What Deutsche Lufthansa (LHA) Said on Its Q3 Earnings Call

Key Points

• Q3 revenue reached a record €12.2 billion, up 9% year over year, while adjusted EBIT rose to €1.4 billion despite a more than €500 million fuel-cost headwind. Lufthansa narrowed its 2026 adjusted EBIT outlook to €1.7 billion–€2.0 billion and raised its expected full-year fuel bill to about €9.3 billion.
• Cargo and maintenance drove earnings growth: Lufthansa Cargo’s adjusted EBIT more than tripled to €162 million, while Lufthansa Technik’s adjusted EBIT increased 54% to €200 million. Passenger Airlines earnings declined, mainly because of €65 million in additional strike-related compensation claims.
• Lufthansa selected as the successful bidder for TAP Air Portugal, expecting up to €450 million in annual run-rate synergies, and plans to increase its ITA Airways stake to 90% in 2027. The group is targeting mid-single-digit capacity growth in 2027, focused on intercontinental routes.

Deutsche Lufthansa ETR: LHA reported record quarterly revenue for the third quarter of 2026 as stronger passenger yields, cargo demand and maintenance activity more than offset a substantial increase in fuel costs.

Revenue rose 9% from a year earlier to €12.2 billion, while adjusted EBIT increased by €76 million to €1.4 billion. The adjusted EBIT margin was 11.5%, down 0.4 percentage points year over year. The company said it absorbed a fuel-cost headwind of more than €500 million during the quarter, including a €543 million increase in fuel expense versus the prior year.

CEO Carsten Spohr said the quarter was shaped by geopolitical tensions and elevated fuel prices, but demand remained resilient across the group’s business segments. He said the company increasingly passed higher fuel costs through to fares, aided by a more balanced industry supply-demand environment and continued constraints in the aerospace supply chain.

“The third quarter shows that we were increasingly able to reflect the higher fuel costs in our fares,” Spohr said. He added that higher fares must be matched by a stronger customer proposition, including reliable operations, upgraded products and service improvements.

Passenger Revenue and Network Airlines

Lufthansa’s Network Airlines segment reported revenue growth of 5%, supported by higher yields and a 21% increase in ancillary revenue. The group attributed the ancillary performance to changes in fare structures, upgrades and differentiated onboard offerings, including its Allegris and SWISS Senses products.

Network Airlines capacity, measured in available seat kilometers, increased 1.6%. Regional revenue per available seat kilometer, or RASK, rose by more than 5%, driven by nearly 7% yield growth. Overall RASK increased 4%, however, as the segment recorded an additional €65 million impact from customer compensation claims related to strikes earlier in the year.

The claims rate exceeded provisions previously recognized, affecting third-quarter results. Adjusted EBIT for Network Airlines was €853 million, about €100 million below the prior-year level, largely because of the strike-related impact.

SWISS, Austrian Airlines and Brussels Airlines improved earnings from the previous year, while results at the Lufthansa core brand declined. Spohr said the financial turnaround of Lufthansa Airlines remains a top management priority, following progress in operational reliability and customer satisfaction.

The company plans to advance measures including the introduction of Airbus A220 aircraft at Lufthansa City Airlines, Airbus A350 aircraft at Discover Airlines, and greater consolidation of technical operations and administrative functions across its Lufthansa airlines in Frankfurt and Munich.

Demand was particularly strong on North Atlantic routes, where capacity was flat and yields rose 9%, supported by premium demand from Europe and North America. Asia-Pacific capacity increased 4% while yields rose more than 9%. Lufthansa also said South America and Africa capacity is growing at a low-teens rate, with both regions maintaining positive RASK growth.

Cargo and Technik Drive Earnings Growth

Lufthansa Cargo’s adjusted EBIT more than tripled to €162 million in the third quarter. Capacity increased 5%, including double-digit growth in belly capacity associated mainly with the integration of ITA Airways capacity. Chargeable weight rose 7%, and load factor improved by more than 3 percentage points.

Cargo yields increased 22%, as the business passed through higher fuel costs and increased base yields by 14%. The company cited demand in Asia-Pacific, particularly India, along with growing transpacific flows. Express deliveries, semiconductors, IT equipment, pharmaceuticals and automotive shipments were among the higher-margin categories supporting demand.

Chief Financial Officer Till Streichert said Lufthansa Cargo’s year-to-date adjusted EBIT had reached €361 million and is likely to “comfortably surpass” €500 million for the full year, though he cautioned that air-freight booking visibility generally extends only about two weeks ahead.

Lufthansa Technik generated revenue of €2.3 billion, up 20%, while external revenue grew 24%. Adjusted EBIT climbed 54% to €200 million, supported by higher maintenance shop volumes, improved cost pass-through and a one-time reimbursement of U.S. tariffs. Engine maintenance and component services performed particularly strongly, aided by contracts and renewals with airlines in the Gulf, Japan and Canada.

Spohr also said Lufthansa Technik had agreed a contractual framework with Boeing for future maintenance of German Bundeswehr Chinook heavy-lift helicopters. He said the defense business should support margin improvement over the medium and long term.

Cash Flow, Fuel and Updated Outlook

Adjusted free cash flow totaled €1.8 billion in the first nine months, broadly matching the previous year’s level. Operating cash flow was €3.4 billion, approximately €500 million lower year over year, reflecting lower earnings and reduced ticket prepayments linked to shorter booking windows.

Total liquidity stood at €11.8 billion at the end of September, above the company’s €8 billion to €10 billion target range. Net financial debt declined to €5.9 billion from €6.4 billion at the end of 2025. The leverage ratio remained broadly stable at 1.7 times.

Lufthansa now expects its full-year fuel bill to total about €9.3 billion, including approximately €1.9 billion of positive hedge results. That would be roughly €2 billion above the prior year and €600 million higher than the company anticipated three months earlier.

The company narrowed its 2026 adjusted EBIT guidance to between €1.7 billion and €2.0 billion. Net capital expenditures are expected to be approximately €2.1 billion, down from €2.5 billion, primarily because planned aircraft deliveries were reduced to 38 from 45. Adjusted free cash flow guidance remains around €900 million.

For the fourth quarter, Lufthansa said it is targeting a low-double-digit total RASK increase to offset fuel costs. Regional RASK improved from 3.1% growth in July to 7.2% in September, while October regional RASK was running above 9% year over year, according to Streichert.

TAP, ITA and 2027 Planning

Spohr said the Portuguese government selected Lufthansa as the successful bidder in the privatization of TAP Air Portugal. The company expects up to €450 million in annual run-rate net synergies and said the transaction is expected to be accretive to its return-on-capital-employed ambition and earnings per share.

The company sees TAP’s Lisbon hub, South Atlantic network, maintenance operations, cargo activities and loyalty capabilities as complementary to its existing business. Lufthansa currently has a 9% market share in South Atlantic traffic flows, while TAP has an 11% share, according to Spohr.

Lufthansa also expects to complete its acquisition of an additional 49% stake in ITA Airways in the first quarter of 2027, subject to outstanding regulatory approvals, taking its ownership to 90%. Streichert said full consolidation would bring ITA’s balance sheet and operating results into Lufthansa’s financial reporting. He said ITA’s adjusted EBIT has improved year over year.

For 2027, Lufthansa plans mid-single-digit capacity growth, concentrated in intercontinental routes, while continental capacity is expected to decline. The company said the reported growth rate reflects a comparatively low 2026 base affected by strike disruptions, Middle East cancellations and the grounding of CityLine aircraft. It aims to reduce Network Airlines unit costs excluding fuel year over year in 2027 while continuing fleet modernization and improving aircraft utilization.

About Deutsche Lufthansa (ETR:LHA)

Deutsche Lufthansa AG operates as an aviation company worldwide. It operates in three segments: Passenger Airlines; Logistics; and Maintenance, Repair and Overhaul Services (MRO). The Passenger Airlines segment offers products and services to passengers of Lufthansa Airlines, SWISS, Austrian Airlines, Brussels Airlines, and Eurowings. Its Logistics segment offers airfreight container management, urgent shipments, and customs clearance services; and e-commerce solutions. The MRO segment provides maintenance, repair, and overhaul services for civil commercial aircraft serving original equipment manufacturers, aircraft leasing companies, operators of VIP jets, government, armed forces, and airlines.

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