Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Deutsche Lufthansa AG (DLAKF, Financial) reported a 7% increase in Q2 revenues, reaching over EUR10 billion for the first time.
- The company saw a 10% increase in passenger numbers, with over 60 million passengers in the first half of the year.
- Lufthansa Technik achieved record results, with a 16% revenue increase in Q2, driven by strong demand in the MRO sector.
- The company is optimistic about sustained demand, especially in premium classes, and expects a positive result for the year.
- Deutsche Lufthansa AG (DLAKF) has launched a comprehensive turnaround program to modernize Lufthansa Airlines and improve efficiency.
Negative Points
- The first half of the year did not meet expectations, with significant impacts from strikes and commercial reasons.
- Ongoing delivery difficulties from aircraft and engine manufacturers have affected fleet modernization plans.
- The certification process for new seats and cabin interiors is taking longer than expected, causing delays.
- Significant increases in taxes and fees in Germany have impacted financial performance.
- The company had to adjust its full-year guidance, now expecting an adjusted EBIT of between EUR1.4 billion and EUR1.8 billion, down from previous expectations.
Q & A Highlights
Q: On your transformation plan, do you have any financial targets that come with this? You talk about an 8% margin. Is that still the goal?
A: (Michael Niggemann, Interim CFO) Yes, 8% is the margin we are aiming for. It's the overall target, and we think it's a number we need to achieve for a viable financial status in the future. However, we can only say as soon as possible. There is a delay, no doubt about that, where we are right now.
Q: What are the costs of restructuring and the profile in terms of getting the restructuring done? Is it months or years? And how should we think about that ramp-up?
A: (Carsten Spohr, CEO) It's important to note that we are not talking about a restructuring but rather a modernization. Some one-time struggles will be overcome by 2026, and structural elements will be optimized. We expect the modernization to be a two-year program, taking us into the summer of 2026.
Q: Are you surprised with the level of capacity that has come back in markets this year despite supply chain issues?
A: (Carsten Spohr, CEO) The reduction in production capacity by Airbus and Boeing will have a positive long-term impact on the industry. While this summer may not reflect that, the long-term view is that these reductions will benefit the industry.
Q: How are you thinking about capacity ramp-up into 2025? Are you still targeting to get to 100% of 2019 levels?
A: (Carsten Spohr, CEO) We are aiming for 100%, but we are currently discussing reducing our planned growth for the winter. This will likely result in capacity being somewhere between 95% and 98% of 2019 levels. Yield is more important than growth to bring up our profitability.
Q: Can you share some color on the booking commentary that you said in the press release, where you mentioned bookings up 10% versus last year?
A: (Carsten Spohr, CEO) The growth varies by region, with Asia being the most problematic. However, on the North Atlantic, we outgrew the market and only lost 2.6% in yields, showing the strength of our market position.
Q: What are the immediate plans to amend capacity plans in response to the yield decline in Asia?
A: (Michael Niggemann, Interim CFO) We are looking into future capacity adjustments, but it's important to be present in the long-term. We expect a kind of normalization and do not foresee such a high growth rate in the future.
Q: Can you quantify the reduction for the winter season? And why are you compensating the 787 delays by operating the less efficient A340s for longer?
A: (Carsten Spohr, CEO) We are in the process of reducing capacity by about 4%-points for the winter. We operate the A340s in the winter because they are more suitable for the lower demand season compared to larger aircraft like the A380.
Q: When do you expect to have news about defining the remedy takers for the ITA process?
A: (Carsten Spohr, CEO) We maintain our optimism to close in Q4. We are in the process of agreeing with potential remedy takers and moving forward to Brussels for approval.
Q: What is new in the Lufthansa passenger turnaround program? It seems like the initiatives are things you were already working on.
A: (Carsten Spohr, CEO) We have announced specific measures to staff, including the number of airplanes to be moved and target numbers for feed not being done by Lufthansa Airline itself. We are also in discussions with unions and social partners to manage cost pressures and capacity optimization.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
