Lufthansa Warns Of Lower Demand For Flights To The United States This Fall

Over the past few months, the global commercial aviation industry has had to address the challenges related to economic uncertainty and trade barriers that have been created as a result of global geopolitical tension and Donald Trump's trade war. One of the largest impacts that this has had on airlines is that they have had to reevaluate how to best cater to customer demand, which has shifted somewhat in the wake of a changing economic climate. With recession fears still looming, airlines are analyzing how to best prevent themselves from being overexposed to weaker passenger demand, especially in their core markets.

German flag carrier Lufthansa, the namesake member of the massive Lufthansa Group conglomerate, said on Friday that it was preparing for significantly weaker demand for flights to the United States in the third quarter, after an anticipated travel boom during the summer months. The Lufthansa Group owns multiple different international carriers, including Austrian Airlines, Brussels Airlines, SWISS International Air Lines, Lufthansa, and ITA Airways, which collectively fly to the United States around 60 times per day from various European hubs.

There are a number of factors behind the airline's anticipated drop in demand, primarily relating to economic factors that have shifted customer sentiments. Rising US inflation and a weakened US dollar have made it less attractive for American tourists to visit Europe, but peak summer demand does not appear to be Lufthansa's primary concern.

Company CEO Carsten Spohr had some rather ominous expectations to share with business journalists last week. Speaking on Thursday night, the executive had the following words to share in a statement published originally by Reuters:

"The first quarter was better than the previous year, but we are seeing a levelling-off in the third quarter."

Spohr noted that last year's drop-off in demand during the third quarter was somewhat offset by an increase in demand for flights to the United States during that time. Services to the United States are some of the Lufthansa Group's highest-yielding routes. Lufthansa is currently undergoing a restructuring that is expected to generate a profit contribution of around $1.7 billion by the end of next year.

It is very clear from Spohr's words that the challenges he anticipates arising this fall are related to business travel. The 'levelling-off' that he mentions almost certainly relates to business travelers, who are the airline's principal revenue-generating demographic during the off-seasons.

During the busiest summer months, Lufthansa fills its jets with tourists and other visitors heading in both directions between the United States and the group's European hubs. During the off-season months of September, October, and November, the airline primarily focuses on catering to high-yielding business travelers who fly in premium cabins.

However, the trade barriers put in place by Donald Trump have made it somewhat less appealing to do business in the United States for foreign companies and vice versa, meaning that Lufthansa could be wise to anticipate lower business travel demand. This, at the end of the day, would mean fewer business travelers would be flying across the Atlantic each weeknight.