BY Kawira Mutisya
German airline Lufthansa has increased its revenues by 12.7 per cent hitting €17.0 billion in the first half of the year, compared to last year’s earnings of €15.0 billion in the same period.
A statement from the airline shows that traffic revenues were up by 14.2 percent to EUR 13.3 billion (prior-year period: EUR 11.6 billion.
This has been attributed to the new alignment of the Lufthansa Group.
“We have achieved the best first half-year result in our company’s history,” says Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG. “In addition to strong demand and a robust pricing environment, this is attributable to the fact that we achieved a further structural reduction in costs. Our hard work in cutting our costs is reaping its rewards. But we must continue these endeavors: this is the most important way that our margins can be improved sustainably.” He added.
The Lufthansa Group is divided into the three strategic areas of Hub Airlines, Point-to-Point Business and Service Companies. The Group’s network carriers, with their premium brands of Lufthansa, SWISS and Austrian Airlines, serve its home market from their Frankfurt, Munich, Zurich and Vienna hubs. With its Eurowings brand, the Group also offers short- and long-haul point-to-point services in the growing private travel market. And with its service companies, which are all global market leaders in their individual industries, the Lufthansa Group has found success in further areas of the aviation business.
The Lufthansa Group’s airlines currently serve 308 destinations in 103 countries on four continents and offer 11,738 weekly frequencies. The Group’s total fleet comprises some 617 aircraft and its member airlines will be taking delivery of 205 new aircraft between now and 2025. In 2016, the Lufthansa Group welcomed 109.7 million passengers aboard its flights and generated sales of around €31.7 billion. The Group employs around 129,000 personnel.
The press statement from the airline shows that the earnings performance is attributable primarily to strong demand and lower unit costs at the Group’s passenger airlines.
“Unit costs excluding fuel and currency effect declined by 1.2 percent in the first half-period, and by 3.4 percent in the second quarter alone. Unit revenues at constant currency were raised by 0.5 percent, and by 1.8 percent in the second quarter.” It reads in part.
Data from the carrier shows that the net profit for the first half of 2017 amounted to €672 million, a 56.6 percent improvement on the prior-year period (prior year: €429 million). Cash flow from operating activities rose more than EUR 1 billion to EUR 3.2 billion. The increase was driven by the good result and more advance bookings for the third-quarter period. With capital expenditure basically unchanged at EUR 1.2 billion, free cash flow rose by 87.0 percent to EUR 2.1 billion (prior year: EUR 1.1 billion). Net financial debt was reduced by more than half – 57.8 percent – to EUR 1.1 billion (year-end 2016: €2.7 billion). Pension obligations stood at €8.1 billion as of 30 June 2017, some €200 million below year-end 2016. The special contribution of €1.6 billion into the new defined contribution pension scheme for the flight attendants of Lufthansa will now start in the third quarter and will continue in various installments until the end of the year.
Load factors were up on their prior-year levels in all traffic regions, despite increased capacity. The Adjusted EBIT margin of 6.1 percent was a 2.6-percentage-point improvement on the prior-year period. Higher fuel costs burdened the result with €223 million: at €2.6 billion, first half-year fuel costs were 9.5% up on their prior-year level. All the Group’s first half-year performance figures and fuel costs include the impact of the first-time consolidation of Brussels Airlines and of the aircraft wet-leased from Air Berlin.
“Our key financial performance indicators have been significantly improved further,” Ulrik Svensson confirms. “Our free cash flow has almost doubled, and our net financial debt has been more than halved. Higher revenues and lower costs have enabled us to soundly finance the investments required for new aircraft and an attractive product. All of which is vitally important in keeping our company the number one in Europe.”
Lufthansa Cargo raised its constant currency yield by 9.3 percent, thanks to favorable trends in demand. The company reported a positive Adjusted EBIT for both the first and the second quarter, resulting in first half year earnings of EUR 78 million (prior year: EUR -45 million).