
German airline giant Deutsche Lufthansa has dealt another blow to its financial outlook for 2024, slashing its earnings target for the second time this year. The news, delivered on July 12th, comes as a stark reminder of the challenges facing the European airline industry in the current economic climate. Lufthansa's revised target sits between €1.4 billion and €1.8 billion in adjusted earnings before interest and taxes (EBIT), a significant drop from the previously projected €2.2 billion.
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This downward revision reflects the airline's struggle with low "yields," a term referring to the average revenue per passenger. The profit warning extends to Lufthansa's second quarter as well. The company expects a hefty decline in adjusted EBIT for the period, with figures falling by more than a third to €686 million compared to the same period last year. Full financial results for Q2 are expected later this month on July 31st.
Analysts believe Lufthansa's woes are emblematic of broader issues plaguing European airlines. High operating costs, including labor expenses, are squeezing margins. At the same time, airlines are struggling to raise ticket prices due to fierce competition and a cost-conscious travel market. This pressure on ticket prices translates to lower yields, further impacting profitability.
The news sent shockwaves through the industry. Lufthansa's stock price tumbled, dragging down shares of other European airlines like IAG (British Airways owner), easyJet, and Air France-KLM. The incident underscores growing anxieties about a potentially weak quarter for the entire European airline sector. Lufthansa is not alone in its struggles. Many airlines are grappling with similar challenges. However, the German carrier's repeated profit target revisions raise particular concerns about its ability to navigate the current economic headwinds. Investors will be closely watching Lufthansa's Q2 results and future strategies to see how the company plans to weather this storm.