Lufthansa (LHAGR; Baa3/BBB-/BBB-) 2Q Earnings Call

It's been blunt in earnings call today; "The first half of the year did not go as expected, as you well know, for the entire industry, and that surely includes us with the numbers we are presenting here today."

EasyJet and Air-France would probably argue the point on falling yields being industry wide. Regardless the read-through to Airport traffic and Dufry is not negative; traffic is still up HSD to LDD yoy - this is an airline capacity issue and is helping normalise pricing/yields (revenue per passenger). The fall in unit revenues (yields times load factors) is not being matched by unit costs - latter now holding flat for most. That's the general industry dynamic we are seeing right now and leading to disappointments. As we said we would be cautious sitting in single-carrier risk here - but that is already priced for AFFP/FOY. Specific notes from Lufty's call below;

• We said €100m impact from strikes this morning. Exact number over 1H is €450m implying €150m in 2Q.
• The 10% fall in yields to Asia its blaming in big Chinese carriers adding capacity.
• It planned 15 new 787's coming into service this year but now sees none on delivery delays. It's highlighting the new models have more cargo capacity in the belly, less maintenance, costs from training one-hundred 787 pilots that cannot be deployed now and the biggest difference; 20-30% higher fuel efficiency. It says in total impact on EBIT is 3-digit-millions (i.e.>€100m/yr).
• It was asked about the 8% EBIT margin target it has - which now seems well away. It simply said still targeting and left timeline long ended ('26-27). Doesn't seem to involve any large scale changes and seems to be relying a large part on eventually getting its new aircraft deliveries and rotating old planes out.
• It was asked if the €203m Technik (airline services arm) which was up +30%yoy and contributing 30% to the group bottom line was one-off on issues like GTF engine recall/maintenance. It says to some extent yes from old contracts - says 2-digit million boost (i.e. €10-99m - wide range).
• Mgmt's view that supply issues from Boeing/Airbus will benefit the industry (dragging on capacity) is unchanged - it sees this having a lagged impact which we are yet to see.
• Positively its saying "yield more important than growth" - i.e. seems focused on lifting margins out and capacity growth thus far (lagging market) supports that (though unclear how much of that was in its control).
• Doesn't give much on dividend, just notes payout policy is 20-40% of net income. Last year it did €0.3/share at 21% payout, totalling €360m.