Category Archives: Lufthansa Group

Lufthansa Group achieves an adjusted EBIT of EUR 1.3 billion in the third quarter

Lufthansa Group has issued this statement:

  • Third-quarter result only slightly below prior-year level, despite economic slowdown and higher fuel costs
  • Substantially greater unit cost reduction than in the first-half year
  • Slower growth at Group airlines and their competitors helps counter pricing pressures in Europe
  • North Atlantic business still buoyant, with third-quarter performance exceeding prior-year
  • Full-year guidance confirmed

In a challenging operating environment, Lufthansa Group achieved an Adjusted EBIT of EUR 1.3 billion for the third quarter of 2019, only slightly below the EUR 1.4 billion of the prior-year period. Against the backdrop of higher fuel costs, which were EUR 171 million above their 2018 level in the third quarter alone, the Group delivered a sound business performance for the period.

“Our airlines were able to translate their premium quality and market strength into solid third-quarter earnings,” confirms Carsten Spohr, Chairman of the Executive Board & CEO of Deutsche Lufthansa AG. “At Eurowings the turnaround measures are showing first results; and at Austrian Airlines, Brussels Airlines and Lufthansa Cargo we will be taking tangible corrective action to improve earnings. As Europe’s leading airline group, we are on a sound and stable strategic course.”

The third-quarter earnings were supported by continued strong business on North Atlantic routes. Unit costs were also substantially reduced in the third quarter, particularly at the Network Airlines.

The Network Airlines will grow only moderately in the 2019/2020 winter timetable period, and Eurowings will even reduce its capacity. In taking these actions, the Lufthansa Group is responding to the continued pricing pressures in Europe, which are further intensified by a general slowdown in the global economy.

Key figures for the third-quarter

Total revenues for the Lufthansa Group for the third quarter of 2019 increased by 2 percent to EUR 10.2 billion (prior year: EUR 10 billion). Third-quarter Adjusted EBIT amounted to EUR 1.3 billion (prior year: EUR 1.4 billion), an 8 percent decline on the prior year. The Adjusted EBIT margin stood at 12.7 percent (prior year: 14.1 percent). Fuel costs for the period were EUR 171 million above their prior-year level, primarily due to currency movements. Cost reductions in other areas only partly offset the increase.

Key figures for the first nine months

Total group revenues for January to September 2019 increased by 3 percent to EUR 27.7 billion (prior year: EUR 26.9 billion). Group wide fuel costs for the first nine months were EUR 620 million above their 2018 level. Nine-month Adjusted EBIT declined 30 percent to EUR 1.7 billion (prior year: EUR 2.5 billion), while the nine-month Adjusted EBIT margin stood at 6.2 percent (prior year: 9.1 percent). The net group result for the first nine months amounted to EUR 1 billion (prior year: EUR 1.8 billion).

Network Airlines

The Group’s Network Airlines Lufthansa, SWISS and Austrian Airlines achieved an Adjusted EBIT of EUR 1.6 billion for the first nine months of 2019 (prior year: EUR 2.1 billion). This corresponds to a decline of 23 percent on the prior-year period. Their nine-month Adjusted EBIT margin amounted to 9.0 percent, a 3.1 percentage-point decline (prior year: 12.1 percent).

The Network Airlines’ currency-adjusted unit revenues for the first three quarters of 2019 were down 2.8 percent on the prior-year period. Business over the North Atlantic remained strong, however, and even improved compared to 2018.

The Network Airlines’ currency-adjusted unit costs (excluding fuel) for the first nine months were down 0.8 percent from their prior-year level. Third-quarter unit costs were reduced by as much as 2.1 percent, as the Group’s Network Airlines felt the combined benefits of a substantial improvement in the stability of their flight operations (and thus lower delay and cancellation costs) and a much slower increase in maintenance costs than they had seen in the first half-year.

Eurowings

The Eurowings turnaround is showing its first successes, and continues to be consistently pursued. Third-quarter Adjusted EBIT increased by 39 percent to EUR 169 million (prior year: EUR 122 million). Currency-adjusted unitrevenues were up 3.5 percent for the period, as a result of a substantial reduction in long-haul capacity and operational improvements. Unit revenues in short haul declined at a low single-digit percentage rate.

Nine-month Adjusted EBIT for Eurowings amounted to minus EUR 104 million, a 6-percent decline (prior year: minus EUR 98 million). Nine-month currency-adjusted unit revenues saw a 1.8-percent decline, while nine-month currency-adjusted unit costs (excluding fuel) were down 3.8 percent.

Eurowings should be back to profitability by 2021, and should achieve a margin of 7 percent in the longer term.

Aviation Services

The Group’s Aviation Services reported mixed developments. Nine-month results for Lufthansa Cargo declined to minus EUR 33 million (prior year: EUR 162 million) as a result of continuing weak demand, especially on Asian routes. Lufthansa Technik raised its nine-month earnings 10 percent to EUR 371 million (prior year: EUR 337 million).

Nine-month earnings for the LSG Group were slightly down on 2018 at EUR 93 million (prior year: EUR 99 million).

The sale of LSG’s European operations is making good progress. A contractual agreement should be signed as planned by the end of this year.

Consistent further development into an Airline Group

The transfer of commercial responsibility for the Eurowings long-haul business to the Network Airlines, which has been announced this summer, will be fully implemented by the end of 2019. With the start of the current winter schedule, three new Eurowings long-haul destinations – Las Vegas, Windhoek and Barbados – received service from Frankfurt. A new Munich-Bangkok route had previously been opened in June. Lufthansa sees positive growth prospects for long-haul touristic flights from Germany. Looking ahead, the new product line will be pooled at a single flight operation, along the lines of Edelweiss in Switzerland.

Numerous efficiency enhancement programs resolved

“In an increasingly challenging market environment, it is more vital than ever that we consistently take every action within our influence and further reduce our costs,” says Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG. “We expect all Group companies to make their contribution here. And to these ends, we have resolved several further measures to improve the performance of our only modestly profitable and even loss-making companies.”

Austrian Airlines will in future focus solely on providing air services from and to its Vienna hub. All its decentralized bases will be closed. The aircraft fleet will also be standardized, with all the present Bombardier Dash 8 Q400s replaced by Airbus A320s by 2021. Productivity should also be further increased and personnel costs reduced. These actions should generate additional annual cost savings of EUR 90 million by the end of 2021.

Brussels Airlines should achieve an Adjusted EBIT margin of 8 per cent in 2022. To this end, the route network will be realigned, while the organization will benefit even more from synergies with the Network Airlines in the future. The administration of Brussels Airlines will be comprehensively digitalized and streamlined. The standardization of the fleet as well as productivity and process improvements in flight operations will also contribute to sustainable cost reductions.

Lufthansa Cargo will have its aircraft fleet both standardized and downsized. To this end, all ten operational Boeing MD-11 freighters will be withdrawn by the end of 2020. At the same time, two further Boeing 777Fs will be added, resulting in a fleet of nine Triple Seven freighters. Lufthansa Cargo will also continue to focus on reducing its costs.

Extensive sustainability drives

“Flying connects people, cultures and economies all over the world,” emphasizes Carsten Spohr. “Air transport is an irreplaceable part of our global infrastructure, and a prerequisite for globalization, for international understanding and for economic development. This makes it all the more important that we play our part in minimizing the environmental impact of our air transport activities. And that’s something we fully intend to do.”

Lufthansa will be investing more than EUR 3 billion in the fleets of its airlines in 2019, receiving a new and more fuel-efficient aircraft an average of every two weeks. The Lufthansa Group is also working with various partners to research new sustainable fuels. Customers can already order the sustainable fuels that are available for their air travel, or offset the carbon emissions it generates, via the online Compensaid platform. From next January, business clients of Lufthansa, SWISS and Austrian Airlines will also be carbon-neutral in all their air travel within Europe, since this provision will be gradually incorporated into all the corresponding corporate travel agreements from this point onwards.

“The future of sustainable and carbon-neutral air travel lies in the use of synthetic fuels,” Carsten Spohr maintains. “Germany’s air transport tax, which has again been substantially increased, must be used to promote the research and development of processes and procedures to produce such fuels. A financial cycle of this kind is the only way to achieve truly effective climate protection within the air transport sector.”

Lufthansa has also resolved various actions to reduce its levels of plastic waste. These will halve the volumes of disposable plastic used on board by 2021.

Outlook

Lufthansa has confirmed its previous guidance for full year 2019, for which it expects to report an Adjusted EBIT margin between 5.5 and 6.5 percent, which corresponds to an Adjusted EBIT of EUR 2.0 to 2.4 billion. Total revenues for the year are expected to rise by a single-digit percentage amount. Fuel costs are expected to be some EUR 650 million above their 2018 levels.

The Network Airlines still expect to post an Adjusted EBIT margin of 7 to 9 percent. The Network Airlines will also report an overall capacity increase of 4 percent for the full year.

Eurowings continues to expect an Adjusted EBIT margin for 2019 of minus 4 to minus 6 percent. Eurowings’s capacity will decline by 1 percent on 2018.

For its logistics business segment with Lufthansa Cargo, the Group expects to report an Adjusted EBIT margin for 2019 of between 0 and 2 percent, in view of the current weak market demand.

The annual revenue projections have been raised for Lufthansa Technik and LSG. The Lufthansa Group now expects to report a low-double-digit percentage increase in revenues at Lufthansa Technik for the year, and a low-single-digit percentage increase for LSG. The expected Adjusted EBIT margins for both entities have been confirmed at their previous levels: a margin of 7 to 8 percent for Lufthansa Technik and of 2 to 4 percent for LSG.

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Lufthansa will continue to be an official partner of Germany’s football association DFB

Lufthansa's Fanhansa - Siegerflieger - "Winnersflyer"

Lufthansa has made this announcement:

Lufthansa is continuing its commitment to football and has extended its partnership with the German football association Deutscher Fußball-Bund (DFB) until 2022. Lufthansa therefore remains an official partner of DFB. As the “official airline”, Lufthansa flies the players, coaches, staff and delegation members of the DFB team to international matches and tournaments. “We are delighted to continue our long-standing and good partnership with DFB. For many years now, it has been a special honor for us to fly the German national team to their major tournaments around the world,” said Markus Binkert, CCO of the Lufthansa Hub Munich and Senior Vice President Marketing. So far, the highlight of the long-standing partnership has been the flight of the Lufthansa “Fanhansa Siegerflieger” returning the national team to Germany from Brazil with the World Cup trophy after their 2014 win.

The contract guarantees Lufthansa extensive rights and marketing services from DFB, especially in the years featuring the European Football Championship and the World Cup, among other things.

Lufthansa has been cooperating with DFB for many years now and also has long-standing partnerships with the German sports aid foundation Stiftung Deutsche Sporthilfe as well as the German Olympic Sports Confederation (DOSB). The company is also a co-sponsor of Germany’s National Paralympic Committee (DBS).

On the financial side, Lufthansa Group issued this statement:

The Lufthansa Group enjoyed a continuing strong performance in its long-haul business in the first half of 2019, particularly on its key North American and Asian routes. On short-haul routes in Europe, the price war in Germany and Austria in particular had a negative impact on earnings.

“Our earnings are feeling the effects of tough competition in Europe and sizeable overcapacities, especially on our short-haul routes out of Germany and Austria,” says Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG. “We are responding to this by further reducing our costs and increasing our flexibility. And with the turnaround plan which we recently presented, we also intend to make Eurowings a sustainably profitable airline.”

In the second quarter, Group revenues rose by 4 percent to EUR 9.6 billion (prior-year period: EUR 9.3 billion). Adjusted EBIT amounted to EUR 754 million (prior-year period: EUR 1 billion). The adjusted EBIT margin for the second quarter was thus 7.8 percent (prior-year period: 10.8 percent). Fuel costs alone were EUR 255 million higher in the second quarter of 2019 than in the previous year.

Top Copyright Photo (all others by Lufthansa): Lufthansa – Fanhansa Boeing 747-830 D-ABYI (msn 37833) (Fanhansa – Siegerflieger – “Winnersflyer”) LAX (Michael B. Ing). Image: 926823.

Lufthansa aircraft slide show:

Lufthansa Group achieves an adjusted EBIT of EUR 754 million in the second quarter

  • Long-haul business sees further growth
  • Lufthansa Technik increases results
  • Network Airlines and Eurowings substantially improve first-half year punctuality 
  • Price wars on short haul routes especially in Germany and Austria as well as rising fuel and MRO costs burden results
  • 2019 full-year forecast confirmed

The Lufthansa Group enjoyed a continuing strong performance in its long-haul business in the first half of 2019, particularly on its key North American and Asian routes. On short-haul routes in Europe, the price war in Germany and Austria in particular had a negative impact on earnings.

“Our earnings are feeling the effects of tough competition in Europe and sizeable overcapacities, especially on our short-haul routes out of Germany and Austria,” says Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG. “We are responding to this by further reducing our costs and increasing our flexibility. And with the turnaround plan which we recently presented, we also intend to make Eurowings a sustainably profitable airline.”

In the second quarter, Group revenues rose by 4 percent to EUR 9.6 billion (prior-year period: EUR 9.3 billion). Adjusted EBIT amounted to EUR 754 million (prior-year period: EUR 1 billion). The adjusted EBIT margin for the second quarter was thus 7.8 percent (prior-year period: 10.8 percent). Fuel costs alone were EUR 255 million higher in the second quarter of 2019 than in the previous year.

Key figures for the first half-year

In the first half of 2019, total revenues of the Lufthansa Group rose 3 percent to EUR 17.5 billion (EUR 16.9 billion in the prior-year period). First-half year Adjusted EBIT declined, however, to EUR 418 million (prior-year period: EUR 1,052 million). The higher price of jet fuel added just under EUR 450 million to costs for the period Group-wide. Adjusted EBIT margin amounted to 2.4 percent (prior-year period: 6.2 percent). The Group’s net profit for the first-half year period amounted to EUR -116 million (prior-year period: EUR 713 million), not least owing to a revaluation of a tax risk in Germany for which provisions of EUR 340 million were required.

Network Airlines

The Group’s Network Airlines – Lufthansa, SWISS and Austrian Airlines – reported an aggregate Adjusted EBIT of EUR 565 million for the first-half year period (prior-year period: EUR 989 million). Adjusted EBIT margin amounted to 5.1 percent, 4.2 percentage points down on the prior-year period (prior-year period: 9.3 percent). Total capacity was expanded 4.9 percent, and seat load factor also rose by 0.9 percentage points. With yields declining, however, especially in Europe, first-half year currency-adjusted unit revenues were 3.2 percent down on their 2018 level. Long-haul business continued to show positive performance. Currency-adjusted unit costs (ex fuel) declined 0.2 percent, owing not least to lower flight irregularity costs: flight cancellations in the first-half year period saw a 28-percent decline.

Eurowings

Eurowings generated an Adjusted EBIT for the first half of 2019 of EUR -273 million (compared to EUR -220 million in the same period last year). Capacity was raised 3.8 percent for the period, and seat load factor rose 0.9 percentage points to 80.7 percent. With yields on short- and medium-haul routes seeing substantial declines, however, currency-adjusted unit revenues were 5.0 percent below their prior-year level. The decline eased in the second-quarter period, thanks primarily to improvements in the long-haul business. First-half year currency-adjusted unit costs (ex fuel) were 6.1 percent below their 2018 levels, owing mainly to the absence of the prior year’s integration expenses and to a reduction in irregularity-related costs. Flight cancellations for the period were down 23 percent, while punctuality was improved by 7 percentage points, making Eurowings one of Europe’s most punctual airlines for the 2019 first-half year period.

Aviation Services

First-half year Adjusted EBIT for the logistics segment with Lufthansa Cargo declined to EUR 15 million (prior-year period: EUR 127 million), owing mainly to falling demand on the routes between Europe and Asia. Lufthansa Cargo responded to the adverse development of the airfreight market by adjusting its capacities accordingly.

Adjusted EBIT for Lufthansa Technik improved 7-percent on the prior-year period at EUR 243 million (prior-year period: EUR 227 million) in particular due to a positive development of the engine maintenance business.

First-half year Adjusted EBIT for the catering business of the LSG Group declined to EUR 33 million (prior-year period: EUR 40 million). The reduction is attributable to the restructuring of the Group’s European business, which is centralizing production sites and bringing more flexibility to logistics processes.

The first-half year Adjusted EBIT for Other Businesses & Group Functions declined 53 percent to EUR -135 million (prior-year period: EUR -88 million).

Full-year outlook

As communicated in June, the Lufthansa Group expects to report a low single-digit percentage increase in total revenues and an Adjusted EBIT margin of 5.5 to 6.5 percent for the full year 2019.

Persistent overcapacities, aggressive competition and increasingly price-sensitive demand continue to pressure yields on the European routes of the Network Airlines and Eurowings, particularly in the German and Austrian home markets. The Lufthansa Group expects the European market to remain challenging until at least the end of this year.

At the Network Airlines, the long-haul business is expected to continue its currently above-average development in the second half of the year. But with the overall economic prospects growing gloomier in the Group’s home markets, the risks of second-half year business trends falling short of their first-half year levels have increased. Actual developments in the long-haul business will depend to a large extent on short-term bookings (especially for the premium cabins) whose development is currently impossible to fully predict. The Group expects the Network Airlines to report an Adjusted EBIT margin of between 7 and 9 percent for 2019 as a whole.

Eurowings will be concentrating on implementing the actions presented at the end of June to accelerate its financial turnaround. These include a clearer focus on European point-to-point short-haul routes, reducing complexity and raising productivity, not least by streamlining German operations to one AOC. Unit costs should be reduced by 15 percent by 2022. The first actions are already being taken: a phase-out of older and now inefficient aircraft has already begun. For the second-half year period Eurowings expects to see further burdens on its short-haul business, at least some of which should be offset by improvements on the long-haul front. For the year as a whole, Eurowings expects to report an Adjusted EBIT margin of -4 to -6 percent.

The logistics segment with Lufthansa Cargo should post a full-year margin of between 3 and 5 percent. This is contingent, however, on demand stabilizing in the fourth-quarter period, in which – for seasonal reasons – this business segment tends to generate a substantial part of its earnings.

Lufthansa Group reverses course, Brussels Airlines will not now be integrated into Eurowings

"BIZ class on board"

Lufthansa Group is announcing major changes, especially those concerning the Eurowings brand. The plan to integrate Brussels Airlines into Eurowings has been a failure (several Brussels Airlines aircraft have been repainted into Eurowings colors and were operating under the Eurowings brand). Brussels Airlines will now stand alone under it own brand and will now be aligned with the other network airlines (Lufthansa, Swiss and Austrian).

Here is the full announcement:

  • Eurowings to focus on short-haul services in future
  • Commercial responsibility for Eurowings long-haul services to be transferred to the Network Organization in future
  • Re-orientation of Brussels Airlines: closer alignment with Network Airlines; integration into Eurowings will not be further pursued
  • Change in dividend policy to enable shareholders to participate more in the Group’s success

The Executive Board of Deutsche Lufthansa AG is informing investors and analysts about the further development of its airline strategy. The planned actions should sustainably enhance Lufthansa Group’s value creation. A key element is a comprehensive set of measures to turn around Eurowings, which should be returned to profit as swiftly as possible and sustainably generate value for shareholders.

To enable shareholders to participate more substantially in the Group’s results, the current dividend policy shall be changed. In future, 20 to 40% of the Group’s net income should be regularly distributed to shareholders. In the medium term, the Group aims to raise its free cash flow to at least EUR 1 billion a year.

Various planned actions will be presented to analysts and investors today. These include:

  • Eurowings turnaround: a clear focus on short-haul point-to-point operations
  • Eurowings long-haul: transfer of commercial responsibility to the Network Organization
  • Eurowings flight operations: less complexity and higher productivity through a reduction to one AOC in Germany
  • Eurowings fleet: standardization on the Airbus A320 family
  • Eurowings costs: a 15% reduction in unit costs (CASK) by 2022
  • Brussels Airlines: no integration into Eurowings and closer alignment to the Network Airlines (further details in the third quarter of 2019)
  • Brussels Airlines: turnaround plan in the third quarter of 2019
  • Network Airlines: innovations in sales and distribution to make a structural growth contribution to raising unit revenues by 3% by 2022
  • Network Airlines: continuous 1 to 2% annual reduction of unit costs.

“With the airlines in our Group we are excellently positioned in our home markets, which are among the strongest in the world,” says Carsten Spohr, Chairman of the Executive Board & CEO of Deutsche Lufthansa AG. “Our Group’s service companies are also world leaders in their fields. We want to translate this market strength even more consistently into sustainable profitability and value creation. And it is to this end that we are presenting concrete actions today which will enhance our efficiency and generate value for our shareholders. Because we don’t just want to be Number One for our customers and our employees: we want to be the first choice for our shareholders, too.”

Top Copyright Photo: Eurowings (Brussels Airlines) Airbus A330-343 OO-SFL (msn 579) (BIZ class on board) BRU (Ton Jochems). Image: 946745.

Eurowings (Brussels Airlines) aircraft slide show:

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Lufthansa Group adjusts its full year outlook

  • Long-haul business continues to be strong, in particular on Transatlantic and Asian routes
  • Strength in long-haul only partly offsets yield pressure in European short-haul business
  • Group committed to defend its leading position in home markets

The Executive Board of Lufthansa Group is revising its financial outlook for the full year 2019. Ongoing strong performance in long haul only partly offsets the price deterioration in Europe caused by market-wide overcapacities and aggressively growing low cost competitors. The Group now expects the Group’s Adjusted EBIT margin to reach 5.5 to 6.5 percent (previously: 6.5 to 8.0 percent), resulting in Group Adjusted EBIT amounting to between EUR 2,000 and 2,400 million in 2019. The outlook factors in a fuel cost increase of EUR 550 million despite the recent decline of the oil price.

Yields in the European short-haul market, in particular in the Group’s home markets Germany and Austria, are affected by sustained overcapacities caused by carriers willing to accept significant losses to expand their market share. This is putting pressure on yields at the Network Airlines and Eurowings. Both will continue to vigorously defend their leading market positions while focusing on securing profitability at the same time. Network Airlines are now expected to reach an Adjusted EBIT margin of between 7 and 9 percent in 2019 (previously: 7.5 to 9.5 percent). For Eurowings, the Group projects an Adjusted EBIT margin between -4 and -6 percent in the full year (previously: around 0 percent). The Group expects the European market to remain challenging at least for the remainder of 2019.

At the Network Airlines, the long-haul business continues to be strong. The transatlantic route is generating particularly positive performance and demand on the Asian routes remains high. Strength in long haul, however, is being offset by price pressures in Europe where demand has become increasingly price sensitive, resulting in lower yields. Network Airlines are addressing these pressures by further reducing their capacity plans, especially for Winter 2019/2020 where they schedule only marginal expansion. Network Airlines’ unit revenues are expected to decline slightly on a currency-adjusted basis in the second quarter. In the full year, they are projected to decline at a low-single-digit percentage rate on a currency-adjusted basis.

At Eurowings, unit revenues are expected to decline significantly in the second quarter of 2019. In the full year, they are forecasted to decrease at a mid-single-digit rate. As the progress in streamlining the Eurowings cost base is also slower than expected, the Eurowings Management has resolved upon further turnaround measures which it will present shortly.

Lufthansa Cargo has responded to the weaker demand especially on routes between Europe and Asia by taking out three MD-11F freighters from the beginning of June onwards. Full year revenues at Lufthansa Cargo are now expected to remain at the prior year level, the segment’s margin should reach 3 to 5 percent (previously:
7 to 9 percent).

In its financial accounts for the first half year of 2019, the Group will also make a provision for tax risks of EUR 340 million. The provision relates to an open tax matter in Germany originating in the years between 2001 and 2005. Past judgments by the competent Fiscal Court and the Supreme Tax Court had confirmed the Company’s legal opinion in principal. However, the Supreme Tax Court has recently repealed the case law established in prior years in a comparable case which led Lufthansa to reassess this tax risk.

Lufthansa Group loses 336 million euros in the first quarter

Lufthansa Group issued this statement:

Substantial industry-wide capacity growth in Europe leads to lower unit revenues on short- and medium-haul routes in comparison to the high levels seen in the prior-year period

  • Higher fuel cost of some EUR 200 million negatively impacts results
  • Group confident to increase unit revenues in the second-quarter period in view of favorable booking levels
  • 2019 full-year outlook remains unchanged

On a preliminary basis, Deutsche Lufthansa AG generated total revenues of EUR 7.9 billion in the first three months of 2019, a 3-percent increase on the prior-year period. Adjusted EBIT for the period amounted to EUR -336 million ($380 million US) on a preliminary basis (prior year: EUR 52 million).

Among other factors, first-quarter Adjusted EBIT was reduced by a EUR 202 million rise in fuel costs. Market-wide overcapacities in Europe also put downward pressure on fares. The negative trend was accentuated by the fact that first-quarter results for 2018 had been particularly strong, owing to the capacity reductions deriving from Air Berlin’s demise.

On this basis, the Lufthansa Group’s Network Airlines suffered a 5.2-percent currency-adjusted decline in their unit revenues for the period. The unit revenue decline at Eurowings, with its higher proportion of short- and medium-haul routes, amounted to 8.5 percent. First-quarter unit costs (ex fuel) decreased 0.8% percent at the Network Airlines and 7.2 percent at Eurowings, both on a currency-adjusted basis.

Lufthansa announced when presenting its 2018 annual results that, in view of the overcapacities in Europe, the strong comparable results for the prior-year period and the interim rise in fuel costs, earnings for the first quarter of 2019 were likely to be down from their prior-year level.

On a preliminary basis, the Network Airlines achieved an Adjusted EBIT of EUR -160 million (prior year: EUR 128 million) for the first quarter of 2019, while Eurowings saw its Adjusted EBIT for the period decline to EUR -257 million (prior year: EUR -212 million). First-quarter Adjusted EBIT for Lufthansa Cargo amounted to EUR 24 million (prior year: EUR 72 million), a 67-percent decline that is attributable to downward airfreight market trends, especially on routes between Europe and Asia. Lufthansa Technik reports a first-quarter Adjusted EBIT of EUR 125 million (prior year: EUR 107 million), while LSG achieved an Adjusted EBIT for the period of EUR 2 million (prior year: EUR 1 million). Adjusted EBIT for the Other Businesses amounted to EUR -59 million (prior year: EUR -29 million).

For 2019 as a whole, the Lufthansa Group confirms its expectation of an Adjusted EBIT margin of between 6.5 and 8.0 percent.

“We are seeing good booking levels for the quarter ahead,” says Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG. “At the same time, we have substantially reduced our own capacity growth. And with a reduction in growth also projected for the European market as a whole, we expect unit revenues to increase again in the second quarter. This should be further buoyed by the still-strong demand on our long-haul routes, especially to Asia and North America.”

Meanwhile Lufthansa is getting ready to take deliver of the first Airbus A321neo.

Photo: Lufthansa.

Lufthansa Group orders 40 Boeing 787-9 Dreamliners and Airbus A350-900 aircraft, will sell 6 A380s

Lufthansa Group is consistently forging ahead with the modernization of its long-haul fleet. In today’s meeting, based on the recommendation of the Executive Board, the Supervisory Board approved the purchase of a total of 40 state-of-the-art aircraft for the group’s airlines. The 20 Boeing 787-9 Dreamliners (above) and 20 additional Airbus A350-900 planes will primarily be replacing four-engine aircraft. The new planes will be delivered between late 2022 and 2027.

The order has a list-price investment volume of $12 billion USD. As is usual with such orders, Lufthansa Group has negotiated a significant price reduction. The parties have agreed not to disclose the actual purchase price.

“By replacing four-engine planes with new models, we are laying a sustainable foundation for our future in the long run. In addition to the cost-effectiveness of the A350 and B787, the significantly lower CO2 emissions of this new generation of long-haul aircraft was also a decisive factor in our investment decision. Our responsibility for the environment is becoming more and more important as a criterion for our decisions,” says Carsten Spohr, CEO and Chairman of Lufthansa Group.

The decision regarding which airline will deploy the aircraft at which hub will be made at a later date.

The investment in new technology, efficiency and passenger comfort is a continuation of the ongoing fleet modernization of the group’s airlines. The arilines of the Lufthansa Group currently operate a long-haul fleet of 199 aircraft (as of December 2018), including twelve state-of-the-art Airbus A350-900 aircraft. Beginning in 2020, Lufthansa will be introducing the new Boeing 777-9.

Investment in modern, fuel-efficient and low-noise aircraft

With the Airbus A350-900, the Boeing 777-9 and the Boeing 787-9, Lufthansa Group will own the most fuel-efficient long-haul aircraft of their class in terms of kerosene consumption per passenger and 100 kilometers flown. This order highlights the company’s desire to invest in cutting-edge technology in the interest of the environment. On average, the new aircraft will only consume around 2.9 liters of kerosene per passenger and 100 kilometers flown. That is 25% below what is used by predecessor aircraft, which will likewise have a positive impact on the CO2 footprint.

The Boeing 787-9 and Airbus A350-900 aircraft that have been ordered will primarily be replacing four-engine aircraft. By the middle of the next decade, the entire long-haul fleet will have been modernized. The possible fuel savings alone add up to 500,000 metric tons per year. This is equivalent to a CO2 reduction of 1.5 million metric tons.

A consistent focus on cost

With the new, more economical aircraft, the operating cost compared to the earlier models will sink by around 20 percent. In addition to this, Lufthansa Group will be significantly reducing the diversification and complexity of its fleet over the next few years and taking seven aircraft types out of service, which will reduce cost and complexity for maintenance and the supply of replacement parts, among other things.

After the long-haul aircraft rollover, the company will be offering its customers one of the world’s most modern fleets. This will also involve a significant increase in comfort and reliability.

Sale of six Airbus A380 aircraft

In today’s session, the Lufthansa Group Executive Board also informed the Supervisory Board of the sale of six of its 14 Airbus A380 planes to Airbus. The aircraft will be leaving Lufthansa in 2022 and 2023. The parties have agreed not disclose the purchasing price. The transaction will not affect the group’s earnings performance.

Lufthansa continuously monitors the profitability of its world-wide route network. As a consequence, the group is reducing the size of its Airbus A380 fleet from 14 aircraft to eight for economic reasons. The structure of the network and the long-haul fleet, fundamentally optimized according to strategic aspects, will give the company more flexibility and at the same time increase its efficiency and competitiveness. This will of course also benefit Lufthansa’s customers.