Category Archives: Lufthansa Group

Lufthansa reduces planned growth for 2019

Lufthansa Airbus A321-231 D-AISP (msn 3864) FRA (Marcelo F. De Biasi). Image: 944223.

Lufthansa Group issued this report:

Lufthansa Group achieved an Adjusted EBIT of EUR 2.4 billion for the first nine months of 2018 – a 7.7 percent decline on the prior-year period which is primarily attributable to the integration costs at Eurowings. Adjusted EBIT margin for the period amounted to 8.8 percent. Nine-month results were also burdened by a EUR 536 million rise in fuel costs, an increase in the costs incurred in connection with flight delays and cancellations, and higher maintenance expenses.

“We expect to see our full-year costs increase by more than EUR 1 billion in 2018 due to fuel costs and the extra expenses incurred from delays and cancellations alone,” says Carsten Spohr, Chairman of the Executive Board & CEO of Deutsche Lufthansa AG. “But despite this, we achieved an Adjusted EBIT of EUR 2.4 billion for the first three quarters of this year, the second-best nine-month result in our history. And had it not been for the losses at Eurowings, we would have posted another record earnings result. This is a clear testament to our sustainable financial strength – a strength that we have demonstrated even under challenging conditions this year.”

Lufthansa Group generated total revenues of EUR 26.9 billion in the first nine months of 2018. Total revenues increased by 6 percent on the prior-year period, while traffic revenues were up 7 percent. As a result of the first-time adoption of the new IFRS 15 accounting standard, the reported growth of total revenues to EUR 26.9 billion was only 0.5 percent, while the reported traffic revenues declined by 1 percent to EUR 21.1 billion.

Unit costs for the period remained stable excluding fuel and currency effects, despite the extraordinary expense. Unit revenues excluding currency effects increased 0.3 percent. The airlines of Lufthansa Group transported some 108.5 million passengers in the first three quarters of 2018, a new record volume. Nine-month seat load factor was also at a record high of 82 percent. The exceptionally strong capacity growth for the period, which was driven by the insolvency of Air Berlin, will be substantially lower in 2019.

“Future growth in the air transport sector will need to pay far more regard to the capacities of the infrastructure in the air and on the ground,” Carsten Spohr observes. “At the same time, we aim to secure the profitability of our airlines through capacity discipline. We also expect the substantial rises in fuel costs to lead to higher ticket prices from 2019 at the latest.”

According to current market expectations, airlines in Germany are likely to expand their capacities by over 10 percent for the 2018/19 winter timetable period, a development that is still being driven by the demise of Air Berlin. The airlines of Lufthansa Group, however, will raise their capacity by a more modest 8 percent, and will further reduce their capacity growth to 3.8 percent for the 2019 summer timetable period.

Balance sheet further strengthened

Free cash flow for the period declined 59 percent to EUR 1.2 billion. The reduction is largely attributable to a 57-percent increase in net investments, which rose to EUR 2.6 billion. Most of this spending – EUR 2.2 billion – was on aircraft and reserve engines. Pension provisions for the period declined 6.2 percent to EUR 4.8 billion, owing partly to the increase in the discount rate from 2.0 to 2.1 percent. Net financial debt declined 14 percent from its 2017 year-end level to EUR 2.5 billion. The debt ratio (adjusted net debt in relation to Adjusted EBITDA) was reduced accordingly, declining 0.2 points to 1.5.

Network Airlines

The Network Airlines – Lufthansa, Swiss and Austrian Airlines – further improved on their record earnings of 2017, raising their aggregate nine-month Adjusted EBIT by another EUR 13 million to just under EUR 2 billion. The driver behind this development was Swiss, which achieved an outstanding nine-month Adjusted EBIT of EUR 525 million, 18.8 percent above its prior-year level. Swiss remains the Group’s most profitable airline, with an Adjusted EBIT margin of 14.3 percent. Lufthansa’s nine-month Adjusted EBIT of EUR 1.3 billion was 4.2 per cent down on the prior-year period, while Austrian Airlines’ EUR 92 million represents a 14-per-cent decline.

Eurowings 

Eurowings reports an Adjusted EBIT of EUR -65 million for the first nine months of 2018. The EUR 210 million decline on the prior-year period is attributable in particular to a non-recurring expense of EUR 170 million for completing the integration of parts of the former Air Berlin, and to additional costs incurred as a result of flight delays and cancellations.

“In 2017 we seized a historic opportunity in the consolidation of Europe’s aviation sector,” comments Carsten Spohr. “And it was the right decision to do so in strategic terms, even if this has given Eurowings a very challenging 2018. We view the one-off costs of integrating these operations and of our rapid expansion as a long-term investment that will help sustainably strengthen our market position.”

Aviation Services

Buoyed by strong demand and continuing high yields at Lufthansa Cargo, the Group’s Logistics business segment raised its nine-month Adjusted EBIT 56.1 percent to EUR 153 million. The LSG Group also posted a much-improved Adjusted EBIT for the period of EUR 99 million, a 50-percent increase that was especially achieved through lower transformation costs. Nine-month Adjusted EBIT at Lufthansa Technik declined 3.3 percent to EUR 322 million, owing mainly to rises in the costs of spares and greater use of external maintenance capacities.

Outlook

Lufthansa confirms its full-year earnings projection for 2018. With originally-planned capacity for the winter timetable period now slightly reduced, total annual capacity is expected to be around 8 percent above 2017. The Group still expects to post a slight increase in unit revenues for the year as a whole. The reduction in unit costs excluding fuel and currency effects is expected to be around 1 percent, despite the negative impact of integration costs at Eurowings. Fuel costs are projected to be around EUR 850 million higher than in 2017.

The Group expects to report a slightly lower annual Adjusted EBIT for its Aviation Services segment. This is related to a more negative result at Other Businesses & Group Functions, owing to an absence of the currency gains reported here in 2017. All in all, Lufthansa Group continues to predict an Adjusted EBIT for 2018 that is slightly below the record level seen last year.

“We have achieved solid earnings for the first nine months of this year, and are still on course for our second-best-ever annual EBIT result,” confirms Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG. “So our earnings projections for 2018 as a whole remain unchanged at slightly below previous year.”

On a like-for-like basis, excluding volume growth, Lufthansa Group expects its fuel costs to rise by a further EUR 900 million in 2019.

Top Copyright Photo: Lufthansa Airbus A321-231 D-AISP (msn 3864) FRA (Marcelo F. De Biasi). Image: 944223.

Lufthansa aircraft slide show:

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Lufthansa CityLine to fly the Airbus A319

Lufthansa Group has made this announcement:

Lufthansa CityLine and pilots’ union Vereinigung Cockpit have agreed on new employment conditions for their approx. 650 pilots. The collective bargaining agreement sets the stage for the introduction of a new, future-proof aircraft type at Lufthansa CityLine.

Come 2019, Lufthansa CityLine will start operating A320 family planes taken over from Lufthansa.

The first Airbus A319-100 aircraft will depart from the Munich hub next spring. Another 5 aircraft will follow by the end of 2020.

“Lufthansa CityLine has been handling an important part of our feeder traffic at the hubs in Munich and Frankfurt for many years,” says Wilken Bormann, Chairman of the Supervisory Board of Lufthansa CityLine and CEO of Lufthansa Hub Munich. “Entering the A320 segment is a logical next step. With the new collective agreement, both negotiating partners have illustrated their will to jointly develop Lufthansa CityLine as a key component of the Lufthansa Group.”

The parties have agreed on an extensive package. It includes, among other things, a moderate salary increase for the next three years and a growth-related increase for 2021. Essential points of the structure of the company pension plan will be adapted to the regulations for Lufthansa’s mainline staff. Another key aspect is the optimization of the training roadmap for its pilots. The package thus opens up important new growth prospects.

Lufthansa CityLine is a wholly owned subsidiary of Deutsche Lufthansa AG and a specialist in hub traffic at the two hubs of Frankfurt and Munich. Every year, the airline welcomes around eight million passengers aboard its roughly 50 aircraft. The fleet takes off to around 80 airports in over 24 countries more than 300 times a day. Lufthansa CityLine employs about 2,200 people.

All photos by Lufthansa.

Lufthansa Group converts purchase options for 24 Airbus A320neo and three A321neo aircraft into firm orders

Delivered on September 3, 2018

Lufthansa Group has made this announcement:

On September 28, 2018 the Supervisory Board of Deutsche Lufthansa AG approved the purchase of 27 short- and medium-haul aircraft.

Purchase options for 24 Airbus A320neo and three A321neo will be converted into firm orders.

With this decision, the Lufthansa Group is reacting to the positive market and earnings development and thus ensuring the necessary fleet size in the coming years. The total investment of this order amounts to a list price of about three billion US dollars.

This increases the total number of A320neo and A321neo orders to 149 for the Group, 13 of them are already operating with Lufthansa.

The A320neo and A321neo (short for “New Engine Option”) are scheduled for delivery in 2023 and 2024.

Ten of the 27 new aircraft are intended for Swiss, the remaining aircraft will be in service by other flight operations within the Aviation Group. One part of the order will be equipped with Pratt & Whitney engines (PW1100G), the other with LEAP-1A engines from CFM International. This means that both engine types will continue to be available to the Lufthansa Group in roughly equal proportions for the “Neo” family.

The innovative engine technologies developed by Pratt & Whitney and CFM International as well as the aerodynamic wingtips (sharklets) with which the aircraft are equipped reduce fuel consumption significantly by up to 20 percent per seat kilometer. As all Lufthansa A320 Family aircraft, the A320neo and A321neo are serially equipped with noise-reducing vortex generators. An A320neo taking off has a noise carpet that is around 50 percent smaller than that of other aircraft of this type.

Top Copyright Photo: Lufthansa Airbus A320-271N WL D-AINM (msn 8456) FRA (Marcelo F. De Biasi). Image: 943646.

Lufthansa aircraft slide show:

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Lufthansa Group optimizes hub management of the network airlines and prepares for moderate growth in summer 2019

Lufthansa Group has made this announcement:

Lufthansa Group continues to consistently optimize the management of its hubs in Munich, Frankfurt, Zürich and Vienna. The main focus is on the flexible multi-hub system: newly integrated processes mean that Lufthansa Group is increasingly able to move fleets and traffic wherever the conditions are best for quality, growth and cost effectiveness.

Specifically, the Lufthansa Executive Board decided to accelerate its growth at the Munich location and develop the Bavarian capital into a hub with a focus on Asia. Lufthansa Group anticipates high single-digit year-over-year growth for the network airlines at this hub for 2019. In addition to increased frequencies in the flights offered from Munich to Seoul and Singapore, Summer 2019 will see the first ever daily connection from Munich to Bangkok. These flights can be booked as of 4 October 2018. And to further strengthen the portfolio of flights to Asia, the connection to Osaka (Japan) will be moved from Frankfurt to Munich.

The transfer of five Airbus A380 aircraft from Frankfurt to Munich in Summer 2018 was very well received on the market and has been a resounding success. In view of these results, Lufthansa is considering transferring additional A380 aircraft from Frankfurt to Munich in 2020. Three Airbus A320 are being moved from the Frankfurt hub to Munich to support the expansion of feeder traffic while three smaller Bombardier CRJ900 will be transferred from Munich to Frankfurt in exchange.

As a “5-Star” location, Munich will also be reinforced with additional First Class offerings. To support this, the majority of the Frankfurt-based A340-600 fleet will be moved to Munich.

The strategic focus of the Frankfurt hub will continue to be on optimising the destination mix in terms of increased quality. Lufthansa will curb its growth at this hub in order to improve on-time ratings and operational stability. For 2019, Lufthansa Group anticipates low single-digit year-over-year growth for the network airlines at this hub. Lufthansa is starting into the 2018/19 winter season with four new destinations from Frankfurt. Eilat (Israel), Agadir (Morocco), Trieste (Italy) and Thessaloniki (Greece) are new additions to the flight program. Lufthansa is also further expanding its route network to the USA. Starting May 3, 2019, the airline will offer its first connections from Frankfurt to Austin (USA).

There are plans to expand on the growth trajectory at the Lufthansa Group hub and home base of Swiss International Air Lines in Zürich. Due to its very successful development over the past years, the aim here is to continue to bank on moderate growth. The main focus in this is on the expansion of activity in Europe. The 2018/19 winter flight schedule includes a new destination: Bremen. And SWISS is now offering Bordeaux (France), Kiev (Ukraine), Brindisi (Italy) and the German island of Sylt as attractive year-round destinations.

Austrian Airlines in Vienna will be significantly expanding its European route network in the upcoming 2018/19 winter flight schedule. Beginning in late October 2018, more than 40 additional flights per week will be taking off for 14 destinations, including cities in Germany such as Berlin, Düsseldorf and Hamburg but also other European destinations such as Copenhagen (Denmark), Kiev (Ukraine), Athens (Greece) and Kraków (Poland). This increase is made possible by increased efficiencies in the route network. In addition to the new European flights, Austrian Airlines is also increasing some of its flight frequencies to North America, strengthening Vienna as a Lufthansa Group hub.

“Our multi-hub system, in which four hubs share a single centralized commercial management, functions well and is successful. This makes it possible for us to react to changing conditions with extreme speed and flexibility. Our key factors are quality, efficiency and cost effectiveness,” saysHarry Hohmeister, Member of the Executive Board of Deutsche Lufthansa AG and Head of Hub Management, speaking on the occasion of these decisions. “The goal of the entire industry should be increased quality. This means that it is also essential for the infrastructure on the ground and in the air to keep pace with the growth of the industry. Existing deficits must be removed. We are growing where the cost and quality are right. This is also why we are waiting until next summer to decide, based on the development of the hubs, where the new Boeing 777-9 aircraft will be taking off from as of 2020. This plane will be taking off for the first time with new products in Business Class and Premium Economy and setting new standards for the industry,” Hohmeister adds in Frankfurt.

All above images by Lufthansa Group.

Below Copyright Photo: Lufthansa Airbus A320-271N WL D-AXAI (D-AINN) (msn 8491) XFW (Gerd Beilfuss). Image: 943668.

Lufthansa aircraft slide show:

Lufthansa Airbus A320-271N WL D-AXAI (D-AINN) (msn 8491) XFW (Gerd Beilfuss). Image: 943668.

Lufthansa Group Airlines welcome around 14.2 million passengers on board in July 2018

In July 2018, the Lufthansa Group airlines welcomed around 14.2 million passengers. This shows an increase of 8.2% compared to the previous year’s month. The available seat kilometers were up 7.0% over the previous year, at the same time, sales increased by 7.0 percent. As compared to June 2017, the seat load factor decreased slightly by 0.1 percentage points to 86.3%.

Cargo capacity increased 1.8 % year-on-year, while cargo sales decreased by 2.9% in revenue tonne-kilometer terms. As a result, the Cargo load factor showed a corresponding reduction, decreasing by 3.1 percentage points to 64.1%.

Network Airlines

The Network Airlines Lufthansa German Airlines, SWISS and Austrian Airlines carried 10.2 million passengers in July – 5.2% more than in the prior-year period. Compared to the previous year, the available seat kilometers increased by 4.1% in June. The sales volume was up 3.7% over the same period, decreasing seat load factor by 0.3 percentage points to 86.3%.

In July, the strongest passenger growth of the network airlines was recorded at the Munich hub, where the number of passengers increased by 9.0 percent compared to the same month last year. The number of passengers increased by 4.5% in Zurich, 4.0% in Vienna and 3.8% in Frankfurt. The underlying offer also increased to varying degrees: in Munich by 11.7%, in Zurich by 7.3%, and in Vienna by 4.3%. The number of seat kilometres available in Frankfurt fell slightly by 0.3 percent.

Lufthansa German Airlines transported 6.8 million passengers in July, a 5.8% increase compared to the same month last year. A 3.1% increase in seat kilometers in July corresponds to a 2.2% increase in sales. Furthermore, the seat load factor was 86.0%, therefore 0.8 percentage points below last year’s level.

Eurowings

Eurowings (including Brussels Airlines) carried around 3.9 million passengers in July. Among this total, 3.6 million passengers were on short-haul flights and 225,000 flew long-haul. This amounts to an increase of 16.9% in comparison to the previous year. July capacity was 21.4% above its prior-year level, while its sales volume was up 23.3%, resulting in an increase of seat load factor by 1.3 percentage points to 86.0%.

On short-haul services the airlines raised capacity 17.2% and increased sales volume by 20.6%, resulting in a 2.5 percentage points increased seat load factor of 86.8%, compared to July 2017. The seat load factor for the long-haul services decreased by 1.3 percentage points to 84.4% during the same period, following a 31.2% increase in capacity and a 29.3% rise in sales volume, compared to the previous year.

Ryanair responds to Lufthansa’s claims about Laudamotion

Laudamotion Airbus A320-214 OE-LOE (msn 4269) FRA (Marcelo F. De Biasi). Image: 941409.

Ryanair on July 13 confirmed that Lufthansa Group is making false claims about Laudamotion.

Lufthansa’s claim that it has “fully complied with all requirements of the European Commission regarding the required transfer of aircraft to Laudamotion” is simply untrue. Lufthansa agreed to transfer 11 aircraft to Laudamotion, yet as of July 13, Lufthansa has only delivered 9 aircraft.

1. One of the aircraft, which was supposed to be delivered “at the beginning” of June, has now been delayed until at least the end of August, which means Laudamotion has lost the benefit of this aircraft (and its slots) during the peak summer months.

2. Not alone has Lufthansa failed to honor its obligations to lease the 11 aircraft, but the lease costs of the aircraft it has leased to Laudamotion are substantially higher than market rates for Airbus A320’s of this age.

3. Laudamotion has repeatedly honored both its aircraft lease payments and maintenance reserves to Lufthansa. Lufthansa’s claims of “repeated failure” to pay is false.

4. Lufthansa has used every tactic in the book to harm and damage Laudamotion including withdrawing flying business from Laudamotion (which Lufthansa had originally agreed) then refusing to pay over €1.5m of lease payments properly due to Laudamotion for flying carried out on behalf of Lufthansa in March, April and May.

Despite Lufthansa owing Laudamotion over €1.5m in overdue lease payments for the months of March, April and May, Lufthansa has attempted to terminate all 9 aircraft leases on unfounded legal grounds, even though lease rentals for the full month of July had already been paid at the end of June.

Ryanair’s Juliusz Komorek said:

“Lufthansa is abusing its dominant position in the German and Austrian markets in a blatant attempt to eliminate a much smaller, Austrian competitor, Laudamotion. Lufthansa’s attempt to terminate Laudamotion’s 9 aircraft leases during the peak of the summer period, at a time which would cause maximum damage to Laudamotion and its customers, is in breach of its obligations to the EU.

Lufthansa dominates the German, Austrian, and Swiss markets and the fact that it is now abusing this position to try to remove Laudamotion’s aircraft fleet, while refusing to pay Laudamotion lease payments that are months overdue, is in flagrant breach of fair procedure and competition rules. It is Lufthansa who has repeatedly failed to pay Laudamotion over €1.5m of lease payments for March, April and May.”

Top Copyright Photo: Laudamotion Airbus A320-214 OE-LOE (msn 4269) FRA (Marcelo F. De Biasi). Image: 941409.

Laudamotion aircraft slide show:

Laudamotion’s routes from Dusseldorf and Berlin this coming winter:

 

Lufthansa Group refutes false allegations by Ryanair

Lufthansa Group has issued this statement:

Irish low-cost carrier Ryanair issued a press release on its planned takeover of Laudamotion. The Ryanair allegations are completely unfounded.

Lufthansa has fully complied with all EU Commission obligations regarding the required transfer of aircraft to Laudamotion. This is true of both the number of aircraft involved and their leasing terms.

All the aircraft covered by the EU derogation decision were offered for sale to Laudamotion by Lufthansa. Laudamotion rejected this offer, preferring to lease the aircraft instead.

Laudamotion has recently failed – repeatedly – to meet its contractually-agreed lease payment obligations.

As the Eurowings Group needs aircraft, Lufthansa has exercised its contractually-agreed right of termination because of a violation of contractual terms by Laudamotion, and has terminated the lease agreements on nine aircraft due to the non-payment of the lease amounts involved.