High fuel costs and air traffic tax burden Lufthansa result for 2011
Group generates operating profit of EUR 820m / Shareholders to receive dividend of EUR 0.25 per share
Deutsche Lufthansa AG upped its revenue by 8.6 per cent to EUR 28.7bn in the 2011 financial year and posted an operating profit of EUR 820m. Its operating profit was therefore down EUR 200m compared to the previous year. Christoph Franz, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG, said: “Posting a profit of this size is impressive in such a turbulent environment shaped by exogenous shocks and regulatory pressures. This confirms once again that the Lufthansa Group is Europe’s number one.” As of the year-end, the net loss for the period comprised a loss of EUR 285m from discontinued operations. This included the current result recorded by the Group company British Midland Ltd. (bmi) – due to be sold to the International Airlines Group – and valuation effects in connection with its disposal. Taking this into consideration, the Group generated a net loss of EUR 13m. However, the result from continuing operations amounted to EUR 289m. Despite posting a negative result in its individual financial statements prepared in accordance with German commercial law (HGB), Lufthansa intends to make an exception and deviate from its dividend policy. The Company will therefore propose a payout of EUR 0.25 per share at the Annual General Meeting on 8 May. Christoph Franz commented: “Trusting in the Lufthansa share and our Company’s positive development is worthwhile. That is why we want to enable our investors to share in our operating profit again this year.”
Group programme SCORE aims to increase operating margin long term
However, Franz also emphasised: “Although the operating profit for 2011 is generally pleasing in itself, the operating margin is not.” The Group’s adjusted operating margin for 2011 was 3.4 per cent. This is why Lufthansa rolled out a Group-wide programme called SCORE in January with the aim of sustainably improving its result by at least EUR 1.5bn by the end of 2014. By implementing this scheme, the Group wants to be able to fund its capital expenditure in the long run and safeguard its financial solidity. “We have to respond to the change in our industry with flexible structures that enable us to remain Europe’s number one in the future. We also want to keep investing in innovative products for our customers,” said Franz. Lufthansa is taking various steps in a bid to achieve its goal, such as realising potential synergies in the Group’s purchasing and making further improvements to the harmonisation of the airlines’ flight plans. Franz added that it would also be necessary to make both administration and management functions leaner and to pool shared services in order to further reduce the Group’s overhead costs.
Passenger business suffers from high fuel costs
The Passenger Airline Group business segment contributed EUR 349m towards the Group’s operating profit for the year after increasing its revenue to EUR 22.3bn. Higher fuel costs were the main reason behind the 44.5 per cent reduction on the previous year’s figure of EUR 629m. The Group also paid air traffic tax totalling EUR 361m to the German and Austrian authorities. The business segment reduced its planned growth for 2012 from 9 to 3 per cent in the third quarter of 2011 and now anticipates a total increase of 2 per cent in available seat-kilometres this year. Meanwhile, Lufthansa Passenger Airlines is examining zero year-on-year growth. It accounted for EUR 168m of the Passenger Airline Group’s operating result. This represents a fall of EUR 214m compared with the previous year. However, the company upped the share of premium income on long-haul routes by 1.7 percentage points to over 50 per cent – even though Economy Class now accounts for a larger proportion of seats than before, following the fleet modernisation. The Climb 2011 programme to safeguard earnings, which was wrapped up at the end of the year, also enabled Lufthansa Passenger Airlines to reduce its unit costs (adjusted for fuel costs) by 2.5 per cent overall and by 4 per cent on short-haul routes. SWISS proved best able to compensate for the high fuel prices and weak economic environment, generating an operating profit of EUR 259m. However, this was EUR 39m down on the previous year’s figure. Although Austrian Airlines improved its operating result by 6.1 per cent, it still posted an operating loss of EUR 62m. For this reason, restructuring the company remains a top priority and efforts have been stepped up in this field. Air traffic tax had a major impact on Germanwings’ operating result, which came in at EUR -52m on 31 December 2011. Compared to other airlines Germanwings was hit the hardest by the air traffic tax, which amounted to 5.4 per cent of its revenue.
Freight and service business segments make a positive contribution to consolidated operating result
As in the past, the Group benefited from its structure: the other business segments contributed towards the Group’s overall result with an operating profit. In the Logistics business segment, Lufthansa Cargo achieved an operating result of EUR 249m – the second best in its history. Flagging industry growth in the second half of 2011 and rising fuel costs were the main reasons why it was unable to match the record figure from 2010. At this stage, Lufthansa Cargo has no plans to increase capacity this year as against 2011. Lufthansa Technik’s operating performance developed well, but the company fell marginally short of its previous year’s result and posted an operating profit of EUR 257m due to provisions for long-term contracts. Thanks to the realignment of Lufthansa Systems, the IT Services business segment almost doubled its operating profit to EUR 19m and stabilised its revenue. In the Catering business segment, LSG Sky Chefs grew both its revenue and its operating profit, recording a figure of EUR 85m for 2011.
Group anticipates an operating profit in the mid three-figure million euro range for 2012
The Lufthansa Group is anticipating an operating profit in the mid three-figure million euro range for the current financial year. Franz expects all the business segments to contribute towards this result, with operating profits forecast across the board. However, he added that further developments in the business environment – and fuel prices in particular – would determine precisely how high the Group’s operating profit would be at year-end. Franz emphasised: “We are determined to keep positioning ourselves at the forefront of the competition in the future. We have the resources to do this on our own. We have paved the way to take the necessary steps and have already seen some initial results. The Executive Board is determined to carry on consistently working towards success.”
2011 in figures
In 2011, the Lufthansa Group’s revenue totalled EUR 28.7bn – an increase of 8.6 per cent on the previous year. Traffic revenue improved by 10.8 per cent to EUR 23.8bn. Overall, the Group’s operating income went up to EUR 31.2bn in the reporting period, an increase of 6.7 per cent. Operating expenses rose by 9.3 per cent in 2011 to EUR 30.4bn. One of the main reasons was the EUR 1.3bn rise in fuel costs, which came to EUR 6.3bn in total. This represents a price and volume-driven increase of 26.4 per cent.
This figure already includes a positive hedging result of EUR 694m. Fees and charges were up 15.8 per cent on 2010. The Lufthansa Group generated an operating profit of EUR 820m in 2011, down by EUR 200m in comparison with the previous year. Altogether the net result for the period was EUR -13m. One year earlier, the Group posted a figure of EUR 1.1bn. The net loss includes a negative valuation effect from changes in the time values of hedging transactions in line with IAS 39 and the result of discontinued operations containing bmi. Earnings per share consequently came to EUR -0.03.
Lufthansa invested EUR 2.6bn in the reporting period. Of this sum, EUR 2bn went on expanding and modernising the fleet. Cash flow from operating activities came to EUR 2.4bn and free cash flow (cash flow from operating activities less net capital expenditure) to EUR 713m. At the end of 2011, the Group had net debt of EUR 2.3bn. Its equity ratio was 28.6 per cent.
Lufthansa Group January–December 2011 2010 Change
Total revenue In €m 28,734 26,459 8.6%
of which traffic revenue In €m 23,779 21,466 10.8%
Profit from operating activities In €m 773 1,386 -44.2%
Operating result In €m 820 1,020 -19.6%
Adjusted operating margin* In % 3.4 4.7 -1.3 pp
Net profit/loss In €m -13 1,131 -1,144
Capital expenditure In €m 2,575 2,273 302
Cash flow from operating activities In €m 2,356 2,992 -21.3%
Employees as of 31.12 120,055 117,019 2.6%
Earnings per share € -0.03 2.47 -2.50
*) Operating result plus write-backs of provisions, divided by revenue
The 2011 annual report is available on the internet at www.lufthansa.com/investor-relations.
Photo material can be downloaded from
# # #
Disclaimer in respect of forward-looking statements
Information published in this press release concerning the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of definitive historical facts. These forward-looking statements are based on all discernible information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication. Since forward-looking statements are by their nature subject to uncertainties and imponderable risk factors
– such as changes in underlying economic conditions – and rest on assumptions that may not occur, or may occur differently, it is possible that the Group’s actual results and development may differ materially from the forecasts. Lufthansa makes a point of checking and updating the information it publishes. It cannot, however, assume any obligation to adapt forward-looking statements to subsequent events or developments. Accordingly, it neither expressly nor conclusively accepts liability, nor gives any guarantee, for the actuality, accuracy or completeness of this data and information.