Lufthansa Achieves Positive EBIT as Traffic Recovers Sharply in Third Quarter

No-moat Deutsche Lufthansa returned to profitability on an operating basis as traffic in the third quarter recovered due to the easing of travel restrictions across Europe and the positive contribution from the group’s cargo business. Group-adjusted EBIT (including restructuring costs of EUR 255 million) equated to EUR 17 million in the quarter, a stark improvement from the EUR 1.2 billion loss in the same period last year as well as a EUR 969 improvement against the second quarter. The group raised EUR 2.1 billion in the quarter, via a rights issue, which brings pro-forma liquidity to EUR 8.5 billion after accounting for the repayment of EUR 5.5 billion in state aid and is more than sufficient to support the ongoing recovery. We maintain our fair value estimate of EUR 8.15 and reiterate our extreme uncertainty rating due to potential shareholder equity value destruction as a result of the group’s high indebtedness.