Lufthansa Challenges The Financial Weakness Of The Airline Sector

The Lufthansa group has returned to the German State 1,500 million euros of the aid granted at the beginning of the economic crisis caused by Covid-19 and plans to return another 1,000 million before the end of the year and thus dispense with the aids you haven’t used. The airline has been able to return the money after carrying out a capital increase in which it has obtained 2,162 million euros.

The German is not the only one who has needed help to overcome in the best possible way the last months, in which air traffic has fallen to levels never seen before. In Spain, without going any further, Air Europa -now owned by Iberia- received in 2020 the first rescue of the aid fund for strategic companies managed by the State Society for Industrial Participations (Sepi) worth 475 million euros.

However, these scenarios of debt and economic problems seem increasingly a thing of the past , especially after Lufthansa has opened the door to start paying back part of the state aid it has received in recent months.

The airlines will return to declare a positive ebitda (gross operating result) in 2022 after two consecutive years in negative . The consensus of FactSet analysts expects Lufthansa to close to 3,000 million euros, for IAG they estimate 2,853 million, approximately 2,450 million for Ryanair and Air France and about 750 million in the case of those andJet. Only Ryanair will return to green in 2021, when it earns an EBITDA of 687 million.

The latter is the one that is expected to increase its earnings the fastest in the recovery and the market estimates that in 2023 it will support half the leverage than the rest of the sector. The market consensus estimates that FactSet gathers show that the indebtedness (net debt / profit) of the Irish in 2022 will be 2 times .

A figure that is offset by Air France’s 6.05 times debt in 2021 or IAG’s 5.83 times that same year. A situation very similar to that expected for 2023, Ryanair will reduce its debt to 1.63 times, compared to the debt of 3.96 times of IAG or that of 3.69 times of Air France.

The slow recovery of the sector is also being noticed in the stock market. The selective Stoxx 600 Travel & Leisure (travel and leisure) accumulates an annual increase close to 14.6%, however, if only the airlines are taken into account (Stoxx Europe Total Market Airlines) the advance is reduced and remains in less 2% , a figure that contrasts with the 35% that the banking sector appreciates or the 23% that the automotive sector does.

Lufthansa, for example, has fallen by around 25% so far this year, drops that worsened on Tuesday, dropping 2.25%. The market does not stop trusting its financial situation despite having returned part of the aid.