Skift Take

The German airline group has warned that increasing tension in the Middle East could also affect its bottom line.

The Lufthansa Group is slashing its financial forecast after a series of strikes affected its operations and warned rising tensions in the Middle East could further affect its bottom line.

The German company expects a loss of around 2.2 billion euros, roughly $2.34 billion, in adjusted earnings before interest and taxes for the full year, a key measure of profitability.

The full-year forecast falls below expectations that its adjusted EBIT loss would be the same as 2023 ($2.68 billion).

Lufthansa said strikes cost it 350 million euros, or roughly $373 million, during the first quarter. 

During the period, Lufthansa reported an adjusted EBIT loss of 849 million euros, a significant drop from the 273 million euros loss the carrier had at the same time last year. 

Strikes among various labor groups had afflicted the Lufthansa Group, which includes Lufthansa, Swiss, Austrian Airlines, Brussels Airlines, and Eurowings, for months.

Unions staged strikes over issues with pay and working conditions, causing Lufthansa to cancel and delay thousands of services. Up to 1,000 flights a day were canceled across the group. 

Lufthansa recently settled the wage disputes. The company said it anticipates a negative second-quarter impact of 100 million euros. 

It said bookings, especially for the summer, are within expectations, giving it an adjusted free cash flow of 305 million euros. 

However, the carrier said it expects second-quarter capacity to be lower than initially expected due to aircraft delivery delays and to support improvements in its operational reliability. Supply chain issues have made it more difficult for airlines to receive new aircraft on time and created backlogs for plane makers Boeing and Airbus. 

Potential for Wider Middle East Conflict Casts Further Uncertainty

Lufthansa also said the potential for wider conflict in the Middle East “poses risks” to the company’s full-year financial outlook.

On Saturday, Iran launched dozens of drones at Israel, prompting airlines to cancel flights and change routes. The attack was widely seen as retaliation for an Israeli air strike on the Iranian consulate in Syria

While Israel intercepted the attack and the damage was minimal, it’s unclear what the next phase of the conflict will be. 

“The as yet unforeseeable effects of the recent escalation of the Middle East conflict and further geopolitical uncertainties pose risks to the Group’s full-year financial outlook,” the company said. 

Lufthansa already canceled flights to Tehran last week after it became public that Iran was planning to attack Israel.

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Tags: airbus, airlines, Boeing, financials, germany, labor strike, lufthansa, Lufthansa Group, middle east

Photo credit: Wikimedia/TJDarmstadt TJDarmstadt / Wikimedia

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