Lufthansa's Turbulent Summer: Barclays Cuts Target as Fuel Bill and Strike Fallout Bite

Barclays trims Lufthansa price target to €7.50, flags possible profit warning as Q2 earnings slump and fuel costs surge.

Barclays Capital has trimmed its price target for Lufthansa to €7.50 from €7.75, maintaining an "Underweight" rating while warning that even the airline's already-lowered operating profit guidance for the current year may prove too ambitious. Analyst Andrew Lobbenberg sees the risk of yet another profit warning, a sobering assessment for a stock trading at €7.90 — roughly 23 percent beneath its 52-week high of €10.27 reached in July.

The caution arrives as the carrier's shares have been in steady retreat. A 2.2 percent decline on the day before the Barclays note extended the monthly slide to 11 percent, with the relative strength index hovering near 31.8, a level technicians read as oversold. The stock now sits about 12 percent below its 50-day moving average, underscoring just how far sentiment has soured since the summer's peak.

A Quarter of Contradictions

The second-quarter numbers that triggered the sell-off painted a picture of a company generating record revenue yet watching profitability evaporate. Sales climbed 7.9 percent to €11.141 billion — a quarterly record — but adjusted operating profit collapsed by 56 percent to €383 million, dragging the margin down to 3.4 percent. The damage extended to the bottom line, where group net profit plunged 88 percent to €123 million, with earnings per share of €0.10 falling well short of the €0.27 analysts had penciled in.

Management pointed to two principal culprits: a €750 million surge in kerosene costs — despite hedging more than 80 percent of fuel requirements — and roughly €150 million in strike-related expenses stemming from April's industrial action. The core Lufthansa Airlines brand slipped into the red operationally, hampered by inefficient hub operations in Frankfurt and Munich alongside delayed deliveries of new long-haul aircraft. Network airlines collectively managed just €137 million in adjusted EBIT, a dramatic fall from €627 million a year earlier. Austrian Airlines, SWISS, Brussels Airlines and the Lufthansa Technik maintenance arm provided rare bright spots, the latter buoyed by robust global demand for servicing.

Passenger numbers told their own story: group-wide traffic dipped 4 percent to 35.6 million in the quarter, with customers booking far closer to departure amid Middle East uncertainty. First-half operating cash flow slid €600 million to roughly €2.3 billion.

Guidance Trimmed Repeatedly

The earnings miss forced a cascade of forecast revisions. What began as a projection for adjusted EBIT "significantly above" last year's €1.96 billion — a target CEO Carsten Spohr reaffirmed as recently as May — now stands at €1.7 billion to €2.2 billion. Capacity plans have followed a similar trajectory, shrinking from an initial 4 percent growth target for 2026 to 2 percent, and now to flat year-on-year. Management is weighing an additional 1 percent cut to European capacity.

Finance chief Till Streichert is responding by tightening the existing cost-saving program, aiming to extract an extra €200 million in the near term. Non-essential projects face the axe, external hiring will be constrained, and administrative roles are being reduced. The broader ambition remains €1.5 billion in savings by end-2026, rising to €2.5 billion annually by 2028. Operational adjustments are already visible: Lufthansa Cityline wound down earlier than planned, and roughly 20,000 European flights were pulled from the summer schedule.

Labor Truce and a Starlink Milestone

On the industrial relations front, there is at least a measure of relief. The Vereinigung Cockpit pilots' union and management have agreed to a comprehensive arbitration process with mediation covering outstanding pay disputes across Lufthansa, Lufthansa Cargo, Lufthansa Cityline and Eurowings — effectively ruling out further pilot strikes in the near term.

The company also marked a technical first: an A320neo registered D-AINM departed Frankfurt for Rome as the group's inaugural aircraft equipped with the new Starlink-powered Wi-Fi system, free for Miles & More members and Travel-ID users. The rollout targets 850 aircraft by 2029.

That progress was somewhat overshadowed by an incident Monday, when an Airbus A380 touched down early on landing in Munich, damaging runway lighting. All 351 passengers exited normally, and Germany's federal aviation accident investigation agency is reviewing the matter.

Divergent Views on the Road Ahead

The analyst community remains split on Lufthansa's trajectory. UBS struck a notably bullish tone on Monday, reiterating a €11 price target that sits well above the broader consensus. Barclays, by contrast, sees further downside risk if the company is forced to walk back its guidance once more. With the stock already in oversold territory, the near-term path may hinge on whether management can deliver on its revised promises — and whether fuel prices and labor relations hold steady long enough for the recovery to take hold.