The past year’s figures were burdened by economy related weaker demand and the disproportionate decline in average yields in the passenger business segment that accompanied it; both were consequences of the financial and economic crisis.
In view of these circumstances, the Executive Board will be proposing not to distribute a dividend to shareholders for the 2009 financial year at the Annual General Meeting. “We are succeeding in the crisis because our business segments are broadly‑poised and ideally‑equipped, and because we have a strong balance sheet. In addition, we have taken targeted and swift evasive action to steer capacities and costs; without ever losing sight of the customer. Despite the highly challenging conditions, we cannot be satisfied with our operating profit, but it remains nevertheless a remarkable performance. It marks the reward for the consistent efforts invested in improving profitability and is the result of the hard work performed by all of the Lufthanseats,” commented Lufthansa Chairman and CEO Wolfgang Mayrhuber, speaking at the presentation of the full-year figures.
At minus eight million euros, the operating result for the Passenger Airline Group, which includes the financial results of Germanwings, SWISS, Austrian Airlines and bmi, was significantly below the level of the previous year. The aim to record an operating profit in this business segment was thus only narrowly missed. In response to the negative trend in the core business segment, all of the Group’s airlines initiated measures to safeguard earnings and continued to pursue these during the past business year. The aim of Lufthansa Passenger Airlines’ “CLIMB 2011” programme to safeguard the earnings is the sustainable improvement of the result by one billion euros by the end of 2011. The implementation of the programme began in the third quarter of 2009; however, it could not yet prevent Lufthansa Passenger Airlines posting a loss of 107 million euros. SWISS posted an operating result of 93 million euros. From the date of full consolidation Austrian Airlines contributed an operating loss of 31 million euros to the overall result of the Passenger Airline Group and bmi entered a loss of 78 million euros.
Germanwings posted an operating profit of 24 million euros. Lufthansa Chairman and CEO Wolfgang Mayrhuber commented on the Group airlines’ measures to safeguard earnings saying: “It is essential that we implement effective programmes with countermeasures to control the effects of the crisis. We will therefore be focusing on finding intelligent ways to improve profitability and, rest assured, we will maintain our high standards of quality at Lufthansa. I see no contradiction in saving costs and improving quality – in fact, quite the contrary: We are continuing to invest in our ground and on-board products during the crisis, our customers are thanking us for it with excellent marks in customer satisfaction ratings and we intend to maintain this lead.”
The Logistics business segment was forced to deal with a major demand-related revenue slump in 2009 and posted a significant operating loss. The measures to safeguard earnings at Lufthansa Cargo, such as the reduction of freighter capacities and reduced working hours, as well as lower material costs and project budgets, continue to be applied. Lufthansa MRO did very well and recorded an increase in revenue despite highly challenging conditions. In addition, the business segment was able to compensate lower demand in individual areas and even achieve a year‑on‑year improvement in its operating result. The IT Services business segment also recorded a slight improvement in its result. However, revenue and operating result remained below the previous year’s figure and the measures to safeguard earnings will therefore also continue to be implemented in this business segment. The Catering business segment posted a slightly improved operating result with a decline in revenue. The efforts of the LSG Sky Chefs will however continue to focus on counteracting the decline in total revenues.
“No one can say how long it will take for us to make up for the current losses. A solid balance sheet, efficient capacity adjustments and the reduction of costs are, and will remain, the decisive factors for success,” stressed Mayrhuber. The Group expects a slight recovery of revenues for the current business year. The development of revenue in 2010 will also reflect the first full-year consolidation of the new companies. It is foreseeable that they will not yet contribute to the profitability of the Group this year. Nevertheless, it remains the aspiration of the Group to record an operating result that is above the previous year’s result. The timing of a strong recovery of demand and the development of the oil price pose risks that could result in scenarios that either foster or hinder the realization of this aim.
Annual figures 2009
During the year 2009, the Lufthansa Group generated revenues totalling 22.3 billion euros, this was equivalent to 10.3 per cent less than the year before. There was a market-related drop in traffic revenue by 11.8 per cent to 17.6 billion euros. This was mainly due to the decline in passenger and freight figures, with the decline in average yields. Overall, the operating income of the Group decreased by 7.2 per cent to 25 billion euros during the reporting period.
Operating expenses decreased by 3.6 per cent to 24.8 billion euros during the course of the year. This was mainly due to the lower fuel costs which dropped by 1.7 billion euros to a total of 3.6 billion euros. The drop was equivalent to a year-on-year reduction of 32.2 per cent, which was both price and volume related. The fees and charges were 7.5 per cent above the previous year’s figure.
The Group recorded an operating result of 130 million euros in 2009, 1.2 billion euros less than during the previous year. This figure includes a balance of 86 million euros from the first-time consolidation of Austrian Airlines (badwill). The decline in the operating result is mainly the result of the negative developments in the Group’s Passenger Airline Group and Logistics business segments. The Group’s net loss for the period came to -112 million euros; the net profit for the previous year stood at 542 million euros.
Lufthansa's capital expenditure during the reporting period totalled 2.4 billion euros, of which 1.8 billion euros were spent on the expansion and modernization of the fleet. The acquisition of 45 per cent of the shares in SN Airholding SA/NV (Brussels Airlines) accounted for 65 million euros. The acquisition of airlines, which are to be consolidated (particularly Austrian Airlines and bmi), accounted for 56 million euros after the deduction of the acquired cash and cash equivalents. 77 million euros were gained from the disposal of the remaining Condor shares and the repayment of related loans. Operating cash flow totalled 2 billion euros, the free cash flow stood at 251 million euros. At the close of the year, the Group's net liquid assets stood at 2.2 billion euros.
By: N. Peter Kramer
