Deutsche Lufthansa AG

Overview Key strengths Key risks The largest airline in Europe, ahead of Air France, KLM, and IAG and fourth largest worldwide (by pre-pandemic revenue), with leading positions at its main hubs in Frankfurt, Munich, Zurich, Vienna, and Brussels. Susceptibility to European and global economic cycles, oil price fluctuations, high capital intensity, pandemics, and unforeseen geopolitical and security events. Operator of one of the world's largest route networks and balanced exposure to high-yield, premium, and long-haul air traffic across the route portfolio. Risk of structural losses in business traffic being insufficiently compensated by expansion in the premium class. Passenger revenue streams complemented by a leading position in aircraft MRO (maintenance, repair, and overhaul) and a significant share of the global air

...Based on Lufthansa'scapacity guidance, S&P Global Ratings expects the group's revenue- passenger kilometers (RPKs) to increase to almost 85% of pre-pandemic levels in 2023 from 70% in 2022. This reflects our view of solid underlying demand for leisure travel across Lufthansa's European short-haul and international long-haul routes, so far largely resilient to the rising cost of living and interest rates. We also note the shift in consumer behavior to favor experience-based expenditure. We anticipate the premium leisure segment (typically one of Lufthansa's most profitable segments) will continue to outperform others. Our forecast reflects a moderate pick up in corporate travel, which reached 60% of the pre-pandemic base (in terms of passenger numbers) at year-end 2022, albeit still significantly lagging leisure travel. Furthermore, capacity constraints at Lufthansa's German hubs, due to labor shortages, limit upside for air traffic volumes beyond our 2023 base-case projection. As these...

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