Lufthansa Chief Executive Wolfgang Mayrhuber is showing optimism about the coming months and is looking to satisfactory yields in its passenger business despite high fuel costs. The German flag carrier has also raised its full-year earnings forecast and now expects operating profit to rise by 30 percent.
Lufthansa increases profit to 691 million euros
Improved forecast for the full year: result of some 750 million euros anticipated.
“Lufthansa remains on success course”, commented Lufthansa Chairman and CEO Wolfgang Mayrhuber when presenting the quarter results. Despite high oil prices the Group increased operating profit in the first nine months of the year by 46.7 per cent to 691 million euros. “The result and the resonance in the market underline our strategic direction. We have become better, larger and more profitable. We are investing in our future and will be taking on 2500 new employees this year.” In view of the continuing good development and the positive economic climate the Lufthansa Board has raised its forecast for the full year and is now anticipating an operating profit of some 750 million euros.
Mayrhuber stressed that all business segments had contributed to this success. “All segments have operated successfully, strengthened their customer base and scored well with new products. The systematic orientation to profitability and the respective core competencies is paying off.” The Passenger Transportation business had made a substantial contribution to improving the result in a very competitive environment. Better yields and a sustained climb in demand had led to this development. Primarily in the growth markets of Asia the Group was operating successfully and was also well prepared for the future. “In India and China Lufthansa takes first place amongst the European airlines and we continue to invest, in new destinations for example”, explained Mayrhuber. Part of the growth strategy was also the most recent ordering of 35 new aircraft to extend and modernise the fleet.
The Lufthansa CEO stressed that the Group’s service and quality offensive was reaping benefits. “Customer satisfaction has improved once again. The reaction to our quality products including bargain prices is extremely positive.” Lufthansa was not only good, but also value for money.
Wolfgang Mayrhuber was also satisfied with the development of the share. In the first nine months of the year the price had risen by more than 30 per cent. “We believe that our share has further potential and we are seeking to justify the trust of our customers and shareholders with solid work also in the future.”
We save to invest
One instrument with this in mind was the action plan which was aimed at achieving improvements in results of 1.2 billion euros by the end of the year. Mayrhuber emphasised that this action plan would be successfully ended to schedule. By the end of September it had been possible to make sustainable cost savings of 1.13 billion euros. Strict cost management remained an ongoing challenge also in the future.
Mayrhuber highlighted the importance of aviation as a growth sector, which was a driving force in the creation of jobs. Lufthansa would be taking on some 2500 new employees this year. If it was to continue this trend in future the industry needed reliable framework conditions and political support in important infrastructure projects above all. “This means greater flexibility and less red tape. We can no longer afford twelve years for a 2.8 kilometre runway in Frankfurt”, commented Mayrhuber. This primarily included the creation of a harmonised European air space which was currently managed by some 50 different air traffic control organisations. “There has been no movement here for the past ten years and yet the Single European Sky is the largest European environmental project with the highest potential to reduce the CO2 emissions in aviation.”
Nine-month figures 2006
The Lufthansa Group generated revenues of more than 15.0 billion euros in the first nine months of the year, representing growth of 12.9 per cent. During this period more than 40 million passengers flew with Lufthansa, a new record level. Lufthansa Cargo also increased the volume of cargo and mail transported to 1.3 million tonnes, its highest level ever. Traffic revenue increased accordingly by 13.2 per cent to 11.6 billion euros. Other operating income dropped compared to the previous year’s period by 16.7 per cent to 887 million euros. Book gains of around 290 million euros were achieved in 2005 through the sale of shares in Amadeus and Loyalty Partner.
The 9.6 per cent rise in operating expenses to 15.2 billion euros remained below the increase in turnover. As a result of the high oil prices in the reporting period a distinct rise in fuel costs was recorded once again. The airlines of the Group expended 2.6 billion euros on kerosene in the first nine months of the year; this was 39.1 per cent or 719 million euros more than in the comparable period for the previous year. Without the successful fuel price hedging measures, fuel would have cost an additional 144 million euros.
The Lufthansa Group improved the operating profit for the first three quarters by 46.7 per cent to 691 million euros. A net profit of 414 million euros was recorded (previous year: 416 million euros). This slight decline was due to positive one-off effects in the previous year, resulting from book gains from share disposals as well as from the first-time incorporation of SWISS.
The Group increased the operating cash flow by 6.9 per cent to 1.4 billion euros. The 25.4 per cent higher investments of 1.3 billion euros compared to the previous year’s period (590 billion euros of which in aircraft) could be financed completely from cash flow.