Lufthansa, Air France predict summer boom, wary over costs

Bloomberg

Europe’s biggest airlines are growing increasingly confident that the easing of coronavirus restrictions will kick off a summer boom as a surge in bookings spurs them to lift capacity.
Deutsche Lufthansa AG and Air France-KLM are less certain about prospects going deeper into the year, with the German company saying that fuel prices are tough to predict and that it’s not clear how far increasing household costs will weigh on demand.
Both carriers reported a strong start to 2022 after the impact from the omicron variant
of Covid-19 quickly faded.
Lufthansa said that demand has “recovered faster and stronger than expected in recent weeks,” while Air France-KLM Chief Executive Officer Ben Smith said that corporate and premium sales have begun to revive, following an already strong upward trend in leisure demand.
European airlines are adding seats and flights as the dropping of travel curbs opens up markets after two years of upheaval, with Lufthansa planning to deploy 2022 capacity equal to 75% of the 2019 level, up from 70%
previously. At the same time a jump in costs for everything from fuel to staff is pressuring margins, pushing carriers to raise fares — something that might not be sustainable as household budgets come under pressure.
Air France-KLM said it expects to break even in operating income in the second quarter and to be “significantly positive” in the third. Lufthansa, which already posted a surprise profit in the third quarter of last year, reiterated guidance for an improvement in full-year adjusted earnings before interest and tax.
Air France-KLM reported an operating loss of 350 million euros for the first quarter, a 40% beat on expectations, according to Bernstein analyst Alex Irving, who said that “the outlook for the summer is sunny,” while Lufthansa cut its adjusted Ebit loss to 591 million euros from 1.05 billion euros a year earlier, also beating analyst estimates.
Carsten Spohr, the German company’s CEO, said he’s “mentally ticking off the crisis” as the Covid threat recedes.