Lufthansa warns profits could fall amid fuel price volatility

By Joanna Plucinska and Ilona Wissenbach

LONDON/FRANKFURT, Aug ‌4 (Reuters) - German airline group ​Lufthansa warned ​on Tuesday operating profit could fall this year after the figure more than halved in the second quarter due to higher fuel costs tied to the U.S.-Iran war, sending its shares sharply lower.

The company forecast its ‌2026 adjusted earnings before interest and tax would be €1.7 billion to €2.2 billion ($2.0 billion to $2.5 billion). It ⁠had previously projected adjusted EBIT well above the previous year's €1.96 billion.

Shares were down 10.35% at 0927 GMT as investors focused on the uncertain outlook and ‌worse-than-expected quarterly results, particularly rising unit costs.

There ‌is still much uncertainty for the second half of the year, Chief Financial Officer Till Streichert told journalists on a call, as customers are booking closer to travel dates.

"Today, we reflect on a challenging second quarter that was once again ​marked by multiple geopolitical crises and uncertainties," Chief Executive Carsten Spohr said in a statement.

"Despite our further improvement in load factor and a significant increase in yield, we were unable to fully offset the considerable rise in fuel costs." The ⁠load factor is a measure of how full an airline's planes are.

However, Lufthansa maintained its longer-term targets, including reaching an operating margin of 8% to 10% between 2028 ​and 2030, despite disruption linked to the war.

Analysts and investors view 2026 as a crucial year for the group's turnaround plan as it seeks to repair finances weakened by years of strikes ​and a complex fleet structure.

CAPACITY CUTS

The U.S. war on Iran sent fuel ‌prices surging when it began in late February, and while they have eased back somewhat, they remain highly volatile amid uncertainty about whether diplomatic efforts will succeed — creating a major headache for ⁠businesses.

European airlines, including British Airways-owner IAG and Air France-KLM, have been hit hard by higher fuel costs despite hedging programmes. Both have said they plan to trim capacity to help offset the impact.

Lufthansa said capacity fell about 3% in the second quarter, partly due to strike days in ⁠April. However, its capacity plans for the full year remain unchanged and are expected to be broadly flat.

Adjusted EBIT fell to €383 million in the ​second quarter from €870 million a year earlier, below analysts' average forecast of €401 million in a company-compiled consensus.

The company now expects 2026 fuel costs of €8.66 billion, compared with an earlier forecast of €8.9 billion.

RETIRING OLD PLANES

Lufthansa said it plans to retire or temporarily ground several aircraft to streamline operations, ‌reduce fuel consumption and limit exposure to unhedged fuel costs.

In its financial report, Lufthansa said this would include the early retirement of fuel-intensive long-haul aircraft such as the Airbus A340-600 and the ‌temporary grounding of two Boeing 747-400s from the start of the winter flight schedule.

The company added that 86% of its fuel needs for ⁠this year are hedged, while Spohr told reporters fuel ‌supplies are expected to remain stable.

Metzler ​said in a research note that Lufthansa was now justified in raising ticket prices to recoup higher costs.

($1 = 0.8690 euros)

(Reporting by Ilona Wissenbach, Linda Pasquini and Joanna Plucinska; Editing by Sherry Jacob-Phillips, Louise Heavens ‌and Mark Potter)

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