Sustainable value generation in the Company

The Lufthansa Group applies a value-based system of management. At its centre is the return on capital. This is measured by the indicator Adjusted Return on Capital Employed (Adjusted ROCE). If Adjusted ROCE exceeds the weighted average cost of capital (WACC), the Company is creating value.

The Company’s profitability is measured by Adjusted EBIT. The adjustments eliminate non-recurring, non-operating effects and thus improve the presentation of the Company’s operating performance. Items that require adjustment are listed in a catalogue which has not been altered since 2015. They largely consist of the gains and losses on the disposal of assets and impairment losses and earnings attributable to other periods in connection with pension obligations.

The use of capital is also optimised by strict working capital management and ensuring that capital expenditure adds value.

Finally, the Lufthansa Group factors specific carbon emissions into its management system in order to enable sustainable value creation that does not come at the expense of a higher environmental impact. In fact, the aim is to reduce specific carbon emissions continuously. Information about the long-term goals for reducing carbon emissions can be found in the Combined non-financial declaration.

The Company’s value creation was negative in 2020 due to the pandemic. The Adjusted ROCE margin after tax was –16.7% (previous year: 6.6%), whereas WACC was unchanged year-on-year at 4.2%. Adjusted EBIT came to EUR –5,451m in 2020 (previous year: EUR 2,026m). The Adjusted EBIT margin, i.e. the ratio of Adjusted EBIT to revenue, was therefore –40.1% (previous year: 5.6%). Specific CO2 emissions per passenger-kilometre (without wet leases) were 105.2 grammes in 2020, 14% higher than the previous year (previous year: 92.2 grammes).

Development of revenue, adjusted EBIT in €m and adjusted EBIT margin in %

Restructuring creates conditions for a return to profitable and sustainable growth

The restructuring and transformation programme ReNew will set the Company up for the changes in the market environment resulting from the crisis. The modifications it will make to the cost structures reflect the lower market volumes that are expected to persist for many years and create the conditions for a return to a positive operating result. The necessary measures are primarily being identified and implemented in the business segments. In addition, the ReNew programme provides for central steering and coordination of the activities.

Even once the pandemic is over, the aim is to increase structural profitability by continuously reducing unit costs, simplifying processes and structures and improving productivity.