Lufthansa Group increases operating result before restructuring costs and one-off effects

IMG_0019Operating result for first half-year 2013 up by EUR 233m after adjusting for restructuring costs and one-off effects. Reported operating result falls to a good EUR 72m (previous year: EUR 235m). Forecast for the full year 2013 unchanged: revenue growth; operating profit up on reported earnings for last year. Simone Menne: “The restructuring of the Lufthansa Group is gaining speed.”

Adjusted for restructuring costs and one-off effects, the Lufthansa Group increased its operating result by EUR 233m in the first half of 2013. The reported result did fall from EUR 235m last year to EUR 72m, but the previous year’s result included positive one-off effects from the restructuring of Austrian Airlines and the settlement of pension obligations at bmi amounting to EUR 325m in total. Expenses in connection with the SCORE programme also depressed earnings of the past six months further on a one-off basis.

The Group kept revenue roughly stable at EUR 14.5bn (-0.3 per cent), despite a 5.1 per cent decrease in the number of flights in the passenger and freight business. Due to positive one-off effects last year, including the transfer of flight operations from Austrian Airlines to Tyrolean Airways, the Group recorded a net loss for the period of EUR 204m, a fall of EUR 254m.

“The restructuring of the Lufthansa Group is gaining speed”, explained Simone Menne, Member of the Executive Board and Chief Financial Officer at Deutsche Lufthansa AG, upon publication of the financial figures. “Implementation of the steps adopted in various SCORE projects is going to plan and is enabling the Lufthansa Group to take key decisions for the future. Without the one-off effects, the Group’s operating profit would have been higher than in the first half of last year.”

Lufthansa German Airlines, which accounts for the most revenue, managed to boost its operating result substantially to EUR -91m (previous year: EUR -268m). Optimised capacity management was the main reason for the success. The use of larger and more efficient aircraft also had a positive effect. Despite operating a smaller number of flights, Lufthansa German Airlines carried nearly as many passengers as in the same period last year. Income per revenue seat-kilometre declined slightly, but costs per seat-kilometre fell more steeply, which contributed to the improvement in earnings.

High fuel costs and the long winter weighed on the result for Lufthansa German Airlines, as did a fall in demand in the Asia/Pacific and Middle East/Asia traffic regions, which also affected the other airlines in the Lufthansa Group.

Extensive investments in the onboard and ground products were appreciated by passengers. At the World Airline Awards 2013 in mid June, Lufthansa German Airlines was given top marks in the “Best First Class Airline Lounge”, “Best Western European Airline” and “Best Transatlantic Airline” categories. Simone Menne said: “We are improving the travel experience for our customers with enthusiasm and dedication. We want Lufthansa to be the first Western five-star airline.”

The Germanwings product, which received a substantial qualitative upgrade in the course of expanding the route network to include additional European direct connections outside the Lufthansa hubs in Frankfurt and Munich as of 1 July, is already gaining traction, according to Menne: “Germanwings is being extremely well received by the market and can already point to some gratifying results.”

SWISS increased its operating result to EUR 63m in the first half-year (previous year: EUR 54m). Austrian Airlines reported a year-on-year fall of EUR 198m in its operating result to EUR -35m. This was largely due to one-off effects from transferring flight operations to Tyrolean Airways. Adjusted for these effects, the result rose by EUR 20m. Overall, the Passenger Airline Group recorded an operating result of EUR -64m (previous year: EUR 73m).

Lufthansa Cargo increased its operating profit at the end of the first half-year, in part thanks to more flexible capacity management and lower depreciation and amortisation, to EUR 61m, an improvement of EUR 13m. Lufthansa Technik increased its operating profit sharply by EUR 73m to EUR 219m. LSG SkyChefs generated an operating result of EUR 19m, compared with EUR 22m in the same period last year. In the IT-Services segment, Lufthansa Systems earned an operating profit of EUR 5m, compared with EUR 8m last year.

The Lufthansa Group stands by its forecast for the full year. Group revenue for 2013 should be higher than last year and the operating result higher than the previous year’s reported earnings of EUR 524m. Implementation of the SCORE measures should boost earnings sustainably.

The first half of 2013 in figures

Overall, the Group’s operating income declined slightly to EUR 15.5bn in the reporting period, a fall of 0.2 per cent. Revenue in the first half of 2013 came to EUR 14.5bn – down 0.3 per cent on last year. Traffic revenue declined by 0.6 per cent to EUR 11.8bn. Operating expenses rose by 1.1 per cent in the first half-year to EUR 15.5bn. Fuel costs fell by EUR 90m to EUR 3.5bn, a decline of 2.5 per cent, largely due to lower volumes. Included in this amount is a negative contribution of EUR 67m from price hedging. Fees and charges fell by 0.9 per cent on the previous year, due to a lower number of flights.

In the first half of 2013, the Lufthansa Group generated an operating result of EUR 72m. To facilitate comparison, the operating result for the same period last year was adjusted by EUR 255m following the amendments to accounting standard IAS 19. Following this adjustment, the result for the first half of 2012 came to EUR 235m.

The net result for the period fell by EUR 254m to EUR -204m. Earnings per share sank to EUR -0.44.

In the reporting period, the Lufthansa Group invested EUR 1.4bn, which was on a par with the same period last year. Of the total, EUR 1.2bn went on modernising and maintaining the fleet. Cash flow from operating activities came to EUR 2.3bn and free cash flow (cash flow from operating activities less net capital expenditure) to EUR 1.3bn. Cash flow therefore climbed steeply year on year. For the first half-year, the Group had net debt of EUR 1.2bn. Following the application of new accounting standards (IAS 19), the equity ratio is now 17.5 per cent.


Lufthansa Group January–June2013        2012** 2012 (old)  Change 
Total revenue €m 14,464 14,509 14,509 -0.3%
of which traffic revenue €m 11,778 11,851 11,851 -0.6%
Result from operatingactivities €m -1 204 -49
Operating result €m 72 235 -20 -69.4%
Adjusted operatingmargin* in % 0.9 1.9 0.2 -1.0 pp
Net profit/loss for the period €m -204 50 -168 -254
Capital expenditure €m 1,352 1,385 1,385 -2.4%
Cash flow from operating activities €m 2,313 1,662 1,662 39.2%
Employees as of 30.6. 116,816 117,416 117,416 -600
Earnings per share -0.44 0.11 -0.37 -0.55

*) Operating result plus write-backs of provisions, divided by revenue
**) Previous year’s figures have been adjusted in line with changes to IAS 19

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