The British investment bank Barclays has downgraded Lufthansa from “Overweight” to “Equal Weight” and lowered its price target from 12.50 to 8.50 euros.
The business of European airlines is likely to develop well in general over the course of 2024, wrote analyst Andrew Lobbenberg in a study available on Monday. However, labor disputes are likely to have a negative impact on Lufthansa. Here the German airline faces greater challenges than its competitors.
This is how Lufthansa shares react
The dwindling optimism of Barclays Bank weighed a little on Lufthansa shares at the beginning of the week. Shortly after the start of trading, the shares fell by 0.2 percent to 7.36 euros. This meant they extended their annual loss to eight and a half percent. In the further course it goes down by 1.95 percent to 7.24 euros.
As a result of a significantly reduced price target, Barclays analyst Andrew Lobbenberg no longer recommended overweighting in the portfolio, but lowered the vote to “equal-weight”. The price target, which was reduced from 12.50 to 8.50 euros, no longer justifies overweighting.
Relations with employees are subject to strong fluctuations, said the expert. This drives up wages and salaries and reduces profitability. The airline’s strategic advantages would also no longer be as important.
There is currently a labor dispute raging at Lufthansa. The airline’s passengers have to prepare for new strikes in the next collective bargaining dispute. Last Thursday, the UFO union declared collective bargaining for around 18,000 cabin workers to have failed. She called on her members to decide on strikes in a strike vote starting next week by March 6th. The union in Frankfurt announced that Lufthansa did not present a sufficient offer in another top-level meeting.
Lufthansa is now facing the escalation of the next collective bargaining dispute. At the airline, pilots from its subsidiary Discover recently went on strike to force an initial collective agreement. In addition, a second warning strike by ground staff almost paralyzed Lufthansa operations. Hundreds of flights were canceled and more than 100,000 passengers had to reschedule. A quick agreement with the Verdi union is not in sight.
Collective bargaining for the aviation security forces is also ongoing. A nationwide warning strike that Verdi organized at the beginning of February also resulted in large-scale flight cancellations.
If the recent downward trend continues, the price would continue to approach the previous year’s low of 6.51 euros at the beginning of November. At that time, positively received business figures for the third quarter had stopped the stock’s decline: lucrative summer business and the prospect of a good winter had helped. This is also why the papers in 2023 ultimately managed a positive annual balance of plus 3.6 percent to 8.05 euros. Nevertheless: in March 2023, around a year ago, the papers still cost more than 11 euros.
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Publication of the original study: February 23, 2024 / 9:48 p.m. / GMT First distribution of the original study: February 26, 2024 / 04:00 a.m. / GMT
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