Strong demand for first-class air travel lifts Lufthansa

Lufthansa reported the “highest revenue and profit ever achieved in one summer” as the German airline said that holiday travellers have kept spending on first-class tickets despite spiralling prices.

The Frankfurt-based group on Thursday reported third-quarter adjusted operating profits of €1.5bn, up 31 per cent from a year before, on an 8 per cent increase in sales to €10.3bn, pushing its shares up 7 per cent.

Carsten Spohr, the carrier’s chief executive, said that even with the “challenging” geopolitical situation, the company’s “booking outlook gives us reason to be positive — not only for a very good group result this year, but also beyond”.

Demand for both long and short-haul flights had remained strong among leisure travellers well into October, Lufthansa said, adding that the trend towards more bookings in premium classes continued. “The very good summer demand has extended into October,” it added.

European carriers — many of which were on the brink of collapse during the pandemic lockdowns — have benefited strongly from pent-up demand for travelling. IAG and Air France-KLM have also reported record sales over the summer.

Leading airlines, including Lufthansa, this year rushed to invest in their first-class cabins and lounges as post-pandemic luxury travel demand jumped — a trend that has coincided with significantly higher ticket prices for flights across the board.

The group confirmed its full-year guidance of adjusted operating profit of more than €2.6bn.

Despite buoyant travel demand, the rise in the price of oil and inflation as well as concerns over geopolitical uncertainty have weighed on airline shares over the past few months.

Alexander Irving, analyst at Bernstein, questioned how long the booming demand for premium travel among holiday makers would last with inflation and high interest rates dampening consumer spending.

“To my mind the question is not where we are now — possibly with still some pent-up demand — but where we are going,” he said. Is that going to continue once we’ve eaten through any remaining excess savings?”

Lufthansa said that it had continued to squeeze costs, despite inflation, with unit costs, or costs per passenger per mile, down 0.9 per cent compared to the same period last year, while bookings for the fourth quarter were up by “double digits in percentage terms”.

The company said that it expected seating capacity to reach 95 per cent of pre-pandemic levels next year.

Jörg Beissel, Lufthansa’s head of finance, told analysts that business travel — which continues to be a more stable source of revenue — was expected to reach 70 per cent of pre-pandemic levels by the end of 2024.