Lufthansa Group posts nine-month results for January to September 2017

Eleanor Steed
By Eleanor Steed October 26, 2017 15:12

Lufthansa Group posts nine-month results for January to September 2017

During the none months from January to September 2017, Lufthansa Group has reported adjusted EBIT of €2.6 billion – an increase of €883 million. Revenues increased by €2.9 billion or 12.1% to €26.8 billion. Traffic revenues rose 14.4 per cent to €21,360 million (prior-year period: €18,674 million). Free cash flow improved over 80 per cent to €2.8 billion, while net financial debt reduced more than 80 per cent to €521 million

“We achieved another record earnings result in the first nine months of this year,” said Carsten Spohr, Chairman of the Executive Board of Deutsche Lufthansa. “A result that gives us the investment and growth capabilities we need to play an active part in the consolidation of the European airline market, and to continue to invest in the future of our company.”

The good result is attributable primarily to continuing positive business trends at the Group’s airlines. Despite increasing overall capacity for the period by 11.7 per cent, the Group’s air carriers improved their aggregate nine-month seat load factor by 2.1 percentage points. Unit costs excluding fuel and currency factors were reduced by 0.8 per cent in the same period, though a slight 0.2-per-cent increase was recorded for the third quarter mainly due to provisions for higher profit sharing payments of 1.1 percentage-points).

The Group’s airlines posted higher-than-prior-year seat load factors and yields for all key traffic regions. Unit revenues excluding currency factors were up 2.0 per cent for the first three quarters and 4.5 per cent for the third-quarter period. The nine-month Adjusted EBIT margin of 9.6 per cent was an improvement of 2.6 percentage points on the prior-year period. Third-quarter Adjusted EBIT margin stood at 15.5 per cent, with all the Group’s airlines (including Lufthansa Cargo) posting significant margin increases. Higher fuel costs burdened the nine-month result with €243 million. In total, these amounted to €3,939 million – a 6.6-per-cent increase on the prior-year period, though this is at least partly attributable to the first-time consolidation of Brussels Airlines and the resulting higher fuel needs.

Net profit for the first nine months of 2017 amounted to €1,853 million, broadly in line with a prior-year result. Cash flow from operating activities increased €1,405 million to €4,459 million, thanks largely to the good result and higher advance bookings.
“Despite higher investments, we almost doubled our free cash flow and reduced our net financial debt by over 80 per cent in the first-nine-month period,” says Ulrik Svensson, Chief Officer Finance of Deutsche Lufthansa. “Particularly encouraging is that all our Group’s airlines were able to raise their margins. The positive economic environment played its part in this. But these results also – and above all – reflect all our hard work over the past few years, which are now bearing fruit. We now need to continue working to consistently lower our costs and further creating the financial strength we need for the future.”

The Network Airlines of the Lufthansa Group generated total revenues of €17,695million for the first nine months of 2017, an increase of €1,065 million on the prior-year period. They reported an Adjusted EBIT of €1,947 million (prior-year period: €1,324 billion). The Airlines’ Adjusted EBIT margin amounted to 11.0-per-cent for the first three quarters and 18.0-per-cent for the third-quarter period.

All three Network Airlines posted improvements in their Adjusted EBIT results: Lufthansa to €1,405 million (prior-year period: €922 million), SWISS to €442 million (prior-year period: €322 million) and Austrian Airlines to € 100 million (prior-year period: € 79 million).

With the first-time consolidation of Brussels Airlines and the further addition of the Air Berlin wet-lease operations, the Group’s Point-to-Point Airlines almost doubled their nine-month revenues to €3,031 million.

“We expect Eurowings to report a positive result as early as this year,” Ulrik Svensson confirms, “which is a year earlier than we originally envisaged.”

With airfreight demand still buoyant in all regions, Lufthansa Cargo raised its yields excluding currency factors by 10.6-per-cent for the third-quarter period. It generated a positive contribution for the fourth quarter in a row. Nine-month Adjusted EBIT amounted to €98 million (prior-year period: €-69 million).

As a result of various factors including residual costs relating to the closure of the Hamburg aircraft overhaul operation and higher material costs, nine-month Adjusted EBIT for Lufthansa Technik decreased by €33 million to €333 million (prior-year period: €366 million).

The LSG Group achieved a nine-month Adjusted EBIT of €66 million (prior-year period: EUR 80 million). The €14 million decline reflects the costs of the group’s ongoing restructuring.

Fourth-quarter unit revenues are expected to increase slightly on organic capacity growth of 5.5-per-cent.

Eleanor Steed
By Eleanor Steed October 26, 2017 15:12