• Adjusted EBIT up from EUR 290m to EUR 468m
• Passenger airlines report positive business development
• Fuel costs down by EUR 309m, currency effects burden result by EUR 158m
• Equity ratio rises again to 17.5 percent due to higher interest rates
The Lufthansa Group reports solid business development for the first half of 2015 and improved results in all of its operating segments. The Adjusted EBIT rose by EUR 290m year-on-year to EUR 468m. For the six months ended 30 June, sales increased by 8.5 percent to EUR 15.4bn, with traffic revenue accounting for EUR 12.1bn of that figure. Yields for the Lufthansa Group’s passenger airlines rose by 2.4 percent in the first half of 2015, which was mainly exchange rate related. Had it not been for the tailwind from a weaker euro, however, yields would have been appreciably lower, in line with expectations. In the second quarter alone, yields declined by 5.7 percent after adjusting for exchange rate effects. Although unit costs as a whole also rose mainly as a result of currency exchange rates, the EUR 309m reduction in fuel costs coupled with improved sales and capacity utilization more than compensated for the reduction in prices. All currency effects in the first six months net to a total negative impact of EUR 158m. The net effect is negative as Lufthansa Group has higher costs in foreign currencies, among others due to fuel spending in US Dollar, compared to the revenue side in foreign currencies.
The Group’s net result for the first six months of the year rose to EUR 954m, compared with a net loss of EUR 79m for the same period in the prior year. In addition to a higher operating result, this is mainly due to the increase in the financial result. More than half of the Group’s net result was attributable to an accounting effect resulting from the appreciation in equity capital of EUR 503m following the redemption of the Jet-Blue convertible bond in the first quarter. In the second quarter, assessments of interest and exchange rate hedging instruments as well as fuel hedging options had a positive impact, increasing the result by a total of EUR 176m.
Simone Menne, Chairman of the Financial and Aviation services of Deutsche Lufthansa AG said: “Our first-half results are solid. Aside from the positive development of our business operating areas and, in particular, our passenger airlines, which gained extra momentum in the second quarter, the fall in fuel costs is largely responsible for the improvement in our results. We will, however, not be misled by that, since we assume that the price level for airline tickets will not recover. We will therefore continue to work consistently on the competitive focus of the Lufthansa Group.”
In the second quarter, the Lufthansa Group achieved an Adjusted EBIT margin of 7.6 percent. Lufthansa Passenger Airlines and, in particular, SWISS played a crucial role in this positive development. The Passenger Airline Group recorded a margin of almost 8 percent in the second quarter, with SWISS, with a margin of over 11 percent, posting an exceptionally good result – also in comparison to others in the sector. Germanwings also remains on a successful course, and will close the current year in profit for the first time.
Simone Menne: “Our strategic focus is right. On the one hand, our premium brands – Lufthansa and SWISS – are very successful, and at the same time Germanwings and Eurowings are also showing good business developments as secondary brands. We are focusing on the premium quality of our hub airlines and the high level of competitiveness of our secondary brands in point-to-point traffic. This approach makes us profitable and fit for the future within the airline market”.
In the first half year, Lufthansa Passenger Airlines improved its result by EUR 181m, SWISS by EUR 90m, based on an Adjusted EBIT of EUR 178m. While Austrian Airlines reported a loss of EUR 17m in the first half-year, it managed to increase the Adjusted EBIT by a solid EUR 27m compared with the previous year. However, in the second quarter, Lufthansa Cargo was unable to maintain its good performance of the first quarter. With the introduction of the summer timetable, Lufthansa Cargo’s competitors significantly increased their freight capacity in many markets, thereby placing prices under increasing pressure. Eventually, the logistics segment achieved an improvement of EUR 7m in the Adjusted EBIT to EUR 50m in the first half-year. The other business segments also managed to improve their half-year results: Lufthansa Technik by EUR 41m to EUR 268m and LSG SkyChefs by EUR 17m to EUR 26m.
The equity ratio rose again to 17.5 percent at the end of the second quarter due to the higher actuarial interest rate and the resultant decrease in pension provisions. The ratio was therewith higher than for the full-year 2014. Although pension liabilities declined as a result of the 2.9 percent increase in the actuarial interest rate, at EUR 6.6bn overall pension liabilities still remain at a very high level.
Simone Menne: “With regard to pension liabilities and equity, it can also be said that developments throughout the second quarter have been positive, even if they were strongly driven by external factors. The need for sustainable structures in our pension scheme and transitional pension arrangements remains unchanged, nevertheless. The ambitious investment program to which we are committed to in the coming years is part of our strategy to ensure our sustainability. In order to generate the necessary funds we need the right conditions in all the business areas and companies within the Lufthansa Group.”
In the first half, operating cash-flow rose by almost 45 percent to EUR 2.5bn. At the end of the first half-year, a free cash flow of just over EUR 1bn was reported – almost double that of the previous year. Against this background, net indebtedness decreased substantially by 31 percent compared to the full-year 2014.
As planned, capital expenditure rose year-on-year. Amongst other things, the delivery of two further Airbus A380s and four Boeing 747-8s as well as the modernization of First and Business Class on the long-haul fleet and the installation of the new Premium Economy Class were contributory factors. Gross expenditure in 2015 will total EUR 2.9bn. For the following years, a decline in the level of investment to EUR 2.5bn is planned.
Lufthansa confirms its outlook for the full-year 2015 with an Adjusted EBIT of more than EUR 1.5m before strike costs.
|Lufthansa Group||January||– June||Change|
|1 HY 2015||1 HY 2014|
|Sales revenue||€ m||15,365||14,166||+8.5%|
|Of which traffic revenue||€ m||12,123||11,466||+5.7%|
|Result of operating activities||€ m.||430||194||+121.6%|
|Group Result||€ m||954||-79||—|
|Adjusted EBIT||€ m||468||178||+162.9%|
|Adjusted EBIT margin||In %||3.0%||1.3%||+1.7pts.|
|Capital expenditure (net)||€ m||1,507||1,198||+25.7%|
|Operating cash flow||€ m||2,527||1,744||+44.9%|
|Employees at 30 June 2015||119,357||119,092||+265|
|Earnings per share||€||2.06||-0.17||+2.23|
This interim report for the second quarter of 2015 is being published at the same time with this press release on 30 July 2015 at 7:30 CET at http://investor-relations.lufthansagroup.com/en.html.
Deutsche Lufthansa AG, Media Relations Lufthansa Group 30.07.15