Lufthansa Weak Revenue In Passenger Business
By Mike Mitchell
October 29, 2009, Weak revenue unrelenting in passenger business segment
despite demand bottoming out Forceful implementation of measures to
safeguard earnings to continue. Lufthansa has posted an operating profit
of 226 million euros for the first nine months of 2009. For the first
time, this figure also includes the results of Austrian Airlines and
BMI, who contributed a total of 28 million euros. The Group’s financial
result therefore remained significantly below the previous year’s figure
at the close of the third quarter.
The reasons for the decline in the result lay essentially in the weaker demand due to the state of the economy and the disproportionate decline of average yields in the passenger business segment. The crisis-related slump in the number of business travellers has led to increased price sensitivity in all booking classes.
“Today we benefit from the fact that we were on a solid foundation with
attractive products and that we were quick to recognize the turbulence
ahead and tighten our safety belts. However, we cannot be satisfied with
the result that we have achieved to date and will therefore have to
increase our efforts further and do even more to safeguard earnings,”
commented Lufthansa Chairman and CEO Wolfgang Mayrhuber, speaking at the
presentation of the third-quarter figures.
Lufthansa Chairman and CEO Wolfgang Mayrhuber commented on the economic
developments in the Group’s individual business segments saying: “The
figures speak for themselves. Whereas recent months have seen the
stabilization of demand in the passenger business, revenues remain at
rock-bottom despite record load factor. All of the business segments are
working hard to overcome the consequences of the crisis and to adjust
their structures to the altered competitive environment.” The operating
result for the Passenger Airline Group, which included the financial
results of Austrian Airlines and bmi for the first time, was clearly
below the level of the previous year. In response to the negative trend
in the core business segment, all of the Group’s airlines have initiated
measures to safeguard earnings and continued to pursue these during the
The aim of Lufthansa Passenger Airlines’ “CLIMB 2011” programme to
safeguard the earnings is the sustainable improvement of the result by
one billion euros by the end of 2011. The implementation of the
programme began in the third quarter. The Logistics business segment was
forced to deal with a record slump in revenue during the first nine
months of the year and posted an operating loss. The measures to
safeguard earnings at Lufthansa Cargo, such as the reduction of
freighter capacities and reduced working hours, as well as lower
material costs and project budgets, continue to be applied.
Lufthansa MRO recorded an increase in revenue despite highly challenging
conditions. In addition, the business segment was able to compensate
lower demand in individual areas and even achieve a year-on-year
improvement in its operating result. The IT Services business segment
also recorded a slight improvement in its result for the third quarter.
However, revenue and operating result remained below the previous year’s
figure and the measures to safeguard earnings will therefore also
continue to be implemented in this business segment. Revenue and
operating result also declined in the Catering business segment. The
efforts of the LSG Sky Chefs therefore continue to focus on
counteracting the decline in total revenues.
“Lufthansa is a strong company with a strong team of staff. We strike
the balance between short-term result-optimization and long-term
benefits. We have learned to successfully fly through turbulence and we
now have the opportunity to prove this again,” emphasized Wolfgang
Mayrhuber. He added that the Group would continue to operate in a
challenging environment with significant declines in revenue and burdens
on the result; the risks would lie particularly in the development of
the fuel prices and demand.
He continued to state that negative effects on the result could also be
expected during the coming months from the Group’s new airlines. The
decisive factor in achieving the targeted positive operating result for
the Group would be the development of the financial result during the
fourth quarter and the effectiveness of the introduced countermeasures.
According to Mayrhuber, the achievement of this aim during the current
business year was still accompanied by the corresponding risks.
The first nine months 2009 in figures - During the first nine months of
2009, the Lufthansa Group generated revenues totalling 16.2 billion
euros, 13.2 per cent less than the year before. The traffic revenue fell
by 16.3 per cent to 12.6 billion euros. This was mainly due to the
decline in passenger and freight figures, as well as lower average
yields per passenger. Overall, the operating income of the Group
decreased by 8.7 per cent to 18.1 billion euros during the reporting
Operating expenses decreased by 5.8 per cent to 17.8 billion euros
during the first nine months of 2009. This was mainly due to the 1.5
billion euros lower fuel costs; equivalent to a year on year reduction
of 36.4 per cent, which was both price and volume related. The fees and
charges were 3.0 per cent above the previous year’s figure. The adjusted
figure without the consolidation effect was 2.1 per cent below the
previous year’s figure.
The Group’s operating result during the first nine months of the year
was 226 million euros, which was 728 million euros less than during the
same period last year. This figure includes the financial results of
Austrian Airlines and bmi with a total of 28 million euros, as well as a
balance of 61 million euros from the first-time consolidation of
Austrian Airlines (badwill). The decline is mainly the result of the
negative developments in the Group’s Passenger Airline Group and
Logistics business segments. The company’s net profit is -32 million
euros; this time last year it was at 529 million euros.
Lufthansa’s capital expenditure during the reporting period totalled 1.8 billion euros, of which 1.4 billion euros were spent on the expansion and modernization of the fleet. The acquisition of 45 per cent of the shares in SN Airholding SA/NV (Brussels Airlines) accounted for 65 million euros. The acquisition of airlines, which are to be consolidated (particularly Austrian Airlines and bmi), accounted for 56 million euros after the deduction of the acquired cash and cash equivalents. 77 million euros were gained from the disposal of the remaining Condor shares and the repayment of related loans. Operating cash flow totalled 1.4 billion euros. At the close of the third quarter, the Group's net indebtedness stood at 1.9 billion euros.
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