Airline Code [DLH]
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Tags :Continental Europe, Lufthansa, finances
The Lufthansa Group increased its offer and sales during the past business year. The Group was able to almost reproduce its previous year’s result by posting operating profit of around EUR1.35 billion. The Group profit was posted at EUR599 million; Last year’s figure had been EUR1.66 billion, however, it had also included EUR585 million of profit from extraordinary items.
Speaking at the presentation of the annual result for 2008 Lufthansa, Chairman and CEO Wolfgang Mayrhube said, “This represents an outstanding result and its quality is underlined by the fact that it has been achieved during a time of global economic crisis. It reflects the quality of our company. A company in which a strong team, strong products and a strong balance were decisive in ensuring success. We intend to maintain our lead in the far more challenging environment of 2009. Our financial and operational flexibility will allow us to benefit from the opportunities that come our way during the crisis.”. In view of the very good result and taking into consideration the current challenging economic situation, the Supervisory Board and Executive Board will be proposing a dividend of 70 eurocent per share at the annual general meeting.
Whereas the worldwide economic slowdown has particularly been felt in the Passenger and Catering business segments, the operating results of the remaining business segments developed positively. In the Passenger Business segment, fuel costs at record levels, strike-related losses and the decline in demand caused by the state of the world economy during the second half of the year, all had a negative effect on the result. However, the attractive premium products, a demand-oriented offer strategy and the successful integration of SWISS all played decisive roles in ensuring a year-on-year growth in sales.
Lufthansa Chairman and CEO said, “Crises also always seem to have a repositioning aspect to them and we will be sure to secure the right position for the future. We will be cost-effective, improve efficiency even further and take important steps in the planned expansion of our airline group, in order to ensure the long-term consolidation of our market position and that of our partners.”
Speaking on the initiated mergers with Austrian Airlines and Brussels Airlines, Mayrhuber underlined that it was important that no obstacles be placed in the way of integration: “Swift and uncomplicated implementation remains the most essential requirement to ensure the future survival of Europe as a successful centre of aviation in the face of global competition. The current economic crisis painfully reveals the structural deficits in European aviation. It has become obvious that European and intercontinental network connections from smaller and medium-sized markets can no longer be realized. Only a strong and economically successful European airline structure can meet the specific requirements of the European economy and provide its centres of business with a sustainable quality of global connections, thus also providing employees with long-term perspectives.”
The Logistics business segment achieved a significantly improved operating result during the past year. In the MRO business segment, LHT extended its advantage as the leading provider of maintenance, repair and overhaul services for civilian aircraft and recorded a year-on-year rise in its operating result. The IT Services business segment was able to profit from targeted measures aimed at improving productivity and achieved a significantly improved operating result. Despite the introduction of cost reducing and productivity improving measures, the operating result of the Catering business segment was below the figure of the previous year.
One of the most challenging years in its history lies ahead of the aviation industry said the Lufthansa Chairman and CEO looking ahead to 2009. It is not possible to forecast the duration and extent of the economic crisis. “Lufthansa stands for reliability and foresight. We cannot and will not rest on the laurels of last year’s result in this highly challenging economic environment. Lufthansa will continue to keep an eye on a solid balance sheet and maintain its financial and operational flexibility. We will continue to adjust our offer to the current demand situation.
“The prerequisite for success is that all of the employee groups and business segments, thus the entire Lufthansa family, work together through the crisis. Only in this way, will we be able to seize the opportunity to remain profitable and powerful in the crisis, and preserve and increase the attractiveness of our company. We intend to continue investing in aircraft, products and training. We want to secure jobs and offer perspectives; and we want to make dividends possible.”
Lufthansa therefore introduced measures to secure the result at an early stage and shall continue to implement strict cost management and demand-oriented capacity management. However, in view of the dramatically deteriorating framework conditions, the further development of business is associated with significantly higher risks than usual. The Executive Board therefore expects a distinctively positive result for the 2009 business year; however, one that will be clearly below the previous year’s result.
During the year 2008, the Lufthansa Group generated revenues totalling EUR24.9 billion, a year-on-year increase of 10.9%. The traffic revenue rose by 13.8% to EUR20 billion. Besides the full consolidation of SWISS in the first half of 2008, this was mainly due to the increased passenger figures with currency adjusted higher average revenues in the Passenger Transportation business segment. During the reporting period, the Group’s operating income increased by altogether 12.1% to EUR27 billion.
Operating expenses rose to EUR25.6 billion during the past year, mainly as a result of the rise in fuel costs to EUR5.4 billion. This was equivalent to an increase of 39.3%. This increase was due to price and quantity-related factors, as well as the change in the scope of consolidation with the full consolidation of SWISS in the first half of 2008.
The Group recorded an operating result of EUR1.35 billion in 2008, EUR24 million less in comparison with the record figure in 2007. The decline can mainly be attributed to the negative developments in the Passenger Transportation business segment. The Group posted a result of EUR599 million. Last year this figure was at EUR1.7 billion, however, it included EUR503 million of profit from the sale of the shares in Thomas Cook, as well as book gains of EUR82 million from the repurchase of own stock by WAM Acquisition SA.
Lufthansa’s capital expenditure during the reporting period totalled EUR2.2 billion, of which EUR1.3 billion were spent on the expansion and modernization of the fleet and EUR214 million were spent on the acquisition of a minority stake in the JetBlue Airways Corporation on 22-Jan-08. Operating cash flow totalled EUR2.5 billion. At the close of the final quarter, the Group’s net liquid assets stood at EUR125 million.
(c) Centre for Asia Pacific Aviation. Date posted: 12-Mar-09
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Lufthansa reports operating profit in 2008 at EUR1.35 billion 
