Lufthansa Shares Under Pressure as Labor Disputes Intensify

Lufthansa posts record revenue but shares fall as pilot strike votes and Middle East tensions threaten near-term operations and profitability.

Despite posting unexpectedly strong annual figures, shares in Deutsche Lufthansa AG have faced significant selling pressure. The airline group's stock has declined nearly 13% over the past week, overshadowing its robust financial performance for 2025. The dual threats of imminent industrial action at two key subsidiaries and the ongoing operational disruption from Middle East tensions are clouding the near-term outlook.

Operational Strength Meets Bottom-Line Pressure

On March 6, Lufthansa presented its 2025 results, revealing an adjusted operating profit of approximately €2 billion, a figure that comfortably exceeded market expectations. Group revenue reached a record €39.6 billion, marking a 5% year-on-year increase. The operating margin also improved to 4.9%, up from 4.4% the previous year.

However, the net profit picture was less positive. Due to negative tax effects, net income fell by 3% to €1.34 billion. In a show of confidence, the executive board has proposed a 10% dividend increase to €0.33 per share. The company's long-term strategic target remains an operating margin between 8% and 10% for the period from 2028 to 2030, though significant headwinds now challenge that ambition.

Dual Labor Conflicts Threaten Network Stability

The immediate risk stems from two separate labor disputes. At Eurowings, pilots are currently voting on potential strike action. The Vereinigung Cockpit union declared negotiations over a company pension agreement to have failed. The ballot, which closes on March 16, will determine whether industrial measures proceed.

The situation appears even more critical at Lufthansa Cityline. On February 26, an overwhelming 99% of pilots voted in favor of a potential strike, with a 95% participation rate. The union is demanding an annual salary adjustment of 3.3% for the years 2024 through 2026. Any work stoppage would primarily impact feeder traffic to the major hubs in Frankfurt and Munich, as well as European routes—connections that are vital for the stability of Lufthansa's entire network.

Middle East Tensions Create Operational Headwinds

Geopolitical instability is compounding the airline's challenges. The escalation in the Middle East is affecting operations on multiple fronts. Direct flights to Tel Aviv, Tehran, and Beirut remain suspended until at least March 8, and the company is avoiding the airspace of the United Arab Emirates.

This has forced numerous long-haul connections between Europe and Asia to take substantial detours. The consequences include longer flight times, increased fuel consumption, and subsequent delays across the schedule. On a positive note, forward bookings for direct flights to Asia are currently running 75% above the prior-year level, partly due to the disrupted hub operations of Gulf carriers Emirates and Qatar.

Regarding fuel costs, Lufthansa highlights its hedging strategy, noting that approximately 80% of its kerosene expenses for 2026 are already secured.

An Uncertain Trajectory for the Current Year

For the ongoing fiscal year, management plans to expand capacity by 4%. The company anticipates further revenue growth, a significant rise in earnings, and additional margin improvement. Nevertheless, Lufthansa has explicitly warned of increased forecast uncertainty directly linked to the Middle East situation.

Shares closed at €8.21 on Friday, reflecting the substantial market concerns. The path to the Annual General Meeting on May 12 is likely to be decisive. Investors will learn whether the wage disputes at Eurowings and Cityline escalate into full-scale strikes and gain clarity on the duration of the operational constraints caused by the Middle East conflict.