Generation of strong free cash flows

Strong free cash flows must be generated in order to create value for shareholders and further reduce borrowing. In addition to increasing the operating result, the key levers for this are strict working capital management and focused investing activities. The Lufthansa Group strives to generate further significantly positive Adjusted free cash flow in the years ahead. In the 2023 financial year, Adjusted free cash flow benefited in particular from the increased earnings as well as further improvements in working capital management. Adjusted free cash flow of EUR 1,846m (previous year: EUR 2,526m) was achieved as a result although, as expected, there was no repeat of the previous year’s sharp increase in advance bookings, which was connected to the sudden leap in demand after the coronavirus pandemic.

¹⁾ Excluding share purchases.

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. Free cash flow also plays a major role for managers’ variable remuneration and in the performance dialogues with the business entities. 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 is making extensive investments in the modernisation of its fleet, on-board and ground products as well as in infrastructure in order to ensure profitable long-term growth. In 2024, capital expenditure should again not exceed the value of the depreciation and amortisation.

Additional aircraft will very largely replace older, less efficient models. The allocation of new aircraft to the different airlines and bases is constantly optimised according to value-based criteria. Greater use of leasing is intended to increase the level of flexibility for long-term fleet planning and to limit the use of capital. In the medium term, this will take the proportion of leasing above its current level of around 11%. Sale-and-lease-back transactions were completed for this purpose in the reporting year, in which a total of twelve aircraft from the A320neo family were sold to lessors and then leased back.

The Lufthansa Group increased the volume of its investments year-on-year in the reporting period. Compared with the previous year net capital expenditure rose by 23% to EUR 2,811m (previous year: EUR 2,286m). Advance and final payments for aircraft and aircraft components along with aircraft and engine overhauls account for most of this.

Now that the balance sheet has been successfully strengthened again, shareholders will regularly participate directly in the Company’s success again 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 provides for a distribution to its shareholders of 20% to 40% of 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 7 May 2024 to distribute a dividend of EUR 0.30 per share to shareholders for the financial year 2023. This represents a total dividend of EUR 359m or 21% of net profit for 2023.