The Lufthansa Group has decided to hold liquid funds of between EUR 8bn and EUR 10bn in future to protect against possible crises. The minimum liquidity level was increased again in view of the significant expansion of business activity. For capital efficiency reasons, part of the strategic liquidity reserve is held in the form of a revolving line of credit. An appropriate line of credit with a volume of EUR 2.0bn was agreed with a broad consortium of international banks in April 2022, replacing non-utilised bilateral lines of credit with a volume of around EUR 0.7bn. The Lufthansa Group’s available liquidity thus increased by around EUR 1.3bn. At the end of the reporting year, it amounted to EUR 10.4bn (previous year: EUR 9.4bn).
Further reduction of debt as the core goal of financial strategy
The long-term financial strategy continues to focus on reducing the level of gearing. The generation of strong free cash flows in particular is intended to help reduce the volume of net debt. Income from the sale of business units which are to be sold off in whole or in part for strategic reasons may also potentially contribute to a reduction in the volume of debt.
Aim is to return to investment grade rating
Before the coronavirus crisis, the rating agencies Standard & Poor’s and Moody’s both rated the Lufthansa Group as investment grade. As a result of the coronavirus crisis and its impact, both agencies downgraded their ratings. Scope Ratings graded the Lufthansa Group still in the investment grade range.
The Group aims to restore its investment grade rating with all of the significant rating agencies. Investment grade ratings for the Company’s debt ensure good access to the capital markets and low funding costs and thus financial flexibility. Conditions for an investment grade rating are further improvement in the operating result and a reduction of debt, among other things.
In order to measure the Group‘s ability to service its debts the key figure Adjusted Net Debt / Adjusted EBITDA will be used. By using adjusted net debt, the ratio also includes pension provisions as well as classic net indebtedness. From 2019 onwards, when the new accounting standard for leases was introduced (IFRS 16), it also includes financial obligations from the Group’s leases (also for property and aircraft).
Adjusted Net Debt / Adjusted EBITDA
|2022 in €m||2021 in €m||Change in %|
|Net pension obligations||1,993||6,540||–70|
|Adjusted Net Debt||8,617||15,316||–44|
|Depreciation and amortisation||2,277||2,259||1|
|Adjusted Net Debt/|
1) In order to calculate net indebtedness, here 50% of the hybrid bond issued in 2015 (EUR 247m) has been discounted. Calculation of net indebtedness Annual report p. 49.