Thursday, March 7, 2024
Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG, says:
“The Lufthansa Group has regained its financial strength. I would like to thank our customers for their continued loyalty and each and every one of our approximately 100,000 employees. With their above-average commitment, they made 2023 one of the three best years in Lufthansa Group’s history.
This success benefits everyone. We want to pay our shareholders a dividend for the first time since 2019. We are also giving our employees a share in our good results development through significantly above-average collective wage agreements and profit-sharings. And this year, we also aim to finally return our customers’ satisfaction to premium levels. That is why we are investing the record amount of 4.5 billion euros in new aircraft, in our cabin interiors, lounges, ground processes and in personal and digital services. As part of the largest fleet modernization in our history, we expect to take delivery of at least 30 new aircraft this year, including around 20 long-haul jets for Lufthansa – another record!”
In the fiscal year of 2023, the Lufthansa Group achieved its third highest financial performance in company history, bolstered by sustained robust demand for air travel and an unprecedented success at Lufthansa Technik.
Revenue soared to 35.4 billion euros, up from 30.9 billion euros the year before. Operating profit, as represented by Adjusted EBIT, climbed to 2.7 billion euros from 1.5 billion euros, enhancing the Adjusted EBIT margin to 7.6 percent from the prior year’s 4.9 percent. Net profit more than doubled, reaching 1.7 billion euros compared to 790 million euros in the previous year. The return on capital employed (Adjusted ROCE) increased by 5.5 percentage points to 13.1 percent, surpassing the 2024 goal of ten percent a year in advance.
Travel interest remained strong in 2023, with ticket demand climbing once more. The Lufthansa Group served 123 million passengers, marking a 20 percent increase from the prior year’s 102 million.
Flight offerings by the Lufthansa Group airlines rose by 14 percent to 946,000. Seat availability was incrementally increased throughout the year, reaching an average of 84 percent of the capacity offered in 2019. The seat load factor saw an improvement of 3.1 percentage points to about 83 percent, aligning with pre-pandemic levels.
Ensuring stable flight operations and enhancing customer experience were prioritized in capacity planning. An impressive 98 percent of all flights operated as scheduled, although system-required buffers meant productivity was still below 2019’s pre-crisis benchmarks, especially for the main Lufthansa brand.
The passenger airlines segment witnessed substantial revenue growth due to high demand and expanded capacity, with revenue reaching 28.3 billion euros for the financial year 2023, up from 22.8 billion euros. Yields increased by approximately six percent over the previous year, primarily fueled by robust demand in the leisure travel sector, especially for premium classes and during a record-breaking travel summer. While business travel showed slower recovery.
Despite facing high cost inflation, the Adjusted EBIT for the passenger airlines segment significantly improved, totaling 2.0 billion euros (compared to the previous year’s -300 million euros), marking a return to profitability. For the first time, all passenger airlines within the Group reported operating profits, with SWISS, Austrian Airlines, Brussels Airlines, and Eurowings all recording their best results ever.
In the financial year 2023, Lufthansa Technik experienced sustained high demand for its maintenance, overhaul, repair services, and other offerings, achieving a record-breaking performance despite challenges such as tight supply chains and escalating costs for materials and labor. The company’s operating profit soared to 628 million euros, up from 554 million euros in the prior year. With its “Ambition 2030” strategy, Lufthansa Technik aims for significant investments in its core operations, international expansion, and the advancement of digital initiatives.
Meanwhile, the air freight sector saw a return to normalcy in demand after several extraordinary years. Lufthansa Cargo’s capacity expanded by 7% year-over-year, thanks to increased passenger flights which also boosted cargo space. Despite a drop from the previous year’s Adjusted EBIT of 1.6 billion euros to 219 million euros, the firm maintained a robust operating margin of 7.4%.
Focusing on the long-term, the company prioritized generating substantial cash flow in 2023 to enhance its investment capacity and reduce debt. The operating cash flow reached 4.9 billion euros, slightly less than the previous year’s 5.2 billion euros, which included unique effects from demand surges post-COVID restrictions. Capital expenditures rose by 23% to 2.8 billion euros, largely for fleet modernization with new, more fuel-efficient aircraft. The Adjusted Free Cashflow was 1.8 billion euros, marking the group’s third-highest. This achievement significantly reduced net debt to 5.7 billion euros, bettering pre-crisis levels, despite an increase in net pension obligations.
The group’s equity also rose to 9.7 billion euros by year-end, and its leverage ratio improved, underscoring a stronger balance sheet. This financial robustness earned the Lufthansa Group investment-grade ratings from all major agencies, a first since the pandemic.
For the first time since the pandemic, shareholders will again share in the profits, with a proposed dividend of 0.30 euros per share for 2023, reflecting a yield of about 4% on the year-end share price. This proposal aligns with the group’s policy of returning 20 to 40 percent of its profit to its shareholders.
Remco Steenbergen, Chief Financial Officer of Deutsche Lufthansa AG:
“The strong result for the financial year 2023 is another important step in positioning the Lufthansa Group for the future. Our solid balance sheet and strong free cash flow enable us to make the necessary investments in our fleet and our product. I am convinced that these investments will pay off – for our customers, but also for our shareholders. Over the past three years, I have had the privilege of supporting the company in overcoming the crisis and putting the Group back on a solid financial footing. The Lufthansa Group has set itself the goal of continuing to pursue the path of profitable growth in order to increase the operating margin in the long term and continue to create value in the future. I am particularly pleased that we can once again allow our shareholders to participate in our success by resuming dividend payments.”
Enhanced Investments from the Customer Perspective
Customers of the Lufthansa Group stand to gain significantly from the group’s profitable year in 2023. In 2024, an unprecedented investment of approximately 4.5 billion euros will be directed towards enhancing the customer experience. This includes the acquisition of new aircraft, upgrading seats and lounges, as well as offering superior culinary options and expanding digital services, all aimed at substantially boosting customer satisfaction.
The introduction of the “Allegris” cabins for Lufthansa and “SWISS Senses” for SWISS marks a new benchmark in the airline industry. Starting from May, Lufthansa passengers will get a first-hand experience of these innovations, beginning with the Munich to Vancouver route.
A steadfast commitment to operational excellence, on-time performance, and enhanced customer communications underscores the group’s efforts. A significant initiative to improve service across the group’s airlines was initiated at the start of the year to achieve these goals.
Unprecedented Fleet Expansion
The Lufthansa Group is amidst its most extensive fleet modernization ever. The group plans to welcome more than 30 new planes in 2024, including approximately 20 long-haul aircraft. This includes a noteworthy number of Boeing 787-9 “Dreamliners”, eight Airbus A350-900s, and a Boeing 777 freighter, all designated for Lufthansa Airlines and Lufthansa Cargo. This marks a historic high in terms of the number of new long-haul jets expected within a single year for Lufthansa.
Currently, the group’s order book exceeds 250 of the latest generation aircraft, setting another milestone. This fleet renewal is anticipated to phase out older aircraft, enhancing passenger comfort and significantly cutting CO2 emissions. The new, more fuel-efficient jets are expected to consume up to 30% less fuel than their predecessors, thereby considerably lowering CO2 emissions.
Employee Participation in Success
The Lufthansa Group extends its success to its employees through superior wage agreements and variable compensation. Since mid-2022, compensation for various job groups within Deutsche Lufthansa AG has increased by over 10%. For the previous year, the group has distributed profit-sharing bonuses totaling more than half a billion euros, as negotiated with labor representatives. Last year, over 13,000 new employees joined the group, with plans to recruit an additional 13,000 this year.
Dr. Michael Niggemann, Chief Human Resources Officer and Labor Director of Deutsche Lufthansa AG:
“We are proud to be one of the best employers in the industry and want to remain so. Our employees perform exceptionally well every day. That’s why we let them share in our economic success. We have significantly increased remuneration since mid-2022. The offers we have made in the current collective bargaining round are also above average. However, they naturally also take our economic performance into account. We face fierce international competition and need economic success – not only for good employment conditions, but also to invest in more fuel-efficient aircraft, new seats and cabin interiors or digital services, for example. We want to grow. However, this is only possible if we are competitive overall and also in terms of labor costs. The uncompromising strikes by the trade union Verdi are damaging our guests, the company and ultimately our employees. We are always open to short-term negotiations with Verdi – however, we bear joint responsibility for finding good solutions. Verdi must suspend strike action and be prepared to enter into constructive negotiations without preconditions.”
Outlook
The Lufthansa Group is optimistic about an upward trend in flight ticket demand this year, noting a significant interest for the Easter and summer holiday seasons. The anticipated increase in flight capacity still shows higher booking load factors for the coming three months compared to the previous year, with Spain, Italy, Greece, and other Mediterranean destinations being the favorites, along with a robust demand for flights to and from North America.
To cater to this surging demand, the Lufthansa Group plans to enhance the capacity of its passenger airlines. The focus for 2024 remains on ensuring smooth flight operations to enhance reliability and punctuality. The Group expects to operate at approximately 94 percent of its 2019 capacity, reflecting a 12 percent growth from the previous year.
Financially, the Lufthansa Group anticipates a substantial increase in revenue for the fiscal year 2024. Passenger airlines’ unit revenues are projected to remain stable or slightly decline compared to the previous year, while unit costs are expected to be consistent. Consequently, the adjusted EBIT for Passenger Airlines is predicted to match the previous year, similar to the outcomes in the Logistics and MRO segments. The Group’s operating result (adjusted EBIT) is also forecasted to align with the 2023 level, maintaining the objective of achieving a sustainable adjusted EBIT margin of at least 8 percent and forecasting an adjusted free cash flow of a minimum of 1.5 billion euros. Net capital expenditures are estimated to be between 2.5 and 3 billion euros, with higher gross investments partially balanced by sale-and-lease-back transaction inflows.
Seasonal trends predict stronger performance in the second and third quarters, whereas the first quarter might witness a larger adjusted EBIT loss than the previous year due to strike impacts and a dip in Logistics division profits, previously boosted by the air freight market’s growth amid the coronavirus pandemic.
Transformation and Internationalization
The Lufthansa Group is steadfast in its evolution into a global airline group, having finalized the sale of its catering division (LSG Group) by late October 2023 and anticipating the completion of the AirPlus payment specialist sale by summer 2024. Approval from the EU Commission for an investment in Italian airline ITA Airways is expected within the year, with the Lufthansa Group actively collaborating with the commission for a quick resolution and execution.
This investment in ITA Airways underscores the Lufthansa Group’s commitment to international expansion, aiming to capitalize on attractive global growth opportunities.
Sustainability Initiatives
The Lufthansa Group’s dedication to sustainability is evident in its pioneering use of Sustainable Aviation Fuel (SAF) since 2011 and its efforts to introduce CO2 filtration and underground storage techniques. The Group is expanding technological partnerships to combat unavoidable CO2 emissions.
As a leader in sustainable aviation services, the Group has successfully sold over one million Green Fare tickets for flights in Europe and North Africa within the first year of introduction, extending tests to selected long-haul routes. Additionally, over 1,500 companies worldwide have invested in SAF with the Lufthansa Group in 2023, reflecting a growing corporate commitment to reducing flight-related CO2 emissions.
Tuesday, April 30, 2024
Tuesday, April 30, 2024
Tuesday, April 30, 2024
Tuesday, April 30, 2024
Tuesday, April 30, 2024
Tuesday, April 30, 2024
Tuesday, April 30, 2024
