Signs of Recovery Visible as Lufthansa Reports Free Cash Inflow for First Time Since Pandemic

Signs of a recovery are visible as no-moat Deutsche Lufthansa reported free cash flow of EUR 340 million in the second quarter, the first time it has generated positive free cash flow since the start of the pandemic. Revenue of EUR 3.2 billion grew 70%, while an adjusted EBIT loss of EUR 952 million is a 43% improvement against the same period in the prior year as well as a EUR 191 million improvement against the first quarter, driven by increasing passenger numbers and the progress made in the group’s restructuring program. Available liquidity at the end of June totaled EUR 11.1 billion, of which EUR 6.7 billion was cash and the balance was undrawn state aid facilities. No further information on the timing or size of the group’s capital raise was provided. We maintain our fair value estimate of EUR 16 and reiterate our extreme uncertainty rating due to potential shareholder equity value destruction as a result of the group’s high indebtedness.