New Alignment of the Lufthansa Group Leads to Significant Profit Improvement
The Lufthansa Group has increased its total revenues by 12.7 per cent to EUR 17.0 billion in the first six months of 2017 (prior-year period: EUR 15.0 billion). Traffic revenues were up by 14.2 per cent to EUR 13.3 billion (prior-year period: EUR 11.6 billion). And the key earnings indicator Adjusted EBIT was roughly doubled to over EUR 1 billion (prior-year period: EUR 529 million), giving the Lufthansa Group its best-ever first half year earnings result.
The earnings performance is attributable primarily to strong demand and lower unit costs at the Group’s passenger airlines. Unit costs excluding fuel and currency effect declined by 1.2 per cent in the first half-period, and by 3.4 per cent in the second quarter alone. Unit revenues at constant currency were raised by 0.5 per cent, and by 1.8 per cent in the second quarter. Load factors were up on their prior-year levels in all traffic regions, despite increased capacity. The Adjusted EBIT margin of 6.1 per cent was a 2.6-percentage-point improvement on the prior-year period. Higher fuel costs burdened the result with EUR 223 million: at EUR 2.6 billion, first half-year fuel costs were 9.5 per cent up on their prior-year level. All the Group’s first half-year performance figures and fuel costs include the impact of the first-time consolidation of Brussels Airlines and of the aircraft wet-leased from Air Berlin.
“We have achieved the best first half-year result in our company’s history,” says Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG. “In addition to strong demand and a robust pricing environment, this is attributable to the fact that we achieved a further structural reduction in costs. Our hard work in cutting our costs is reaping its rewards. But we must continue these endeavors: this is the most important way that our margins can be improved sustainably.”
Tangible improvements in key financial indicators
Net profit for the first half of 2017 amounted to EUR 672 million, a 56.6 per cent improvement on the prior-year period (prior year: EUR 429 million). Cash flow from operating activities rose more than EUR 1 billion to EUR 3.2 billion. The increase was driven by the good result and more advance bookings for the third-quarter period. With capital expenditure basically unchanged at EUR 1.2 billion, free cash flow rose by 87.0 per cent to EUR 2.1 billion (prior year: EUR 1.1 billion). Net financial debt was reduced by more than half – 57.8 per cent – to EUR 1.1 billion (year-end 2016: EUR 2.7 billion). Pension obligations stood at EUR 8.1 billion as of 30 June 2017, some EUR 200 million below year-end 2016. The special contribution of EUR 1.6 billion into the new defined contribution pension scheme for the flight attendants of Lufthansa will now start in the third quarter and will continue in various installments until the end of the year.
“Our key financial performance indicators have been significantly improved further,” Ulrik Svensson confirms. “Our free cash flow has almost doubled, and our net financial debt has been more than halved. Higher revenues and lower costs have enabled us to soundly finance the investments required for new aircraft and an attractive product. All of which is vitally important in keeping our company the number one in Europe.”
The Network Airlines of the Lufthansa Group raised their
total first half year revenues by just under EUR 700 million to EUR 11.1 billion, thanks to stronger demand in all traffic regions. The Network Airlines reported an Adjusted EBIT of EUR 757 million for the period (prior year: EUR 487 million). All airlines have lowered their unit cost compared to the same period last year. Lufthansa German Airlines and Austrian Airlines also saw their unit revenues increase.