Lufthansa Outflies Rivals

At the last annual press conference before his retirement, Lufthansa`s Chairman and CEO Jürgen Weber was able to present an outstanding result for 2002 that outshines the efforts of other airlines and a robust company that is prepared for the challenges of the 21st century. “When Wolfgang Mayrhuber takes over Lufthansa`s helm after the Annual General Meeting in June, he will captain a well-run ship. We are fit for the 21st century, we are in a leading position in our industry and we shall continue to work hard to maintain and extend this position. The Lufthansa Group has proved that it can withstand crises, respond rapidly and act flexibly,” said Jürgen Weber when presenting the Company`s annual financial statements in Munich. The Group`s successful capacity and cost management strategy is reflected in the result for the 2002 financial year. “Counter to the general trend in the airline industry and the prevailing overall economic situation, Deutsche Lufthansa has pulled ahead of its competitors and posted an operating profit of EUR 718 million”, said Jürgen Weber. This surpasses the operating result in 2001 by EUR 690 million. “Our employees can be proud of such a feat. This result is the sum of many individual achievements and an expression of our customers` loyalty towards Lufthansa,” the company`s Chairman added. Along with the operating profit, the net profit for 2002 likewise improved markedly to EUR 717 million. The Lufthansa Group managed to simultaneously cut its indebtedness from EUR 3.8 billion to EUR 1.1 billion. “This means we have kept our promise to cut debt and boost liquidity.”

Jürgen Weber reminded his audience that 2002 had been marked by geopolitical uncertainties, a persistent cyclical slowdown, insolvencies and new lows on the stock markets. He said that the danger of further terrorist attacks and the threat of war, which has been in the air for months, have made both markets and consumers extremely nervous. But precisely in this turbulent phase Lufthansa had managed to buck the sector-wide trend. The shareholders, too, will profit from the company`s fine performance in 2002. “The Executive Board and the Supervisory Board will propose the payment of a dividend of 60 cents per share to the Annual General Meeting,” Jürgen Weber announced.

Even though the Group has performed better than other airlines, it needs to remain on its guard. Irrespective of developments in Iraq, the crisis has intensified. “An end is not yet in sight and it will be prolonged as a result of the Iraq conflict”, according to Jürgen Weber. In view of the uncertain geopolitical situation, the threat of terrorism and the economic situation, it is currently impossible to make a reliable forecast of Lufthansa`s likely result for the current financial year. From today’s point of view, however, Lufthansa will be unable this year to match its 2002 result. In order to bolster its profitability, the company has already initiated far-reaching measures. These include capacity reductions in German and European traffic, investment curbs, a Group-wide recruitment freeze and a supplementary D-Check initiative “Cash 100”.

In times of crisis it is important to keep looking ahead. “There are sure to be better times ahead, and it is imperative to be well prepared for them,” Jürgen Weber pointed out. “Lufthansa has an excellent track record since its privatisation and restructuring. What made this possible was that the team constantly had one aim in mind: Lufthansa`s success.” Jürgen Weber said that his successor Wolfgang Mayrhuber had played a key part in this. “When he takes over the controls this summer, Lufthansa will have a captain who knows the company like the back of his hand, who enjoys the trust of the workforce and who has demonstrated his capability at the head of Lufthansa Technik and Lufthansa German Airlines. His dynamism, his high standards in terms of both product and quality and his innovative force come at the right time,” commented Jürgen Weber.

In the opinion of Lufthansa`s current Deputy Chairman Wolfgang Mayrhuber it is precisely in adverse periods that forward-looking decisions must be taken in good time for key future investments so as to strengthen Lufthansa`s long-term position as a high-quality and network carrier in the international competitive environment. “Whatever happens, it must be ensured that the high product and service quality is further enhanced and simultaneously that costs are reduced”, said Wolfgang Mayrhuber. That calls for a high level of innovativeness, creativity and flexibility. From this autumn Lufthansa will offer its passengers a new Business Class with greater comfort and a radically revamped seat that converts into a bed. These will be initially fitted in the modern long-haul Airbus 340-600 fleet. Lufthansa is investing around €30 million in a comprehensive customer program that will be implemented by summer 2004. “Our premium customers deserve an outstanding service. They will be given their own dedicated terminals in Frankfurt and Munich as well as exclusive transfer lounges. State-of-the-art technology, also in the field of security controls, currently under development in cooperation with the Federal Ministry of the Interior, will help to make air travel a pleasure once again,” announced Wolfgang Mayrhuber at the annual press conference. He added that to maintain its pole position in future, Lufthansa must constantly be better than other carriers. “The key criteria for achieving this are quality, innovation, a sharp focus on the customer`s needs and a strong service mentality. In this way we shall remain the generator of innovation within our industry,” concluded Wolfgang Mayrhuber.

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In 2002 the Lufthansa Group generated total revenue of EUR 17.0 billion, which was 1.7 percent more than in 2001. The Group`s airlines earned traffic revenue amounting to EUR 12.0 billion, a decrease of 1.8 percent on the previous year. Thanks to a farsighted capacity and pricing policy, however, Lufthansa was able to increase its utilization of capacity and to keep average yields steady. Other operating revenue rose by 11.3 percent to EUR 4.9 billion owing to an enlargement of the consolidated Group. Other operating income climbed by 42.7 percent to EUR 2.1 billion. It contains book profits of EUR 414 million from the sale of the DHL shareholding and another EUR 74 million from the disposal of the remaining equity stake in GlobeGround.

Cost reductions in all business segments pushed down the operating expenses. They totalled EUR 17.5 billion, or 5.4 percent less than in 2001. Staff costs increased following the first-time consolidation of companies by 4.0 percent to EUR 4.7 billion; excluding the consolidation changes, they would have fallen by 0.4 percent. The cost of materials fell by 5.6 percent to EUR 7.2 billion, with the outlay on fuel dropping by as much as 16.9 percent to EUR 1.3 billion. Insurance charges rose disproportionately last year: they came to EUR 107 million, which represents an increase of 224.2 percent.

The concept of the integrated all-round aviation group has demonstrated its effectiveness even in difficult times and has once again proved to be a key asset. Thus Lufthansa was able to massively improve its net profit to plus EUR 717 million compared with minus EUR 633 million in 2001. The Group also further reduced its indebtedness: net debt was cut by EUR 2.7 billion to EUR 1.1 billion (-70.3 percent). As part of the crisis management strategy, capital expenditure was limited to EUR 880 million, thus falling well short of the 2001 level (EUR 3.0 billion). The cash flow trend was equally positive: it increased by 33.2 percent to EUR 2.3 billion.

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