The Lufthansa Group has decided to hold liquid funds of between EUR 8bn and EUR 10bn in future to protect against possible crises. For capital efficiency reasons, part of the strategic liquidity reserve is held in the form of a revolving line of credit. This amounted to EUR 2.0bn at year-end 2023, unchanged from the previous year. Including the unused credit line, the liquidity available to the Lufthansa Group totalled EUR 10.4bn at the end of the reporting year, as in the previous year.
Further reduction of debt as the core goal of the 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. In addition, the Group has started to change the allocation of pension assets. This is intended to align the sensitivity of plan assets to interest rates more closely with the sensitivity of the pension obligations. In this way, the volatility of pension provisions should be permanently reduced and a repeated significant increase avoided, even if interest rates drop across the market. A corresponding switch initially took place for half the pension assets in 2023; in 2024 the quota is to be increased to the target value of 75%.
Retaining the investment grade rating
Deutsche Lufthansa AG is again receiving an investment grade rating from all the leading rating agencies. During the coronavirus pandemic the rating agencies, with the exception of Scope Ratings, downgraded the Company.
The global rating agency Fitch rated the credit risk of Deutsche Lufthansa AG for the first time in November 2023, giving it an investment grade rating of BBB-, outlook stable. Since December 2023 Standard & Poor’s has also given Deutsche Lufthansa AG an investment grade rating of BBB- again, outlook stable. The rating agency Moody’s likewise raised its rating for Deutsche Lufthansa AG to Baa3, which is also investment grade, in mid-January 2024, with a stable outlook.
The Group strives to be rated as investment grade on a lasting basis. 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 good profitability and low 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
| 2023 in €m | 2022 in €m | Change in % | |
|---|---|---|---|
| Net indebtedness1) | 5,435 | 6,624 | –18 |
| Net pension obligations | 2,676 | 1,993 | 34 |
| Adjusted Net Debt | 8,111 | 8,617 | –6 |
| Adjusted EBIT | 2,682 | 1,520 | 76 |
| Depreciation and amortisation | 2,228 | 2,199 | 1 |
| Adjusted EBITDA | 4,910 | 3,719 | 32 |
| Adjusted Net Debt/ Adjusted EBITDA | 1.7x | 2.3x | -28 |
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. 44.