Ukraine War doesn’t affect Lufthansa’s flights

Tuesday, March 8, 2022

Russian invasion will not affect Lufthansa’s recovery plans even if they have to fly a longer route than previously. They are predicting heavy summer leisure demand, particularly on European short- and medium-haul routes. Before the invasion, they operated only about 2 percent of its system wide capacity to Russia and Ukraine. Lufthansa’s CEO Carsten Spohr told investors on Thursday that this route was a small part of their business. Since Russia closed its airspace to European airlines earlier this week in response to Europe barring Russian airlines from operating in the bloc their routes and flights to Asia might be affected.

He estimates the southern and western routes to Asia will take about two hours longer than they would have if they could overfly Siberia. Lufthansa now is operating only about 20 percent of its pre-pandemic capacity to Asia, due to depressed demand and continuing Covid-related travel restrictions in the region. The new, longer routes to Asia require more aircraft to operate so Lufthansa would not divert resources from its Asia network to satisfy increased transatlantic demand.

The war is also causing oil prices to spike worldwide, and the company is expecting fuel costs to rise sharply this year. But the carrier says that they have 63% of its fuel hedged. Analysts believe cargo flights could be most affected by the Russian airspace closure. Spohr cited anecdotal evidence that Russian and Ukrainian merchant sailors are abandoning their ships in harbors around Europe, further snarling maritime transport, which will redound to air cargo’s benefit. Since the start of the pandemic, Lufthansa has cut its workforce by 30,000 employees, 10,000 in Germany alone last year.

The carrier forecasts strong transatlantic and short- and medium-haul European routes this summer. They plan to operate 95 percent of its pre-pandemic capacity on those routes this summer. The booking curve is lengthening out now that the industry has settled from the turmoil the Omicron variant caused at the beginning of the year. They also say that passenger airlines lost money last year but its other businesses turned profits. Their cargo transportation buisness has seen a huge rise in the recent years. Lufthansa’s catering arm turned in a €210 million profit, while Lufthansa Technik was €27 million in the black.

The network airlines reported a €3.5 billion loss, and Eurowings was €230 million in the red. Their passenger traffic was up system wide by 29 percent year-over-year. For the full year, Lufthansa reported revenues of €16.8 billion, up 24 percent from 2020.

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