European airlines have managed to maintain financial stability in Q2, even in the face of the current scenario of crises and geopolitical tensions, which cause exchange rate fluctuations and make the market more competitive. Behind these positive results lies a strategic plan. What can we expect from the airline companies in this crisis scenario? Learn more about this topic.
Airlines see high profitability in the second quarter
European airlines Lufthansa LHAG.DE and Air France-KLM AIRF.PA reported higher second-quarter profits on Thursday, defying worries that economic uncertainty and U.S. tariffs might hit transatlantic travel. Transatlantic connections are among the most lucrative for airlines, having bolstered British Airways-owner IAG ICAG.L in recent years as European competitors struggled. A number of U.S. airlines, including Delta DAL.N, abandoned their full-year financial forecasts this spring on the back of weakening travel demand after U.S. President Donald Trump’s tariffs dented business and consumer confidence.
European airlines, however, are bucking the trend. Lufthansa said on Thursday that demand in the U.S. remained strong despite a weaker U.S. dollar, while Air France-KLM highlighted the strength of its premium offering. Lufthansa reported a 27% year-on-year increase in second-quarter operating profit to 871 million euros ($995 million), beating analysts’ average forecast of 805 million euros.
“Although the second quarter was again marked by geopolitical crises and economic uncertainties, we are today confirming our positive outlook for the full year,” Chief Executive Carsten Spohr said in a statement.
Air France-KLM’s performance was solid this quarter, directly linked to the strength of its business and first class offerings. These results, which exceeded market expectations, were achieved thanks to capacity adjustments and operating cost control, as well as the enhancement of its hybrid model of hubs and regional connections.
Premium demand boosts Europe-US flights
U.S. airlines have reported an improvement in bookings since late June after a sharp drop in March and April when Trump unleashed his trade war. While demand has stabilised, airline executives say it is below estimates at the start of the year. Moreover, spending by price-sensitive travellers remains depressed amid lingering uncertainty about the U.S. economy and rising living costs.
European travellers are known for being more price-sensitive than Americans, often having less spending power. But wealthy Americans are flocking to Europe this summer. While domestic U.S. travel has struggled, hitting budget airlines, resilient demand for premium and long-haul international travel has helped Delta and United Airlines UAL.O perform better.
Strategic partnerships expand results
Lufthansa’s profit beat was helped by its investment in Italy’s ITA Airways, which contributed a “surprisingly large” profit to the group’s bottom line, Bernstein analyst Alex Irving said in a note to clients. Still, Irving said Air France-KLM had “meaningfully outperformed” Lufthansa on North Atlantic sales. At 1106 GMT, Lufthansa shares were down 1.4% and Air France-KLM’s up 0.6%. Air France-KLM and Lufthansa have both seen big share price rises this year as they’ve managed to weather ongoing geopolitical turbulence.
Lufthansa’s merger with ITA Airways undoubtedly drove the company’s strategic growth and robust performance. This merger resulted in financial contributions exceeding initial projections, expanding the group’s presence in southern Europe and optimizing connections to intercontinental destinations.
European optimism outweighs American caution
European companies made a plan thatย combines investments, a focus on profitable routes, and a growing preference for premium flights, especially on the transatlantic route.
European companies have brilliantly managed to navigate economic uncertainties and demonstrated that growth is possible with planning, service differentiation, and strategic focus, standing out from American companies, which have shown more caution in the face of the crisis. The companies demonstrate that they are well prepared for any global environment, even crisis scenarios.
GCN.com/Reuters