Lufthansa Third Quarter Profits Expected To Rebound As Capacity Expands – Profit Snapshot
By Olivia Bugault
Deutsche Lufthansa AG is expected to release its third quarter results on Wednesday before the market opens. Here’s what you need to know:
REVENUE FORECAST: Analysts see the German airline setting aside 5.65 billion euros ($ 6.56 billion) in revenue for its third quarter, according to a consensus estimate provided by FactSet. The group achieved a turnover of 2.66 billion euros during the same period last year. In the third quarter of 2019, Lufthansa’s revenue amounted to € 10.18 billion.
WHAT TO LOOK FOR:
– 3Q EARNINGS: Lufthansa said in its second quarter results in August that it is expected to return to positive earnings before interest, taxes, depreciation and amortization and to stop generating negative operating cash flow over the course of the year. July-September period when the resumption of travel accelerates.
“We believe 3Q will be a mixed event, with EBIT around breakeven and positive bookings feedback, but cash headwinds weighing on FCF [free cash flow]performance, ”said financial services firm Stifel. Stifel expects free cash flow to be negative at minus € 550 million during the period due to a total of € 900 million of tax refunds due in the second half of the year.
– CAPACITY: The group should have operated at 50% of the 2019 capacity level in the third quarter and will increase its capacity to 60% in the last three months of the year, estimates Bank of America. That’s lower than most of its European peers, according to BofA estimates, including Air France-KLM which said last week that its capacity in the third quarter had reached 66% of its pre-pandemic level and that this could climb up to 75% in its fourth quarter.
Lufthansa recently said bookings for the United States had increased after Washington announced that the North Atlantic route would reopen for European travelers vaccinated from November.
In August, he predicted that an increase in long-haul and business bookings – which are recovering much more slowly than short-haul leisure travel – should help boost demand in the second half of the year. It then headed for an increase in capacity to around 50% of 2019 levels in the third quarter, down from 29% in the second quarter. For the full year, he expects capacity to be around 40% of 2019 levels.
– CAPITAL RISE AND STATE AID: In October, Lufthansa – which received € 9 billion in state aid last year – said it had repaid € 1.5 billion of its participation in the Fund German economic stabilization program, also known as silent participation, earlier than initially expected and that it aims to repay an additional € 1 billion before the end of the year.
The repayment came after the airline made a long-awaited capital increase of € 2.16 billion which it says will help strengthen its balance sheet and repay state aid it received during pandemic as it suffered huge losses due to travel restrictions.
The German government took a stake in the airline last year and currently owns around 14% of its shares.
Write to Olivia Bugault at [email protected]