Lufthansa's costly labour disputes threaten 2024 profit goals

Lufthansa will likely miss its 2024 profit margin goal as the German airline seeks to agree new, higher pay deals to end prolonged strikes, which have forced it to cancel thousands of flights, analysts and investors say. The carrier's shares have been among the best performers compared with rival European flag carriers, Air France-KLM and IAG, as the region's travel industry has recovered from the devastating COVID-19 pandemic which shut borders and grounded planes around the world in 2020. In 2021, the German group presented an ambitious plan to return to profit, including a target for adjusted earnings before interest and taxation (EBIT) margins of at least 8% and adjusted return on capital employed (ROCE) of at least 10% in 2024. But many airlines have struggled with recruitment efforts as staff from baggage handlers to cabin crew have left the sector. Spiralling energy and food costs have also fuelled inflation. As a result, carriers have agreed big pay rises in recent years to attract workers. Lufthansa's ongoing labour disputes and service disruptions have put those profit-margin goals in jeopardy. Adjusted EBIT margins will fall to 6.9% this year from an estimated 7.4% in 2023, according to a company-provided analyst poll. The airline may lower that target when it releases 2023 results on March 7.<br/>