Reorientation Of The Lufthansa Group Leads To A Significant Improvement In Earnings

Published on : Thursday, August 3, 2017

LufthansaThe Lufthansa Group increased its sales in the first half of 2017 by 12.7 percent to around 17.0 billion euros (previous year: 15.0 billion euros). Traffic revenues in this period rose by 14.2 percent to 13.3 billion euros (previous year: 11.6 billion euros). The relevant earnings figure, the adjusted EBIT, has roughly doubled to over one billion euros (previous year: 529 million euros). The Lufthansa Group thus achieved the best half-year results of its corporate history.



The result is mainly due to strong demand and lower unit costs for the passenger airlines. Unit costs, adjusted for currency effects and fuel costs, fell by 1.2 percent in the first half of the year, and fell by 3.4 percent in the second quarter alone. At the same time, unit sales rose by 0.5 percent, while in the second quarter by 1.8 percent. In all traffic areas, the capacity utilization of the aircraft was higher than in the previous year, despite an increased supply. At 6.1 percent, the adjusted EBIT margin was 2.6 percentage points higher than in the previous year. Higher fuel costs had impacted earnings by € 223 million, an increase of 9.5 per cent on the previous year at € 2.6 billion.



“We have achieved the best half-year result of the company’s history. In addition to strong demand and a solid price environment, this was due to the fact that we were once again able to reduce our structural costs. Our hard work on cost reductions pays off. We must continue this effort. Cost reductions are the most important means of sustainably improving our margin, “says Ulrik Svensson, CFO of Deutsche Lufthansa AG, in presenting the figures.



Financial ratios have improved significantly

Consolidated net income for the first half of the year amounted to EUR 672 million, an increase of 56.6 percent over the same period last year (previous year: EUR 429 million). Operating cash flow rose by more than EUR 1 billion to EUR 3.2 billion. This is due to the good result and higher advance bookings. With roughly equivalent investments of EUR 1.2 billion, free cash flow rose by 87.0 percent to EUR 2.1 billion (previous year: EUR 1.1 billion). Net debt has declined by more than half (57.8 percent) to 1.1 billion euros (previous year: 2.7 billion euros) compared to the end of the last financial year. The pension obligations as of the reporting date of June 30, 2017 amounted to 8.1 billion euros and thus around 200 million below the year-end value.



“Our financial ratios have improved significantly again. We almost doubled the free cash flow, the debt has declined by more than half. We were able to finance the necessary investment in new aircraft and an attractive product on the basis of increased sales and lower costs. This is important to keep our company further than the number one in Europe, “emphasizes Svensson.



Networkairlines increase earnings particularly in the second quarter 

The Lufthansa Group’s network airlines increased their sales in the first half of 2017 by almost 700 million euros to 11.1 billion euros on the basis of improved demand in all traffic areas. They generated a result of 757 million euros (previous year: 487 million euros). All network airlines were able to reduce their unit costs against the previous year. Lufthansa and Austrian Airlines were also able to increase their unit sales.



Lufthansa achieved a result of 569 million euros (previous year 361 million euros).



SWISS was able to compensate for the decline in average earnings by a sharp rise in sales and to increase its earnings to 187 million euros (previous year: 127 million euros).



Austrian Airlines increased its earnings to three million euros (previous year: -1 million euros).



Point-to-point airlines

The point-to-point airlines almost doubled their sales to 1.8 billion euros (previous year: 0.9 billion euros), on the basis of strong, mainly inorganic capacity growth, particularly the first-time consolidation of Brussels Airlines. They increased their result by 58 million euros to -77 million euros. In the second quarter, both Eurowings and Brussels Airlines achieved a positive result.



“All passenger airlines have been able to increase their capacity despite an increased offer. This shows that our offers are well received by our customers. The network airlines in particular contributed significantly to the improved result. We are also very pleased with the development at Eurowings, which is already drawing this year black figures and thus sooner than planned, “says Svensson.



Aviation Services

Lufthansa Cargo was able to increase its currency-adjusted yields by 9.3 percent on the basis of positive demand trends. In the first two quarters of the year, the company achieved a positive result, which totaled 78 million euros in the first half year (previous year: -45 million euros).



Lufthansa Technik was able to increase its earnings in the first half year by 8.8 percent to EUR 222 million (previous year: EUR 204 million).



LSG Group generated earnings of EUR 13 million in the first half year (previous year: EUR 24 million). The main reason for the decline compared to the previous year is restructuring costs.


In particular, due to currency effects, the Other companies and Central Functions division increased its result to 41 million euros (previous year: 50 million euros).


Source:- Lufthansa

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