Lufthansa takes off to unexpected profit as cargo demand surges

German flag carrier Deutsche Lufthansa reported an unexpected return to profit driven by cargo demand and said it would be earnings positive in the fourth quarter.

The company added that the reopening of the US border to European travellers would keep earnings positive through year-end.

Adjusted third quarter earnings before interest and tax came in at €17m versus a loss of €1.26bn a year ago - its first profit since the Covid-19 pandemic brought air travel to a virtual standstill. Analysts had predicted a €33m loss for the period.

Third-quarter revenue almost doubled to €5.2bn, compared with forecast of €5.5bn.

Lufthansa’s results and upbeat outlook follow strong results from rival Air France-KLM in a sign that airlines are seeing an uptick in the recovery as more travel restrictions are eased.

Cargo has proved to be a boost for carriers as sea containers are in short supply. With demand for goods surging and shipping fees soaring, many companies are turning to air freight to alleviate supply-chain constraints.

While Lufthansa’s passenger operations posted a loss, the US will reopen to foreign visitors next week, releasing pent-up demand for travel. The company said it should be able to at least halve its full-year loss from 2020 as the US opens up next week.

Profit at Lufthansa’s cargo unit hit €301m while the group’s full-service airlines reported a €304m loss.

Passenger bookings had returned to 80% of pre-crisis levels, Lufthansa said, with the group set to offer more than 70% of its usual capacity in 2022. Its domestic Eurowings discount brand was also profitable following a revival in short-haul European travel

The company said it was close to cutting staff numbers to 100,000 people from almost 140,000 before the crisis, with 3,000 staff yet to agree their departure. A new voluntary exit plan has begun for cabin crew.

"We have mastered another milestone on our way out of the crisis: We are back to black," said chief executive officer Carsten Spohr.

Lufthansa, which also owns Swiss, Brussels and Austrian Airlines, said it expects demand to develop positively, resulting in positive fourth quarter core earnings.

New bookings are currently at 80% of 2019 level, the airline said, prompted by recovering business bookings and rising demand for long-haul flights, especially to the United States, which will open for travellers from Europe next week.