the quarter, pushing group revenue up to 10.1B euros.

Passenger yields - a measure of the amount of revenue received per mile flown - were up by 23% against 2019 levels, touching a new record high. Average seat load factor, which gauges how many seats in each flight are filled with paying passengers, was also back to heights last seen before the outbreak of the pandemic.

In a statement, Lufthansa Chief Executive officer Carsten Spohr hailed the results as a sign that the post-COVID rebound in air travel demand remains resilient in the face of soaring consumer price growth.

"The Lufthansa Group has economically left the pandemic behind and is looking optimistically into the future," Spohr said.

The group expects passenger traffic to remain strong over the rest of 2022 despite a typical slowdown in bookings during the winter months. Analysts at Bernstein said this commentary could be a sign that the airline industry as a whole may be "confounding fears of a macro-driven slowdown even as Europeans turn the heating on."

With this outlook in mind, Lufthansa confirmed an earlier announcement that it has raised its earnings forecast for 2022, saying it now sees full-year adjusted core profit coming in at over 1B euros. Its 2024 medium-term targets for income margin and return on capital employed were also reiterated.

But in a note to clients, analysts at Stifel warned that while pent-up demand will continue to boost sector-wide airline earnings this year, this effect may wane into 2023 as consumer purchasing power weakens and input expenses increase.

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