FRANKFURT—Lufthansa CEO Carsten Spohr is concerned about the number of new aircraft coming into the market in the coming years, mainly based on the production rates envisioned by Airbus.
“I have to say that too much capacity has always been damaging for the industry,” Spohr said Nov. 3, adding that suppliers are struggling to keep up with parts, lessors are worried about residual values and yields and load factors are suffering. Therefore, Spohr said, “we should move closer towards each other.”
Lessors AerCap and Avolon have been most outspoken in their criticism of the Airbus production plans. The manufacturer plans to raise narrowbody output from around 40 to 65 aircraft per month by the summer of 2023. Airbus was struggling with supplier delays in September when it handed over only 30 aircraft to customers as a consequence and is facing similar issues in October, according to CEO Guillaume Faury. Spohr said he wants to moderate the conflict “in the background” and “not through the press.”
The comments came as Lufthansa experienced a strong return of business in the third quarter (Q3) and expects that trend to continue based on the reopening of U.S. routes for non-essential travel. The group posted a small adjusted operating profit in Q3 for the first time since the COVID-19 pandemic unfolded, but its network airline part was still in the red. The group expects to return to overall profitability in fiscal 2022.
Demand for U.S. services has returned stronger than Lufthansa anticipated and is now at 81% of 2019 levels. Premium demand is developing particularly well, as first class sales are up 8% from 2019. Business class is down 12% from 2019 levels; premium economy is down 23% and regular economy is down 24%. Together with United, Lufthansa is offering about 200 U.S. flights per week. And Lufthansa Group’s new leisure affiliate Eurowings Discover is entering the U.S. market with services to Salt Lake City and Anchorage, Alaska.
Lufthansa Group’s airlines ran at 50% of 2019 capacity in Q3 and expect to grow to 60% in the fourth quarter. For the full year, the airline’s capacity is projected to be at 40% of 2019 levels, reflecting the low level of operations in the first half. Spohr expects the company to grow to 70% of pre-crisis capacity on average for fiscal 2022 but should be at 80% or more toward the end of next year.
In 2022, the company plans to take delivery of 14 additional long-haul aircraft, a mix of Boeing 787-9s and Airbus A350-900s. The A380s will not return, but five of the A340-600s will be used for interim lift next summer. Four-engine widebodies in general, including the 747-400s and A340-300s, will be permanently retired in the coming years. The 747-8 will be Lufthansa’s new largest aircraft.
At the other end of the spectrum, Lufthansa has launched a request for information (RFI) for the replacement of its regional aircraft fleet. The group’s various airlines operate nine Embraer E190s, 34 E195s and 31 CRJ900s. Spohr said there was little time pressure to reach a decision soon.
Lufthansa’s Q3 revenues increased by 96% to €5.2 billion ($6 billion). The company posted an adjusted operating profit of €17 million and a €72 million net loss. Adjusted free cash flow was slightly positive at €13 million.
Performance across the divisions varied greatly with the network airlines (Lufthansa German Airlines, Swiss, Austrian, Brussels Airlines) posting a combined €450 million adjusted operating loss. Eurowings achieved a strong turnaround to post a €108 million operating profit, compared to a €108 million loss in Q3 2020. Lufthansa Cargo reached a €301 million profit for the quarter and €941 million for the first nine months—well on track to exceed its internal target to make at least €1 billion in the full year. Lufthansa Technik returned to profitability at €61 million.
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