Frankfurt (Germany) (AFP) – Lufthansa on Tuesday became the latest airline to warn that ticket prices will rise further, as it forecast a two-billion-euro ($2.2 billion) jump in annual fuel costs due to the Middle East conflict. It came a day after Irish no-frills carrier Ryanair said it would raise prices and launch a cost-cutting drive, as the US-Israeli war on Iran keeps global energy costs elevated.
The conflict, which started in February, has led to the near total closure of key oil and gas trade route the Strait of Hormuz, pushing up airline fuel costs as well as fares. The German firm, Europe’s biggest airline group by sales, said the outlook for fuel costs had worsened from just a few months ago, predicting a bill of 9.3 billion euros for 2026, two billion higher than last year.
Price hikes would be necessary “to pass on the increase in kerosene costs,” finance chief Till Streichert told journalists, after the group released forecast-beating quarterly results. “Ticket prices will increase by double digits next year.” He also warned fuel costs would increase in 2027, but added: “That can still change — and hopefully for the better — if the geopolitical situation eases.”
Streichert stressed that Lufthansa had hedged over 80 percent of its fuel costs for 2026, meaning they had it largely locked in prices and were less exposed to market volatility. For 2027, over 60 percent of fuel costs were already hedged, he said.
– AI boom lifts cargo division –
The higher fuel costs prompted Lufthansa, which also operates carriers including Swiss, Austrian Airlines, Brussels Airlines, and Eurowings, to adjust its earnings forecast for the year. It now expects core profit in a range of between 1.7 and 2.0 billion euros for 2026, having previously predicted a range of between 1.7 and 2.2 billion euros.
Despite the slightly bleaker outlook, the group reported a 30-percent jump in profits for the July-September period, beating forecasts. Net profit came in at 1.26 billion euros, boosted by strong demand for premium tickets to Asia and North America. Revenues increased nine percent from a year earlier to 12.2 billion euros.
The group’s cargo division tripled its core profit, boosted by deliveries of equipment for data centers that are being rapidly built to power the artificial intelligence (AI) revolution, according to CEO Carsten Spohr. German companies manufacturing equipment such as industrial lasers in data centers are enjoying strong demand.
However, the group’s flagship airline Lufthansa saw its operating profit fall, in part due to cabin crew and pilot strikes. Spohr nevertheless said it was the strongest quarter “in terms of revenue in the history of the Lufthansa Group.”
“With rising revenues amid consistently high demand and strict cost discipline, we were able to more than offset the increase in fuel costs of approximately half a billion euros,” he said. Lufthansa’s shares rose over three percent on the Frankfurt Stock Exchange after the results were released.
© 2024 AFP
