Research Update: Deutsche Lufthansa AG Upgraded To 'BBB-/A-3' On Strong Yields And Robust Air Travel Demand; Outlook Stable

We now expect Deutsche Lufthansa AG to generate S&P Global Ratings-adjusted EBITDA of €4.8 billion-€4.9 billion this year, compared with our April 2023 forecast of up to €4.5 billion, underpinned by stronger-than-expected yields amid robust passenger air travel demand and industrywide capacity constraints. We expect EBITDA to stay flat or rise moderately in 2024. We forecast that higher EBITDA will offset large capital expenditure for new aircraft and, supported by Lufthansa's commitment to deleverage, translate into sustained S&P Global Ratings-adjusted funds from operations (FFO) to debt of more than 45%, commensurate with a 'BBB-' rating. We therefore raised our long-term issuer credit and issue ratings on Lufthansa and its senior unsecured debt to 'BBB-' from 'BB+', our issue rating on

...- We now expect Deutsche Lufthansa AG to generate S&P Global Ratings-adjusted EBITDA of 4.8 billion-4.9 billion this year, compared with our April 2023 forecast of up to 4.5 billion, underpinned by stronger-than-expected yields amid robust passenger air travel demand and industrywide capacity constraints. We expect EBITDA to stay flat or rise moderately in 2024. - We forecast that higher EBITDA will offset large capital expenditure for new aircraft and, supported by Lufthansa's commitment to deleverage, translate into sustained S&P Global Ratings-adjusted funds from operations (FFO) to debt of more than 45%, commensurate with a '###-' rating. - We therefore raised our long-term issuer credit and issue ratings on Lufthansa and its senior unsecured debt to '###-' from '##+', our issue rating on its junior subordinated debt to '##' from 'B+', and our short-term issuer credit rating on the airline to 'A-3' from 'B'. - The stable outlook reflects our expectation that economic or geopolitical...

Research Update