Complexity Works for Lufthansa Group. For Now.
The company posted nice profit in 2023, including at the long-maligned Eurowings.
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As a lover of simplicity, sometimes I wonder how Lufthansa Group does it. The company's five main passenger airlines have an absurd number of operating certificates — including Lufthansa City Airlines, a new entrant that mimics the parent carrier's short-haul offering at a lower cost — and combined, they fly 16 aircraft types.1 Yet it's a well-run group that (mostly) segments its brands, with each targeting different markets.
Lufthansa Group reported full-year 2023 earnings last week, producing what it said was its third-best result ever and its strongest since the pandemic. Net profit was €1.673 billion ($1.83 billion U.S.) with an earnings before interest and taxes (or EBIT) margin of 7.5 percent. For 2024, the group has set a modest goal of an 8 percent margin. But in the group’s typically blunt style, CFO Remco Steenbergen made no promises it will reach it, saying it could take until 2025 to break the 8 percent barrier. Recent labor actions have been costly, he said.
The company breaks out results from three business segments — passenger airlines; logistics, including cargo; and maintenance, repair, and overhaul (or MRO). The MRO business was the big winner with 9.6 adjusted EBIT, roughly flat compared in 2022, with revenues of €6.5 billion. The logistics business produced adjusted EBIT of 7.4 percent, on revenues of almost €3 billion.2 A year earlier, the logistics arm had a remarkable 34.6 percent margin, but we all know what happened to the cargo market between 2022 and 2023. Or we should know.
Passenger airlines is the biggest business. Combined, Lufthansa, Swiss, Austrian, Brussels and Eurowings recorded an adjusted EBIT of 7.2 percent, on revenues of €28.3 billion. A year earlier, they had taken a small combined loss. Of the airlines, Swiss reported the highest adjusted EBIT margin (13.7 percent) followed by Eurowings (7.9 percent), Austrian (5.4 percent), Lufthansa (5.3 percent) and Brussels (3.4 percent).
I enjoy the group's earnings calls mainly because with analysts, CEO Carsten Spohr has an extremely direct manner that borders on abrasive. He's not interested in sugar-coating, which makes for some compelling drama by earnings call standards.
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