The beginning of the year has been challenging for Lufthansa Group.
First and foremost, excessive supply growth in our short-haul business impacted our quarterly results. We estimate that market-wide short-haul capacity in our home markets grew by around 9% during winter – a rate which clearly exceeded demand growth. As a result, price sensitivity of customers was high, putting yields and unit revenues under pressure. In addition, fuel costs increased by a good EUR 200m. Finally, our Logistics business weakened compared to its stellar performance in 2017 and 2018.
Solid results in long-haul, continued cost efficiency improvements and strong growth in our MRO business were not enough to offset these pressures. All in, the Group’s Adjusted EBIT declined to a negative EUR 336m. However, contribution of the first quarter to full year profits has historically been small or even negative, so the coming summer months will have a far greater impact. Therefore, the outlook for the financial year 2019 remains unchanged. Lufthansa Group still expects mid-single-digit revenue growth and an Adjusted EBIT margin of between 6.5% and 8.0%.
We continue to adhere to the Company’s long-term development and the modernisation of the fleet in the first quarter 2019. The Supervisory Board followed the recommendation of the Executive Board and approved the purchase of 40 state-of-the-art aircraft for the Lufthansa Group. Regarding corporate management, the appointment of Ulrik Svensson as CFO ahead of schedule set the course for further successful cooperation of the whole executive board. We are happy to provide further information and other developments during the first quarter to you in this issue of the Lufthansa Group Shareholder Information.
We would be please if you would continue to accompany us on this journey.
Head of Investor Relations
Deutsche Lufthansa AG
Revenue €m
Adjusted EBIT €m
The market environment in Europe was characterised by overcapacities, intensive competition and correspondingly high pricing pressure on short-haul routes in first quarter of 2019. Furthermore, the strong first quarter of last year, following the departure of Air Berlin from the market and the corresponding capacity gap thus forms a strong basis for comparison.
Revenue increased by 3% in the first quarter of 2019 compared to previous year, primarily due to higher traffic. Adjusted EBIT decreased to EUR – 336m (previous year: EUR 52m), particularly due to lower unit revenues and higher fuel costs that could not be fully recouped by lower unit costs. Adjusted EBIT margin decreased by 5.0 percentage points to – 4.3% (previous year: 0.7%). Earnings decreased in all business segments apart from MRO and Catering.
Cash flow from operating activities decreases by 10%, mainly due to lower profit before income taxes and higher tax payments in connection with the increased earnings in the previous year. Adjusted free cash flow (free cash flow adjusted for effects from the first-time application of IFRS 16, Leases) decreased by 78%. This is mainly a consequence due to an increase in investments. Investments increased because of prepayment for new aircraft which will be delivered until 2027. Net indebtedness increased by 67% compared to year-end 2018; without IFRS 16 effects net indebtedness would have been stable. Adjusted net debt/Adjusted EBITDA increased compared to year-end 2018 by 0.6 points to 2.4 points, mainly due to IFRS 16 effects.
Development Revenue, Adjusted EBIT €m (Jan – Mar)
Adjusted EBIT margin in % (Jan – Mar)
| Jan – Mar 2019 | Jan – Mar 2018 | Change in % | ||
|---|---|---|---|---|
| Total revenue | €m | 7,890 | 7,640 | 3 |
| of whichtraffic revenue | €m | 5,857 | 5,785 | 1 |
| Operating expenses | €m | 8,734 | 8,103 | 8 |
| Adjusted EBITDA | €m | 321 | 582 | – 45 |
| Adjusted EBIT | €m | – 336 | 52 | |
| EBIT | €m | – 344 | 52 | |
| Net profit/loss | €m | – 342 | – 39 | – 777 |
| Jan – Mar 2019 | Jan – Mar 2018 | Change in % | ||
|---|---|---|---|---|
| Total assets | €m | 42,761 | 37.838 | 13 |
| Equity | €m | 9,742 | 8.134 | 20 |
| Equity ratio | % | 22.8 | 21.5 | – 1.3 pts |
| Net indebtedness | €m | 5,830 | 2,090 | 179 |
| Pension provisions | €m | 6,179 | 5,541 | 12 |
| Cash flow from operating activities | €m | 1,558 | 1,737 | – 10 |
| Capital expenditure (gross) 1) | €m | 1,236 | 826 | 50 |
| Adjusted free cash flow | €m | 178 | 800 | – 78 |
| Jan – Mar 2019 | Jan – Mar 2018 | Change in % | ||
|---|---|---|---|---|
| Adjusted EBITDA-Marge | % | 4.1 | 7.6 | – 3.5 pts |
| Adjusted EBIT-Marge | % | – 4.3 | 0.7 | – 5.0 pts |
| EBIT-Marge | % | – 4.4 | 0.7 | – 5.1 pts |
| Jan – Mar 2019 | Jan – Mar 2018 | Change in % | ||
|---|---|---|---|---|
| Share price at the quarter-end | € | 19.57 | 25.94 | – 6 |
| Earnings per share | € | – 0.72 | – 0.08 | – 800 |
| Jan – Mar 2019 | Jan – Mar 2018 | Change in % | ||
|---|---|---|---|---|
| Employees as of 31 Mar | number | 136,795 | 132,620 | 3 |
| Jan – Mar 2019 | Jan – Mar 2018 | Change in % | ||
|---|---|---|---|---|
| Flights | number | 262,492 | 253,514 | 4 |
| Passengers | tsd. | 29,384 | 28,493 | 3 |
| Available seat-kilometres | millions | 79,500 | 74,778 | 6 |
| Revenue seat-kilometres | millions | 61,899 | 58,237 | 6 |
| Passenger load factor | % | 77.9 | 77.9 | 0.0 pts |
| Available cargo tonne-kilometres | millions | 4,049 | 3,730 | 9 |
| Revenue cargo tonne-kilometres | millions | 2,543 | 2,622 | – 3 |
| Cargo load factor | % | 62.8 | 70.3 | – 7.5 pts |
1) Without acquisition of equity investments.
Date of publication: 30 April 2019.
The Lufthansa share stood at EUR 19.57 at the end of the first quarter of 2019. This represents a decrease in the share price of 1 % since year-end 2018. The DAX Index rose by 9 % over the same period.
As of 31 March 2019, 14 analysts recommended the Lufthansa share as a buy, ten as a hold and two as a sell. The average target price was EUR 24.04. The free float for Lufthansa shares was unchanged at 100 % at the end of the first quarter of 2019. 71 % of Lufthansa shares were held by German investors.
The forecast for the development of Group revenues and earnings in the financial year 2019 remains unchanged compared with the information in the Annual Report 2018. Lufthansa Group continues to assume mid-single-digit revenue growth for the financial year 2019 and an Adjusted EBIT margin of between 6.5% and 8.0%.
In contrast to the original forecast, capacity growth at Eurowings is now expected to be 0% (previously: 2%). Fuel costs for Network Airlines are anticipated to increase by EUR 600m year-on-year (previously: EUR 550m year-on-year increase). The Group now anticipates the results for Additional Businesses and Group Functions to decrease by around EUR 100m year-on-year (previously: EUR 150m year-on-year decrease).
The supervisory board of Deutsche Lufthansa AG decided on 13 March 2019 to extend the contract with Ulrik Svensson prematurely for three more years until 31 December 2022. Thereby, the 57-year-old Swede is going to continue his successful work at Europe’s leading airline group.
The 66th Annual General Meeting of Deutsche Lufthansa AG will be held on 7 May 2019 in the World Conference Center Bonn. The meeting starts at 10.00 a.m. CET with the speeches by Karl-Ludwig Kley, Chairman of the Supervisory Board, and Carsten Spohr, Chairman of the Executive Board and CEO. Thereafter, shareholders can ask their question regarding the agenda in the general debate.
This year’s agenda comprises the appropriation of the net profit from the financial year 2018, the re-election of Monika Ribar to the Supervisory Board, the approval of the remuneration systems for Executive Board members as well as several anticipary resolutions regarding the authorisation for capital measures.
Last day for registrations for the Annual General Meeting is 30 April 2019. Until then, shareholders can order admission tickets, exercise their voting rights by absentee vote or issue proxy and instructions to representatives of the company or to credit institutions and shareholder associations.
Lufthansa Group is consistently forging ahead with the modernization of its long-haul fleet. In its meeting on 13 March 2019, based on the recommendation of the Executive Board, the Supervisory Board approved the purchase of a total of 40 state-of-the-art aircraft for the group’s airlines. The 20 Boeing 787-9 and 20 additional Airbus A350-900 planes will primarily be replacing four-engine aircraft. The new planes will be delivered between late 2022 and 2027.
The investment in new technology, efficiency and passenger comfort is a continuation of the ongoing fleet modernization of the group’s airlines. With the Airbus A350-900, the Boeing 777-9 and the Boeing 787-9, Lufthansa Group will own the most fuel-efficient long-haul aircraft of their class in terms of kerosene consumption per passenger and 100 kilometers flown. This order high-lights the company’s desire to invest in cutting-edge technology in the interest of the environment. By the middle of the next decade, the entire long-haul fleet will have been modernized.
With the new, more economical aircraft, the operating cost compared to the earlier models will sink by around 20 percent. In addition to this, Lufthansa Group will be significantly reducing the diversification and complexity of its fleet over the next few years and taking seven aircraft types out of service, which will reduce cost and complexity for maintenance and the supply of replacement parts, among other things.
Deutsche Lufthansa AG benefits from the currently very attractive market for debt loans and has issued a high-volume “Schuldscheindarlehen” on 10 April 2019. The maturities of the “Schuldschein” are three and five years. By this, the Lufthansa Group has secured long-term financial resources amounting to EUR 800m in total. These funds are used for general corporate purposes and refinancing of maturing financial liabilities.
With a share of over 120 participating investors the transaction attracted a high demand, resulting in an increase of the original volume of the “Schuldscheindarlehen” from EUR 300m to EUR 800m. The broad investor base comprises savings Banks, cooperative banks as well as other international commercial banks. This demonstrates the high level of trust attributed to the Lufthansa Group as borrower at the international financial markets. The issuance was arranged by Bayerische Landesbank and Landesbank Hessen-Thüringen Girozentrale. The transaction was exclusively executed through the digital issuance platform vc trade.
On 15 April 2019 the rating agency Standard & Poor’s lifted the investment grade rating for Deutsche Lufthansa AG by one notch from BBB – to BBB with stable outlook. Standard & Poor’s mentions strong operating performance during the last five years and further improvements to the financial profile as key reasons.
The Lufthansa Group currently has an "investment grade" rating from the rating agencies Standard & Poor’s (BBB, stable outlook), Moody's (Baa3, stable outlook) and Scope Ratings (BBB-, positive outlook).
The credit ratings given to the Lufthansa Group by the rating agencies are particularly important. A good rating ensures access to new financing and hedging instruments in general as well as access to favourable conditions.
The Association of Former Members of Congress (FMC) paid tribute to the Lufthansa Group for its sustainable corporate actions. At its annual Statesmanship Award Dinner in Washington DC, Carsten Spohr, Chairman of the Executive Board of Deutsche Lufthansa AG, accepted the organization’s award.
Responsibility for society and the environment is a central and strategic leitmotif for the Lufthansa Group. Notable, as a globally active corporate citizen was the Lufthansa Group’s support for the Aguadilla, Puerto Rico region following Hurricane Maria in autumn 2017. A Lufthansa Technik facility is active in Aguadilla. The storm knocked out power as well as other services there and a Lufthansa Cargo MD11F with 80 tons of relief supplies for the region was dispatched to the facility.
The FMC also honored the Lufthansa Group for the activities of Cargo Human Care in Kenya. Here, doctors who treat and care for hundreds of children every year are supported in their activities.
The Lufthansa Group is the first aviation group to receive this award.
The trade magazine Air Transport World (ATW) awarded Lufthansa the "Airline of the Year" prize yesterday evening in New York. For the first time in 14 years, one of the most important international awards in the aviation industry goes to a European airline.
In their tribute to this year's winner, ATW highlighted a wide variety of aspects. Lufthansa German Airlines has been the first European airline to be awarded a 5-star rating by Skytrax - proof of its first-class customer service on the ground and in the air. In addition, the company is continuously introducing new technologies and services that further enhance the passenger experience, for example biometric boarding at various airports in North America. Lufthansa German Airlines also remains a leader in the field of sustainability.
We are at your disposal to answer your questions.
Head of Investor Relations
Analyst and Investor Communication
Information published in this Shareholder Information with regard to the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of definitive historical facts. Its purpose is exclusively informational and is identified by the use of such terms as ‘believe’, ‘expect’, ‘forecast’, ‘intend’, ‘project’, ‘plan’, ‘estimate’, ‘assume’ and ‘endeavour’. These forward-looking statements are based on all discernible information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication. Since forward-looking statements are by their nature subject to uncertainties and imponderable risk factors – such as changes in underlying economic conditions – and rest on assumptions that may not, or divergently occur, it is possible that the Group’s actual results and development may differ materially from those implied by the forecasts. The Lufthansa Group makes a point of checking and updating the information it publishes. It cannot, however, assume any obligation to adapt forward-looking statements to accommodate events or developments that may occur at some later date. Accordingly, it neither expressly nor conclusively accepts liability, nor gives any guarantee for the actuality, accuracy or completeness of this data and information.
The Lufthansa Group is a global aviation group with a total of more than 580 subsidiaries and equity investments.
Corporate responsibility, that is to say sustainable and responsible entrepreneurial practice, is an integral part of our corporate strategy. It means that we are committed to creating added value for our customers, employees and investors and to meeting our responsibilities toward the environment and society.
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