Lufthansa's Q2 Profit Collapses 56% as Iran War Fuel Costs and Strikes Bite

Why Lufthansa's Second-Quarter Profit Fell 56%

Lufthansa's second-quarter earnings were hit hard by the knock-on effects of the Iran war, with higher jet-fuel prices and crew strikes sending adjusted operating profit down 56% year on year to €383 million. The group said fuel cost €750 million more than a year earlier despite hedging more than 80% of its requirement, while walkouts by its unions around the company's 100th anniversary in April cost roughly €150 million.

Although the airline raised ticket prices and used those increases to cover about 60% of the higher fuel bill, it has cut its outlook. Management now expects full-year adjusted operating profit of €1.7bn–€2.2bn, having previously said it would 'clearly exceed' last year's €1.96bn. Lufthansa shares fell sharply after the figures.

Chief executive Carsten Spohr said supply problems for jet fuel, which became acute after the start of the war, have eased as refiners added capacity and new supply chains, including from Nigeria, were set up. He also said demand remains robust: 'People want to fly, and they can afford it at higher prices.'

Passengers should not expect relief on fares. Finance chief Till Streichert said prices would keep rising in the second half, even as customers book closer to departure. The group is also weighing a further 1% cut to European capacity and plans to focus growth on long-haul routes.

What the Fuel Shock Reveals About Lufthansa's Strategy

Hedging Cushioned, But Did Not Absorb, the Fuel Shock

Lufthansa's claim to have hedged more than 80% of its fuel needs shows how far kerosene prices moved after the Iran war began. Hedging locks in prices before a spike and typically limits the damage; a €750 million increase in a single quarter means the unhedged portion, plus the cost of replacing hedges, still delivered a major blow. The full-year fuel bill is now expected to reach €8.7 billion — painful, though €200 million lower than the group feared in May, reflecting the recent normalisation of supply.

Ticket Prices Are Doing the Heavy Lifting

The 60% cost pass-through into fares explains why revenue held up even as profit collapsed, and it reveals the strategy for the rest of the year. Spohr argues travel demand is less price-sensitive than the industry assumed. The risk in that bet is visible in the data itself: bookings are coming more short-term, giving the airline less visibility, while the return of Gulf carriers with aggressive pricing could limit how much more Lufthansa can charge without losing long-haul traffic.

Gulf Rivalry Cuts Both Ways

The war gave Lufthansa a temporary advantage when Emirates and Qatar Airways had to close their Gulf hubs. That benefit is fading: Spohr says the Gulf airlines have 'everything back in the air' and are competing hard on price. Lufthansa's long-haul expansion push is therefore happening at a moment when capacity and price competition in its most profitable segment are intensifying.

Costs Beyond Fuel: Strikes and Capacity

The €150 million strike hit and the early shutdown of Lufthansa Cityline, which removed around 20,000 European flights from the summer schedule, show how much disruption was self-inflicted. The group now expects total capacity to stagnate this year after originally planning growth of up to 4%. Cutting European flying to protect long-haul margins is a deliberate trade-off, but it also exposes the group to competitors on short-haul routes. Positive contributions from the technology and freight arms underline that the passenger business, not the industrial divisions, is where the profit squeeze is concentrated.

What Investors and Fliers Should Watch Next

• Investors: Lufthansa's revised full-year target of €1.7bn–€2.2bn in adjusted operating profit replaces the earlier promise of clearly exceeding €1.96bn; treat the lower end as the base case until second-half pricing power is proven.
• Travellers: Expect further fare increases in the coming months — Lufthansa has said it will keep raising prices, with only about 60% of higher fuel costs covered so far.
• Competitors: Air France-KLM and IAG reported smaller profit declines, suggesting Lufthansa's strike exposure and fuel mix made it disproportionately vulnerable; watch whether it responds with deeper European capacity cuts.
• Fuel watchers: The full-year fuel bill forecast of €8.7bn, €200m below May's estimate, is the key indicator of whether jet-fuel supply normalisation continues.