Record profit for Brussels Airlines but social conflict causes downer

After five years of loss-making, Brussels Airlines posted record results last year, with an operating profit of 53 million euros. The airline carried 8,3 million passengers for the entire year, 21% more than in 2022.

But even though turnover climbed back to pre-corona levels, Brussels Airlines has been plagued by social unrest for some time, both among pilots, stewards and flight attendants, and ground staff, over pay and working hours. The team made concessions during the corona health crisis but wants a slice of the cake now that the airline is back in better financial shape.

19% more flights

“We are proud to close 2023 with a nice profit, after an intense reorganization and several years of losses,” said Chief Financial Officer Nina Öwerdieck, looking back with satisfaction at high demand and higher margins, with 19% more flights in which Sub-Saharan destinations were once again a strong performer for the company. “But we still have a way to go before we reach the 8% profit margin target and can truly speak of a sustainable, profitable business.”

Brussels Airlines – revenue went up a quarter to 1,54 billion euros, and the operating profit margin came in at 3,4% – has meanwhile incorporated three of the five announced new A320neo aircraft for short- and medium-haul flights. There will also be a tenth long-haul aircraft, allowing the airline to resume flights to Nairobi, Kenya, after nine years.

Social conflict

Despite these positive results, there is also a solid downside: Brussels Airlines has had social unrest for some time. Staff, who made concessions during the Covid-19 crisis, want a slice of the cake now that the company is doing better financially again.

Meanwhile, management has tabled a proposal for an average purchasing power increase of 6% for the airline’s around 3,400 employees, with outliers of up to 12% for some employees (on top of a 4% indexation this year). The proposal’s cost equals one-sixth of last year’s profits or some 9 million euros. “That’s the limit,” CEO Dorothea von Boxberg said Thursday at a press conference on the annual figures. “Even if there are more strikes, we will not go further.”

Still too fragile

The situation is still fragile, the management stresses. “We must take care to remain a viable company and not lose everything again after barely one year of profit,” the CEO said. Or how CFO Öwerdieck put it: “We are coming from one seat profit per aircraft in 2019, and we are now at a one-row profit. That’s great, but it can also easily disappear again.”

The management indicated that the unions had put several legitimate issues on the table during negotiations, which it said it had addressed. For now, that is not enough for the unions. On Wednesday, a reconciliation process for the pilots ended without a result.

“The positions are still very far apart,” admitted finance director Nina Öwerdieck.  For instance, in some cases, triple what the management is offering would be demanded on the trade union side.

Earlier this year, several strike actions were already taken, costing the airline a combined 4 million euros. It can certainly not be ruled out that further strikes will follow, but according to the management, this makes no sense. “We are at the limit of where we can go,” it sounded.

Profit of €6 per passenger

Öwerdieck presented the results using the 180 seats in an A320 aircraft, which Brussels Airlines flies within Europe. All seats together make up revenue. From that, all costs are subtracted. Paraffin accounts for a quarter of the costs or seven rows of seats on the plane. There are also costs for staff (four rows), things like handling and air traffic control (four rows), and so on.

Empty seats, Brussels Airlines had an average occupancy rate of 82,5% in 2023, constituting another four rows that yield nothing. Ultimately, only the last row of seats remains as profit or an average of 6 euros per passenger. With such a depiction, Öwerdieck wants to highlight how fragile profits are now. “Just a few people have to stop booking, or costs go up, and the profit is quickly gone.”

According to Öwerdieck, Brussels Airlines will probably take until 2026 or 2027 to reach the 8% operating margin, after which there will be room for investment and sustainable growth.

A fifth more passengers for the Lufthansa Group

Lufthansa, the parent group of Brussels Airlines, also announced its annual results on Thursday. “For the first time, all passenger airlines in the group reported an operating profit,” the group stated. “Swiss, Austrian Airlines, Brussels Airlines, and Eurowings all posted record results.”

All the passenger airlines combined carried 123 million passengers in 2023, a fifth more than in 2022. However, of the five airlines, Brussels Airlines posted the lowest operating margin, partly due to Belgian wage indexation.

The entire Lufthansa Group, including the cargo division Lufthansa Cargo and Lufthansa Technik’s aircraft maintenance business, achieved sales of 35,4 billion euros. It posted an operating profit of 2,7 billion euros and saw net profit more than double to 1,7 billion euros. For the first time since 2019, the group plans to pay a dividend of 0,30 euros per share.

Lufthansa Group expects higher sales and stable operating profit this year. It also hopes to get the green light from the European Commission for its planned entry into Italian airline ITA Airways. Lufthansa would inject 325 million euros into ITA for a 41% stake. Eventually, the Germans could acquire the airline outright.

The European Commission has launched an in-depth investigation into the plans because it is “concerned that the transaction could reduce completion on several short- and long-haul routes to and from Italy.”

Apropos, there is also social unrest at Lufthansa. For instance, a 60-hour strike, which started on Wednesday evening, is ongoing until 7.10 a.m. on Saturday. The action will upset the travel plans of more than 200,000 passengers. The liberal trade union Verdi is demanding a 12.5% pay rise (and at least 500 euros a month) and a 3,000-inflation bonus for the 25,000 staff affected.