Lufthansa Group reports H1 2017 results

Eleanor Steed
By Eleanor Steed August 4, 2017 15:33

Lufthansa Group reports H1 2017 results

The Lufthansa Group increased its total revenues by 12.7 percent to €17.0 billion in the first six months of 2017 (prior-year period: €15.0 billion). Traffic revenues were up by 14.2 percent to €13.3 billion (prior-year period: €11.6 billion). And the key earnings indicator Adjusted EBIT was roughly doubled to over EUR 1 billion (prior-year period: €529 million), giving the Lufthansa Group its best-ever first half year earnings result.

“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.”

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 €1 billion to €3.2 billion. The increase was driven more advance bookings for the third-quarter period.

“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.”

The Network Airlines of the Lufthansa Group raised their total first half year revenues by just under €700 million to €11.1 billion, thanks to stronger demand in all traffic regions. The Network Airlines reported an Adjusted EBIT of €757 million for the period (prior year: €487 million). All airlines have lowered their unit cost compared to the same period last year. Lufthansa German Airlines and Austrian Airlines also saw their unit revenues increase.

Lufthansa German Airlines achieved a first half year Adjusted EBIT of €569 million (prior year: €361 million).

SWISS more than offset a decline in yields with a substantial increase in sales, and raised its Adjusted EBIT for the period to €187 million (prior year: €127 million).

Austrian Airlines improved its first half-year Adjusted EBIT to €3 million (prior year: EUR -1 million).

The group’s point-to-point airlines almost doubled their revenues for the first half-period to €1.8 billion (prior year: €0.9 billion). Their total earnings improved by €58 million to €-77 million. Both Eurowings and Brussels Airlines posted a positive result for the second-quarter period.

“All our airlines were able to improve their load factors despite raising their capacities,” Svensson adds. “This shows that our products are well received by our customers. As a result, our Network Airlines in particular made a substantial contribution to our improved overall earnings. We are also very satisfied with the developments at Eurowings, which now has every prospect of breaking even this year – earlier than anticipated.”

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 €78 million (prior year: €-45 million).

Lufthansa Technik improved its first half year Adjusted EBIT by 8.8 percent to €222 million (prior year: €204 million).

The LSG Group achieved an Adjusted EBIT of €13 million for the first half-year period (prior year: €24 million). The decline is primarily attributable to restructuring costs.

“In view of our successful first half-year development and the better visibility into the important third-quarter period, we have raised our forecast for 2017,” says Ulrik Svensson.

At the passenger airlines, the organic capacity growth in the second half-year is expected to be 4.7 per cent. From today’s perspective, unit revenues at constant currency will be negative in the second half-year compared to the prior-year period. They are, however, expected to perform better than this in the third quarter. Unit costs excluding fuel and currency effects are expected to come down slightly in the second half-year.

The Lufthansa Group forecasts an Adjusted EBIT for 2017 above previous year. Fuel cost excluding Brussels Airlines for the second half of the year are projected EUR 100 million below the previous year.”

Eleanor Steed
By Eleanor Steed August 4, 2017 15:33