"We achieved another record earnings result in the first nine months of this year," said Carsten Spohr, Chairman of the Executive Board of Deutsche Lufthansa AG, at today"™s presentation of the Lufthansa Group"™s nine-month interim results. "A result that gives us the investment and growth capabilities we need to play an active part in the consolidation of the European airline market, and to continue to invest in the future of our company."
The Lufthansa Group increased its total revenue for the first nine months of the year from 12.1 percent to EUR 26,761 million (prior-year period: EUR 23,870 million). Traffic revenues rose from 14.4 percent to EUR 21,360 million (prior-year period: EUR 18,674 million). The key performance indicator of Adjusted EBIT increased from EUR 883 million to EUR 2,560 million (prior-year period: EUR 1,677 million). Thus, the Lufthansa Group"™s result for the period was a substantial improvement compared to its previous record level of 2016.
This positive nine-month result is attributable primarily to the continuation of positive business trends within the Group"™s airlines. Despite increasing overall capacity for the period by 11.7 percent, the Group"™s air carriers improved their aggregate nine-month seat load factor by 2.1 percentage points. Unit costs, excluding fuel and currency factors, were reduced by 0.8 percent in the same period, though a slight 0.2 percent increase was recorded for the third quarter mainly due to provisions for higher profit sharing payments of 1.1 percentage-points.
The Group"™s airlines posted higher-than-prior-year seat load factors and yields for all key traffic regions. Unit revenues, excluding currency factors, were up 2.0 percent for the first three quarters and 4.5 percent for the third-quarter period. The nine-month Adjusted EBIT margin of 9.6 percent was an improvement by 2.6 percentage points compared to the prior-year period. The third-quarter Adjusted EBIT margin stood at 15.5 percent, with all the Group"™s airlines (including Lufthansa Cargo) posting significant margin increases. Higher fuel costs burdened the nine-month result with EUR 243 million. In total, these amounted to EUR 3,939 million "“ a 6.6 percent increase on the prior-year period, though this is at least partly attributable to the first-time consolidation of Brussels Airlines and the resulting higher fuel needs.
A further material improvement in the Group"™s financial KPIs
Net profit for the first nine months of 2017 amounted to EUR 1,853 million, broadly in line with a prior-year result that had felt the positive impact of EUR 713 million on certain non-recurring items. Attributed mainly to the positive result and more advanced bookings, cash flow from operating activities increased from EUR 1,405 million to EUR 4,459 million. Despite a 10.3 percent increase in capital expenditure to EUR 1,802 million, free cash flow improved by 83.3 percent and rose to EUR 2,790 million (prior year: EUR 1,518 million). Net financial debt fell to EUR 521 million, amounting to an 80.7 percent reduction since the beginning of this year (end of 2016: EUR 2,701 million). Pension liabilities were reduced by almost half a billion euros to EUR 7,888 million over the same nine-month period thanks, in particular, to the positive developments of the pension fund asset. At the end of the quarter, the balance sheet equity ratio stood at 22.3 percent, a 1.7-percentage-point increase since the beginning of the year.
"Despite higher investments, we nearly doubled our free cash flow and reduced our net financial debt by over 80 percent in the first nine-month period," said Ulrik Svensson, Chief Officer Finance of Deutsche Lufthansa AG. "Particularly encouraging," Svensson continued, "is that all our Group"™s airlines were able to raise their margins. The positive economic environment played its part in this. But these results also "“ and above all "“ reflect all our hard work over the past few years, which are now bearing fruit. We now need to continue working to consistently lower our costs and further create the financial strength we need for the future."
Network Airlines continue to drive favorable results
The Network Airlines of the Lufthansa Group generated total revenues of EUR 17,695 million for the first nine months of 2017. This is an increase of EUR 1,065 million on the prior-year period. They reported an Adjusted EBIT of EUR 1,947 million (prior-year period: EUR 1,324 billion). The Airline"™ Adjusted EBIT margin amounted to 11.0 percent for the first three quarters and 18.0 percent for the third-quarter period.
All three Network Airlines posted improvements in their Adjusted EBIT results: Lufthansa increased to EUR 1,405 million (prior-year period: EUR 922 million), SWISS increased to EUR 442 million (prior-year period: EUR 322 million) and Austrian Airlines increased to EUR 100 million (prior-year period: EUR 79 million).
Point-to-Point Airlines with significantly positive earnings contribution
With the first-time consolidation of Brussels Airlines and the further addition of the Air Berlin wet-lease operations, the Group"™s Point-to-Point Airlines almost doubled their nine-month revenues to EUR 3,031 million. They posted a clearly positive Adjusted EBIT of EUR 145 million for the period (prior-year period: EUR -24 million). They also achieved a significant improvement in their unit costs for the period, including a third-quarter reduction just under 10 percent. "We expect Eurowings to report a positive result as early as this year," Ulrik Svensson confirmed, "which is a year earlier than we originally envisaged."
Aviation Services
With airfreight demand still buoyant in all regions, Lufthansa Cargo raised its yields, excluding currency factors, by 10.6 percent for the third-quarter period. It generated a positive contribution for the fourth quarter in a row. The nine-month Adjusted EBIT amounted to EUR 98 million (prior-year period: EUR -69 million).
As a result of various factors, including residual costs relating to the closure of the Hamburg aircraft overhaul operation and higher material costs, the nine-month Adjusted EBIT for Lufthansa Technik decreased by EUR 33 million to EUR 333 million (prior-year period: EUR 366 million).
The LSG Group achieved a nine-month Adjusted EBIT of EUR 66 million (prior-year period: EUR 80 million). The EUR 14 million decline reflects the costs of the group"™s ongoing restructuring.
Outlook
Fourth-quarter unit revenues are expected to increase slightly from organic capacity growth by 5.5 percent. The financial burden of EUR 100 million that resulted from strikes in the fourth quarter of last year will not recur. The Group expects to see a slight reduction in fourth-quarter unit costs excluding fuel and currency effects at its passenger airlines. Fuel costs (including Brussels Airlines) are expected to amount to an estimated EUR 5.3 billion this year. This reflects a cost increase of about EUR 50 million in the fourth quarter (excluding Brussels Airlines). Aviation Services are expected to report an Adjusted EBIT for the year that is broadly on par with its 2016 level.
"The modernization of the Lufthansa Group has made good progress," concluded Carsten Spohr. "As our strong results confirm, we are successfully implementing our strategic initiatives in all our business segments. This is a great team achievement, to which all our 130,000 employees have made their contribution. Our shared success motivates us to consistently move ahead on this strategic path."
