Lufthansa in Top League of World

19th Jun 2003

At his last Annual General Meeting as Chairman of the Lufthansa Executive Board, Jürgen Weber presented a financially robust Lufthansa Group that is poised to meet the challenges of the future. “Lufthansa is in the top league of the world airline industry,” he said in Cologne. After twelve years at the helm of the company, Jürgen Weber, the world`s longest-serving airline chief, is handing over the reins to his successor, Wolfgang Mayrhuber. Lufthansa`s evolution from a state enterprise into a profitable aviation group and the founding of the Star Alliance, the world`s largest airline alliance, are important milestones and achievements during his period of office.

With Wolfgang Mayrhuber, the company was well equipped for the future in times of crisis, Weber said. “Under his leadership Lufthansa will remain ready for change and will develop its strengths, such as vigilance, speed and the choice of the right tools.” Wolfgang Mayrhuber, he added, would always insist on bringing about a fair equilibrium between the interests of Lufthansa`s customers, shareholders and employees.

For Jürgen Weber, the 2002 annual result and the company`s financial strength are renewed proof that Lufthansa is fit for the inevitable changes facing the airline industry. The aviation group had once again proved its strength, he said. The fact that Lufthansa could today claim the best annual result for 2002 in the aviation industry worldwide showed how successful the transformation process in the last decade had been: an operating profit of 718 million euros and a result from ordinary activities of 1.6 billion euros - an increase of 1.9 billion euros over the prior year. In view of the positive business developments in the previous year, the Executive Board and the Supervisory Board were therefore proposing a dividend of 0.60 euros per share.

Taking stock of his time as chairman, Jürgen Weber said it was thanks to the company`s staff and management that Lufthansa had recovered from the shock of September 11 and had been able to post a good result in 2002. Together they were vigilant, adaptable and a top team, for whom quick reactions had become second nature, Weber said. But crisis management at Lufthansa did not automatically mean job cuts and redundancies, which were often proclaimed elsewhere to be the panacea for any crisis. “That approach does not fit in with our culture,” he stressed.

Lufthansa had done well to steer a clear course: structural flexibility and financial stability were the key features. And Lufthansa could be proud of its achievements, Weber said. A former state enterprise had become a market-driven and customer-focused company that had learned to deal with crises. But the overlapping crises presented a major challenge. “Our Group revenue dropped by five per cent. And so, in spite of fast and vigilant adjustment measures, we had to report an operating result of minus 415 million euros at the end of the first quarter of 2003. Nevertheless, we managed to drive down net credit indebtedness to one billion euros and to generate positive cash flow,” Weber said. In the year 2003 an already foreseeable poorer economic performance was contrasted with persistently high financial stability at Lufthansa. Maintaining that stability was Lufthansa`s duty to its shareholders.


However, the first silver linings could already be seen on the horizon. In the US, business travel was gradually coming out of the doldrums. On North Atlantic routes there were clear signs of a revival. In May, signs of recovery were observed in passenger numbers. And with the exception of the Asia/Pacific region, all areas had managed to improve their capacity utilisation. As far as yields were concerned, however, there was still room for improvement. Capacity cuts had left 68 aircraft grounded. What was needed now was a reliable framework to help bring about an economic upswing.

“It is high time to enshrine the Agenda 2010 reform in legislation. And further steps will have to follow,” Weber urged. “An economic recovery - particularly in Germany - is therefore of vital importance to the improvement of our business.” But even if the economic recovery were to succeed in the second half of the year, Lufthansa would have to resign itself to the fact that 2003 would not turn out to be one of its better years. IATA estimated that the industry had lost more than ten billion US dollars in the first five months of this year alone, Weber noted. “The first quarter is traditionally the weakest in the airline business, even though it is rarely as dramatic as this year. But if the trend we have observed in the last few weeks persists, we will also be in a better position than most of our competitors at the end of this year,” the outgoing chairman said.

Weber hoped that the crisis would have a cathartic effect on the entire industry. Experts were continuing to forecast long-term positive growth for the airline industry, with the volume of passengers worldwide expected to increase by 4.3 per cent a year. For Weber, however, there is absolutely no doubt that free world trade cannot do without the services of the aviation industry in the long run.

Even if Jürgen Weber had wished for a more positive annual outlook at his last Annual General Meeting as chairman of the company, he was at least able to determine one thing: “We have crossed the valley of tears. Our firm foundations have weathered the storm, and the knowledge that a good team will take over at the helm of Lufthansa gives me a feeling of security, even in this difficult situation.”

Heading this team is Weber`s successor Wolfgang Mayrhuber. He was in charge of the turnaround team that led Lufthansa out of its major crisis and laid the foundations for the successful development of the company in the 1990s. For Mayrhuber, quality and innovation were the key to the future. His focus is on the customer. Even in times of widespread consumer restraint it was therefore necessary, Weber said, to invest in the product, to use state-of-the-art technologies and to make them attractive to the customer. Adjusting capacities to market demands and exercising stringent cost discipline did not, however, rule out investments in the latest technology, advanced technical equipment and the most modern procedures.

Lufthansa`s image was strong, Weber concluded. It was characterised by technical and aviation competence, by high safety standards, reliability and a consistently high level of product and service quality. With this service offer Lufthansa was well positioned in strategically important markets as a quality network carrier. This course would be pursued by Wolfgang Mayrhuber, who has been at the helm of Lufthansa Passenger Airlines for two-and-a-half years now.

From this autumn Lufthansa will offer passengers a new Business Class with more comfort and will introduce a completely new seat that can be converted into a bed. Lufthansa is investing some 30 million euros into a future-oriented programme for its premium customers, offering them outstanding service with their own terminals at Frankfurt and Munich as well as exclusively designed transfer lounges from the summer of 2004. The new Terminal 2 at Munich, which will go into operation on 29 June, was setting new standards in innovative service offers and an unbeatable transfer time of 30 minutes, Weber said. Innovation and creativity were Lufthansa`s hallmarks in many areas. Future-oriented projects, such as Internet access on board, the equipping of lounges with wireless LAN technology and the introduction of the Executive Jet Service were examples of the quality and product offensive that Wolfgang Mayrhuber initiated and would now continue as Chairman of the Executive Board and CEO.



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