Pandemic rebound clouded as war lifts oil, says Lufthansa

Bloomberg

Deutsche Lufthansa AG said the war in Ukraine will cloud prospects for a long-awaited recovery from the coronavirus pandemic as fuel prices climb and flights are diverted to avoid shuttered skies.
Europe’s biggest airline cut its annual loss by two-thirds in 2021 as Covid curbs eased, according to a statement. Earnings this year should show a further improvement, but the Russian assault makes it impossible to provide an estimate, the German company said.
“Major uncertainties regarding the dramatic developments in Ukraine and the economic and geopolitical consequences of the conflict, as well as remaining uncertainties regarding the course of the pandemic, do not allow to provide a detailed financial outlook,” the company said.
Lufthansa is the first major carrier to provide an earnings update since the extent of disruption from the invasion became clear, with widespread airspace closures that upended travel in eastern Europe and closed down the shortest routes to Asia. Oil prices have surged above $110 a barrel, pushing up kerosene costs and hitting consumers by increasing household bills.
Lufthansa posted an adjusted loss of 2.35 billion euros ($2.6 billion) before interest and tax, aided by record cargo revenue. The figure beat its own guidance but fell slightly short of the average analyst estimate.
The carrier predicted improved Ebit as well as free cash flow this year, with improvements from April onwards after a tough first quarter that was impacted by the omicron variant of Covid. Still, increasing external costs will impact the entire airline industry this year, Lufthansa warned. The carrier is currently hedged on 63%
of its fuel needs for 2022 at $74 a barrel.
Capacity should be above 70% of 2019 levels this
year, improving from 40% in 2021, Lufthansa said.
The figure should reach about 85% by the summer, with short- and medium-haul routes almost back to normal but inter-continental operations lagging behind.