Sustainable value generation in the Company
The Lufthansa Group applies a value-based system of management. At its centre is the profitability of the Company. This is measured by reference to Adjusted EBIT. In order to hardwire profitability into all decision-making processes, the management's variable remuneration is linked to the Company’s economic performance as well as to non-financial factors such as specific CO2 emissions. Remuneration report, p. 115ff.
Adjusted EBIT came to EUR 2,026m in 2019 and was thus 29% below the previous year. Specific CO2 emissions per passenger-kilometre were 92.2 grammes in 2019, on par with the previous year. Positive effects from greater fuel efficiency due to the fleet renewal and a higher passenger load factor were offset by a lower proportion of freight in the total payload.
The adjusted return on capital employed (Adjusted ROCE) is measured for the Lufthansa Group and the individual companies. If Adjusted ROCE exceeds the weighted average cost of capital (WACC), the Company is creating value. In 2019, the Lufthansa Group had an Adjusted ROCE after tax of 6.6%. This was 4.0 percentage points down on the previous year and higher than the WACC, which was just 4.2% and unchanged from the previous year. The Company therefore added value again in 2019.
Continuous reductions in unit costs, increasing process simplification and productivity improvements are intended to lift structural profitability. Unit costs at the passenger airlines, adjusted for fuel costs and exchange rates, are to be reduced by 1% to 2% per year. Cost-cutting measures are also implemented on a continuous basis in Aviation Services.