Lufthansa takes off again with €1.5 billion EBIT; sees more to come in 2023

By Geoffrey Smith 

Investing.com -- Deutsche Lufthansa (ETR:LHAG) stock hit a three-year high in early trading in Frankfurt on Friday after the airline group reported a big swing back to profit in 2022, beating its own and the market's expectations.

"Lufthansa is back," CEO Carsten Spohr said in a statement as the flag carrier said earnings before interest and taxes swung to a profit of €1.5 billion (€1=$1.0623) from a loss of €1.7M in 2021. The bottom line swung to a profit of €791M from a loss of €2.19B in 2021.

Revenue nearly doubled to €32.8B as the end of the pandemic in most of the world unleashed huge demand pent up over the previous two years. Passenger numbers more than doubled to 102M.

Lufthansa stock rose 6.1% at the open in response, its highest since the start of the pandemic in early 2020, as the group forecast another strong year ahead. That made it the best-performing stock in the DAX and the best-performing stock in European travel.

It said demand for the Easter and summer vacation periods looks "particularly robust", both for European and North American destinations. It expects yields to remain high, accordingly, but is still holding back from restoring capacity. It expects its capacity in the current quarter will be only 75% of pre-pandemic levels, rising to 85%-90% over the full year. 

The group said it expects "a further significant improvement in adjusted EBIT in 2023," but stopped short of saying it will meet its medium-term targets a year early. It's aiming for an adjusted EBIT margin of over 8% next year, and an adjusted return on capital employed of over 10%.

The group had lost nearly €9B over 2020 and 2021, requiring massive government support around Europe to stay afloat. It repaid the last support loans to the governments of Austria and Belgium in the last quarter of 2022.

As with many European companies, the airline's longer-term financial position was also helped by the sharp rise in interest rates last year, which reduced the amount that the group had to set aside to cover future pension obligations. Net pension obligations fell to €2B from €6.5B, while its overall financial leverage - net plus net pension liabilities- fell to 2.3 times underlying earnings, below its pre-pandemic level of 2.8 at the end of 2019.