German airline group Lufthansa declared on Tuesday a year-over-year decline in its operating profit in the third quarter, as its flagship brand struggles with low yields, competition with international airlines and rising costs.
The third quarter operating profit of 1.3 billion euros ($1.41 billion) was largely in line with the expectations of analysts polled by the company, but 9% lower than a year earlier.
"Delayed aircraft deliveries, punctuality issues at our hubs in Germany and regulatory disadvantages are impacting our core brand," CEO Carsten Spohr said in a statement.
The third quarter, which includes the busy summer months for travelers, is usually the strongest for European airlines. But rising costs, unpredictability tied to the crisis in the Middle East and plane delivery delays continue to weigh on results.
Shares of Lufthansa were down 3.7% in pre-market trading after the group's third quarter results were announced.
Lufthansa's passenger airlines, which include its namesake brand as well as carriers such as Austrian Airlines, Swiss International and Eurowings, generated an operating profit of 1.2 billion euros in the third quarter, down from 1.4 billion in the same period of 2023.
The decline was driven mainly by a 234-million-euro decline in the result of its core brand Lufthansa Airlines, the company said in a statement. A slower recovery in corporate travel contributes, too, analysts said.
Yields, a proxy for airfares, fell 14% in the Asia-Pacific region in the third quarter, the company reported.
"The fact that Lufthansa now must remove one of its oldest routes, Frankfurt-Beijing, from its flight schedule shows how much the balance of international competition is shifting," a Lufthansa spokesperson told Reuters in an email.
"European airlines are in an extremely unequal competitive position with China, as well as with airlines from the Persian Gulf and Bosporus."
The group has launched a turnaround program at its core brand in an effort to recover after a difficult earnings year to date.
Lufthansa has already issued two profit warnings this financial year, as it grappled with costs tied to strikes.
By 2026, the cost-cutting measures will have a gross effect on operating profit of around 1.5 billion euros, according to the company.
Lufthansa confirmed its outlook for the full year, targeting group operating profit in a range of 1.4 billion to 1.8 billion euros, and maintaining 8% as a midterm target for its operating profit margin. Analysts have cast doubts on whether this can be achieved by 2026.
The profit margin for the 2024 financial year is expected at 4.3%, according to a company-led analyst consensus.
