Good day, and thank you for standing by. Welcome to the Lufthansa Group Q1 2026 results analyst call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session you will need to press star one and one on your telephone. You will then hear an automated message device in your hand is raised. To withdraw your question, please press star one and one again. Please be advise that this conference is being recorded. Then I'd now like to hand the conference over to your first speaker today, Marc-Dominic Nettesheim. Please go ahead.
Yes, thank you very much. Welcome, ladies and gentlemen, also from my side to the presentation of our first quarter results 2026. With me today are our CEO, Carsten Spohr, and our CFO, Till Streichert. Both of them will present our results for the first quarter and discuss the commercial outlook for the remaining nine months of this year. Afterwards, as always, you will have the opportunity to ask question and please limit your questions to two, so that everybody has a chance to participate in the Q&A session. Thank you very much. With that, Carsten, now over to you.
Marc, thank you very much and a warm welcome from me as well. It's exactly two months since we presented here from this building our full year 2025 results to you. I think you would agree that the dynamics of recent weeks have once again demonstrated how rapidly the environment for our industry can change and how vital it is in our industry to be ready for crisis management at any given time. The ongoing crisis in the Middle East, combined with rising fuel costs, obvious operational constraints, poses enormous challenges for the world at large, for global aviation, and surely for our company specifically. Historically, though, the Lufthansa Group has grown through crisis and emerged from them stronger. We are confident that this will also be no different this time.
For one, we are positioned with greater resilience than many of our competitors to absorb the impact of the Iran war. We are better hedged against fuel prices, with more than 80% of the kerosene requirements for our passenger airlines for the current year and more or less 40% for the coming year being hedged as we speak. Equally important to our crisis resilience is our unique multi-hub and multi-airline structure. It gives us the flexibility to quickly adapt our network to shifting demand by consolidating how destinations are served across our hub system. Routes that become uneconomical, for example, due to rising cost, can be cut without compromising our network quality.
This way, we were able to almost fully offset the recent 1% capacity reduction, which was equivalent to 20,000 flights for the whole summer, and we actually only had to remove four destinations from our network of 300. At the same time, this reduces our fuel requirements in the 20% share that remains unhedged even for us. Every ton of fuel we save by cutting capacity is a ton of fuel at currently 2x the price of last year. This strategic setup also gave us the flexibility to drive forward our fleet modernization in an accelerated fashion, that obviously was shown in the Lufthansa CityLine Canadair example, where in the light of cost pressure, driven by rising fuel prices on the one hand and labor disputes on the other hand, we just decided we had to act.
This included retiring aircraft with the highest operating cost per seat, which was our Canadair fleet, delivering immediate savings through the reduction of an entire sub-fleet. Finally, our multi-hub and multi-airline structure demonstrated its strength most recently during the strikes of our cabin staff in Lufthansa Classic and Lufthansa CityLine, combined with our pilots, where despite significant cancellations at the core brand, more or less 75%- 80% of the group's entire flight program could be maintained in each case and served our customers to get them to their desired destination. By the way, the recent grounding of our loss-making Lufthansa CityLine operations has been, after the closure of SunExpress Germany and Germanwings, the third and final step in our previously announced strategy to consolidate the number of passenger AOCs in Germany. We have now reached our envisioned structure.
Our mainline and our feeder airline for Frankfurt and Munich, one airline focused on leisure and a specialist for point-to-point traffic bypassing our hubs. As you can see, we are responding with the necessary resolve, not only in light of the dynamic developments arising from the Iran war. We hope for the same determination from the regulatory side, both national and European levels, when we see necessary changes due to the situation in Iran. In particular, we have three requests for action on part of the European Commission. First, we need quickly the authorizing of the import of Jet A fuel from the U.S., which is used there at every airport, rather than the Jet A-1 fuel, which is currently required out of Europe.
This would require less refinery activity because currently all kerosene imported from the U.S. coming in Jet A quality needs to be refined again to be turned into Jet A-1 quality, which is no need, especially in the summer when the different freezing points don't matter. Secondly, we believe that it's time to advocate and decide on the temporary suspension of slot regulations at airports in case there is the need to cancel flights due to fuel shortages, we shouldn't have an impact on slots. Last but not least, we need an exception for the European anti-tankering rules, which would then allow us additional operational flexibility in case single airports in our short-haul network are becoming short of fuel.
Overall, we're quite optimistic these rules and adaptions won't be required because we maintain a certain optimism on the fuel situation, but it's better to be ready, including our regulatory bodies, which sometimes need some time. Ladies and gentlemen, even in this volatile environment, we achieve what we set out to do. This is why we can look back on the first quarter today in which we significantly exceeded the prior year's financial results. As a result, adjusted EBIT came in EUR 110 million above the prior year figure. This, by the way, without any capacity growth in our network airlines. At the same time, Eurowings capacity grew by 5%, Lufthansa Technik delivered double-digit revenue growth numbers, and Lufthansa Cargo achieved a 5% increase in revenue over year as well. Therefore, total revenues reached EUR 8.7 billion in the first quarter, which is up 8% compared to last year.
This is the highest we've ever seen for a first quarter and shows that demand in our industry remains robust, and that's for sure something we have not always seen in times of geopolitical crisis. We saw additional momentum building in March with network airlines RASK up 12% and air freight yields increasing by 5% year-over-year. This underlines our ability to flexibly profit from elevated demand levels. Obviously, higher fuel prices had only a marginal impact in the first quarter, as most volumes were still priced at pre-crisis levels. Our fleet renewal progressed as planned with the delivery of seven new aircraft, including five wide-bodies, which of course are all equipped with Allegris or SWISS Senses, depending on which airline they went to. We not only increased the share of new technology aircraft in our fleet, but we also enhanced the travel experience for our long-range customers.
The strong commercial performance we delivered in the first quarter, as did several of our competitors, is, as mentioned, also evidence of a continuous, robust market and resilient demand in our industry, which again has seen very different behaviors in global crisis in the past. It's also against this backdrop of optimism that we announced two months ago that we would grow our long-haul business while at the same time consolidating our European network to become more efficient, and we have delivered on that commitment. In Q1, we expanded our long-haul capacity by 1.4% year-over-year, and simultaneously, without reducing our feeding capabilities, reduced short haul by 3%. We also, as announced, focus on the Southern Hemisphere as a key growth market. Here also, as still mentioned, we delivered on our promise.
Capacity to South America or Latin America grew by 4% and to Africa by an even stronger 10%. It was sold very well with both seat load factors rising and average yields, average yields increasing accordingly. The situation in the Middle East was particularly challenging. Early March marked a turning point in the quarter as the Iran conflict escalated and required swift adjustments. The disruption constrained airspace availability led to a reduction in leisure destinations, especially in the Gulf region, and also limited connectivity of the hubs located in that region. At the same time, the overall travel demand remained consistently strong. However, the travel behavior of passengers shifted regarding where they fly to and very much how they reach their destinations. We therefore reacted fast and adjusted our network accordingly. The cancellations of the Middle East routes freed up 13 aircraft.
There are three wide-bodies, which we now use for additional frequencies to serve India and Singapore, especially in total 13 flights every week on top of our regular network we're currently offering to Asia. Obviously, we also immediately adjusted our commercial strategy, prioritizing yields over volume. We tightened the availability of lower fare classes wherever appropriate and implemented broad-based pricing measures. March and April validated that focusing on this yield discipline was right. In March, yields increased by 5% and seat load factors improved by 6% year-on-year. Once again, premium demand showed a very positive development. In the first quarter, yields in our premium cabins rose by almost 2% compared to last year and by 5% in March alone.
Don't forget on this that when the Iran war started, of course, a big part of the March seats were already sold, so this is purely driven by the remaining seats being sold at higher fares. This once again confirms our conviction that investments in premium products are not cyclical, but are long-term value drivers for the Lufthansa Group. Looking ahead, we expect the positive demand trend to continue. Later, Till will walk you through the numbers, showing how this translate into our current positive booking outlook. First, let me quickly take you through the results of our four business segments. In the first quarter, our network airlines were able to make good progress. Average fuel prices were below the prior year level still, but the demand shifts driven by the Iran war were already having a positive effect in the last month.
Commercially, this translated into a stronger performance, revenue increased year-on-year, and adjusted EBIT improved by EUR 135 million. The main driver of the improvement was Lufthansa Airlines, which contributed EUR 110 million earnings improvement, or if you exclude the strikes, even close to EUR 150 million. This demonstrates that the turnaround program is increasingly delivering results. SWISS Also reported an improvement of EUR 49 million, and at ITA Airways, the operating result also improved, here by EUR 70 million. However, our equity result, based on ITA's earning after tax declined by EUR 38 million due to currency effects. Unit costs increased by 2.5% across network airlines, broadly in line with inflation.
This was primarily due to the very low ASK growth of only 0.1%, which of course doesn't help on reducing unit cost. This enforces our decision to implement our strategy as quickly as possible in response to current and potential future cost headwinds. The commercial performance is clearly encouraging. RASK increased by 3.3%, regional RASK even by 4.2% versus prior year. High load factors and increased revenues from flight-related ancillary services supported this encouraging trend. Ancillary revenues were mainly driven by our digital channels and rising advanced seat reservations for our new Lufthansa Allegris and SWISS Senses cabin. We didn't have an easy start here. Our upselling strategy now clearly pays off, and both trends show that we focus on the right topic, namely digitalization and premiumization. Let me now turn to Eurowings.
Operationally and commercially, the first quarter delivered strong top-line momentum. As already mentioned, capacity increased by 5% year-over-year, despite the ongoing constraints related to the Middle East in the third month, demand clearly outpaced this growth even. Traffic revenues therefore rose 14%. The seat load factor improved to a strong 84.4%. Supported by disciplined pricing, unit revenues increased by almost 7%. Here, as mentioned, a strong intra-European business more than offset the revenue shortfalls in the Middle East in March. In addition, flight-related ancillary revenues rose by 13% versus last year, also here, mainly driven by seating options and upgrades and baggage. On the cost side, however, we face significant headwinds compared to previous year.
As a result, unit cost increased by 5%, mainly driven by EUR 60 million higher IROPS impact from winter operations and the Middle East cancellations, as well as 29% higher MRO expenses. Despite these cost pressures, Eurowings delivered an adjusted EBIT broadly stable year-on-year. If you take the whole point-to-point airline segment, the overall result was EUR 14 million below prior year due to a EUR 10 million below year delivery of SunExpress. Taking everything into account, this, we believe, is a solid result for our point-to-point segment in a challenging environment. This brings me now to a sector that usually benefits from volatile markets and short-term shifts, especially talking about Lufthansa Cargo. They delivered another clear year-on-year earnings improvement in the first quarter, with operational momentum strengthening toward the end of the year, sorry, the quarter.
A tight market supply and ongoing disruptions in global supply chains supported a recovery in air freight yields compared with recent quarters, driven in particular by continued strong performance in Asia-Pacific. Lufthansa Cargo expanded its capacity by 7%, supported by higher belly capacity, including, for the first time, additional marketing of ITA Airways belly spaces, which are equivalent to three Boeing 777 freighters alone. At the same time, load factors remained broadly stable year-over-year. Total revenue increased by 5%, while operating expenses rose by 3%. Higher charter costs, primarily due to increased fuel costs, especially as we don't hedge in the cargo segments, were a cost driver. Unit costs decreased by 7% thanks to lower MRO expenses and strict cost management.
All in all, profitability improved significantly with adjusted EBIT up 35% year-on-year, resulting in an adjusted EBIT margin of 9.5%. Last, but of course not least, our success story of Lufthansa Technik, which likewise continues to be characterized by strong resilience with its revenues providing a sustainable stabilizing effect across our portfolio for quite some time now. Its recurring revenue streams stabilize our portfolio, and Lufthansa Technik continues to experience robust demand and takes actions to mitigate headwinds, for example, from a weak US dollar, U.S. tariffs, and still ongoing supply chain burdens. The completion of Lufthansa Technik's 1,000th Pratt & Whitney GTF engine overhaul marks a significant operational milestone, and it underscores the industry's structural shift towards next-generation engines. Strategically, we are advancing our global expansion where it matters most.
In the Americas, for example, with progress on the Tulsa, Oklahoma, component repair facility or our new engine shop in Calgary. In Asia, by strengthening our market position with the signing of our largest maintenance contract to date in China for the CFM56 engine, or in the growing defense sector, where the first completed maintenance of the German Navy's P-8 Poseidon aircraft marks an important milestone for growth in this segment. From a revenue perspective, Lufthansa Technik remains structurally strong, with around now 80% of first-quarter revenues attributable to third-party customers. These external revenues grew by 19% year-on-year. On the cost side, Lufthansa Technik was facing increases in material expenses, driven by both volume and pricing effect. This resulted in a 12% increase in operating expenses. The adjusted EBIT was broadly in line with the prior year level overall.
However, margins were impacted slightly by ramp-up costs. For the coming quarters, we anticipate a meaningful recovery in margins compared to prior year. After having examined the Q1 results, let me comment on where we stand from a strategic perspective. In the midterm, this means, as you know, '28 to '30, we target our 8% adjusted EBIT margin. The crisis makes us execute our strategy even faster than originally planned. The good old never waste a good crisis obviously applies to Lufthansa Group as well. In response to sharply increased kerosene prices following the Middle East situation, we decided to push forward several measures to streamline our operations. This includes the immediate removal of Lufthansa CityLine's 27 operational aircraft from our schedules, leading to a broadly 1% ASK reduction.
The phase out of Lufthansa CityLine's Canadairs to harmonize our fleet and reduce by reducing another subfleet and therefore also reduce operational complexity. The announced early retirement of our not most fuel-efficient long-haul aircraft like the A340-600 by the mid-October timeframe and also grounding part of our 747-400 fleet, at least for the winter. All of this reduces fuel consumption, lowers exposure to unhedged fuel prices, streamlines the fleet, and makes us structurally more competitive. In other words, this crisis has acted as a catalyst, bringing forward decisions that were already strategically planned. With having said that, I hand over to Till, who will guide you through the Q1 financials of the group. We'll guide you through our full year guidance and of course, the underlying rationale. Till, over to you.
Yeah. Thank you, Carsten, and good morning, everyone. Let me take you through the financial performance of Lufthansa Group in the first quarter of this year and provide some context on cash flow, the balance sheet, and of course, most importantly, our outlook for the rest of the year. Let me share some details on our group P&L. In the first quarter, revenues increased by 7.6% year-on-year to EUR 8.7 billion, despite broadly flat capacity with ASK growth of just 0.5% versus prior year. This was primarily driven by higher passenger revenues, continued strength in cargo volumes, and a very strong MRO growth, where third-party revenues increased at a double-digit rate.
In addition, we benefited from structurally higher ancillary revenues while irregularity-related compensations weighed slightly on revenues, reflecting the Middle East situation and strikes. The three days of strike in Q1, which we faced, impacted our result by approximately EUR 40 million. Commercial performance was strong. Premium demand held up well. Cargo yields recovered materially towards the end of the quarter, flight-related ancillary revenues grew by 8%. As a result, adjusted EBIT improved by EUR 110 million compared to prior year, reaching minus EUR 612 million, and the adjusted EBIT margin improved by almost 2 percentage points. This improvement was achieved without capacity growth at our network airlines, underpinning the improvement in earnings quality.
The difference between adjusted EBIT and reported EBIT is largely explained by book gains, particularly a EUR 154 million book gain from the sale of 1 Boeing 747-8. Let me now briefly touch on cash generation. Operating cash flow was strong in the first quarter, driven primarily by working capital effects, and the main contribution came from advanced ticket sales of around EUR 2.4 billion, fully in line with the seasonal pattern and reflecting solid demand. This was partly offset by higher trade receivables, driven by passenger ticket sales and continued growth in external MRO business. Turning now to investing activities, we continue to invest into fleet renewal, including final payments for eight aircraft, advanced payments for future deliveries, and capitalized engine overhauls.
The outflows for these investments were partly offset by aircraft disposals and sale and leaseback transactions, including the sale of the Boeing 747-8. Overall, net CapEx remained well on track with our plan. As a result, adjusted free cash flow reached EUR 1.38 billion, clearly above the prior year level. Let me move to balance sheet. We continue to operate with a strong and resilient balance sheet. The strong cash generation, which I described before, further supported this balance sheet strength. We used the cash to repay a EUR 1 billion Eurobond and a EUR 500 million hybrid. Liquidity stood at around EUR 10.3 billion at the end of March, comfortably above our target corridor of EUR 8 billion-EUR 10 billion, even after debt repayments and ongoing fleet investments. Net financial debt declined further.
As a result, our leverage ratio improved to 1.6 x, and our investment-grade ratings remain unchanged with a stable outlook. This balance sheet strength gives us sufficient headroom to navigate volatility like the current situation while continuing to invest into fleet renewal and our strategic priorities. Let me now come back to fuel, as this is clearly one of the most important variables this year. Since March, fuel markets have been shaped by geopolitical developments in the Middle East, particularly the escalation of the conflict and the closure of the Strait of Hormuz. What we are seeing is not a classic oil price move. While crude prices have increased materially, jet fuel prices have risen significantly stronger, driven by widening product spreads. Refining capacity, logistics constraints, and product availability have become the dominant drivers.
Importantly, these developments were not yet fully visible in our first quarter figures, particularly since 60% of our March fuel consumption was settled at previous months' price levels. You will remember that during our full year 2025 earnings call, we had announced an additional cost burden of, and that was estimated at that time, of about 20%-25% versus prior guidance for the two months, March and April combined. Now with hindsight, having these two months behind us, I can confirm that we landed within that range respectively, rather towards the lower end of it.
In fact, for the first quarter in total, and that's now going back to Q1 again, fuel was still a tailwind as higher prices only started to flow into our cost base from April onwards, and the earnings impact is therefore clearly backloaded into the last nine months of the year, particularly into Q2. Based on prices as of last week Thursday, our fuel bill for 2026 is currently estimated to be around EUR 8.9 billion. Of this amount, approximately EUR 8.7 billion relates to fossil fuel and around EUR 0.2 billion to mandatory SAF.
Compared to our previous guidance, this represents an increase of around EUR 1.7 billion, driven almost entirely by the price escalation since the start of the war in Iran. This clearly makes fuel the single most relevant cost headwind for the remainder of the year. From a mitigation perspective, we entered this phase well prepared. We are currently around 83% hedged at our passenger airlines for the remainder of the year 2026, which provides meaningful protection against short-term volatility, while still allowing us to benefit also if prices normalize. For 2027, we are hedged at around 36%. In a relative sense, this gives us significantly more stability than less hedged peers in the current environment.
That said, fuel markets remain exceptionally volatile, and given the high uncertainty as well as the elevated price levels for the upcoming months, we have temporarily suspended our regular hedging activities since the beginning of March. Given the exceptional volatility and uncertainty, we've adjusted our hedging approach in recent weeks to seize opportunities created by these market conditions. Alongside our existing hedge portfolio, we have selectively added short-term instruments to protect against jet fuel price escalation and spread risk when prices were favorable. This helps us to capture market dislocations while retaining flexibility. However, it is important to be transparent. Our expected fuel costs are based on the forward curve, because that forward curve is still in backwardation. This is obviously the best estimate that everyone or the best view that everyone can use.
Fuel cost will hence depend on whether this forward curve materializes. Apart from fuel pricing, let me also comment a few sentences on fuel availability. Currently, we don't have any shortages in the physical supply, and up until June, we are convinced that our fuel supply will be fully secured, particularly in our own hubs. Nevertheless, we are currently making also plans for a scenario if this should change. Measures, again, are various, and they can include also tank stops or other aspects, but we'll come to that later on. This clearly shows that the entire topic of fuel is not an isolated issue. It must be viewed together with network adjustments, cost discipline, and also revenue recapture. Let me now move on.
To put the current demand environment into perspective and how it helps to offset fuel headwinds, let me highlight four key aspects or 4 data points. First, March was an inflection point. Can we move on with the slide? You are perfect. Brilliant. First, March was an inflection point. This month, March, it benefited from one-off effects, and we captured those opportunities successfully, as demonstrated by unit revenues up 12% versus prior year. More importantly, when we normalize for direct crisis effects or positive effects from the crisis, the year-over-year Easter timing shift that we need to normalize and FX impact, we see an increase of around 5%. We read this as a clear proof point for an intact demand environment and also for our ability to translate it into value through revenue management.
Second, April was a special month for us. six strike days weighed on demand at Lufthansa, As a result, RASK for new bookings for departures in April was, let me say, in inverted commas, only about 12 percentage points above pre-crisis levels. If I exclude, if we exclude Lufthansa Airlines from this perimeter, the RASK increase for all other airlines was 14 percentage points above pre-crisis levels. Two things matter here. The demand signal remained positive despite the disruption, the breadth of our group network, together with our multi-AOC approach, helped buffering or cushioning the impact from the strike. At the same time, let me be very clear, additional strikes do harm or can harm demand further, repeated disruption can certainly intensify that effect. Let me come to the third point. The key question is: How sustainable is this demand strength?
Let me share our current view based on what we see in our booking data. As you can imagine, we follow here a kind of facts and figures-based approach. Looking at the near term for the second quarter as a whole, we currently see unit revenues around 8 percentage points higher compared to end of February. That suggests that the demand upside at higher yields is not a short-lived spike. It appears to last, showing longevity. Let me now come to my last, the fourth point. Beyond Q2, we remain appropriately cautious. We certainly cannot predict how things will play out eventually, particularly not how quickly Gulf carrier capacity returns into the market and how rapidly customers regain confidence in using those hubs.
What we can say is this: For the remainder of the year, we have already locked in long-haul bookings at favorable pricing levels with yields around 34 percentage points above pre-crisis levels. Even as booking cycles shorten, which is normal in times of volatility, we are already seeing persistently strong demand in our intercontinental booking curve well into year-end. This is exactly why a yield-focused revenue steering approach is the right thing to do for the time being. Going forward, we will not solely rely on demand strengths but also continue to optimize our network. On the network side, we are actively reducing capacity on structurally weakest routes, particularly where profitability does not compensate current fuel price levels, as in the case of CityLine.
At the same time, largely as a result of the CityLine measure, we are migrating capacity to more efficient AOCs, which structurally improves our cost base over time. Furthermore, and also as mentioned a few times, it is an important step in our strategy execution to simplify and harmonize our fleet, and we will make further progress on that through these measures as well. On the cost side, we complement this with targeted safeguarding measures. This includes a reduction of project spending or temporary external hiring stop, except for operational roles, and this is fully aligned with the Lufthansa Airlines turnaround logic. All of these measures, we are implementing simultaneously. With that, we are not waiting for the uncertainty to resolve it.
You can clearly see we are actively managing it while the demand environment remains constructive. Let me now move on to guidance. We guided for adjusted EBIT significantly above prior year, the underlying reasons for that guidance are still intact. Fleet modernization continues, the revenue environment benefits from commercial initiatives, including ancillaries focus, Lufthansa Airlines turnaround measures are contributing, Lufthansa Technik's earnings trajectory structurally higher. The first quarter is a proof point that these fundamentals in place. However, it is equally important to put this into perspective. In our wording, significantly above prior year means more than 10% growth. When we issued the guidance at the beginning of this year, or when we last time spoke on our earnings call, we of course had some headroom beyond that threshold.
Given the fuel price development and the strikes that we've seen so far, that headroom is now largely gone. What do you need to believe for us to maintain this guidance? The core assumption is that additional revenues in the network airlines can offset the additional fuel cost. On fuel, we currently see roughly EUR 1.7 billion more cost than initially expected based on the current forward curve. On the revenue side, the key drivers are the strong demand situation on Asia and Africa routes, higher-than-expected yields and load factors, and the assumption that the yield uplift persists through the year as our yield-focused steering continues to work. As I've shown you, the booking intakes we currently see support this thesis.
However, it is equally clear that time will tell to what extent and for how long the demand quality will persist. When speaking of timing, let me also say timing matters. Apart from a volatile environment that we have to deal with, all of us, generally, we do not expect the quarterly evolution to be linear. The recapture of fuel cost is expected to be around 60% in Q2, and there it will weigh on the second quarter more. The recapture rate for the following quarters, Q3 and Q4, we expect to be well above 100% if demand remains on the elevated level that we currently see in our data. In other words, as the fuel headwind is front-loaded in the second quarter, the projected recapture rate strengthens sequentially throughout the year.
Additionally, we see different parts of the group being impacted differently by the crisis. On the one hand, the point-to-point business is facing negative net effects. While generally leisure demand remains supportive in parts of the network, some markets, including Türkiye via SunExpress, are affected, and the segment has less ability to offset higher fuel costs through intercontinental yield dynamics. On the other hand, what adds confidence is that other parts of the portfolio provide counterbalancing effects. Lufthansa Cargo benefits from strong demand in volumes and freight rates. Post-crisis freight rates are up around 31% worldwide and around 90% on routes to Southeast Asia, which helps offset pressure elsewhere. MRO remains broadly unchanged in its outlook and is comparatively less affected by the Middle East situation.
Despite the Middle East crisis, while being fully aware of the high level of complexity and uncertainty that comes with it, we follow the data that we currently see and there always maintain our financial guidance for 2026. Adjusted EBIT significantly above 2025, adjusted free cash flow around EUR 0.9 billion, and net CapEx around EUR 2.9 billion. Of course, we continue to follow a disciplined capacity growth with a continued focus on intercontinental markets. To summarize, headroom has tightened materially, but demand resilience, yield-focused steering, targeted hedging improvements, and accelerated network and cost measures drive our confidence that the fuel headwind can be absorbed over the course of the year. With that, Carsten and I are happy to take your questions.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please be reminded, we ask for a limit of two questions per caller. Thank you. We'll now take our first question. This is from James Hollins, BNP Paribas. Please go ahead.
Thanks very much. Very interesting, Till, on a lot of that. Maybe, Till, I could just follow up on your turnaround program. I didn't hear much mention of the EUR 1.5 billion gross cost benefit in full year 2026. Maybe just, is that still the right number? Are you pushing a lot harder on this? I think secondly, second question probably relates to that, perhaps you could quantify, I think you've implicitly implied strike costs in Q1, EUR 40 million. What have you seen for the six days in Q2? I think a broader question, maybe for Carsten, is any sign of a resolution across the divisions? Thank you.
Yeah, thanks James for the two questions. First on turnaround. Look, we've had so many topics to cover today, I saved that for the Q&A. We are fully on track with the turnaround and the activities that are happening there. Once again as a reminder, kind of the three big blocks that you always need to keep in mind is fleet renewal, the Q1 was, I think, proof point that we are fully on track with the fleet, with the aircraft we have received. Again, in total, for the full year, we expect to receive about 45 new aircraft, step 1. Step 2, we continue to accelerate shifting into our lower cost, higher profitability AOCs. You can see that what we have announced around CityLine is a step in that.
The third big bucket is indeed the 700 initiatives that we are following through. The EUR 1.5 billion of gross contribution stands. Let me add, you're quite right, are we pushing now harder? Of course. We do some additional EBIT safeguarding, which I mentioned. This is a bit of shorter term nature, I would say. You can imagine everyone approaches discretionary spending with a sharp pencil at the moment. There was, of course, we keep pressing and pushing towards probably rather a bit more than less. That's the answer to your first question. Second, on quantifying strike cost, Q1, EUR 40 million, absolutely. The second quarter, the six days are roughly EUR 150 million negative. You can say rounded roughly EUR 200 million so far negative weighing on us.
James, Carsten, just to add, these numbers per day are significantly smaller than what we used to have per strike day. Maybe two backgrounds on that. First of all, the participation rate is lower. We have a lot more volunteers than in the past. Secondly, with the multi-hub approach, we're able to offer between 75% and 80% of the program for our passengers and reroute them via other hubs. That's why these numbers, fortunately, are smaller than what we had seen in the years before.
Thanks. To use your own words, never waste a crisis. Just to follow up, do you think this crisis will potentially lead to a resolution sooner rather than later?
Well, I think the discussions, negotiations, also individual conversations with crews over the last weeks have shown that the only way we get a resolution is to offer perspectives to our labor groups across the airlines again. I think also Union has understood that to achieve those perspectives for everybody, costs have to come down. In that regard, I think in the days of less growth, in days of also being able now to grow our new AOCs, as mentioned by Till, this resolution eventually will come about. The other alternative to continuously shrink short haul in the mainline and one day have a long-range airline only, I think is a strategic option we also have prepared, but I don't see as the most likely outcome.
Okay, thanks very much.
Thank you. We'll now take the next question. This is from Stephen Furlong from Davy. Please go ahead.
Yeah, good morning, gentlemen. I was wondering, Carsten, do you see any movement in general from your discussions with EU, you know, with obviously what everything has happened and the risk with access? I know you talked about some initiatives there, but for example, things like SAF and, you know, issues of eSAF and availability and stuff. I was just wondering whether the competitive disadvantage that European airlines are suffering, are you seeing any kind of, I guess, realization that Europe wants to have kind of global leaders in aviation like other sectors? Just maybe, Till, just on the booking curve, hear for some kind of LCC airlines that, or leisure airlines that the booking curve is very short. People are concerned about cancellations and things like that.
It sounds to be like maybe a little, but more like long haul is very strong and short haul is just more question mark at the moment. Thank you.
Stephen, this dialogue on this topic between you and me could fill the whole Q&A, but of course, I need to be short, and I summarize it in a way, the higher up the ladder we engage with the EU Commission, the more understanding there is. I would say this includes our national governments in all our home countries, Italy, Germany, Austria, Switzerland, Belgium. When you work your way down on the working level, where actually regulatory policies are made and put into writing, it's way too slow. With all these years of experience, I still would give it a positive twist because we have not seen, even on the top, neither in Berlin nor in Brussels over the last years, any indication that they understand the issue you rightly raised.
How can there be global champions out of Europe if we disadvantages them? That we have been missing for years, it's now there. How we turn this into new regulatory policies, I think will take a few more quarterly presentations and discussions with you, and mainly with them, of course.
Yeah, Stephen, to your second question, can confirm our booking window, our booking cycles have shortened. Equally, in April, we've seen that the load factor gaps that we were still seeing basically have closed, when arriving closer to the departure date. You are quite right. I think it is more towards the cont side. Intercont is showing there, more resiliency in terms of the booking window compression. I think we can also see that in particular in the outer months, we can see actually quite comparable, quite comparable seat load factors, in the intercont than we had a year ago.
Great. Thank you.
Thank you. The next question is from Alex Irving, Bernstein. Please go ahead.
Hi, good afternoon. Thanks for taking my questions. First one, how confident are you really that Q3 and Q4 yields will be able to more than offset the increase in fuel bills with only minimal capacity reductions? How much visibility do you have, and what do you need to believe around the return of Gulf connecting traffic and passengers' willingness to use it for that, increase in fuel bills to be more than offset? Second question, how are you thinking about winter capacity? The less hedge of the year goes on, I think you've announced some short- to medium-haul reductions, but left long haul untouched. Why would it be the wrong decision to reduce this potentially against macro risk and accelerate fleet simplification into the winter? Thank you.
Yeah, look, on the Let me start off on the first one. Just in terms of Q3 and Q4, as I said before, we all we can do is we follow a facts and figures-based approach, and basically start from what we've seen in our numbers, both in March and also now in the second quarter, and what we see actually also in terms of yield evolution, and particularly in the intercont side, on full, on the year to go. What needs to happen, and this is why I said it also, what you need to believe is that the current booking trends, which again is a yield-based steering, will see the bookings then coming in.
Let me add as well, just to put it a bit into perspective, there is obviously a lot of dynamic taking place right now in the market, around obviously fuel recapturing and also prices, which of course are eventually done at market level. As everyone has started to shrink or take back certain capacity in the market, you've got an environment which currently is conducive to see higher prices being realized. In terms of recapture, of course, as you go into Q3 and Q4, we are seeing a lesser booking stock, which is totally normal, and a year ago we would have seen the same, because the seat load factor as you move further out is just lower.
There with you also benefit from the opportunity to have more of those bookings compared to, let me say, Q2 coming in at yields which are elevated. That is the element which offsets the fuel bill assumption. There with, let me also say what we said to you here, above 100%, that is, that is of course a topic, this should be clearly above 100% in order to have the offset created. Sorry. Short term, the next question was just capacity. Here we contin-
Into capacity, yeah, mm-hmm.
Here we continue our strategy as we have basically talked at the beginning of the year. Consolidation, we continue, and you can see that literally in everything that we've done in the first quarter and also in April. On intercont, we continue to grow. All in all, I do expect, and this is why we guided also to a slightly lower overall ASK growth. Instead of the close to 4%, we are now guiding more towards 0%-2% with intercont positive and cont slightly shrinking.
Okay. Thank you.
Thank you. We will now take the next question. This is from Ruairi Cullinane from RBC Capital Markets. Please go ahead.
Yes. Good, good morning. The first question is on your hedge ratio in 2027. Have you actually continued hedging crack spreads into 2027? Could you provide some detail on to what degree you're hedged on Brent gasoline and potentially kerosene? Secondly, just to clarify on the recapture rate, should we consider that just a function of the EBIT change relative to the fuel cost change? Is that how we should think about that? Thank you.
Sorry, let me start off with the first one. Look, what I said is that we, when early in the crisis, when there were prices on jet crack still low, we opportunistically added this to increase our protection level at a product level for 2027. As I said, we are at about 40%, or let me say precise, 60%, 36%, in terms of overall hedge ratio. Here, we had, and that was all done pre-crisis level, please remember. This is where we had a combination of Brent and gas oil-based hedges placed. Your second question was the recapture rate or the recapture concept.
In essence, it comes down to what we see on the fuel bill. Basically then you can put it just back to RASK, which eventually yield times what we see as available seat kilometers being taken up. That's eventually those two elements. Of course, what I said, EBIT safeguarding measures, kind of they complement the picture, but the big levers are those two, fuel versus RASK.
Thank you.
Thank you. I'll take the next question. This is from Jarrod Castle, UBS. Please go ahead.
Good morning, everyone. Maybe can you give a bit of an update in terms of M&A, re TAP and also the ITA stake if, if you're gonna be, increasing it come the end of June? Secondly, North America, you know, you were lagging a bit on yields in 1 Q. I don't know if this is currency, but what are you seeing now in terms of point of sale from the U.S. versus point of sale from Europe? Thanks.
On M&A, Jarrod, not much new to report today. You rightly quoted on ITA the window to agree on a potential additional share to be invested in is June and then again June next year, not today. Then on TAP, I think it's all been said. As you do know, the two, or the one competitor and us being in the race have announced their interest. We share our view that it's not only about TAP, but it's about Portugal and Lufthansa Group. There is an aviation strategy behind it. We are about, in a few weeks' time, to open our new facility in Porto on Lufthansa Technik. We're looking at an additional location for a flight school in Europe together with the military, which could well be Portugal.
Obviously, we would perfectly fit TAP into the picture by then catching up market share to Latin America to the other two large, or at least to the second large competitor currently already positioned in that market. That has not been changed. As Till said before, strategic decisions, investments, M&A in our company are not withheld by operational or short-term challenges.
North Atlantic, point of sale, U.S., continues to be pretty strong. That's more than, clearly more than half of our booking, 60%-65%. You're quite right what you're pointing out. We had obviously a little bit of FX headwind. Also due to that, FX was less favorable on the revenue side. I would expect that this starts to phase out as we are moving through Q2 and Q3, Q4, just dollar-based.
Okay. Thanks very much.
Thank you. Next question is from Harry Gowers from JP Morgan. Please go ahead.
Yeah. Morning, everyone. First question from me. On slide 16, you showed those numbers around, kind of, the bookings level and RASK versus pre-conflict. I was wondering if you could provide your April network year-over-year RASK number, so on the same basis as the March +12% number that you gave. Just any color you could give around transatlantic and Asia pricing in April specifically. Second question, your Q1 network ex-fuel costs came in a bit higher than the rate of inflation. Will that just be a one-off given the lack of capacity growth, and could that reverse into the coming quarters? Thanks a lot.
Okay, Harry. Just on April, I mean, obviously we are not moving into a monthly disclosure on our call. You must, you have to bear with me, that for March, we did it because that was a bit of an inflection point that was created due to the crisis. For the current quarter, I'll stick to relative pointers to give you an idea of what we see. Again, what matters here really is, and this is where the whole logic goes, you have a certain booking stock, which is pre-crisis levels, which obviously kind of follow the normal pattern, let me put it like that.
This is why I try to give you a normalized March figure, solid, let me say exit point with 5% RASK increase normalized into April. I have to leave it with the relative perspective, and this is why I stick to the 12% higher, 12 percentage points higher RASK for the post-crisis bookings. Let me add also, April was a specific month for us because of the 6 strike days, and sometimes you also don't fully capture kind of the negativity in that because there are always certain carry-over effects that you've got also in your booking behavior.
This is why I tried to give you an ex-Lufthansa Airlines perimeter where it was 14 percentage points higher, post-crisis bookings versus pre-crisis. Your second question, ex-fuel costs were higher than inflation. No, on cost as such in the first quarter, we are on track. You always have got in these comparisons a little bit of year-over-year dynamics. Let me say at the CASK level, of course, the ASK growth plays a bit into it. We had a bit of, and there was less fixed cost regression. Overall, if I draw a line under the cost review for the first quarter, this is all in line with what I had expected.
Thank you, Till. Maybe just a very quick follow-up. On the April kind of six days of strike activity, did you see any evidence that you started to see any future bookings impact or kind of nervousness for people around traveling just to, due to the very high number of strike days?
Well, I mean, look, it's not ideal. Nobody wants it, and nobody's happy also with the sentiment effects of it. Normally, these things do come back relatively quickly. Let me just add one point that Carsten has already highlighted. We have managed very well to use our other sister or subsidiary airlines and our hub system to capture and serve for the good of our passengers and guests, most of them or a lot of them. That's not ideal, and nobody is happy from an experience point of view, but of course, we were able to help most of them getting through that.
Great. Thank you.
Thank you. We will now take the next question. This is from Muneeba Kayani from Bank of America. Please go ahead.
Good morning. Thanks for taking my questions. Till, I just wanted to follow up a bit on how to understand your guide for this year. The 2Q fuel recapture of 60%, you've said the fuel bill will increase based on the forward curve, EUR 1.7 billion for the year. Is it right to think that most of that increase, say, EUR 1 billion is coming in 2Q? If you get a 60% recapture, then that's something like a EUR 400 million headwind on Q2 EBIT, then that with more than 100% recapture gets positive in the second half. That's my first question. Secondly, just wanted to follow up on your comments around jet fuel supply risks. Is that mostly a comment on Asia and Africa post-June?
Kind of what are you seeing right now in Asia and Africa, and how much of a concern would jet fuel availability in Europe be post-June and at your hubs? Thank you.
Let me start, hi Muneeba. Let me start off with the second question first. I mean, obviously, we go also here with what our suppliers tell us, in terms of visibility, but also what the authorities in the end tell us for the European situation overall. I think it's fair to say that nobody has got complete crystal ball of how things were gonna play out. What you can probably see is that the market is finding a bit its way at the product level. This is why you also see that actually jet crack has come down again, vis-à-vis gas oil, or crack there, which is basically a bit of an indication. We have seen first imports, obviously, from the U.S. coming in.
We've seen imports from Africa, coming in on jet fuel. Of course, these are elements that keep kind of, let me say, speak to the or depict the fluidity and dynamic within the markets, eventually. Let me also say it's fair, nobody knows exactly how things were gonna play out. Of course, there was one of our core assumptions for the guide or the guidance that I also said is that we will basically, continue to have jet fuel available. If that would materially change, then of course, things, many things do change, but that's not what we see at the moment. Let me go to your first question. Just the guide, the guidance Q2 recapture rate.
Yeah, fuel bill up EUR 1.7 billion in total. Just as a reminder, within that, there's also cargo. Roughly 10%, you can say is cargo. Cargo, we follow a different principle where we usually pass on the price increases directly, so that takes you roughly to about EUR 1.5 billion. Now when you think of it, very true, 50, very true. The second quarter will take a very high share. I would say probably about, yeah, 50% of that, roughly you can see in the second quarter. This will weigh on the recapture rate because the booking stock that we brought into the second quarter, of course, carries also a sizable portion of pre-Iran War bookings at a lower price level.
Basically, as I said, sequentially, you move through and you've got the forward curve on the one hand side for fuel, and you've got the yield seat load factor translating into RASK in Q3 and Q4 into a recapture rate above 100%.
Thank you. That breakdown is helpful. Kind of half of the EUR 1.5 billion in 2Q, and then we assume the 60%, so the remaining would be an EBIT impact, at least for passenger airlines.
Let me-
Cargo now would have a benefit.
Muneeba, let me just clarify if I wasn't precise enough. In Q2, almost 50% of the fuel increase, that should come in the second quarter. The largest part of fuel increase is in the second quarter, almost 50%, I would expect. Okay?
That's clear. Thank you.
Thank you. We will now take our next question. This is from Andrew Lobbenberg from Barclays. Please go ahead.
Hi, Carsten. Hi, Till. Can I come back to these numbers where you're showing the post-crisis booking revenues compared to the pre-crisis? You're showing it's 14% for April. I think if I'm not misinterpreting, you're showing it as an 8% improvement for Q2. On a normal booking curve over time, the unit revenues that come in go up. When you're, you know, on the month coming into the quarter, that booking curve is gonna be moving up quite a lot. Therefore, when you're giving us these numbers of 12% for April or 14, excluding mainline, 8% for Q2, I mean, in a normal year, or does this industry ever have one? You know, in a normal circumstance, how much would that booking curve move up? You know, just want to put that in perspective.
My second question would come round to premium. When we look at your premium unit revenues on long haul, they are in Q1 better than economy, but not by much. When we hear the American carriers talk, indeed, when we hear Ben at Air France talk, premium is wonderful. It is a halcyon of joy and huge prices, and your gap is quite small. You also told us that the March premium unit revenues were pretty damn good, suggesting that January and February premium revenues were falling. Can you perhaps help me understand why your premium performance looks more calm than your other peers who are talking in the industry? Thanks.
Hi, Andrew. Let me take the first question. I can only revert back to what I said, but let me try to rephrase a bit. I can explain what we see for the second quarter. It is in essence a snapshot on booking inventory today, versus end of February, which was basically pre-crisis. That is the eight percentage points higher for the entire inventory of the second quarter. It is true that we do see a change in booking behavior, which is more short-term, which I also commented on even more so in the cont area versus intercont.
We have seen, and this is the element which I think I also commented on, seat load factor closing nicely in April, which kind of then gives you the result of, which I withheld to tell you the April, the April RASK, but which gives you eventually the figure. This is what we see, and at the same time, this is what we have to live with, because the circumstances or the more volatile environment, of course, makes people also book more short-term. Premium. Premium revenue on intercont.
Clearly, I mean, here you need to step back and basically see a bit more the strategic view because we are getting in, we are transforming the experience with more and more long-haul aircraft coming in with the Allegris cabin or SWISS Senses. In all fairness, that now started, let me say, only or started more in Q1. Also driven by the certification of the remaining business class seats, where the bulk of it got obviously certified and now available for sale. There was, I would say, on the yield uptick in the premium classes, I expect that there's a lot more to come in the weeks and months, quarters and years, as we continue to roll out Allegris and SWISS Senses.
Okay. Thank you.
Thank you. Our last question today is from Marc Zeck from Kepler Cheuvreux. Please go ahead.
Thank you for taking my question. Actually, just two clarification questions. With the more than 100% recapture rate in H2, would it basically mean that you expect with the forward curve, indicating, fuel prices to come down somewhat? Did you kind of keep ticket prices then stable from here on, or let's say from May on, therefore you will have higher than 100% recapture rate, indicating that you probably won't give back lower fuel prices to the passengers for now? I guess we heard from some of your U.S. competitors, that were saying that airlines were kind of underpricing generally.
If we look into 2027, assuming at one point we'll have normal fuel prices again, would you attempt to keep current ticket price levels? Or would you, at one point, fully give back any decline in fuel prices to the end consumer? I guess second question on the adjusted EBIT guidance. I guess that the EBIT guidance significantly above 2025, 10% includes strike cost. You said there was probably EUR 200 million or so in strike cost, so that's about 10% or so of 2025 EBIT.
If I look at consensus pre-crisis, we were looking, so analysts were looking for 15% to 20% up. Does it mean basically, you now see, or you basically see the same EBIT level, ex strikes that you saw pre-crisis, and that you're still looking for 10% up minus those 10% from the strike level, matching those 15% to 20% that were expected initially? Is that the right way to look at it, or am I missing here something? Thank you.
Yeah. Hi. Hi, Marc. Two important and great questions. Let me start with the second one first. Just to remind you again, when we moved into our outlook at the beginning of the year, you can imagine, and it gives you also a bit of a perspective on how we think about outlook, we came in with headroom. We picked the significantly above to give you a good guide of how you can think about everything, and we had headroom. With everything that has happened now around us, including also the EUR 200 million, roughly EUR 200 million of strike costs so far, the headroom has largely gone. This gives you an idea where we stand roughly.
That is how to think about kind of the strike positioning as such. Underneath, you've got obviously big moving items with fuel to start off with, the whole revenue steering and yield evolution on the other end side. These are the two big factors I think explained extensively. Furthermore, at P2P segment. Eurowings, you saw also that we take a slight step back in terms of what we expect from them in the year. Of course, we see cargo performing stronger, and that goes also into the year to go, with MRO largely being unaffected. That gives you the big moving parts at the segment level for our guide or the expectation for the rest of the year.
When you now think about or your first question, the forward curve, of course, I mean, there's nothing, there's nothing more intelligent than the forward curve in the market to determine what price levels for fuel should be. That forward curve is in backwardation. That is a core assumption. When you now think of relative to others, indeed, we benefit from being hedged. Let me say also to your question, how do you think about pricing? Prices are done at market level eventually. Of course, we've got, we've got a view on this, and we've got a dedicated, yield-based strategy that we pursue with the goal to make sure that we achieve an offsetting of the fuel bill over time.
I think that is shared, also what the, our U.S. peers, highlighting. It's not a secret. They've got a higher fuel bill to stem. That creates overall in the market, while everyone is also reducing capacity a bit, it creates an environment which I believe is also allowing these yields to realize. Time will tell.
Maybe, Marc, just one quick addition to your view of the industry or your question towards the view, remember, we have been saying for some time, and I now talk also for my counterpart in United, because obviously we legally allowed to talk on capacity and price. We have been saying for some time with demand being somewhat limited for probably years to come. Sorry, supply being limited for probably years to come due to the ongoing issues with the engine manufacturers, airframers, and let's be honest, more even with the supply chain below. On the one hand, a healthy demand around the world, we should see good years ahead. Now it's proven that if you raise prices, customers go along. I think that's a proof of our idea that this indeed industry probably has been underpricing its products.
In the end, the market sets prices, as Till said, but there is room to get more for the limited amount of supply we can due to lack of equipment offer. I think one day maybe we might look back at this time after the Iran war as a turning point where the industry was starting to show what its products are really worth, and maybe also consolidation on top, the healthy ones be getting stronger and larger. Obvious in the U.S., little less obvious in Europe, but I'm sure similar trends one day might be looked at as an important part of the industry's recovery to higher profits.
Thank you. Proper closing remarks, I guess. Well, look forward to that. Thank you.
Thank you. There are no further questions. I will now hand back to Marc-Dominic Nettesheim for closing remarks. Thank you.
Thanks to all of you for the good discussion, for the lovely interaction and questions. We from Investor Relations look forward to staying in touch with you and talk to you on the latest conference or next quarter. Bye-bye.
Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.