Lufthansa’s 2025 Performance: Operational Strength Meets External Headwinds

While Lufthansa’s operational results for 2025 surpassed many expectations, the airline now faces significant challenges largely beyond its direct control. Escalating geopolitical tensions, volatile fuel prices, and renewed labor disputes are coming to the forefront, raising questions about the resilience of its outlook for 2026.

Financial Highlights: Strong Underlying Business Amid Net Income Dip

Presenting its annual figures on March 6, the Lufthansa Group demonstrated robust operational health. Adjusted EBIT climbed by approximately 19% to €1.96 billion, with the corresponding margin improving to 4.9% from 4.4% a year earlier. Group revenue increased by 5%, reaching a record €39.6 billion.

The bottom line, however, showed a modest decline. Net profit decreased by 3% to €1.34 billion, attributed to negative tax effects. Despite this, the board has proposed a 10% increase in the dividend to €0.33 per share.

Cost relief played a key role in the operational performance. The company benefited from lower fuel expenses, providing a €0.5 billion tailwind, and the absence of the substantial strike-related costs incurred in the prior year. Furthermore, the Lufthansa Cargo division contributed a profit of €324 million.

Geopolitical Impact: Operational Strain and Unexpected Opportunities

The escalating situation in the Middle East is affecting Lufthansa’s network in multiple ways. Direct flights to Tel Aviv, Tehran, and Beirut remain suspended until at least March 8. The airline is also currently avoiding the airspace of the United Arab Emirates.

A more substantial operational impact comes from extended flight paths. Numerous long-haul routes between Europe and Asia now require significant detours, increasing fuel consumption and potentially causing delays across the network.

Paradoxically, these disruptions have created a booking surge. According to the company, advance bookings for direct flights to Asia are currently running 75% above the previous year’s level. This is largely because major Gulf carrier hubs for Emirates and Qatar Airways, which typically funnel traffic to Asia, Australia, and Africa, are currently inactive.

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Regarding fuel price volatility, Lufthansa highlighted its hedging strategy, with approximately 80% of 2026’s fuel costs already secured. CFO Till Streichert anticipates total fuel expenses of around €7.2 billion for the coming year.

Labor Relations: Rising Tensions at Subsidiaries

Beyond external factors, internal pressures are mounting. At Eurowings, the Vereinigung Cockpit pilots’ union has initiated a ballot for industrial action following failed negotiations on a collective agreement for company pensions. Pilots have until 10:00 on March 16 to vote on potential measures.

Lufthansa Cityline has already shown strong union resolve. A recent ballot saw 99% approval for potential strike action, with a 95% participation rate. Any walkout would primarily disrupt feeder traffic to the Frankfurt and Munich hubs, along with European routes—connections critical to the stability of the entire network.

2026 Strategy: Growth Targets and Fleet Modernization

Looking ahead, Lufthansa forecasts another significant rise in adjusted EBIT for 2026, accompanied by higher revenue and an improved margin. The passenger airline group plans to expand capacity by roughly 4%. The company’s medium-term target is to achieve an adjusted EBIT margin between 8% and 10%.

The group also continues its fleet renewal. By the end of 2026, approximately 30% of the fleet is slated to consist of next-generation aircraft, offering lower fuel consumption, reduced noise, and enhanced passenger comfort. An additional industry boost is expected from the confirmed reduction of the German air traffic tax, which is scheduled to take effect on July 1, 2026.

Recent market sentiment reflects this complex mix of strengths and uncertainties. Shares closed at €8.21 on Friday, marking a decline of 9.12% over the preceding seven days.

The next key event for investors is the Annual General Meeting on May 12, 2026. In the interim, the narrative will likely be shaped by two critical factors: whether the operational detours and cost implications from the Middle East conflict remain manageable, and whether the wage disputes at Eurowings and Lufthansa Cityline escalate into full-scale industrial action.