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Lufthansa (LHAGR; Baa3, BBB-, BBB-; S) {LHA GY Equity} Strikes resolved

CONSUMER CYCLICALS
  • Reuters article late yesterday flagging Lufthansa had agreed with trade union Verdi on pay rise for 25k ground staff - they were the latest to go on strike. Early march reports were Union looking for +12.5% salary increase & extra €3k inflation bonus.
  • No details of agreement, direct strike costs were negligible (~€250m YTD), impact to margins more of a focus with Union requests (~+12.5%) at pace with last years reported staff inflation.
  • Staff costs in FY23 for the group jumped by just over €1b/+15%yoy to €8.3b (revenue €35.4b) - the bulk of it from the passenger airlines segment (+€900m/18%yoy to €5.4b).
  • Only 3% of cost inflation for the group was from a increase in staff numbers (leaving net +12%) & 6% of it for the passenger airlines segment (net +12% again).
  • It reported EBIT margin of 7.6%, target is 8%, consensus doesn't see that being achieved in the next 2 years.

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