Tag Archives: Lufthansa Group

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 to bid for Thomas Cook’s Condor Flugdienst

Condor Flugdienst-Thomas Cook Boeing 757-330 WL D-ABOL (msn 29021) AYT (Ton Jochems). Image: 946462.

Lufthansa is prepared to make an offer for Condor Flugdienst from the Thomas Cook Group according to Reuters. It will also offer an option to acquire the other Thomas Cook airlines.

Read the full story from Reuters: CLICK HERE

Top Copyright Photo: Condor Flugdienst-Thomas Cook Boeing 757-330 WL D-ABOL (msn 29021) AYT (Ton Jochems). Image: 946462.

Condor aircraft slide show:

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 to sell LGW to Zeitfracht

Operated by Luftfahrtgesellschaft Walter

Lufthansa Group has agreed to sell subsidiary LGW to Zeitfracht (Berlin), which already owns WDL Aviation.

The group acquired LGW from Airberlin and had placed the division under the Eurowings banner.

LGW will continue to operate for Eurowings.

The sale is expected to be completed on April 1, 2019.

LGW currently operates 18 Bombardier DHC-8-402s (Q400s).

Above Photo: BriYYZ.

Top Copyright Photo: Eurowings (LGW) Bombardier DHC-8-402 (Q400) D-ABQH (msn 4256) ZRH (Rolf Wallner). Image: 941071.

 

 

Lufthansa Group invests in artificial intelligence partnership with Hopper

The Lufthansa Group and the Lufthansa Innovation Hub have entered into a research alliance with Hopper focused on the subject of artificial intelligence. They have thus finalized their third technology-related investment within a year, following investments in the startups Fleet Logistics and cargo.one.

Founded in Montreal, Canada in 2007, Hopper operates one of the world’s most innovative travel booking apps. By leveraging powerful machine learning and AI, Hopper’s proprietary technology accurately predicts flight and hotel prices and offers its users personalized recommendations at the optimal booking time, as well as alternative travel offers. With this research project – in which the Lufthansa Group is making a multi-million-dollar investment – the two companies are estab¬lishing a long-term collaboration regarding predictive analytics models and flight-demand forecasting. In addition, the project will utilize AI to learn customers’ preferences on a much deeper level in order to provide personalized recommen¬dations about additional services or upgrades.

“Hopper operates one of the world’s most successful flight booking apps and has developed a unique AI-based technology. With this research alliance, the Lufthansa Group is further expanding its expertise in this area. This will enable us to provide our customers with even better data-driven, tailor-made offers in the future. This is one of the central goals of our digital strategy for this year,” explains Christian Langer, Vice President Digital Strategy, Lufthansa Group.

Supported by the partnership with the Lufthansa Group, Hopper continues with the technological development of its services. Following the company’s recent US $100 million financing round, Hopper will also continue to grow its global market presence as part of its international expansion efforts.

“We are thrilled to have Lufthansa Group and Lufthansa Innovation Hub as part-ners in research as we further our expansion into Europe,” said Frederic Lalonde, CEO of Hopper. “The combination of local market knowledge and dedication to exploring the upper bounds of AI makes this an ideal partnership for Hopper as we double down on our efforts to bring the best in travel booking to a global audience.”

The Lufthansa Innovation Hub facilitates Hopper’s European Rollout

The strategic partnership with the Lufthansa Group was initiated and negotiated by the Lufthansa Innovation Hub, the Group’s innovation and digitization unit. In addition to furthering the development of AI, Hopper will work closely with the Lufthansa Innovation Hub to expand into the European market. The Innovation Hub will provide strategic input on market-specific customer needs as well as access to its network of stakeholders in the European travel and technology space.

“We are delighted to have established a meaningful partnership between the Lufthansa Group and one of the world’s most innovative travel tech startups,” explains Gleb Tritus, Managing Director of the Lufthansa Innovation Hub. “In the coming months, we will support the collaboration with the Lufthansa Group’s revenue management and distribution experts. We are also confident that our Berlin team will be able to make a vital contribution to Hopper’s European expansion.”

Hopper’s European rollout is scheduled to start in mid-2019.

Photo: Lufthansa Group.