Lufthansa has said during its earnings call today (March 6) its hedging strategy as well as traffic moving to Europe from Middle East amid the conflict may help offset the cancellations for Middle East-bound flights.
The airline estimated an impact of around €5 million per week from cancellations as a result of the conflict. Middle East made up around 2% of its capacity in 2025, though this is normally around 3%. It was reduced amid conflict in the region last year.
“There are pros and cons [to the situation] and it’s very difficult right now to quantify them only after a few days,” said Lufthansa CEO Carsten Spohr. “Cost of cancellations exist at around €5 million per week, which is our best estimate. But at the same time, we have a relative advantage on the fuel cost.”
The airline noted in the call that it had a hedge ratio of over 80%, which management said was higher than its main competitors.
“The only other airline hedged like we are is Ryanair with which we hardly overlap and should give us a relative advantage when prices in the market need to go up to cover for higher fuel prices – especially of course for our American competitors who more or less are not hedged at all,” said Spohr.
United Airlines CEO Scott Kirby told CNBC today that jet fuel prices could impact US carriers’ bottom line sooner than anticipated, with airlines in the country largely not hedging fuel due to difficulties surrounding crack spread pricing. Crack spread pricing is the margin between crude oil and refined jet fuel.
Fuel costs amounted to around €7.3bn in 2025, which was in line with its guidance. For 2026, the company estimates its fossil fuel bill to be around €7.2bn. The weaker US dollar has also provided an estimated €100 million tailwind for this year’s fuel costs, compared with last year.
Lufthansa management also said customer sentiment towards the brand may prove an asset during this period.
“There is historically a certain move of bookings towards highly trusted brands in times of crisis where definitely SWISS and Lufthansa will to a certain degree benefit from,” said Spohr.
He further added that, amid the conflict, people are changing their travel plans in the short term, and there is a possibility that this could persist – given the uncertainty surrounding the length of the conflict.
“Security concerns around the Gulf region might also lead to more traffic within Europe or through European hubs or US destinations,” he said.
“The Lufthansa Group has recorded a sharp rise in demand for long-haul flights since the weekend, particularly on routes to and from Asia and Africa,” the airline group said. “The group is therefore considering extra frequencies, for example to Singapore, India, China, and South Africa.”
This may be offset, however, by European carriers potentially “overcompensating” by the shift in travel demand.
“There will be flexibility in our network as we putting capacity into China, South Africa, Southeast Asia and we are happy to reallocate capacity throughout the whole summer if needed,” Spohr said.
“If, for example, the demand to and from Asia becomes so strong that the next best route to and from Asia is more profitable than the weakest route on the North Atlantic. We would move the airplane, but I think it's way too early to discuss it.”
The comments come after reporting strong profits for full-year 2025 – beating Wall Street expectations.
The group’s revenues rose 5% to a record €39.6bn in 2025, while operating profit climbed to €2bn – up from €1.6bn in the previous year.
Net income was relatively flat at €1.3bn, compared with €1.4bn in the year prior. The airline group said net profits were impacted by valuation effects on loss carry forwards. Excluding these items, net income would have increased in line with its operating result.
Capacity was up 4% in 2025, while load factor was slightly higher at 83.2%.
“As anticipated, yields came under pressure – particularly on short-haul and parts of long-haul,” management said in the call. “However, in our important North Atlantic traffic, unit revenue increased in the fourth quarter by 2.1% on a currency-adjusted basis, confirming the resilience of the demand.”
For 2026, the company said it targeting a “further increase in revenue and a significant improvement” in earnings and further improvements to its operating margin. Capacity is expected to grow around 4% for the year – supported by its ongoing fleet renewal programme.
The company said its net capital expenditure is expected to be around €2.9bn, reflecting the planned delivery of up to 45 new aircraft.
“That’s the largest single-year fleet expansion in our company’s history,” management said in the call.
The company received 23 aircraft deliveries in 2025, including seven Boeing 787-9s, two Airbus A350s, 14 A320neo family jets, as well as four aircraft purchased at the end of their leases.
By the end of 2026, the group said around 29% of its fleet will be made up of latest generation aircraft.
The said that four widebody deliveries that were expected last year have shifted to the first half of this year.
Adjusted free cash flow is expected to be around €9bn – slightly below 2025 due to the higher investment volume this year.
In November last year, the group formally notified the market of its intention to “play an active role in the privatisation of TAP Air Portugal” and said it was bidding to acquire a stake in the government-owned airline.
During the call, management said there was no updates on this process, but maintained it would be the “perfect addition” to its network due to the fact that its network was weakest in the Latin American market – a strong-point of TAP’s network.
“The overlaps are less than they would be for other airlines, which would probably have an impact on the antitrust approvals,” management said.
Management added that if the acquisition fails to create shareholder value, the company “will not do it as we don’t need it”.
Lufthansa ended the year with around €10.7bn in liquidity, which was above its €8-10bn target. The company said this liquidity will likely return within this range by the end of this year as it uses these available funds for aircraft. Net leverage improved to 1.8x by the end of last year.