Financial management aims for strong free cash flows
The generation of strong free cash flows is a clear focus of the Lufthansa Group’s financial strategy, with the aim of creating value for its shareholders, further reducing its volume of debt in the long term and pursuing necessary capital expenditure. In addition to increasing the operating result, the key levers for this are strict cash and working capital management as well as focused investing activities.
Free cash flow also plays a major role for the variable remune- ration of many employees, particularly of managers, and in the performance dialogues with the business entities. With this, the organisation is continuously made aware of its influence on company value and incentives are established to increase the level of free cash flows.
The Lufthansa Group achieved a positive Adjusted free cash flow of EUR 840m in the 2024 financial year (previous year: EUR 1,846m). The year-on-year decline stems mainly from the lower earnings volume, which has partly been offset by positive effects from the working capital trend.
Primary, secondary and financial investments in mio. EUR 1)
1) Excluding share purchases.
Improvements in working capital management support cash flow generation
Working capital management is to be further intensified. This includes targeted measures such as strict receivables management, optimising payment terms with suppliers, improvements to procurement processes and maintenance of inventories, in particular at Lufthansa Technik.
Focused investments to increase return on capital employed
The strategic goals of the Group and its business segments, and the portfolio roles of the different Group companies provide the framework for the allocation of capital and for investment decisions. All investment projects should contribute to sustainable value creation, i.e. profitability above the weighted average cost of capital (WACC).
The Lufthansa Group is extensively investing in the modernisation of its fleet, on-board and ground products, digitalisation and infrastructure. It is largely replacing older, less efficient aircraft with new models and thereby sustainably increasing its profitability through increased fuel efficiency and reduced maintenance costs, for example. The allocation of new aircraft to the different airlines and bases follows value-based criteria and is continuously optimised.
Sale-and-lease-back transactions to finance the modernisation of the fleet were completed in the reporting year: a total of 15 short- and medium-haul aircraft were sold to lessors and then leased back.
The Lufthansa Group reduced the volume of its investments year-on-year in the reporting year. Compared with the previous year, net capital expenditure declined by 14% to EUR 2,392m (previous year: EUR 2,771m). Advance and final payments for aircraft and aircraft components along with aircraft and engine overhauls account for most of this.
Continuous dividend distribution aimed for
The Company plans for its shareholders to regularly partici- pate directly in its success via an attractive dividend. This is intended to make the Company more attractive on the capital market, including for investors with a long-term investment horizon.
The Lufthansa Group’s dividend policy is to distribute to its shareholders 20% to 40% of the Group’s net profit, adjusted for non-recurring gains and losses. One condition for the payment of a dividend is that the net profit for the year as shown in the individual financial statements of Deutsche Lufthansa AG that are drawn up under German commercial law allows for a distribution of the relevant amount.
In line with the dividend policy, the Executive Board and Supervisory Board will table a proposal at the Annual General Meeting on 6 May 2025 to distribute a dividend of EUR 0.30 per share to shareholders for financial year 2024. This represents a total dividend payment of EUR 359m or 26% of net profit for 2024, which is a higher percentage than the previous year, when 21% of net profit was distributed.