Lufthansa warns 2026 profits could fall amid fuel price volatility

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

The group forecast its 2026 adjusted earnings before interest and tax (Ebit) would be 1.7 billion (US$2 billion) to 2.2 billion euros. It had previously projected adjusted Ebit well above the previous year’s 1.96 billion euros.

Shares dropped 8 per cent in early trade as investors focused on the uncertain outlook and worse-than-expected quarterly results, particularly rising unit costs.

“Today, we reflect on a challenging second quarter that was once again marked by multiple geopolitical crises and uncertainties,” CEO 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.

Capacity cuts

The US war on Iran sent fuel prices surging when it began in late February. While they have eased back somewhat, they remain highly volatile amid uncertainty 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 per cent in Q2, 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 euros, from 870 million euros a year earlier, below analysts’ average forecast of 401 million euros in a company-compiled consensus.

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

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.

Lufthansa added that 86 per cent of its fuel needs for this year are hedged.

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