In July and August 2024 I bought Lufthansa shares because I had identified a bottom (the first tranche was at €6). After a rollercoaster ride in which the position was sometimes up over 40%, it is now almost back to plus minus 0. What has happened since then?
Positive developments
Lufthansa has 7.8 billion euros on kerosene in 2024 spent on kerosene. This makes kerosene the second largest cost item for Lufthansa, right next to personnel costs; by comparison, revenue amounted to 37 billion euros in 2024. Good news for Lufthansa is therefore that the oil price (on which the kerosene price also depends) has been on a downward trend since 2022 and has already fallen by more than 50% from its last peak.
Lufthansa is gradually taking over ITA Airways, this strengthens its presence in the southern European market.
Due to Corona, the number of vacations in Germany has fallen significantly, but is well on the way to returning to pre-Corona levels
And another little nice to know, surprisingly for me there is still no decline in the number of USA bookings despite the new US entry policy
Negative developments
Since the Russia - Ukraine war Lufthansa no longer flies via Russia. A flight ticket is estimated to be 5-10 percent more expensive and the flight takes about 2hours longerChinese airlines can fly via Russia and are competing strongly with Lufthansa's Asian business. In general, Lufthansa is in an intense price war, especially with low-cost airlines. intense price warwhich is putting pressure on margins.
Due to the tariff war will lead to less trade between China, the USA and the EU in the future, which means that Lufthansa will transport fewer goods. Lufthansa Cargo accounts for 10% of revenue. However, I do not expect any major losses here.
Lufthansa wants to cut jobs and reduce costs, among other things by transferring flights to cheaper subsidiaries such as City Airlines. This leads to a conflict of interest with VC (Vereinigung Cockpit), as experienced Lufthansa pilots are to be replaced by cheaper staff. VC is therefore repeatedly threatening to strike. However, VC must also pay attention to its image. I think large-scale strikes are very unlikely, but strike threats or 1-2 day warning strikes are possible. A strike lasting one or two days would cost Lufthansa around 100 million in revenue plus a loss of passenger confidence, depending on the extent of the strike, but even then I would expect a short-term drop in shares of no more than 5%.
Lufthansa is currently modernizing its long-haul fleet with new, more efficient aircraft, which is positive for the time being. However, Airbus and Boeing in particular often have supply chain problems. supply chain problems. For example, Lufthansa ordered 20 Boeing 777-9s in 2013 that were to be delivered in 2020, but it is now clear that they will not be delivered until 2026 at the earliest.
Lufthansa is a bargain with a P/E ratio of 5.4, there are some risks, but they are manageable. Unlike many other companies that have also fallen sharply in recent days, I don't think they will be hit too hard by the tariffs, so they could recover quickly.
Sources
https://www.businessinsider.com/boeing-777x-first-delivery-lufthansa-delays-kelly-ortberg-2025-1?
