Category Archives: Lufthansa Group

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:

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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.

Lufthansa Group expands tourist-oriented long-haul portfolio in Frankfurt and Munich with Eurowings

  • First-ever Eurowings presence in Frankfurt as of October 
  • Lufthansa will support marketing and sales for the new long-haul destinations 
  • In Munich, Eurowings will supplement Lufthansa’s long-haul portfolio with daily flights to Bangkok (Thailand) 
  • Harry Hohmeister: “Lufthansa will actively shape the future of tourism together with Eurowings”
  • Thorsten Dirks: “We are combining the strengths of Lufthansa and Eurowings”

Lufthansa Group will be significantly expanding its tourist-oriented long-haul portfolio at its hubs in Frankfurt and Munich. After the successes of Edelweiss in Zürich and the deployment of the first few Eurowings long-haul aircraft departing from Munich, there will now also be flights available from Frankfurt, along with an increase in flights from Munich. For Frankfurt Airport, this means that, as of Fall 2019, Eurowings will be taking off from the metropolis on the Main river.

"BIZ class on board", leased from Brussels on April 29, 2018

As a first step, Eurowings will offer flights from Frankfurt to the popular vacation islands Mauritius and Barbados when the winter flight schedule goes into effect in October 2019. In addition to this, there will also be flights to Windhoek in Namibia, with other destinations currently being planned.

From the Munich hub, Eurowings has already been successfully offering long-haul connections to a selection of tourist destinations since Summer 2018. In the 2019/2020 winter schedule, Eurowings will also be connecting the Bavarian capital with Bangkok (Thailand). Connections from Munich to additional flight destinations are currently being planned.

This step goes hand in hand with a closer cooperation between Lufthansa and Eurowings at Germany’s biggest hub airport: “It is the right strategic step for the Group to combine the strengths of its two largest airlines in Frankfurt: going forward, we will be combining a product tailored to leisure travelers and families and the affordable cost structure of Eurowings with the sales and marketing power of Lufthansa at the Frankfurt location,” says Thorsten Dirks, Member of the Executive Board of Deutsche Lufthansa AG and CEO of Eurowings. “This makes it possible for the group to successfully evolve its portfolio for the growing tourism and leisure travel segment at Germany’s largest airport.”

For this expansion in the tourism segment, Eurowings will be using a total of seven Airbus A330 aircraft (with up to 310 seats), a portion of its fleet that is operated by Sun Express Deutschland. Capacities will be distributed evenly between the two Lufthansa hubs in Frankfurt and Munich.

Top Copyright Photo (all others by the airline): Eurowings (Brussels Airlines) Airbus A330-342 OO-SFB (msn 915) (BIZ class on board) BRU (Ton Jochems). Image: 945850.

Eurowings aircraft slide show:

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