Lufthansa

In deleveraging mode

  • Sectors : Airlines & Other Transport
  • Companies : Lufthansa

Ratings and price correct at time of issue.

  • Lufthansa

    Closing Price: 1241c

  • RATING 08/06/20

  • PREVIOUS RATING 30/10/18

    NEUTRAL

DAVY VIEW

Post restructuring, with a liquidity buffer and important strategic position, the Lufthansa Group will remain a global leader. However, with net debt and pension liabilities nearing €20bn, the pathway to investment grade (net debt incl. pensions <3.5x) will be long and will require: (i) significant free cash generation, which has been patchy in the past; (ii) a likely capital raise in the next 12 months; and (iii) perhaps a partial sale or listing of Lufthansa Technik. The assumption that business travel will be 10-20% smaller in the medium term will be important as it represents 45% of revenues. We continue to rate the shares ‘Underperform’ (price target €7.0) until some of the above, particularly (i) and (ii), are realised.

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Mar 9 2021, 11:20 GMT

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