Deutsche Lufthansa AG is aiming to acquire a stake in the Italian national carrier ITA Airways (Italia Trasporto Aereo S.p.A.). The plan is to agree on the initial acquisition of a minority stake as well as on options to purchase the remaining shares at a later date. Today, the company submitted an offer to the Italian Ministry of Economy and Finance (Ministero dell’economia e delle finanze) to conclude a Memorandum of Understanding (MoU) in this respect. Contingent on both parties signing this MoU, further negotiations and discussions would be conducted on an exclusive basis.
These talks would primarily focus on the form of a possible equity investment, the commercial and operational integration of ITA into the Lufthansa Airline Group, as well as resulting synergies. In case of a binding agreement is reached, its implementation would be subject to approval by the relevant authorities.
For Lufthansa Group, Italy is the most important market outside of its home markets and the US. Italy’s importance for both business and private travel lies in its strong export-oriented economy and status as one of Europe’s top vacation spots.
Top Copyright Photo: ITA Airways Airbus A350-941 EI-IFF (msn 283) LAX (Michael B. Ing). Image: 959390.
Carsten Spohr, CEO of Deutsche Lufthansa AG, said:
“The Lufthansa Group achieved a very strong result in the third quarter with an operating profit of over one billion euros, thus demonstrating its regained profitability. All business segments, passenger airlines as well as logistics and MRO, contributed to this success. This once again underlines the strength of our portfolio. The Lufthansa Group has economically left the pandemic behind and is looking optimistically into the future. After all, the desire to travel and thus the demand for air travel continues unabated. Now we are focusing on the future and launching the biggest product renewal in our history. We are investing in 200 new aircraft and offering perspectives for our employees around the world. It remains our ambition to further strengthen our position among the top 5 airline groups in the world.”
Group revenue almost doubled compared to last year (+93 percent), reaching 10.1 billion euros in the third quarter (previous year: 5.2 billion euros).
The company generated an Adjusted EBIT of 1.1 billion euros in the third quarter of 2022, including an impact from strikes of around 70 million euros. In the same period last year, operating profit was 251 million euros. The operating margin amounted to 11.2 percent (prior year: 4.8 percent). Net income increased significantly in the third quarter to 809 million euros (previous year: -72 million euros).
Load factor at Lufthansa Group Airlines at 2019 level
The number of passengers travelling on board of the passenger airlines increased significantly in the third quarter compared with the previous year. Between July and September, more than 33 million passengers flew with the airlines of the Lufthansa Group (previous year: 20 million).
The development of yields was particularly positive. In the third quarter, yields were on average 23 percent higher than in 2019 and thus reached a new record level. At just over 86 percent, the average seat load factor was back at the level of the record years before the Coronavirus pandemic. Load factors in Business and First Class were even higher than in 2019. Especially remarkable was the continued high premium demand from leisure travelers. Bookings among business travelers also continued to recover. Revenues in this segment are now back at around 70 percent of the pre-crisis level.
Due to the high demand and strong average yields, the Passenger Airlines segment returned to profitability with a positive Adjusted EBIT of 709 million euros (previous year: -193 million euros). All airlines in the segment generated an operating profit individually as well.
In the third quarter, the airlines’ result was burdened by costs for irregularities in air traffic amounting to 239 million euros.
Lufthansa Cargo and Lufthansa Technik on course for new record year, Catering on course for recovery
Lufthansa Cargo again achieved a record result. Although airfreight capacities on passenger aircraft are increasing again due to the continuation of air traffic recovery especially on the North Atlantic, average yields remain well above pre-crisis levels, especially on routes to Asia. Adjusted EBIT in the third quarter rose to 331 million euros (previous year: 302 million euros), an increase of 10 percent compared to last year’s already very strong performance. In the first nine months of the year, Lufthansa Cargo has thus already achieved an operating profit of 1.3 billion euros (previous year: 943 million euros) and is on course for a full-year result even above last year’s record 1.5 billion euros.
In the third quarter, Lufthansa Technik benefited from the high demand for air travel and the associated demand from airlines worldwide for maintenance and repair services. The volume of business was already back at around 90 percent of the pre-crisis level. Lufthansa Technik generated an Adjusted EBIT of 177 million euros in the third quarter (previous year: 149 million euros), the best quarter ever for the company. The forecast for the annual result was raised again. Lufthansa Technik is thus also heading for a new record for the full year.
The recovery also continued in the Catering segment. Demand picked up in North America in particular. However, due to the non-recurrence of government subsidies in 2021, earnings were down on the previous year at 6 million euros (previous year: 35 million euros).
Adjusted free cash flow again positive
The Lufthansa Group generated an Adjusted free cash flow of 410 million euros in the third quarter of 2022 (prior year: 43 million euros). The strong operating result and the effects of structural improvements in working capital management offset the outflows due to the seasonal reduction in bookings in the third quarter.
Net debt decreased further between July and September to 6.2 billion euros (31 December 2021: 9 billion euros).
Due to the further increase in the discount rate, the Lufthansa Group’s net pension obligation has fallen by almost 70 percent since the end of the previous year and now stands at around 2.1 billion euros (31 December 2021: 6.5 billion euros). This had a positive effect on shareholders’ equity, which doubled to 9.2 billion euros as of September 30 (31 December 2021: 4.5 billion euros). Available liquidity at the end of the quarter was 11.8 billion euros (31 December 2021: 9.4 billion euros).
Remco Steenbergen, Chief Financial Officer of Deutsche Lufthansa AG:
“A healthy balance sheet is the basis for profitable growth, especially in economically challenging times. We have already made very good progress in reducing our debt. Thanks to our strong cash flows, our refinancing needs will remain low in the coming quarters. With disciplined capacity management, our yield focus and strict control of spending, we are confident that we will continue to be able to compensate well for inflation-related cost increases.”
Austrian Airlines and Brussels Airlines repay government stabilization measures early
Due to the strong increase in demand, a good liquidity development and the financial support of the Lufthansa Group, both Austrian Airlines and Brussels Airlines will repay the remaining government stabilization measures early by the end of the year. In Austria, Austrian Airlines will repay the remaining 210 million euros of the total loan, and in Belgium, Brussels Airlines will repay 290 million euros. This means that all stabilization measures will end prematurely at the end of 2022.
The Lufthansa Group expects demand for air travel to remain strong in the coming months, with average yields remaining high. Passenger Airlines plan to offer around 80 percent of 2019 capacity in the fourth quarter. The Group expects to achieve an operating profit in the fourth quarter despite the usual seasonal slowdown in business.
In the fiscal year 2022, the result in the Logistics segment is expected to exceed the record level of the previous year, Lufthansa Technik will generate a higher profit than in 2021 and is expected to achieve a record result. The Passenger Airlines segment will also significantly improve its result compared with the previous year.
Based on these positive developments, Lufthansa Group is raising its earnings forecast for the Group as a whole. The Group now expects an Adjusted EBIT of over 1 billion euros in 2022. In addition, Lufthansa Group expects to generate an Adjusted free cash flow of over 2 billion euros in 2022. Net capital expenditure is expected to amount to circa 2.5 billion euros, in line with previous planning. The company is thus on track towards its medium-term targets for 2024 – an Adjusted EBIT margin of at least 8 percent and a return on capital employed (Adj. ROCE excl. cash) of at least 10 percent.
Strong increase in average yields and successful cargo segment drive positive quarterly result
Boom in demand for airline tickets continues
Load factors in premium classes above 2019 levels – recovery of business travel continues
Group will be hiring around 5,000 new employees in the second half year of 2022
First European airline group: SBTi validates climate targets of the Lufthansa Group
Lufthansa Group specifies outlook for the year and expects Adjusted EBIT above 500 million euros in line with market expectations
Carsten Spohr, CEO of Deutsche Lufthansa AG, said:
“The Lufthansa Group is back in the black. This is a strong result after a half-year that was challenging for our guests but also for our employees. Worldwide, the airline industry reached its operational limits. Nevertheless, we are optimistic about the future. Together, we have steered our company through the pandemic and thus through the most severe financial crisis in our history. Now we must continue to stabilize our flight operations. To this end, we have taken numerous measures and successfully implemented them. In addition, we are doing everything in our power to expand the premium positioning of our airlines again and thus to fully meet the demands of our customers and also our own standards. We want to and will continue to strengthen our position as the number 1 in Europe and thus maintain our place in the global top league of our industry. In addition to the achieved return to profitability, top products for our customers and prospects for our employees are now once again our top priority.”
The Group generated an operating profit of 393 million euros in the second quarter. In the prior-year period, Adjusted EBIT was still clearly negative at -827 million euros. The Adjusted EBIT margin rose accordingly to 4.6 percent (prior year: -25.8 percent). Net income increased significantly to 259 million euros (prior year: -756 million euros).
The company turned over 8.5 billion euros in the second quarter, almost three times as much as in the same period last year (previous year: 3.2 billion euros).
For the first half-year of 2022, the Group recorded an Adjusted EBIT of -198 million euros (prior year: -1.9 billion euros). The Adjusted EBIT margin amounted to -1.4 percent in the first half of the year (prior year: -32.5 percent). Sales increased significantly compared with the first six months of 2021 to 13.8 billion euros (prior year: 5.8 billion euros).
Increase in yields and high load factors for passenger airlines
The number of passengers on board the Passenger Airlines more than quadrupled in the first half-year compared with the same period last year. All in all, the airlines in the Lufthansa Group welcomed 42 million travelers on board between January and June (previous year: 10 million). In the second quarter alone, 29 million passengers flew with the Group’s airlines (previous year: 7 million).
The company continuously expanded the capacity offered in line with the steady rise in demand over the course of the first half of the year. In the first half of 2022, the offered capacity averaged 66 percent of the pre-crisis level. Looking at the second quarter in isolation, offered capacity amounted to around 74 percent of the pre-crisis level.
The positive development of yields and seat load factors in the second quarter should be highlighted. Yields improved significantly in the quarter by an average of 24 percent compared to the previous year. They also increased by 10 percent compared to the pre-crisis year 2019.
Despite the higher price level, the Lufthansa Group’s flights had an average load factor of 80 percent in the second quarter. This figure is almost as high as before the Corona pandemic (2019: 83 percent). In premium classes, the load factor of 80 percent in the second quarter even exceeded the figure for 2019 (2019: 76 percent), driven by continued high premium demand among private travelers and rising booking numbers among business travelers.
Thanks to ongoing and consistent cost management and the expansion of flight capacity, unit costs at the passenger airlines fell by 33 percent in the second quarter compared with the same period last year. They remain 8.5 percent above the pre-crisis level, due to the still significantly reduced offer.
Adjusted EBIT at the passenger airlines improved significantly in the second quarter to -86 million euros (previous year: -1.2 billion euros). Between April and June, the result was burdened by 158 million euros of irregularity cost in relation to disruptions in the flight operations. In the first half of the year, the Adjusted EBIT in the Passenger Airlines segment amounted to -1.2 billion euros (previous year: -2.6 billion euros).
The positive result at SWISS deserves special mention. Switzerland’s largest airline generated an operating profit of 45 million euros in the first half-year (previous year: -383 million euros). In the second quarter, its Adjusted EBIT was 107 million euros (previous year: -172 million euros). SWISS benefited above all from strong booking demand combined with profitability gains as a result of the successful restructuring.
Lufthansa Cargo still at record level, Lufthansa Technik and LSG with positive result
Results in the logistics business segment remain at record levels. The demand for freight capacities is still high, also due to ongoing disruptions in ocean freight.
As a result, average yields in the airfreight industry remain well above the pre-crisis level. Lufthansa Cargo benefited from this also in the second quarter. The Adjusted EBIT rose by 48 percent compared to the same period last year, to 482 million euros (previous year: 326 million euros). In the first half-year the company achieved a new record Adjusted EBIT of 977 million euros (previous year: 641 million euros).
In the second quarter of 2022 Lufthansa Technik benefited from the further recovery in global air traffic and the resulting increase in demand for maintenance and repair services from airlines.
Lufthansa Technik generated an Adjusted EBIT of 100 million euros in the second quarter (previous year: 90 million euros). For the first half-year, the company generated an Adjusted EBIT of 220 million euros (previous year: 135 million euros).
LSG group benefited in particular from revenue growth in North and Latin America during the reporting period. Despite the discontinuation of grants under the US Cares Act, the LSG group generated a positive Adjusted EBIT of 1 million euros (same period last year: 27 million euros). For the first half-year, Adjusted EBIT fell to -13 million euros (same period last year: 19 million euros).
Strong Adjusted free cash flow, liquidity further increased
Over the course of the first half of the year, the number of bookings increased significantly. Due to this high level of new bookings and structural improvements in working capital management, a significantly positive Adjusted free cash flow of 2.1 billion euros was generated in the second quarter (previous year: 382 million euros). In the first half of the year, the Adjusted free cash flow amounted to 2.9 billion euros (prior year: -571 million euros).
Net debt decreased accordingly to 6.4 billion euros as of June 30, 2022 (December 31, 2021: 9.0 billion euros).
At the end of June 2022, the company’s available liquidity amounted to 11.4 billion euros (December 31, 2021: 9.4 billion euros). Liquidity thereby remains well above the target corridor of 6 to 8 billion euros.
Due to the sharp increase in the discount rate, the Lufthansa Group’s net pension liability has fallen by around 60 percent since the end of last year and now stands at around 2.8 billion euros (31 December 2021: 6.5 billion euros). This directly increased balance sheet equity, which amounted to 7.9 billion euros at the end of the first half-year (31 December 2021: 4.5 billion). The equity ratio rose accordingly to around 17 percent (December 31, 2021: 10.6 percent).
Remco Steenbergen, Chief Financial Officer of Deutsche Lufthansa AG:
“Returning to profitability in a quarter that was marked also by high geopolitical uncertainty and rising oil prices is a major achievement. This demonstrates that we are making good progress in recovering from the financial consequences of the Corona crisis. Even after the repayment of state aid last year, our goal remains to further strengthen the balance sheet on a sustainable basis. With a free cash flow of almost 3 billion euros, we were very successful in this regard in the first half of the year. Also in the full year 2022, thanks to the expected return to positive results, strict working capital management and disciplined investment activities, we forecast a clearly positive Adjusted free cash flow and thus a reduction in our net debt compared to the prior year.”
Lufthansa Group recruits more staff
Against the backdrop of the rapid increase in air traffic worldwide, Lufthansa Group is once again recruiting staff. In the second half year of 2022, the company will be hiring around 5,000 new employees, in line with the Group’s ramp-up plan while still ensuring sustainable productivity gains. The vast majority of new hires relates to adjusting staff levels in operations to the expansion of the flight schedule. Key areas in this regard are the cockpit and cabin of Eurowings and Eurowings Discover, ground personnel at airports, workers at Lufthansa Technik and catering staff at LSG. A similar number of new hires is planned in 2023.
SBTi validates climate targets of the Lufthansa Group
The Lufthansa Group has set itself ambitious climate protection goals and aims to achieve a neutral CO₂ balance by 2050. Already by 2030, the aviation group wants to halve its net CO₂ emissions compared to 2019. To this end, the Lufthansa Group is pursuing a clearly defined reduction path. This has now been successfully validated by the so-called “Science Based Target Initiative” (SBTi). This makes the Lufthansa Group the first aviation group in Europe with a scientifically based CO₂ reduction target in line with the goals of the Paris Climate Agreement of 2015.
Since August 2, the Lufthansa Group has been testing so-called Green Fares in Scandinavia. For flights from Norway, Sweden and Denmark, customers can now buy flight tickets on the airlines’ booking pages that already include full CO₂ compensation through sustainable aviation fuels and certified climate protection projects. This makes CO₂-neutral flying even easier. The Lufthansa Group is the world’s first international airline company with an offer of this kind.
The Lufthansa Group expects demand for tickets to remain high for the remaining months of the year – people’s wish to travel continues unabated. Bookings for the months August to December 2022 are currently at an average of 83 percent of the pre-crisis level.
Despite the need for some flight cancellations to stabilize operations, the company will continue to expand capacity in line with demand and plans to offer around 80 percent of its pre-crisis capacity in the third quarter of 2022. This is expected to result in a further significant increase in Adjusted EBIT in the third quarter compared to the second quarter, primarily due to a continued improvement in the results of the Lufthansa Group Passenger Airlines.
For the full year 2022, the Lufthansa Group expects the offered capacity at the passenger airlines to amount to around 75 percent on average. Despite continuing uncertainty regarding global economic and geopolitical developments and the further progress of the Corona pandemic, the Group specifies its outlook and now expects Adjusted EBIT to be above 500 million euros for the full year of 2022. This forecast is in line with current market expectations. The Lufthansa Group also expects a clearly positive Adjusted free cash flow for the full year. Net capital expenditure is expected to amount to around EUR 2.5bn.
Summer capacity on short and medium haul routes almost back to 2019 level
Bookings for Easter and summer partially above pre-crisis levels
Adjusted EBIT before restructuring expenses at -1.8 billion euros (previous year: -5.2 billion euros)
Lufthansa Cargo again posts record result. Adjusted EBIT doubled to 1.5 billion euros
Structural cost reductions – more than 75 percent of planned annual savings already secured
Positive result development expected over course of 2022
Carsten Spohr, CEO of Deutsche Lufthansa AG:
“2021, was a challenging year for the Lufthansa Group and its employees. And 2022 also begins with developments that worry us as citizens of this continent. Our Airlines connect people, cultures and economies. We stand for international understanding and peace in Europe and around the world. Our thoughts are with the people of Ukraine and with our colleagues on the ground, to whom we are providing every possible support.
The Lufthansa Group used the past financial year to further renew itself. We have decisively and consistently advanced and implemented the transformation and restructuring of the company. Today, the Lufthansa Group is more efficient and more sustainable than before the pandemic.
Even in the financially most difficult two years in our history, in which painful cuts were unavoidable, we acted in a socially responsible manner and sustainably secured 105,000 jobs in the Lufthansa Group.
We are very certain that air traffic will experience a strong upswing this year. Our strategy of expanding the private travel segment has proved successful and is paying off. People want to travel. They seek and need personal contact – especially after two years of pandemic and the associated social restrictions. The pent up demand for leisure and business travel was already significantly noticeable in 2021 – and this trend is set to intensify in 2022.
The Coronavirus crisis has taken its toll on all of us. The pandemic presented our customers, shareholders and our employees with extreme challenges. We are now leaving the crisis behind us, mentally and – in view of the strong booking figures this year – also commercially and face the next challenge strengthened.”
The Lufthansa Group generated revenue of 16.8 billion euros in the fiscal year 2021, around 24 percent more than in the previous year (previous year: 13.6 billion euros).
An increase in passengers, the transformation and restructuring of the company, and the associated cost reductions contributed to a significant improvement in earnings. The company returned to profit in the third quarter due to strong summer travel months. For the full year, the operating loss was significantly reduced, despite the third and fourth pandemic wave and the resulting travel restrictions. Adjusted EBIT in 2021 was -2.3 billion euros (previous year: -5.5 billion euros). Excluding restructuring costs of 581 million euros, Adjusted EBIT was -1.8 billion euros. The Adjusted EBIT margin improved accordingly to -14.0 percent (previous year: -40.1 percent).
Compared with the pre-crisis level, the structural decrease in personnel expenses, excluding one-off restructuring expenses, effects from short-time working and temporary measures, amounted to 10 percent. With the implementation of additional planned measures, the decrease will be 15 to 20 percent. At the end of last year, the Lufthansa Group employed around 105,000 employees, more than 30,000 fewer than before the start of the Coronavirus pandemic.
The Group net income improved by 67 percent to -2.2 billion euros (previous year: -6.7 billion euros).
Lufthansa Cargo posts record result, Lufthansa Technik and LSG generate profit
The positive earnings trend in the logistics segment continued in the financial year 2021. High demand for freight capacities combined with a limited offer due to a global lack of freight capacity on passenger aircraft and disruptions to supply chains, especially in shipping, ensured that average yields continued to rise. Lufthansa Cargo benefited from this and almost doubled its Adjusted EBIT year-on-year to 1.5 billion euros (previous year: 772 million euros). This is the best result of its history.
By contrast, Network Airlines’ earnings were still heavily impacted by the Corona pandemic in the fiscal year 2021. Adjusted EBIT remained clearly negative at
-3.5 billion euros but improved by 25 percent year-on-year (previous year:
-4.7 billion euros).
Eurowings benefited in particular from the return of demand in the private travel segment, especially last summer. Cost reductions as part of the restructuring program also contributed to the improvement in earnings. Adjusted EBIT increased by 67 percent to -230 million euros (previous year: -703 million euros).
Lufthansa Technik posted a clearly positive result last year. The provider of aircraft maintenance, repair and overhaul services benefited from the recovery in air traffic. Lufthansa Technik achieved an Adjusted EBIT of 210 million euros (previous year: -383 million euros).
The LSG catering division also returned to profitability, posting an Adjusted EBIT of 27 million euros (previous year: -284 million euros), mainly thanks to the recovery of air traffic in North America.
Passenger numbers and traffic development
During the past year, significantly more passengers flew with the Lufthansa Group airlines than in 2020. In total, 47 million passengers were welcomed on board. That was an increase of 29 percent compared to the previous year. The number of flights in 2021 increased by almost 18 percent compared to 2020. As a result of the significant increase in demand, a total of 32 percent more seat kilometers were offered last year than in the previous year.
Alongside the dynamic growth in demand for air travel, the number of offered flights was significantly expanded over the course of the year. While at the beginning of 2021 the offered capacity still only amounted to 21 percent (compared to 2019), by the end of the year the airlines had reached an offered capacity of 60 percent.
In line with expectations, average offered capacity amounted to 40 percent of 2019 capacity for the year.
Free cash flow excluding special effects only slightly negative, liquidity above target value
The Lufthansa Group continued to place a particular focus on consistent cash management in 2021. At 1.3 billion euros, gross capital expenditure remained considerably below pre-pandemic levels. Through strict management of receivables and payables and the significant increase in new bookings, the Group achieved a significant improvement in Adjusted Free Cash Flow to -855 million euros (prior year: -3.7 billion euros). Excluding the payment of taxes amounting to 810 million euros that had been deferred in the previous year, Adjusted Free Cash Flow was close to breakeven at -45 million euros.
In the past year, the Lufthansa Group significantly improved its balance sheet through numerous transactions on the financial market. A successful capital increase, the issue of six bonds and the conclusion of 20 aircraft financings clearly document the confidence of the financial markets in the company. The repayable funds raised as part of the WSF stabilization measures were repaid in full earlier than expected.
As of December 31, 2021, the Lufthansa Group’s available liquidity of 9.4 billion euros was above the long-term target corridor of 6 to 8 billion euros.
Other balance sheet ratios also improved notably in the financial year. Pension liabilities decreased to around 6.7 billion euros, mainly due to an increase in the interest rate used to discount pension obligations (previous year: 9.5 billion euros). As a result of the capital increase, net debt decreased to 9.0 billion euros (previous year: 9.9 billion euros). Equity tripled to 4.5 billion euros (previous year: 1.4 billion euros).
Remco Steenbergen, CFO of Deutsche Lufthansa AG:
“We used the past year to significantly strengthen our balance sheet. Our financing measures on the equity and debt side show that we again have a very good and broad market access. Our liquidity is more than twice as high compared to the pre-crisis level. This, combined with our structural cost savings, gives us a very good financial basis to further expand our strong market position.”
Transformation and restructuring lead to significant cost reductions
The successful continuation of the company’s ambitious transformation and restructuring program led to a further significant reduction in costs in the Group. In the meantime measures have been implemented which will reduce costs by around 2.7 billion euros per year. Thereby more than 75 percent of the annual cost savings of 3.5 billion euros targeted by 2024 have already been secured. This has been achieved primarily by reducing personnel costs, increasing productivity, improving processes at the passenger airlines, Lufthansa Cargo and the Group functions, and the modernization of the fleet. The company continues to examine the sale of subsidiaries that are not part of the core business of the Group. AirPlus and the remaining part of LSG’s catering business after the sale of the European part, are to be sold as soon as market conditions permit. A partial sale or a partial IPO are still being pursued for Lufthansa Technik. The closing of the transaction is intended for 2023.
The Lufthansa Group expects a significant increase in demand for air travel in the current year. In February, our customers have booked more flight tickets than at any time since the beginning of the pandemic. The number of bookings for the Easter and summer holiday periods has almost reached the level of 2019. To some destinations, the number of bookings has even tripled (compared to 2019). For the Easter vacations, Lufthansa alone will therefore offer more than 50 additional flights to meet all booking requests. Overall, in this year the Lufthansa Group airlines offer a greater variety of tourist destinations than ever before, with more than 120 classic vacation destinations. Demand is particularly strong for destinations in the USA and the Mediterranean.
In line with the growing demand, flight schedules are further expanded. For the summer, the company expects capacity to increase to around 85 percent compared to 2019. On short- and medium-haul routes, the figure is expected to be around 95 percent. Eurowings will even offer more capacity in the summer than in 2019. For the year as a whole, the Lufthansa Group expects an average capacity of more than 70 percent compared to 2019.
The entire airline industry will be confronted with increasing external costs in 2022. Air traffic control and airport charges are significantly increasing. Additional burdens also result from the rising oil price. However, the Group expects to be significantly less affected by this cost inflation than its competitors. It has for example started to hedge at an early stage against rising fuel prices and the increase in the cost of emissions certificates.
Major uncertainties regarding the dramatic developments in Ukraine and the economic and geopolitical consequences of the conflict, as well as remaining uncertainties regarding the course of the pandemic, do not allow to provide a detailed financial outlook at present.
In 2022 however, the company expects further year-on-year improvements in Adjusted EBIT and Adjusted free cash flow. After a challenging first quarter, which is still impacted by the spread of the Omicron variant, the Lufthansa Group expects a significant improvement in operating results in the following quarters.
Building on the progress we forecast for 2022, the Lufthansa Group confirms its communicated targets for 2024 (Adjusted EBIT margin of at least 8% and Adjusted ROCE of at least 10%).
Remco Steenbergen, CFO of Deutsche Lufthansa AG:
“Our ambition is clear – we want to return to positive results as quickly as possible. We have laid the foundations for this, above all by implementing our cost reduction program. The strong recovery in demand in recent weeks also gives us cause for optimism. We cannot yet foresee how the significant increase in geopolitical uncertainties will affect demand and the economic environment. Nevertheless, we will be able to continue and accelerate our economic recovery in 2022.”
Connect the world – protect its future
The Lufthansa Group has set itself ambitious climate protection goals and aims to halve its net CO₂ emissions by 2030 compared to 2019 and to achieve a neutral CO₂ balance by 2050. The company is focusing in particular on accelerated fleet modernization. Last year, the Lufthansa Group took delivery of eleven new aircraft. In 2022, the company expects to take delivery of 29 more fuel-efficient, quiet and efficient aircraft, including four Airbus A350-900s and five Boeing 787-9 long-haul aircraft. The use of sustainable aviation fuels and innovative new offers for customers to make their air travel CO₂-neutral will further reduce CO₂ emissions.
The company’s clear goal is to continue to play a pioneering role in aviation for more and better climate protection in the future. The Lufthansa Group bundles its numerous sustainability initiatives and partnerships in the “CleanTech Hub”, where impulses from science, industry and the global start-up scene are combined with the company’s extensive airline know-how. Experts are currently collaborating on more than 80 projects – which include the production of sustainable aviation fuels using sunlight, the use of artificial intelligence for flight route optimization in real time, the development and the implementation of a fuel-saving surface technology for passenger aircraft that imitates the properties of the particularly streamlined shark skin.
Investments in new premium customer offerings
The clear goal in 2022 is to once again consistently offer the premium service that passengers rightly expect from the Lufthansa Group. Several measures are underway in order to achieve this. For example, the digital offerings and self-service options will be consistently expanded and the processes at the airports optimized for our customers. Onboard service will not only be restored to the usual premium standard as soon as the pandemic-related hygiene protection measures permit but will also be improved further. The company is also investing in renewing and expanding the infrastructure, for example in the lounges.
Further information on the results of individual business units will be published in the Annual Report. It will be published at the same time as this press release on March 3, 2022, at 7:00 a.m. CET at http://www.lufthansagroup.com/investor-relations.
The government of Italy has signaled to the Lufthansa Group and MSC shipping group of Switzerland it can proceed with negotiations to acquire a majority share of newly-created ITA Airways.
The government however wants to retain a small share.
The government has also drafted a decree which lists ways it can offload its majority share of ITA Airways, including a direct sale or a public offer, without setting a deadline for a final deal.
ITA Airways on January 24, 2022 announced it had received an Expression of Interest from the MSC Group and Lufthansa to acquire the majority of ITA Airways. The MSC Group has agreed with Lufthansa its participation in the partnership on terms to be defined during the Due Diligence.
Both the MSC Group and Lufthansa have expressed the wish that the Italian Government maintains a minority stake in the Company. Furthermore, the MSC Group and Lufthansa have requested 90 days of exclusivity to work on this Expression of Interest.
Top Copyright Photo: ITA Airways Airbus A320-216 EI-DTN (msn 4143) CDG (Manuel Negrerie). Image: 956718.
The Company announces that today it has received an Expression of Interest from the MSC Group and Lufthansa to acquire the majority of ITA Airways. The MSC Group has agreed with Lufthansa its participation in the partnership on terms to be defined during the Due Diligence.
Both the MSC Group and Lufthansa have expressed the wish that the Italian Government maintains a minority stake in the Company. Furthermore, the MSC Group and Lufthansa have requested 90 days of exclusivity to work on this Expression of Interest.
ITA Airways is satisfied that the work carried out in recent months to offer the best prospects to the company is starting to have the expected results, providing for a company recognized as viable for partners of international reputation both in passenger and cargo transport. The Board of Directors will examine the details of the Expression of Interest in an upcoming meeting.
CO2-neutral flying is already possible today. The Lufthansa Group is pursuing an ambitious path for more climate friendly aviation and, since spring 2021, in addition to private travelers, has also been offering companies the option of using Sustainable Aviation Fuel (SAF) for their flights. Steadily more of the Lufthansa Group’s corporate customers are interested in this climate friendly form of business travel or freight transportation. After the insurance company AXA Deutschland, the logistics service providers DB Schenker and Kuehne+Nagel, Kearney has now also become the first internationally active management consultancy to invest extensively in SAF. As a result, Kearney is now using the Lufthansa Group’s “Compensaid Corporate Program” to make the majority of its business flights CO2-neutral.
“As Europe’s largest purchaser of Sustainable Aviation Fuel, we already enable CO2-neutral flying. Among our corporate customers, we are seeing increasing interest in using this genuine alternative to fossil aviation fuel. Every company that already invests in Sustainable Aviation Fuel spurs the market ramp-up and thus makes an important contribution on the way to CO2-neutral air transport,” says Christina Foerster, Member of the Lufthansa Group’s Executive Board responsible for Customer, IT & Corporate Responsibility.
Lufthansa Group continues to invest in Sustainable Aviation Fuel
A few days ago, the Lufthansa Group secured sustainable kerosene for a quarter of a billion US-Dollars in order to be able to meet the foreseeable increase in demand in the coming years. This is the largest pure sustainability investment in the history of the Lufthansa Group to date.
Sustainable Aviation Fuel is currently produced mainly from biogenic residues, for example from used cooking oils. This means that the new aviation fuel can, in perspective, enable nearly CO2-neutral aviation. The Lufthansa Group has been involved in SAF research for many years and has built up an extensive network of partnerships. The company is already the largest buyer of SAF in Europe, a pilot customer of the first industrially produced Power-to-Liquid fuel worldwide, and also aims to be among the world’s leading airline groups in the use of sustainable kerosene.
Currently, very little SAF is available on the global market and it is significantly more expensive than conventional kerosene. The Lufthansa Group is therefore working on various projects to advance the development and availability of SAF including, in particular, SAF produced from renewable electrical energy. In addition to the use of more efficient, latest-generation aircraft, SAF are the most effective lever on the path to a CO2-neutral aviation industry.
Lufthansa Group joins SBTi initiative
The Lufthansa Group has set ambitious climate protection goals and aims to halve net CO₂ emissions by 2030 compared to 2019 and to achieve a neutral CO₂ balance by 2050. To further specify these net targets, it has joined the so-called Science Based Target Initiative (SBTi) to bring its CO2 reduction path in line with the United Nations Paris Climate Agreement. Based on scientific calculations, CO2 emissions will be continuously reduced with the help of fleet renewal and optimization, improved operational efficiency and the use of SAF. The official validation will take place in 2022.
The airlines of the Lufthansa Group (Lufthansa, Swiss, Austrian Airlines, Brussels Airlines and Eurowings) are offering around 80,000 additional seats on 440 extra flights for the upcoming holiday season and New Year. The airlines are now responding to the weeks-long increase in demand for flights during the Holiday vacations by resuming destinations and increasing the frequency of existing connections or deploying larger aircraft.
From its hubs in Munich and Frankfurt alone, Lufthansa is offering more than 120 additional flights with a capacity of 25,000 seats during the Christmas period.
In the U.S., New York and destinations in the state of Florida are booked particularly often. In Europe, destinations on the Spanish mainland and the Canary Islands, Portugal and other sunny destinations in the Mediterranean region as well as Scandinavia are in particularly high demand. In addition to these destinations, the snow-sure ski resorts in Lapland (northern Finland) are back on the flight schedule. Thus one reaches over the holiday season and New Year from Frankfurt Ivalo and Kuusamo as well as from Munich Kittilä in Lappland and Tromsö in Norway – Northern Light inclusive.
All flights are immediately bookable. With planning air travelers should consider in each case the appropriate current entry and quarantine regulations.
Flying CO2 neutral today
Travelers can make a personal contribution to climate protection and make their air travel CO2 neutral. In addition to the option of offsetting the flight via high-quality climate projects, Lufthansa guests can already fly with sustainable fuel today. The airlines of the Lufthansa Group have integrated the options into the booking process. Frequent flyers can find them in the Miles & More app.
Deutsche Lufthansa AG repaid or cancelled all remaining government Stabilization funds from the Federal Republic of Germany on Friday, November 12. The repayment was made much earlier than originally planned. This was made possible primarily by the rising demand for air travel, the fast restructuring and transformation of the Lufthansa Group and the capital markets’ confidence in the company.
This means that, the Silent Participation II of the Economic Stabilization Fund of the Federal Republic of Germany (ESF) amounting to 1 billion euros was repaid in full. After the company had already repaid Silent Participation I in October, of which only 1.5 billion euros were drawn, the unused and remaining part has now been terminated too. Last February, the company had already repaid a KfW loan of 1 billion euros earlier than expected. This means that all German loans and Silent Participations, including interest, have now been repaid respectively terminated. Under this condition, ESF has undertaken to sell its stake in Deutsche Lufthansa AG amounting to approx. 14 percent of the share capital by October 2023 at the latest.
In June 2020, the shareholders of Deutsche Lufthansa AG cleared the way for the Stabilization measures of the Economic Stabilization Fund (ESF) of the Federal Republic of Germany. The German government’s package originally provided measures and loans totaling up to 9 billion euros, of which the company has drawn down a total of around 3.8 billion euros. This includes around 306 million euros with which the ESF built up its shareholding in Deutsche Lufthansa AG.
To refinance existing liabilities and the government Stabilization packages, the company has taken various debt and equity financing measures since autumn 2020. In doing so, it benefited from the steadily growing confidence of the financial markets in the future prospects of the Lufthansa Group.
In November 2020, the company made a “comeback” on the capital markets with a convertible bond with a total volume of 600 million euros and a corporate bond of 1 billion euros. In February 2021, Deutsche Lufthansa AG again successfully issued a bond for 1.6 billion euros. Another bond placement followed in July 2021 in the amount of 1 billion euros. In October 2021, the company successfully completed a capital increase. The gross proceeds from the capital increase amounted to 2.2 billion euros. Finally, on 9 November 2021, the Lufthansa Group was again successfully active on the financial market and issued a bond in the amount of 1.5 billion euros.