January to
September 2016
·
Adjusted EBIT of
EUR 1,677m close to prior-year level
·
Adjusted unit costs
down 2.1 per cent
·
Successfulsteeringand
capacity measureslimitunit revenue decline
·
Lufthansa Passenger
Airlines, Austrian Airlines and LSG above prior-year levels
·
Financial stability
further strengthened
Outlook
·
Full-year Adjusted
EBIT approximatelyon previous year’s level
·
Eurowingsdeveloping
into European consolidation platform
·
Successful steeringand
capacity measures to continue
“The Lufthansa Group is developing with
stability in a difficult market environment,” says Carsten Spohr, Chairman of
the Executive Board & CEO of Deutsche Lufthansa AG. “We are responding to
the pricing pressures in the air transport sector with consistent capacity and
cost discipline. Our three-pillar strategy – our premium network airlines, our
successful dual brandEurowings and our world-leading service companies – is
reaping its rewards. Our business is diversifiedand robust. And we are
confident to reach last year’s good results’ level also for the full year 2016.”
“We are building on this position of
strength to grow further through global partnerships and drive the
consolidation within Europe via our Eurowings platform. The expansion of the
Eurowings Group is progressing well, thanks to the planned wet-lease agreement
with Air Berlin and our planned full acquisition of Brussels Airlines. This
would make Eurowings the Number Three in European in point-to-point traffic,
less than two years since its launch. Following our successful new
joint-venture agreement with Air China, we have now secured our position in all
the key long-haul markets for thelong-term. This will sustainably support our
revenue development.”
Passenger
volumes were up for the period, but traffic revenues fell by 4.2 per cent in
the face of continued pricing pressures on both the passenger and the cargo
front. Total revenue for the Lufthansa Group for the nine months of January to
September 2016 amounted to EUR 23.9 billion, a 1.8percent decline from the same
period last year. Adjusted EBIT, which is the key indicator for the Group’s economic
success, amounted to EUR 1,677 million for the period – 0.9 per cent down on
the record prior year but with a stable Adjusted EBIT margin. Adjusted EBIT for
the third-quarter period declined 6.3 per cent to EUR 1,148 million.
The earnings trends reflect substantial
declines in unit revenuesand further improved unit costs. Constant currency unit
revenuesdeclined 5.8 per cent in the January-to-September period. Prices remain
under strong competitive pressure on transatlantic routes, in particular to and
from South America. In the Asia business, the increase in individual bookings did
not yet fully offset the substantial decline in group bookings. In the European
hub traffic, by contrast, revenues remained relatively stable. The pressure on
prices eased somewhat in the traditionally strong month of September, thanks in
particular to a good short-termbooking development of corporate customers. Moreover,
Lufthansa slowed its capacity growthand successfully intensified promoting its Premium
Economy product.
The Lufthansa Group also made structural progress
on the cost. Constant currency unit costs, adjusted for fuel and non-recurring effects,declined
by 2.1 per cent.Fuel costswere EUR 798 million lower than they had been in the
prior-year period.
Earnings before interest and taxes (EBIT)
for the Lufthansa Group amounted to EUR 2,330 million, substantially above the Adjusted
EBIT result. The conversion of retirement and transitional paymentsfor cabin
staff in Germany from a defined-benefit to a defined-contribution system resulted
in the release of EUR 713 million of provisions to the income statement. Since
EBIT results for the prior-year period had also included non-recurring income
of EUR 503 million deriving from the conversion of the JetBlue bond, however,
the nine-month net group result after taxes saw only a 5.9percent improvement
to EUR 1,851 million.
The Lufthansa Group further enhanced its
financial stability in the thirdquarter. Pension liabilities declined. Net
indebtedness also showed a further decline. As a result, the equity ratio rose
from the 10.4 per cent at half-year to 14.1 per cent. Due the low-interest-rate
policy, the pension liabilities still remain on the high level ofEUR 10.5
billion. The reduction of the actuarial interest rate from 2.8 per cent at the
end of 2015 to 1.5 per cent by the end of September has added almost EUR 4
billion to pension provision in this year alone.
Stable development at the Passenger Airline Group
The passenger airlines have been
instrumental in the stable results of the Lufthansa Group this year. For the
first nine months, the Passenger Airline Group achieved an operating profit of
EUR 1,406 million, EUR 56 million more than for the prior-year period.
Lufthansa Passenger Airlines remains the driving forceraising its Adjusted EBIT
by EUR 179 million to EUR 955 million for the period. This equates to a margin
improvement by 1.8 percentage points to 8.1 per cent particularly by
consistently eliminating loss-making routes. Austrian Airlines raised its
nine-month Adjusted EBIT by EUR 18 million, while Swissrecorded a EUR 46
million decline in its Adjusted EBIT. Swiss is currently seeing its business
performance burdened by the strength of the Swiss franc but remains the Group’s
most profitable airline with an Adjusted EBIT margin of 9.8 per cent. Eurowings
posted an operating loss of EUR 35 million for the first nine months, a decline
of EUR 95 million on the prior-year period. Revenues were up 7.5 per cent to
EUR 1.6 billion; but the airline also incurred sizeable start-up and
development costs, along with a substantial decline in yields, especially in
its Southern European business. The cumulative contributionfrom the Lufthansa Group’s holdings in SunExpress
and Brussels Airlines were EUR 48 million down on the previous year. SunExpress
is currently operating in a particularly difficult market;Brussels Airlines
suffered substantial losses following the Brussels Airport terrorist attacks.
Lufthansa Cargo saw its nine-month revenues
decline 15.9 per cent to EUR 1.5 billion in the face of strong pricing
pressures. The company posted an operating loss of EUR 69 million, EUR 104
million down on the prior-year period. The air cargo business remains under
pricing pressure. But September was Lufthansa Cargo’s best month of 2016 by
far, raising the prospect of better business trends until year-end. Nine-month result
at Lufthansa Technikwas down EUR 32 million, though this still represents a
margin of 9.6 per cent. The LSG Group posted a nine-month Adjusted EBIT of EUR
80 million, a EUR 4 million improvement on January-to-September 2015.
Improved full-year outlook
The Lufthansa Group recently raised its earnings
forecast for the full year 2016. The Group now expects to report an Adjusted
EBIT approximately on previous year’s level. The Lufthansa Group posted an
Adjusted EBIT of EUR 1,817 million for 2015. The forecast has been primarily
raised in view of the encouraging developments in short-termbookings at the end
of the third-quarter period. In addition to stable corporate travel volumes,
the actions taken to steer capacities and revenues are also increasingly
reaping rewards. The Lufthansa Group will be slowing the capacity growth at its
passenger airlines by a further percentage point in the fourth-quarter period
to help further stabilize the pricing environment.The Group now expects to see
constant currencyunit revenuesto decline by 7 to8 per cent in the fourth
quarter, compared to a projection of 8 to 9 per cent three months ago. Constant
currency unit costs excluding fuel are expected to fall 2 to 3 per cent and fuel
costs to decline by EUR 140 million. For the Group’s other business segments (Lufthansa
Cargo, Lufthansa Technik, LSG and Others) cumulative earnings slightly below
the same period last year are expected for the fourthquarter.In addition to its
beneficial impact on the balance sheet, the switch of
Lufthansa cabin personnel’s retirement and transitional payment schemes to a defined-contributions
system should reduce annual costs by about EUR 60 million at current interest
rate levels from 2017 onwards.
“Despite the volatility of our business and
despite the difficult market environment, we are looking ahead with confidence
to 2017,” Carsten Spohr concludes. “We are moving forward; we are making things
happen; we are delivering. We will continue to further work onourfuture
viability also next year.”
|
Lufthansa Group
|
|
January
toSeptember
|
Change
|
Q3
|
Q3
|
|
|
2016
|
2015
|
|
2016
|
2015
|
||
|
Revenue
|
EUR
m
|
23,870
|
24,304
|
-1.8%
|
8,828
|
8,939
|
|
of which traffic revenue
|
EUR
m
|
18,674
|
19,486
|
-4.2%
|
7,037
|
7,305
|
|
EBIT
|
EUR m
|
2,330
|
1,663
|
+40.1%
|
1,812
|
1,200
|
|
Adjusted EBIT
|
EUR m
|
1,677
|
1,693
|
-0.9%
|
1,148
|
1,225
|
|
Adjusted EBIT margin
|
%
|
7.0%
|
7.0%
|
+/-0.0pts.
|
13%
|
13.7%
|
|
Net profit/loss for the period
|
EUR
m
|
1,851
|
1,748
|
+5.9%
|
1,422
|
794
|
|
Gross investments
|
EUR
m
|
1,634
|
1,931
|
-15.4%
|
|
|
|
Cash flow from operating
activities
|
EUR m
|
3,054
|
3,160
|
-3.4%
|
|
|
|
Employees as of 30September
|
124,192
|
119,391
|
+4,801
|
|
|
|
|
Earnings per share
|
EUR
|
3.98
|
3.78
|
+5.3%
|
3.06
|
1.72
|
The Lufthansa Group’s interim report for the first nine months of 2016
is being published simultaneously with this press release at 07:30 CET on 2
November 2016, and will be found atwww.lufthansagroup.com/investor-relations
