Europe

Air France Lufthansa predicts bumper summer and is wary of costs

Air France-KLM said in a statement that it expects operating profit to be a break-even point in the second quarter.

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Europe’s largest airlines are increasingly convinced that the relaxation of coronavirus restrictions will begin the summer boom, as the surge in bookings has spurred capacity increases.

Deutsche Lufthansa AG and Air France-KLM are uncertain that this year’s outlook will be even deeper, German companies have difficulty predicting fuel prices on Thursday, and how much higher household costs will affect demand. He said it was not clear if he would do it.

Both carriers reported a strong start until 2022, after the effects of Covid-19’s Omicron variant soon disappeared. Lufthansa said demand “recovered faster and stronger than expected in recent weeks,” and Ben Smith, Air France-KLM CEO, said corporate and premium, following an already strong upward trend in leisure demand. He said sales had begun to revive.

Lufthansa plans to expand its 2022 capacity from the previous 70% to 75% of the 2019 level, as the decline in travel curbs opens the market after a two-year cataclysm. European airlines are adding seats and flights. At the same time, the surge in all costs, from fuel to staff, is squeezing margins and urging carriers to raise fares. This may not be sustainable as households are under pressure.

Lufthansa’s share price rose 3% at 9:06 am in Frankfurt, while Air France-KLM rose 3.7% in Paris. Planemaker Airbus SE, which reported its results after Wednesday’s closing and showed long-term confidence in global travel by increasing the build rate of future jet airliners, surged 7.4%.

Air France-KLM said in a statement that it expects operating profit to reach a break-even point in the second quarter and to be “significantly positive” in the third quarter. Lufthansa, which already made a surprising profit in the third quarter of last year, repeated guidance to improve interest and pre-tax adjusted profits for the full year.

Air France-KLM reported an operating loss of € 350 million in the first quarter. This is 40% better than expected. Adjusted Ebit losses increased from € 1.05 billion in the previous year to € 5.91 million, exceeding analysts’ estimates.

Carsten Spohr, CEO of the German company, said that as Covid’s threat receded, it “would mentally undermine the crisis.” At the same time, Lufthansa warned that it is impossible to predict fuel trends and consumer behavior as inflation rises, and that “uncertainty remains in the company’s further business development.”

Lufthansa’s kerosene costs more than doubled this quarter, but Europe’s largest economic inflation in April jumped to its highest level since the post-unification record began in the early 1990s.

Europe’s busiest London Heathrow airport before the pandemic raised passenger forecasts for the year last week, but demand could decline after the end of summer as the boom gives way to a “winter freeze.” I warned that there was sex. Much of the current demand comes from those who reunite with their loved ones, or those who monetize vouchers from postponed trips, both of which are short-term trends.

In the long run, while still confident that aviation will overcome current obstacles, Airbus is pursuing an ambitious plan to increase production of its best-selling A320 jet to 75 a month by 2025. The production rate has increased by 50%. now.

IAG SA, the third of Europe’s leading network carrier groups and the parent company of British Airways, will report its results on Friday.

© 2022 Bloomberg LP

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