The Lufthansa Group applies a value-based system of management. At its centre is the return on capital. This is measured by the Adjusted Return on Capital Employed (Adjusted ROCE). If Adjusted ROCE exceeds the weighted average cost of capital (WACC), the Company is creating value. The Lufthansa Group has set the objective of generating an adjusted ROCE of at least 10% from 2024, not including cash and cash equivalents.
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. Circumstances that justify an adjustment are listed in a catalogue. This includes gains and losses on the disposal of assets, impairment losses and earnings attributable to other periods in connection with pension obligations. Staff-related restructuring expenses and non-operating extraordinary expenses for legal procedures and company transactions not related to operating activities will also be included in the catalogue from 2022 onwards. From 2024, the Lufthansa Group aims to achieve an Adjusted EBIT margin of over 8%.
The use of capital is also optimised by further improvements in working capital management and ensuring the value-creation of investments.
Finally the Lufthansa Group includes the specific CO2 emissions in the control system in order to enable sustained value creation by reducing the environmental impacts. Information about the long-term goals for reducing carbon emissions can be found in the combined non-financial declaration/ Climate protection.
The Company’s value creation was negative in 2021 due to the crisis. The Adjusted ROCE margin after tax was –7.5% (previous year: –16.7%), whereas WACC was unchanged year-on-year at 4.2%. Adjusted EBIT came to EUR –2,349m in 2021 (previous year: EUR –5,451m). The Adjusted EBIT margin, i.e. the ratio of Adjusted EBIT to revenue, was therefore –14.0% (previous year: –40.1%). Specific CO2 emissions per passenger-kilometre were 101.6 grammes in 2021, 3% lower than the previous year (previous year: 105.2 grammes).
With a restructuring and transformation programme implemented throughout the Group, the Company has aligned itself with the modified market environment as a result of the crisis. The modifications it will make to the cost structures reflect the lower market volumes and create the conditions for a return to a positive operating result. Necessary measures to generate the planned structural cost savings of EUR 3.5bn annually by 2024 have been identified both in business segments and top-down. These include measures to reduce staff costs by a total of EUR 1.8bn. In addition to reducing headcounts, the focus is on permanently increasing productivity. Measures relating to the reduction in organisational and operational complexity as well as standardising and modernising the Group fleet should generate cost savings of around EUR 1.7bn. By the end of the 2021 financial year, over three quarters of the measures had been implemented, sustainably reducing annual costs by around EUR 2.7bn.