Lufthansa Group raises operating profit for first half-year
Improved cost structures and lower depreciation help increase operating profit by
EUR 41 million to EUR 114 million / competitive pressures on fares, devaluation of
the Venezuelan bolivar and pilots’ strike depress second-quarter results / Lufthansa
Group to slow capacity growth for the winter period and go on the offensive with
new innovation and quality drives / profit outlook for 2014 and 2015 confirmed
East Meadow, NY, July 31, 2014 – Deutsche Lufthansa AG reports an operating profit of EUR
114 million for the first six months of 2014, an improvement of EUR 41 million on the EUR 73
million of the same period last year. Total revenue for the period amounted to EUR 14.2 billion,
a decline of just under 2.1 percent. Adjusted to exclude non-recurring expenditure totaling some
EUR 105 million – for such actions as the accelerated installation of the new Lufthansa
Business Class seating and provisions relating to the Score program – the first-half operating
result amounted to EUR 219 million, a EUR 75 million year-on-year improvement. The prime
reasons for the improved result were the positive impact of the new depreciation policy for
aircraft and spare engines which was adopted at the beginning of the year, and the enhanced
cost structures in the passenger business segment. The net result for the first half-year
amounted to EUR -79 million, a EUR 124 million improvement on the prior year period.
“For the full year 2014, we are confirming our profit guidance, despite the unusual adverse
developments in the second quarter. This quarterly performance was shaped by a number
of one-off effects, such as strikes and currency devaluations. At the same time, we have
presented a comprehensive work program with quality, growth and innovation initiatives, which
we will drive forward with great determination. In doing so, we are also forging the right path for
strengthening the Lufthansa Group’s competitiveness and future viability,” says Simone Menne,
Chief Officer Finance & Aviation Services of Deutsche Lufthansa AG. The goals already
announced in this regard, Menne continues, include raising the contribution to overall revenues
from new businesses, new platforms and the Group’s service business segments from the
present 30 percent to 40 percent between now and 2020.
The positive impact of enhanced cost structures and lower depreciation needs was countered
by factors which contrived to lower operating profits, particularly in the second quarter period.
Overcapacities – especially on North and South American services, on European routes and,
more recently, on Asia-Pacific routes – prompted price declines in both the passenger and the
cargo segment. The strike in April by Vereinigung Cockpit pilots’ union at Lufthansa also eroded
EUR 60 million from the first-half group operating result, while the impairments required on
outstanding receivables in the recently-devalued Venezuelan bolivar removed a further EUR 61
million. The Group has already responded to the declines in passenger and cargo revenues by
reducing its planned further seat-kilometre capacity growth from the original 5 percent to 3
percent.
The first-half operating result for the Passenger Airline Group amounted to EUR -96 million, a
EUR 32 million decline on the prior-year period. Lufthansa and Germanwings reported a firsthalf operating result of EUR -146 million (down EUR 55 million), while Austrian Airlines posted
an operating result of EUR -44 million (down EUR 9 million). Swiss reported a first-half
operating profit of EUR 92 million, a EUR 29 million improvement on the prior-year period.
Lufthansa Technik achieved a first-half operating profit of EUR 206 million, only EUR 13 million
below the high level of the prior-year period. LSG SkyChefs reported a first-half operating profit
of EUR 18 million, largely in line with prior-year levels, and IT Services raised its first-half
operating result by EUR 6 million to EUR 11 million.
The Lufthansa Group aims to increase the share of total revenues, which is contributed by its
service business segments, its new businesses and its new platforms (including the new
WINGS multi-platform concept for point-to-point air services away from the Group’s major hubs)
from the present 30 percent to 40 percent between now and 2020. This goal is part of a broader
raft of measures, including quality and innovation drives, through which the Group aims to
participate even more substantially in the further growth of the aviation sector.
In the shorter term, the Lufthansa Group expects the markets to remain weak in the second half
of 2014, though with the capacity reductions already initiated the situation should ease
somewhat compared to the first-half period. For 2014, as a whole, the Group remains confident
of posting an operating profit of around EUR 1 billion, or EUR 1.3 billion, excluding non-
recurring items. And for 2015, the Group currently expects to achieve an operating profit of
around EUR 2 billion.
The first half of 2014 in figures
Total revenue for the first six months of 2014 amounted to EUR 14.2 billion, a 2.1 percent
decline on the same period last year. Total operating income also declined 2.4 percent, to EUR
15.2 billion. At the same time, total first-half operating expenditure was reduced by a more
substantial 3.7 percent to EUR 15.0 billion. Fuel costs for the period declined by EUR 260
million or 7.4 percent to EUR 3.2 billion. The figure includes a EUR 23 million loss from fuel
price hedging activities. Fees and charges were 0.1 percent above their prior-year level. The
Lufthansa Group achieved an operating profit of EUR 114 million for the first half of 2014. The
net result for the period amounted to EUR -79 million, a EUR 124 million improvement on the
first six months of 2013. First-half earnings per share rose from the EUR -0.44 of 2013 to EUR 0.17.
The Lufthansa Group increased its investments in modernizing and maintaining its aircraft fleet
to EUR 1.3 billion in the 2014 first-half period. All in all, the Group invested EUR 1.6 billion,
some EUR 196 million more than in the same period last year. Cash flow from operating
activities totaled EUR 1.7 billion, while free cash flow (operating cash flow less net capital
expenditure) amounted to EUR 546 million. Net debt stood at EUR 1.6 billion, down EUR 81
million year-to-date. The balance sheet equity ratio capitalization principles amounted to 16.6
percent, down 4.4 percentage points from the end of 2013.
The interim report for the first half of 2014 will be available here from 07:30 CEST on Thursday,
July 31st. The corresponding webcast for media and analysts will be broadcast on the same day
from 09:30 CEST via the following link here.
About Lufthansa
One of the world's largest and most prestigious airlines, Lufthansa currently flies to 253 destinations in 103 countries, with hubs
in Frankfurt, Munich, and with the Lufthansa Group acquisition of Austrian Airlines, Brussels Airlines and SWISS – Vienna,
Brussels and Zurich. From its 20 North American gateways, Lufthansa and its partners serve over 450 destinations in more than
120 countries. An industry innovator, Lufthansa has long been committed to environmental care and sustainability, operating the
most technologically-advanced and fuel-efficient fleet in the world. Its long-haul fleet to and from North America includes the
Boeing 747-400 and the 747-8, as well as the Airbus A330, A340 and A380. Currently, Lufthansa has nearly 300 new aircraft
worth about $48 billion on order. Lufthansa is the largest European operator of the A380 and was the launch customer for the
new Boeing 747-8, the industries’ two most fuel-efficient passenger aircraft. Known for its premium services, Lufthansa
continues its $150 million program earmarked for building new or upgrading existing lounge facilities across its worldwide
network and will spend more than $3.6 billion in new onboard products and services by 2015. In 2010, Lufthansa re-launched its
broadband wireless Internet service onboard, FlyNet. For more information or reservations, visit www.LH.com.
Deutsche Lufthansa AG
Corporate Communications
Christina Semmel
Tel: +1 516-296-9671
[email protected]
www.LH.com
www.lufthansa.com/newsroom