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Lufthansa: The Phoenix of European Aviation
Introduction: The Improbable Empire
On a crisp January morning in 2025, Carsten Spohr stood at Rome's Fiumicino Airport to celebrate what he called "the largest airline acquisition in our history." The Lufthansa Group had just completed its €325 million purchase of a 41% stake in ITA Airways, adding Italy's flag carrier to a portfolio that already included the national airlines of Germany, Switzerland, Austria, and Belgium. With this transaction, ITA Airways became part of the Lufthansa Group as its fifth network airline.
This moment crystallized a question that has animated European aviation for decades: How did an airline born from the ashes of Nazi Germany, twice dissolved and rebuilt, become the dominant force in European skies?
Today, Lufthansa Airlines ranks second in Europe by passengers carried and is the largest in Europe and fourth largest in the world by revenue. In 2024, the Group increased its revenue by six percent year on year to €37.6 billion, making it the year with the highest revenue in the history of the Lufthansa Group. The company carried 131.3 million passengers in 2024, an increase of 7% over the prior year.
Besides operating flights under its own brand, the Lufthansa Group also owns several other airlines, including Austrian Airlines, Brussels Airlines, Discover Airlines, Eurowings, ITA Airways and Swiss International Air Lines. The group also owns several aviation-related companies, including Global Load Control, Lufthansa Consulting, Lufthansa Flight Training, Lufthansa Systems and Lufthansa Technik.
Yet the path to this commanding position winds through some of the darkest chapters in aviation history, multiple near-death experiences, and a pattern of government entanglement that continues to shape the company's DNA. This is not merely a story of corporate expansion—it is a meditation on how national identity, geopolitical upheaval, and crisis management create and destroy value in one of the world's most challenging industries.
Origins: The First Lufthansa (1926–1945)
Birth of a Flag Carrier
The story begins in Weimar-era Berlin, a city crackling with artistic ferment and political instability. Lufthansa traces its history to 1926 when Deutsche Luft Hansa was formed in Berlin by the merger of Deutscher Aero Lloyd, the world's sixth-oldest airline, and Junkers Luftverkehr.
This was no voluntary union. The two companies, Germany's largest airlines at the time, were forced to merge by the German government, while all other airlines were shut down. The government's motivation was prosaic: reduce the massive subsidies flowing to a fragmented, money-losing industry. The name "Hansa" drew from the medieval Hanseatic League of trading cities—a deliberate invocation of commercial glory to mask political intervention.
From its founding, Deutsche Luft Hansa pioneered innovations that would define modern aviation. By 1931 DLH was serving Paris, Barcelona, Rome, and Oslo and accounted for a third of all passenger travel and air transport in Europe. In 1934 DLH began the world's first scheduled transoceanic flights—between Germany and South America.
The Nazi Chapter
The airline's relationship with the Nazi regime represents the most troubling chapter in its history—and one that continues to generate controversy nearly a century later.
The Nazi party used footage of those flights for their propaganda efforts. Erhard Milch, who had served as head of the airline since 1926, was appointed by Hermann Göring to be head of the Aviation Ministry when Hitler came to power in 1933; Milch had been a member of the Nazi party since 1929, and was later convicted of war crimes.
According to a leading scholar of the history of German aviation, from this point, "Lufthansa served as a front organization for armament, which took place secretly until 1935 – it was an air force in disguise."
The airline's technical capabilities were systematically repurposed for military ends. During the war, the airline was focused mainly on aircraft maintenance and repair in which forced labor was employed on the site of Berlin Tempelhof Airport.
Dissolution and the Question of Heritage
Following the surrender of Germany and the ensuing Allied occupation of Germany, all aircraft in the country were seized and Deutsche Luft Hansa was dissolved. The remaining assets were liquidated on 1 January 1951.
Yet this apparent death would prove more complicated. Although Deutsche Luft Hansa was the forerunner of modern German airline Lufthansa and both airlines share the same logo, there is no legal connection between the two. However, the new Lufthansa took over staff from the old airline and claims DLH's legacy. For this reason it is controversial in the historical reappraisal to what extent the modern Lufthansa should confess to crimes committed by the old airline.
This legal discontinuity combined with operational and symbolic continuity creates a fascinating case study in corporate identity. The modern Lufthansa has acknowledged this dark history—Lufthansa actively addressed its historical legacy. In 1999, the airline participated in a German initiative aimed at resolving wartime misdeeds, acknowledging the use of forced labor by its predecessor, Deutsche Luft Hansa. As part of the initiative, Lufthansa also reportedly paid tens of millions German marks.
Rebirth: The New Lufthansa (1953–1970s)
Rising from the Ashes
In the divided Germany of the early 1950s, aviation remained forbidden to Germans. Yet even as Allied occupation continued, a small group of former airline employees began planning for the day when Germany would once again take to the skies.
In an effort to create a new national airline, a company called Aktiengesellschaft fĂĽr Luftverkehrsbedarf (Luftag) was founded in the city of Cologne in West Germany on 6 January 1953, with many of its staff having worked for the pre-war Deutsche Luft Hansa.
Lufthansa was organized in Cologne jointly by the federal government, the German National Railway, and the state of North Rhine–Westphalia; later it accepted private investors.
West Germany had not yet been granted full sovereignty over its airspace, so it was not known when the new airline could become operational. Nevertheless, in 1953, Luftag placed orders for four Convair CV-340 and four Lockheed L-1049 Super Constellations aircraft and set up a maintenance base at Hamburg Airport.
This was an extraordinary bet—ordering aircraft before the airline had permission to fly them. But those behind the venture understood something essential: when sovereignty came, Germany would need an airline ready to reclaim its place in the sky.
On 6 August 1954, Luftag acquired the name and logo of the liquidated Deutsche Lufthansa for DM 30,000 (equivalent to €41,000 today), thus continuing the tradition of a German flag carrier with that name.
Taking Flight
On 1 April 1955, Lufthansa won approval to commence operation of scheduled domestic flights. The airline's initial network linked Hamburg, DĂĽsseldorf, Frankfurt, Cologne, and Munich.
What happened next demonstrated the airline's ambition. Lufthansa, only two months after inaugurating scheduled services within West Germany in April 1955, began transatlantic flights to New York City. In the same year, scheduled service began to Paris, London, Madrid, and Lisbon.
The speed of this expansion was remarkable. A decade after Germany's complete destruction, its flag carrier was connecting the country to the world's major capitals. This was not merely commerce—it was redemption through connectivity.
Entering the Jet Age
The transition to jet aircraft marked another inflection point. Lufthansa became the launch customer of the Boeing 737 on February 19th, 1965, after it placed an order for 21 units of the twinjet. Lufthansa was the world's first purchaser of 22 Boeing 737-100s.
The airline received its initial 737-100 on December 28th, 1967, to become the first carrier outside the United States to launch a new Boeing aircraft.
This relationship with Boeing would prove enduring and strategically important. Lufthansa's willingness to be a launch customer—accepting the higher risks that come with being first—gave it advantageous pricing and established the airline as a technical leader whose operational experience shaped aircraft development.
Despite the heavy investment required for the airline's expansion, Lufthansa was able to declare its first profitable year in 1964.
Transformation Era: Restructuring & Star Alliance (1990s)
Reunification and Identity
The fall of the Berlin Wall in 1989 presented Lufthansa with both opportunity and obligation. Following German reunification on 3 October 1990, Lufthansa swiftly reintegrated Berlin into its network, marking the city's return as a key destination within 25 days.
For Lufthansa, which had been barred from flying to Berlin due to the city's special status during division, this was symbolically profound. With the Berlin Wall fallen, Lufthansa became the proper flag carrier of a reunited Germany.
Strategic Restructuring
The mid-1990s saw a period of strategic restructuring for Lufthansa. This involved the establishment of independent operating companies within the Lufthansa Group, specializing in areas like maintenance (Lufthansa Technik), cargo (Lufthansa Cargo), and information technology (Lufthansa Systems).
This divisional structure would prove prescient. By creating profit centers that could serve external customers, Lufthansa transformed potential cost centers into revenue engines. Lufthansa Technik, in particular, would become a jewel in the corporate crown—today the world's leading independent MRO provider serving over 800 customers worldwide.
Privatization
The relationship between Lufthansa and the German state evolved dramatically during this period. In 1982, 80% of Lufthansa's stock was owned by the West German government. In 1985 the Federal government held 74.31% of Lufthansa.
The transformation was gradual but inexorable. By 1993, the German government still held 51.6 percent of Lufthansa. Then, in 1997, the company achieved full privatization—despite representing the country in the new era, it became fully privatized in 1997.
Creating the Alliance Model
On May 14, 1997, airline history was made in Frankfurt. The Star Alliance was announced by five airlines from three continents: Air Canada, Lufthansa, Scandinavian Airlines, Thai Airways International and United Airlines. The group adopted a shared star-shaped logo, with each point representing a founding member.
Star Alliance created a new milestone for the airline industry with its founding on 14 May, 1997. As the first global airline alliance, linking five major airlines into a single network, it offered a completely new type of service to the international traveller.
The strategic logic was compelling. The primary motivations for forming Star Alliance were clear. First and foremost, it enabled network expansion for alliance members by tapping into the networks of partners rather than having to make capital investments. This created a competitive advantage and helped drive increased passenger revenues and loyalty.
Since then, the Alliance has expanded to 25 member airlines, who together offer a comprehensive network spanning 186 countries worldwide.
Carsten Spohr is still convinced of the advantages of the "Star Alliance" aviation alliance. "From the customer's point of view, no airline in the world can provide this global coverage," says the head of Lufthansa.
The Acquisition Machine (2005–2012)
Swiss International Air Lines (2005)
When Swissair collapsed in 2001—one of aviation's most shocking bankruptcies—it left a vacuum in Swiss aviation filled by the government-backed Crossair, rebranded as Swiss International Air Lines. By 2005, the nascent carrier needed a stronger partner.
Lufthansa's acquisition of SWISS was strategic on multiple dimensions. Switzerland's premium business traveler market perfectly complemented Lufthansa's corporate focus. The Zurich hub provided geographic diversification and access to Switzerland's disproportionate concentration of multinational headquarters.
Austrian Airlines (2009)
Lufthansa completed the purchase of Austrian Airlines from the Austrian government in January 2009.
Austria's flag carrier had struggled with familiar challenges: legacy cost structures, aging fleet, and intensifying competition from low-cost carriers. For Lufthansa, the acquisition added another Central European hub and eliminated a competitor on crucial routes.
Brussels Airlines & BMI (2009)
Lufthansa acquired a 45% stake in Brussels Airlines in 2009. It has an option to acquire the remaining 55% by 2017. As a part of the deal, Brussels Airlines joined Star Alliance in December 2009.
The British Midland (BMI) acquisition was more complex. On 28 October 2008, Lufthansa exercised its option to purchase a further 60% share in BMI (in addition to the 20% Lufthansa already owned), this resulted in a dispute with the former owner Sir Michael Bishop. Both parties reached an agreement at the end of June 2009, and the acquisition took place with effect from 1 July 2009.
The Consolidation Logic
By 2012, Lufthansa had assembled Europe's largest airline group—a portfolio of flag carriers serving distinct national markets while generating operational synergies through shared platforms. The group's strength lay not in homogenization but in preserving strong local brands while integrating back-office functions.
The SCORE Program & Low-Cost Response (2012–2015)
Confronting a New Competitive Reality
The financial crisis of 2008 and subsequent European debt crisis exposed vulnerabilities in Lufthansa's cost structure. Low-cost carriers like Ryanair and easyJet had captured increasing market share on short-haul routes, while Gulf carriers like Emirates threatened premium long-haul markets.
Lufthansa responded with SCORE—a restructuring program aimed at radically improving profitability. The centerpiece was a transformation of short-haul operations.
At the turn of the century, Lufthansa began acquiring stakes in Eurowings, and it is now part of the Lufthansa Group. Following a 2015 restructure, it currently operates low-cost flights from bases throughout Europe, with a key emphasis placed on leisure destinations.
Lufthansa announced Eurowings' transformation from a regional airline into a low-cost long and short-haul carrier by the end of 2015.
The Germanwings Tragedy and Brand Transition
The Germanwings brand played a crucial role in Lufthansa's low-cost strategy—until tragedy struck.
Germanwings Flight 9525 was a scheduled international passenger flight from Barcelona–El Prat Airport in Spain to Düsseldorf Airport in Germany. The flight was operated by Germanwings, a low-cost carrier owned by the German airline Lufthansa. On 24 March 2015, the Airbus A320-211 operating the flight crashed 100 km north-west of Nice in the French Alps, killing all 150 people on board.
The crash was deliberately caused by the first officer, Andreas Lubitz, who had previously been treated for suicidal tendencies and declared unfit to work by his doctor. Lubitz kept this information from his employer and instead reported for duty. Shortly after reaching cruise altitude and while the captain was out of the cockpit, Lubitz locked the cockpit door and set the plane to fly downward in a controlled descent into a mountain.
Carsten Spohr described the Germanwings Flight 9525 disaster as "the darkest day for Lufthansa in its 60-year history".
The human tragedy reverberated through the industry. By 2017, Lufthansa had paid €75,000 to the family of every victim, as well as €10,000 in pain and suffering compensation to every close relative of a victim.
"No serious fault, nor any deliberate violation of a duty of care or safety imposed by law or regulation could be blamed on Germanwings, Lufthansa (its parent company) or its managers or employees," according to the final investigation.
Germanwings remained its own brand until January 2016, and the IATA code of that company (4U) was used in certain operations until March 2018. The Eurowings brand took over as the Group's low-cost offering.
The Leader: Carsten Spohr
Understanding Lufthansa today requires understanding the man who has led it through crisis and recovery.
After graduating with a degree in industrial engineering from the University of Karlsruhe, Carsten Spohr obtained a commercial pilot's license at the Lufthansa Flight Training school in Bremen and Phoenix.
Carsten Spohr holds the Lufthansa Captain's license for the Airbus A320 Family aircraft types.
This dual identity—engineer and pilot, strategist and operator—shapes Spohr's leadership approach. Unlike many airline CEOs who come from finance or consulting, Spohr can personally operate the aircraft his company flies.
Following this, Spohr joined Lufthansa in 1994. Between 1995 and 1998, he served as the personal assistant to the CEO of the company. After this role, he moved on to head various regional partnerships at Lufthansa.
Carsten Spohr was appointed Chairman of the Executive Board of Lufthansa Cargo AG with effect from 15 January 2007.
On 1 May 2014 Spohr took over from Christoph Franz as Chief Executive Officer of Deutsche Lufthansa AG. He was just ten months into the role when the Germanwings tragedy struck.
Both in 2019 and in 2023, Spohr's contract was extended for five years.
COVID-19 & The Government Bailout (2020–2021)
An Industry in Freefall
The coronavirus pandemic struck European aviation with unprecedented force. Lufthansa, like all carriers, saw demand evaporate virtually overnight.
The airline cut jobs to mitigate the decline in financial accounts, with the number of Lufthansa Group's employees falling by nearly 30,000 between 2019 and 2020.
The Bailout Negotiations
The German government and Lufthansa, which has been hit hard by the coronavirus pandemic, reached a preliminary deal on a 9 billion euro ($9.8 billion) bailout. The airline has been in talks with Berlin for weeks over aid to help it to cope with what is expected to be a protracted travel slump, but the carrier has been wrangling over how much control to yield in return for support.
The German Finance and Economy Ministries said Lufthansa was an operationally healthy company before the coronavirus outbreak, was profitable and had good prospects for the future but had got into trouble because of the pandemic.
The bailout package was substantial and came with conditions. The rescue package gave the government a 20% stake in the group, which owns airlines in Germany, Austria, Switzerland and Belgium, and two seats on its supervisory board.
Lufthansa said that conditions of the deal include the waiver of future dividend payments and limits on management pay. The government also filled two seats on the supervisory board.
The European Commission imposed additional requirements. The WSF acquired a 20% stake in Lufthansa in June 2020 as part of support measures to help counter the impact of the pandemic. They included €5.7 billion in potential silent contributions to the carrier and €300 million through the acquisition of the 20% stake.
Rapid Repayment
What happened next confounded skeptics. Deutsche Lufthansa AG repaid the last of its 9 billion-euro ($10.3 billion) bailout ahead of schedule, paving the way for the German government to sell its stake in the airline group for a significant profit.
In total, of the €10 billion allocated, the company drew down just €3.8 billion and has returned the rest unused.
"On behalf of all Lufthansa employees, I would like to thank the German government and the German taxpayers. In the most serious financial crisis in our company's history, they have given us a perspective for the future. This has enabled us to save more than 100,000 jobs."
Lufthansa has returned to private ownership after a final tranche of pandemic bailout support from the German government was sold. The state initially took a 20% stake in Lufthansa via its Economic Stabilisation Fund (WSF) for €306 million in summer 2020. The remaining 6.2% shareholding was sold to various investors.
German taxpayers were reported to have made a €760 million profit from the bailout as the carrier returned into private hands.
The ITA Airways Acquisition & Pan-European Expansion (2023–2025)
Completing the European Puzzle
Italy had long represented a missing piece in Lufthansa's European mosaic. The country's aviation history—from the founding of Alitalia in 1946 through decades of restructuring, bailouts, and ultimately bankruptcy—illustrated both the challenges of flag carrier economics and the strategic importance of the Italian market.
ITA Airways, launched in 2021 as Alitalia's successor, offered a fresh start. The airline was founded in 2020 as a successor to the bankrupt Alitalia.
The two parties had already agreed in May 2023 that Deutsche Lufthansa AG would acquire a minority stake of 41 percent in ITA Airways.
The regulatory journey proved complex. The European Commission approved the participation by approving the remedies on 29 November 2024.
These conditions require Lufthansa and ITA Airways to allow competitors access to key routes between Italy and North America, as well as to central European hubs and slots at Milan's Linate Airport.
The first step of the investment was implemented on January 17, 2025 by means of a capital increase of 325 million euros.
"This is the largest airline acquisition in our history and indeed a real milestone in the development of our group," said Lufthansa Group Chief Executive Carsten Spohr.
Strategic Rationale
Italy will become a further "home market" for the Lufthansa Group. The country is already the company's second most important international market after the USA, outside the existing home markets of Germany, Austria, Switzerland and Belgium. The five-star Rome Fiumicino Airport will be the sixth and southernmost Lufthansa Group hub.
Between 2025 and 2029, there is the option for Lufthansa Group to acquire an additional 49% of ITA, and a further option to acquire the remaining 10% after 2029, making ITA a wholly-owned subsidiary.
The initial 41% stake acquisition lays the groundwork for Lufthansa to gain full control of ITA Airways by 2033, with a total investment of €829 million.
The integration is moving rapidly. Lufthansa Group carriers are now codesharing with ITA, creating over 100 new connections. ITA is also aligning with Lufthansa Airlines' terminals in Frankfurt and Munich to cut transfer times at the German airports.
On 3 February 2025, Lufthansa Group and SkyTeam announced that ITA Airways had left the airline alliance. Following a transitional period, ITA will join Star Alliance in first half of 2026.
"We are confident that ITA Airways will realise a profit as early as this year," said Spohr.
Lufthansa Technik: The Hidden Jewel
MRO Leadership
While passenger airlines capture headlines, Lufthansa Technik may be the group's most valuable strategic asset.
Lufthansa Technik is the world's leading manufacturer-independent provider of maintenance, repair and overhaul services (MRO) for civilian commercial aircraft. The Lufthansa Technik group comprises 30 plants offering technical aviation services worldwide.
Lufthansa Technik serves more than 800 customers worldwide, including OEMs, aircraft leasing companies, VIP jet operators, governments and armed forces as well as airlines. Around one third of its business comes from entities in the Lufthansa Group and two thirds from clients outside of the Lufthansa Group.
Lufthansa Technik AG once again generated record figures in the 2024 financial year. The company's revenue exceeded seven billion euros for the first time, specifically 7.441 billion euros, up 14%.
Earnings (Adjusted EBIT) also achieved a record with 635 million euros.
Ambition 2030
"We aim to increase our revenue to over 10 billion euros with a double-digit earnings margin by 2030," says Soeren Stark. "Our goal is to generate earnings of over 1 billion euros."
In Portugal, the company is investing around 300 million euros in a new plant near Porto with up to 700 jobs. In Calgary, Canada, a site will be built to service the state-of-the-art LEAP-1B aircraft engines which power the Boeing 737 MAX.
The MRO business provides crucial diversification and counter-cyclicality. When airlines reduce capacity during downturns, older fleets remain in service longer—increasing maintenance demand. When airlines grow, new aircraft require specialized capabilities that Lufthansa Technik increasingly dominates.
Current Performance & Outlook
Record Revenue, Margin Pressure
In 2024, the Lufthansa Group achieved record revenue of €37.6 billion, reflecting a six percent increase compared to the previous year's €35.4 billion.
Yet profitability compressed. The Group's operating profit (Adjusted EBIT) fell to €1.6 billion from €2.7 billion in 2023, with the operating margin declining from 7.6 percent to 4.4 percent.
Strikes impacted the Passenger Airlines division by approximately €450 million, while a sharp increase in industry-wide capacity led to a fall in average yields at the start of the summer.
Net profit fell less sharply than the operating result and reached EUR 1.4 billion compared to EUR 1.7 billion in the previous year.
2025 Outlook
Lufthansa Group anticipates that the course of business in 2025 will be positive. This expectation is based in particular on the ongoing strong demand in the Passenger Airlines segment, which is reflected at the start of 2025 in the form of continued positive developments in new bookings.
The Lufthansa Group anticipates that available capacity for Passenger Airlines in 2025 will be around 4% higher than the previous financial year. The Lufthansa Group expects Adjusted EBIT in 2025 to be significantly higher than the previous financial year.
Through the first nine months of 2025: The Lufthansa Group reported a 19% increase in its operating result (Adjusted EBIT) for the first nine months of 2025. The company's Adjusted EBIT amounted to €1.5 billion for the period, a €300 million improvement over the previous year.
In the first nine months of 2025, Lufthansa Group achieved €11.2 billion in revenue, a 4% increase from the same period in 2024.
The net debt of the Lufthansa Group continued to decline, standing at €5.1 billion as of the end of September 2025, down from €5.7 billion at the end of 2024.
Competitive Landscape Analysis
The European Market
Currently, the five largest European airline groups Ryanair, easyJet, Lufthansa Group, Air France-KLM and IAG control some 45% of the European market.
As of July 2024, Lufthansa ranked as the second-largest airline group in Europe based on seat capacity, accounting for 9.7% of all seats flying to, from, or within the continent. This position is set to strengthen with the integration of ITA Airways, which is expected to boost Lufthansa Group's European seat share to 11.0%.
Ryanair Group has established a dominant presence, holding the largest seat share in Europe at 12.5% as of July 2024. This directly challenges Lufthansa's position, especially in the short-haul and budget travel markets.
Low-Cost Carrier Pressure
What is clear in the short-haul market is that LCCs such as Ryanair bounced back from the Covid-induced slump more quickly than FSCs. Looking at the major European airline groups, IAG airlines Vueling and Iberia grew their market share, while Lufthansa Group Airlines Eurowings and Lufthansa have lost market share.
Lufthansa responds through its dual brand strategy. With Eurowings, the Lufthansa Group has an innovative and competitive offering in point-to-point traffic, which addresses both price-sensitive and service-oriented customers with low-cost basic fares and additional service options that can be booked flexibly.
As of 2024, Eurowings is the largest low-cost-carrier in the German market.
Investment Framework
Porter's Five Forces Analysis
Threat of New Entrants: LOW to MODERATE High capital requirements, regulatory barriers, and slot constraints at premium airports create significant entry barriers. However, well-funded competitors (Gulf carriers, Asian expansions) periodically enter. The ITA acquisition demonstrates how Lufthansa uses M&A to capture entrants.
Bargaining Power of Suppliers: HIGH Airbus and Boeing duopoly gives aircraft manufacturers significant power. Engine manufacturers (CFM, Rolls-Royce, Pratt & Whitney) similarly concentrated. Labor unions, particularly pilot associations, historically powerful in Germany—evidenced by 2024 strike impacts.
Bargaining Power of Buyers: MODERATE to HIGH Price comparison tools and OTAs increase buyer power for leisure travelers. Corporate accounts retain switching costs but increasingly demand concessions. Premium travelers have choices including Gulf carriers and direct flights.
Threat of Substitutes: GROWING Video conferencing permanently reduced business travel demand. High-speed rail competes on routes under 500km. Environmental consciousness creates social pressure, particularly in core German market.
Competitive Rivalry: INTENSE European aviation among world's most competitive markets. This compares with a relatively higher degree of concentration in the US where some 80% of the total market is controlled by four airlines. Low-cost carriers maintain aggressive pricing. Gulf carriers compete for long-haul premium traffic.
Hamilton Helmer's 7 Powers Framework
Scale Economies: Lufthansa benefits significantly from scale in MRO, ground handling, and IT systems. Fleet size enables advantageous purchasing. However, scale in passenger aviation creates complexity costs that partially offset benefits.
Network Effects: Miles & More creates some lock-in, reinforced by Star Alliance breadth. Hub connectivity generates demand density that smaller competitors cannot replicate. However, network effects weaker than in technology industries.
Counter-Positioning: Not a primary power for Lufthansa, which is itself positioned as the legacy incumbent. Must defend against counter-positioning by LCCs and Gulf carriers.
Switching Costs: Moderate for corporate contracts and frequent flyers. Limited for price-sensitive leisure travelers. Airport slots and bilateral agreements create geographic switching costs for route access.
Branding: Lufthansa maintains strong brand equity for quality and German engineering. Individual subsidiary brands (SWISS, Austrian) retain national affinity. Brand must balance efficiency with service quality.
Cornered Resource: Frankfurt and Munich hub positions are genuinely scarce resources. Lufthansa Technik capabilities represent proprietary know-how. Slot portfolios at constrained airports provide protected market access.
Process Power: Decades of operational experience create institutional knowledge in complex logistics. However, process advantages are replicable over time—as demonstrated by successful LCC execution.
Key Risks and Monitoring Points
Regulatory Overhang
The EU's general court annulled state aid provided during COVID-19, creating legal uncertainty. The ruling came in response to challenges by Ryanair, though Lufthansa has already repaid the aid and returned to private ownership.
Labor Relations
During his time as CEO there have been poor industrial relations, with a number of strike actions, due to the push to expand Lufthansa's low-cost airline. Strike impacts of €450 million in 2024 demonstrate ongoing vulnerability.
Fleet Transition
The Group incorporated a total of 18 modern and efficient aircraft in their fleets in the reporting year. In December 2024, they added to their aircraft orders five additional state-of-the-art A350-1000 long-haul aircraft.
The Group now has a total of 242 aircraft on order. These new aircraft have up to 30% lower fuel consumption levels and carbon emissions by comparison with their predecessor models.
Aircraft delivery delays from Boeing and Airbus create operational challenges and capital expenditure uncertainty.
Geopolitical Exposure
As a European carrier with extensive international network, Lufthansa faces exposure to conflict zones, route restrictions, and geopolitical tensions. Recent Middle East conflicts have required route adjustments.
Key Performance Indicators
For long-term fundamental investors tracking Lufthansa, the following metrics deserve particular attention:
1. Revenue per Available Seat Kilometer (RASK) This measure captures both pricing power and load factor efficiency. Unit revenues (RASK) dropped by 4.3 percent in 2024 due to high compensation payments related to flight disruptions. Recovery of RASK toward pre-2024 levels signals improving market conditions and operational execution.
2. Adjusted EBIT Margin Operating margin reveals whether revenue growth translates to profitability. The operating margin declined from 7.6 percent to 4.4 percent in 2024. The turnaround program targets margin improvement toward the 8-10% range typical of well-run global network carriers.
3. Lufthansa Technik Revenue & EBIT The MRO segment provides diversification and generally counter-cyclical stability. The goal of Lufthansa Technik's "Ambition 2030" program is to increase revenue to over ten billion euros and Adjusted EBIT to more than one billion euros in 2030. Progress toward these targets indicates execution on the Group's highest-margin business.
Bull and Bear Cases
The Bull Case
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European Consolidation Leader: With ITA integration, Lufthansa controls the largest multi-hub network in Europe, creating booking density advantages and corporate contract leverage.
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Premium Positioning: Fleet modernization with Allegris cabins and new aircraft positions Lufthansa for premium revenue growth. Around 90% of Lufthansa Airlines' long-haul fleet will fly to destinations around the world with the Allegris product by 2028.
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MRO Crown Jewel: Lufthansa Technik's path to €10 billion revenue and €1 billion EBIT by 2030 represents significant value creation potential with lower cyclicality than passenger operations.
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Operational Recovery: Early improvements in punctuality and operational efficiency have already been observed in the initial months of 2025, signaling promising momentum.
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Valuation Discount: At approximately 5.5x P/E, Lufthansa trades at a significant discount to historical multiples and comparable transportation companies.
The Bear Case
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Structural Low-Cost Pressure: LCCs continue gaining share in intra-European travel. Eurowings' margins remain below standalone LCC levels, suggesting incomplete response to this threat.
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Labor Cost Disadvantage: German labor costs and union power create persistent margin headwinds versus competitors, particularly on short-haul routes.
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Gulf Carrier Competition: Emirates, Qatar Airways, and Etihad continue expanding premium long-haul offerings with state backing, pressuring yields on Lufthansa's most profitable routes.
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Sustainability Transition Costs: European environmental regulations impose costs that competitors in other jurisdictions avoid. Fleet renewal requirements and SAF mandates represent ongoing capital demands.
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Integration Risk: ITA Airways integration adds complexity; Italian flag carriers have historically proven challenging for acquirers (see Air France-KLM's Alitalia negotiations).
Conclusion: The Phoenix Persists
From its controversial origins in Weimar Germany through Nazi complicity, postwar rebirth, privatization, COVID-19 crisis, and European consolidation, Lufthansa has demonstrated remarkable institutional resilience. The company has been effectively destroyed and rebuilt twice—and emerged stronger each time.
Today's Lufthansa Group represents the culmination of decades of strategic consolidation. The acquisition of ITA Airways extends this logic, adding a sixth hub and capturing Europe's second-largest outbound travel market. With over 100,000 employees, 700+ aircraft, and €37+ billion in revenue, the Group operates at a scale that creates both competitive advantages and organizational challenges.
"This year, 2025, will be a year of transformation for us with a clear goal: to further strengthen our position as the global number one outside the United States," Carsten Spohr declared.
For investors, Lufthansa offers exposure to European travel recovery and consolidation benefits, counterbalanced by structural industry challenges and execution risks. The MRO segment provides diversification that distinguishes Lufthansa from pure-play passenger airlines.
The company that rose from postwar prohibition to build the world's first airline alliance, that survived an unprecedented pandemic through government partnership and rapid restructuring, continues adapting to competitive realities. Whether this phoenix can maintain altitude in an industry known for destroying shareholder value remains the central question for investors.
The crane—Lufthansa's logo since 1918—was chosen because the bird never stops moving, even when resting, keeping one leg raised in perpetual readiness for flight. After nearly a century of turbulence, that symbol remains apt for a company that has proven remarkably skilled at taking off again.
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