Deutsche Lufthansa (ETR:LHA) outlined its strategy, financial priorities, and 2026 outlook during an OTCQX Best 50 Virtual Investor Conference presentation led by Marc Nettesheim, vice president and head of investor relations. Nettesheim said the company is navigating “turbulent times,” noting that a Middle East crisis has affected the airline industry, but emphasized a focus on Lufthansa Group’s underlying strategy and value levers.
Business model built on four segments
Nettesheim described Lufthansa Group as the number one airline group in Europe and number four globally, with roughly €40 billion in revenue, 135 million passengers carried last year, a fleet of more than 730 aircraft, and more than 100,000 employees.
- Network airlines (about 70% of revenue), including Lufthansa, SWISS, Austrian Airlines, Brussels Airlines, and ITA Airways (41% owned, with a potential move to majority ownership this year or next year).
- Point-to-point, a leaner, more flexible model primarily represented by Eurowings.
- Logistics, through Lufthansa Cargo, which Nettesheim described as a dynamic business and currently the group’s most profitable business unit.
- MRO (maintenance, repair and overhaul), through Lufthansa Technik, an €8 billion revenue business with what he called stable, long-term maintenance cycles; he said half of Technik’s revenue through 2028 is already “locked in.”
Network airlines: hubs, brands, and deeper integration
Nettesheim said the group’s network airlines operate from six hubs—Frankfurt, Munich, Zurich, Vienna, Brussels, and Rome—located in what he characterized as affluent markets with high yields and loyal customer bases. He highlighted the role of brand identity across the group, contrasting Lufthansa’s approach with U.S. airline mergers that often fully integrate brands.
He also framed Lufthansa’s multi-hub structure as a source of flexibility, citing the ability to shift capacity depending on cost competitiveness and to assign specialized roles to hubs (such as Brussels as an Africa hub). He said the group’s historically smaller hubs have driven a higher degree of behind-the-scenes integration, which Lufthansa is now pushing further through centralized network planning, IT integration, and more consistent group branding for customer touchpoints such as lounges at outstations.
As an example, Nettesheim described centralized long-haul network planning that staggers departure times across hubs to increase connectivity and avoid internal cannibalization, offering travelers multiple daily connection options.
Fleet renewal, premium products, and restructuring targets
A key value lever, Nettesheim said, is modernizing and harmonizing the fleet. Lufthansa plans to reduce the number of long-haul aircraft types from 13 to six by 2030 and increase the share of new-generation aircraft from 27% to almost 60% over the same period. He tied a more homogeneous fleet to productivity gains, training efficiencies, and operational stability, while also pointing to cost savings from new aircraft, including up to 30% lower fuel consumption and 20%–30% lower maintenance costs versus older generations.
Nettesheim also highlighted new onboard products—Allegris for Lufthansa and Swiss Senses for SWISS—alongside a retrofit program. By 2030, he said 95% of long-haul seats across the group airlines are expected to feature a “state-of-the-art product with all aisle access.”
Based on rollout experience since 2024, he said the group has seen a “significantly higher willingness to pay,” citing a 12% increase in unit revenues tied to the new Allegris product. He also said ancillary revenues were 15% higher last year compared with 2024, attributing the gain mainly to the new product and monetization via advance seat reservations, including differentiated business-class seat types.
Nettesheim said Lufthansa’s turnaround and restructuring program targets a gross EBIT impact of €2.5 billion in 2028, including €1.5 billion in the current year. He said more than €500 million was achieved last year and that 80% of the measures tied to the additional €1 billion expected this year are already in implementation.
Segment updates: Eurowings, Cargo, and Technik
On the point-to-point business, Nettesheim positioned Eurowings as a market leader in German metropolitan areas outside Lufthansa’s main hubs, with strength in leisure travel. He noted Eurowings redirected traffic previously planned for Dubai to other destinations such as Palma de Mallorca and said the group has launched Eurowings Holidays with an aim to become a top 10 tour operator in Germany.
For Lufthansa Cargo, Nettesheim said profits increased 29% last year, driven by demand including Chinese e-commerce, pharmaceuticals, and semiconductors, as well as lower unit costs. He highlighted the flexibility provided by a 22-aircraft dedicated freighter fleet, with roughly half of cargo carried in passenger aircraft bellies and half in freighters.
For Lufthansa Technik, Nettesheim described a market with high barriers to entry and significant licensing requirements. He said Technik aims to grow revenue to €10 billion by 2030 with a 10% margin target, driven by geographic expansion (including facilities in Portugal and Canada), growth in defense business supported by long-term German Air Force contracts, and increased digitalization.
2026 outlook, capital allocation, and integration moves
Nettesheim said the group delivered about €2 billion in adjusted EBIT last year, describing this as more than 20% above the prior year and an overachievement versus a target of “significant” growth (defined as more than 10%). He said this came despite a 12% increase in material costs excluding fuel.
Looking to 2026, Lufthansa targets disciplined growth, with 4% capacity growth in available seat kilometers (ASK). In the Q&A, Nettesheim said this includes about 0% growth in continental flying and roughly 6% growth intercontinentally, with the strongest focus on the Southern Hemisphere—specifically South America, Africa, and selected parts of Asia, including India. He also said there will be some growth over the North Atlantic, but “not too big” in order to maintain yield stability.
On investment spending, he said net capital expenditures are expected to peak in 2026 and 2027 as Lufthansa renews 240 aircraft out of its fleet of more than 730. For 2026, he cited net CapEx of €2.9 billion, noting the figure accounts for sale-leasebacks. He said Lufthansa aims to generate €0.9 billion in free cash flow this year.
Nettesheim said the group’s capital allocation framework includes a dividend payout ratio of 20%–40%, and that the payout for last year is 30%.
Addressing the Middle East crisis, he said uncertainty has increased, with potential headwinds from higher fuel prices but also potential offsets such as a demand spike toward Africa and Asia, higher cargo freight rates due to reduced Gulf capacity, and Lufthansa’s fuel hedging, which he said is higher than many competitors. He added that risks and opportunities may balance depending on the duration of the crisis.
In the Q&A, Nettesheim discussed ITA Airways integration, saying ITA contributed €90 million to earnings last year and that the group is pursuing what he called its fastest integration to date. He cited operational and commercial steps including terminal moves to facilitate connections, expanded codeshares, harmonized loyalty programs into Miles & More, and Lufthansa Cargo marketing ITA belly capacity. He said Star Alliance inclusion is planned for April and that Lufthansa is awaiting antitrust approval to add ITA to its transatlantic joint venture with United and Air Canada. He said Lufthansa can exercise a call option each June to increase ownership to 90% and expects a decision in May, with the step likely this year or next year depending on integration progress, financial KPIs, and maintaining an investment-grade profile.
Nettesheim also said Lufthansa believes further consolidation is needed in Europe and confirmed the company plans to submit a bid for TAP Air Portugal, with non-binding bids due April 2. He said TAP could add value through exposure to South America, particularly Brazil, and provide a strategically complementary western European hub.
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.
