Lufthansa Revises Profit Expectations Upwards

Interim operating result up 18 per cent to DM 683 million (Euro 349 million) Group anticipates 15 per cent rise in earnings for full year
In the first six months of this year the Lufthansa Group strongly reinforced its leading position in the airline industry and as a result has revised its profit expectations upwards.
The integrated aviation group extended its market position with an interim operating result of DM 683 million (Euro 349 million). This was 17.9 per cent higher than last year`s comparable figure. “With this result we remain the European leader in the airline industry,” commented Lufthansa`s Chairman Jürgen Weber.
For the rest of the year Lufthansa anticipates a continuation of this favourable trend. The buoyant momentum of the world economy is boosting the demand for air transportation services and so will have a positive impact on earnings. Consequently, the aviation group has now upwardly adjusted its profit expectations for the full year. Whereas Lufthansa had originally envisaged raising the operating result by 10 per cent compared with 1999, it is now aiming to lift year-on-year earnings by 15 per cent.
“Our goal was and is to be well prepared for the economic upturn and for the New Economy,” said Jürgen Weber. “Our dual strategy - providing a full range of services to the customer as an all-round aviation group and leading our industry in the field of e-business - are paying off”.


Revenue increased by 18.8 per cent:


Lufthansa expanded in all its strategic business segments. In the first six months of the year the revenue generated by the Group totalled DM 13.4 billion (Euro 6.9 billion), which was18.8 per cent more than at the half-way stage in 1999. Rising sales volumes, improved average yields and positive exchange rate effects combined to lift traffic revenue significantly. It grew by 14.7 per cent to reach DM 11.03 billion (Euro 5.6 billion). The Logistics segment turned in a particularly pleasing business performance. Traffic revenue from freight business climbed by a higher-than-average 20.4 per cent. Other revenue increased by 42.7 per cent, fuelled largely by the strong turnover growth of the business segments Catering and Ground Services with their newly consolidated subsidiaries.


Lufthansa`s commercial success was again driven by a buoyant demand for air transportation services. Thus the Group improved its overall rate of capacity utilisation to the record level of 70.9 per cent. The number of passengers carried went up by 7.1 per cent to 22.6 million. The amount of seat capacity sold rose by 9.8 per cent, thereby surpassing the increase in capacity available, which was expanded merely by 7.7 per cent. The passenger load factor attained a new high of 73.2 per cent. The Logistics segment likewise increased its sales volume (by 7.8 per cent). The cargo load factor improved by 0.5 percentage point to 67.5 per cent.


Outlining Lufthansa`s corporate goal, Jürgen Weber said: “Increasing capacity sold by a greater margin than capacity available underscores our intention of accommodating the strong growth of air travel in a socially responsible way. That saves resources and spares the environment.”

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Costs driven by growth:
Total operating expenses increased by 19.8 per cent compared with the first six months of last year. They were inflated above all by a 27.7 per cent rise in the cost of materials. The expanded traffic output, steep increases in fuel prices and the strength of the dollar caused expenditure on kerosene to soar by DM 479 million (Euro 245 million) or 64.6 per cent. The consequences of the oil price hike would have been even more dramatic had it not been for Lufthansa`s comprehensive package of fuel price hedging measures, which are without parallel in the airline industry. Staff costs went up by 20.2 per cent, chiefly on account of the newly consolidated companies, which are labour-intensive.

If the effects of the first-time consolidations are disregarded, personnel expenses would have risen by only 10.8 per cent.

Pre-tax earnings climb to DM 1.05 billion:


Lufthansa posted a much higher pre-tax earnings result in the first six months of 2000 than in the first half of 1999. The profit from ordinary activities climbed by 82.1 per cent to DM 1.05 billion (Euro 539 million), thanks in part to capital gains from the disposal of an equity interest in Amadeus Global Travel Distribution S.A. (DM 739 million/Euro 378 million).


The Group continued on its growth path in the first six months of this year and invested DM 2.4 billion (Euro 1.2 billion), which was almost 60 per cent more than in the corresponding period last year. Cash flow grew by 67.2 per cent to DM 1.98 billion (Euro 1.01 billion). As a result, the internal financing ratio reached 82.2 per cent. Around 70 per cent of the capital expenditure was spent on modernising and expanding the fleet. The complete Group Report on the first half of 2000 is available on the Internet at: http://www.lufthansa-financials.de


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