To our shareholders
Letter from Marc-Dominic Nettesheim,
Head of Investor Relations
In the first six months of 2024, we safely flew more than 60 million passengers to their destinations. Due to the continued high demand for flights, this resulted in a significant year-on-year increase in capacity and sales volumes for our Passenger Airlines.
However, market-wide capacity growth intensified price pressure for the Passenger Airlines, causing yields to fall. In addition, the strikes in the first quarter of 2024 and inflation-related cost increases adversely affected the earnings of the Passenger Airlines, and Lufthansa Airlines in particular. As part of the programme to secure efficiency and earnings, Lufthansa Airlines announced measures in response to the challenging market environment and rising costs.
The Logistics and MRO business segments achieved a positive result in the first six months of 2024, although earnings in the Logistics business segment declined relative to the prior-year period.
Overall, Adjusted EBIT for the Lufthansa Group came to EUR -163m in the first half of 2024, compared with EUR 812m in the previous year. For the year as a whole, we expect Adjusted EBIT of EUR 1.4bn to EUR 1.8bn. This outlook is largely dependent on the earnings development for Lufthansa Airlines as well as the traditionally important fourth quarter at Lufthansa Cargo.
The consistent ongoing pursuit of our strategy makes us even more international, even more competitive and even more resilient, and is therefore the best way to keep pace with the volatility in our industry. In early July, we received the approval from the European Commission for our planned acquisition of a 41% stake in ITA Airways, subject to certain conditions. The transaction is due to be closed in the fourth quarter of 2024. Also, Lufthansa City Airlines commenced flight operations in late June, a move that will enable us to safeguard the growth of our long-haul services through competitive feeder services.
We have also made further improvements to our customer products and services. In early May, the first scheduled flight of an Airbus A350 with the new Lufthansa cabin product Allegris took off from Munich to Vancouver. Four A350s fitted with the Allegris cabin are now in service, and on average one more is added every month. Overall, more than 31,000 new seats will be fitted in our Group’s long-haul aircraft.
We have also made changes to our Executive Board. On 1 July 2024, we welcomed Grazia Vittadini and Dieter Vranckx as new members of the Executive Board of Deutsche Lufthansa AG. As Chief Technology Officer, Grazia Vittadini took over the MRO and IT function, which also includes taking responsibility for sustainability. Dieter Vranckx is responsible for Global Markets and Commercial Management Hubs, which also includes the areas of Customer Experience and Group Brand Management. In addition, Till Streichert will assume responsibility for Finance starting on 15 September 2024.
Together, we will push ahead with the development of the Lufthansa Group and create added value for all – for our passengers, our employees and our shareholders.
Many thanks for accompanying us on this journey.
Head of Investor Relations
Deutsche Lufthansa AG
Revenue €m
Adjusted EBIT €m
Despite continued capacity growth, the financial position of the Lufthansa Group deteriorated significantly in the first half of 2024, with a number of strikes by different employee groups of the Lufthansa Group and by employees at system partners in the first quarter of 2024 having a particularly negative impact. In addition, market-wide capacity growth intensified the price pressure on Passenger Airlines, resulting in a fall in yields, which affected Lufthansa Airlines in particular.
Capacity in the passenger business increased by 11% compared with the previous year. Relative to the pre-crisis level in 2019, capacity stood at 88%. However, capacity failed to meet the original target due to strikes.
Overall, revenue at the Lufthansa Group increased by 6% year-on-year to EUR 17,399m (previous year: EUR 16,406m), primarily due to the further expansion of the flight programme and strong growth in the MRO business segment.
However, the Lufthansa Group’s earnings deteriorated year-on-year in the first half of 2024. Adjusted EBIT came to EUR -163m (previous year: EUR 812m). In addition to growing price pressure in the second quarter, the strikes had a negative impact of around EUR 450m on earnings. The Adjusted EBIT margin in the reporting period was -0.9% (previous year: 4.9%).
Performance in the Logistics segment in the first half of 2024 was shaped by a challenging environment in the airfreight sector as well as the strikes in the first quarter of 2024. A positive result was nonetheless achieved, but this represented a decline relative to the high basis for comparison in the previous year.
The MRO business segment reported a positive result in the first half of 2024 due to continued strong demand for MRO services.
Despite the operating loss, the Lufthansa Group’s Adjusted free cash flow in the first half of 2024 was positive at EUR 878m (previous year: EUR 1,071m). Inflows from advance ticket payments in particular compensated for the negative result.
The balance sheet was further strengthened in the first half of 2024. Net indebtedness in the amount of EUR 5,640m was roughly at the same level as at the end of 2023 (31 December 2023: EUR 5,682m). Net pension obligations fell by EUR 225m to EUR 2,451m (31 December 2023: EUR 2,676m) due to interest rates.
| Jan - Jun 2024 | Jan - Jun 2023 | Change in % | ||
|---|---|---|---|---|
| Total revenue | €m | 17,399 | 16,406 | 6 |
| of which traffic revenue | €m | 14,332 | 13,751 | 4 |
| Operating income | €m | 18,807 | 17,845 | 5 |
| Operating expenses | €m | 18,980 | 17,010 | 12 |
| Adjusted EBITDA | €m | 978 | 1,911 | -49 |
| Adjusted EBIT | €m | -163 | 812 | |
| EBIT | €m | -212 | 777 | |
| Net profit/loss | €m | -265 | 414 |
| Jan – Jun 2024 | Jan – Jun 2023 | Change in % | ||
|---|---|---|---|---|
| Total assets | €m | 47,233 | 45,315 | 4 |
| Equity | €m | 9,701 | 8,091 | 20 |
| Net indebtedness | €m | 5,640 | 5,914 | -5 |
| Net pension obligations | €m | 2,451 | 2,312 | 6 |
| Net debt+net pension obligations/equity | ratio | 45:55 | 50:50 |
|
| Cash flow from operating activities | €m | 2,788 | 3,100 | -10 |
| Gross capital expenditure | €m | 1,761 | 1,773 | -1 |
| Net capital expenditure | €m | 1,754 | 1,871 | -6 |
| Adjusted free cash flow | €m | 878 | 1,071 | -18 |
| Jan – Jun 2024 | Jan – Jun 2023 | Change in % | ||
|---|---|---|---|---|
| Adjusted EBITDA margin | % | 5.6 | 11.6 | -6.0 pts |
| Adjusted EBIT margin | % | -0.9 | 4.9 | -5.8 pts |
| EBIT margin | % | -1.2 | 4.7 | -5.9 pts |
| Jan – Jun 2024 | Jan – Jun 2023 | Change in % | ||
|---|---|---|---|---|
| Share price as of 30 June | € | 5.71 | 9.38 | -39 |
| Earnings per share | € | -0.22 | 0.35 |
|
| Jan – Jun 2024 | Jan – Jun 2023 | Change in % | ||
|---|---|---|---|---|
| Employees as of 30 June | number | 100,173 | 114,773 | -13 |
| Jan – Jun 2024 | Jan – Jun 2023 | Change in % | ||
|---|---|---|---|---|
| Flights | number | 469,625 | 440,717 | 7 |
| Passengers | thousands | 60,298 | 55,025 | 10 |
| Available seat-kilometres | millions | 153,816 | 137,960 | 11 |
| Revenue seat-kilometres | millions | 124,733 | 112,696 | 11 |
| Passenger load factor | % | 81.1 | 81.7 | -0.6 pts |
| Available cargo tonne-kilometres | millions | 8,277 | 7,289 | 14 |
| Revenue cargo tonne-kilometres | millions | 4,796 | 4,192 | 14 |
| Cargo load factor | % | 57.9 | 57.5 | 0.4 pts |
1) Previous year's figures have been adjusted
Date of publication: 31 July 2024.
Date of publication: 31 July 2024.
Starting from a 2023 year-end price of EUR 8.05, the Lufthansa share price declined in the first six months of the 2024 financial year.
The decline in the share price reflects the market's fear that demand could weaken over the course of the year. In addition, analysts see the strong growth in long-haul capacity as a risk to the development of average yields for European network airlines, especially in the increasingly important Asian market. Furthermore, the large number of strikes in the first quarter also had a negative impact on the price of Lufthansa shares. Some analysts also cited uncertainties in connection with the personnel changes in the Executive Board as a reason for the price declines. In the same period, the shares of European low-cost airlines performed more positively, as did the shares of its main competitor IAG. By contrast, AirFrance-KLM shares suffered primarily from concerns about continued high cost inflation.
On 30 June 2024, Lufthansa shares were listed at EUR 5.71. This meant that the share price recorded a loss of 29% in the period under review. The benchmark MDAX index was 7% below its year-end 2023 level on 30 June 2024.
In view of the short booking cycles in the passenger business, the fact that freight business is driven mainly by the spot market, and uncertainty in the macroeconomic and geopolitical environment, the financial outlook for the Lufthansa Group is subject to a high degree of forecasting uncertainty.
Operating and financial performance are also subject to the further developments in Russia’s war of aggression against Ukraine and the Middle East conflict, in particular their impact on fuel costs.
Uncertainty as regards the macroeconomic outlook, and above all the impact on the global economy of the steps taken by the major central banks to combat inflation, may potentially have a material influence on customer demand.
Notwithstanding the above-mentioned uncertainty, the Lufthansa Group assumes that demand will be strong enough in 2024 for sales to continue to rise. In addition to the private travel segment, where demand is forecast to exceed its pre-crisis level, the continued recovery in demand in the business travel segment will also contribute to this trend. For this reason, flight capacity is to be expanded further.
Overall, the Lufthansa Group anticipates that available capacity for Passenger Airlines in 2024 will be at around 92% of its pre-crisis level in 2019.
The Group expects that the airlines of the Lufthansa Group will receive up to 30 new aircraft in 2024. However, due to production problems affecting aircraft manufacturers and their suppliers as well as delays in certification, there have been repeated postponements in planned aircraft deliveries throughout the industry. The Company’s capacity forecast is largely decoupled from this, since at least the outstanding Boeing long-haul aircraft are no longer expected to be operationally relevant in the current year.
The Lufthansa Group expects revenue to increase significantly in the 2024 financial year in comparison with the previous year. The main drivers are expected to be further capacity growth in the Passenger Airlines segment and anticipated growth in the Logistics and MRO segments.
However, due to market-wide capacity growth which is intensifying price pressure on Passenger Airlines, the Lufthansa Group expects yields to decline year-on-year.
The Lufthansa Group expects revenue growth to be more than offset by ongoing cost increases and the effects of the strikes in the first quarter and for earnings to therefore decline relative to the previous year. Overall, for the 2024 financial year the Lufthansa Group predicts Adjusted EBIT of between EUR 1.4bn and EUR 1.8bn. This outlook is largely dependent on the earnings trend for Lufthansa Airlines as well as the traditionally important fourth quarter at Lufthansa Cargo.
The Lufthansa Group stands by its goal of generating a sustainable Adjusted EBIT margin of at least 8%. The Group is striving to achieve this target margin as soon as possible.
Net capital expenditure by the Lufthansa Group in the 2024 financial year is expected to roughly match the level in the previous year subject to delivery of the outstanding Boeing long-haul aircraft. This will mainly relate to capital expenditure on aircraft. Cash inflows from sale-and-lease-back agreements will partly offset higher gross capital expenditure. The scope and dates of the sale-and-lease-back agreements have not yet been agreed and also depend on the delivery dates for the new aircraft.
Including the forecast earnings development, Adjusted free cash flow for the Group is projected to be significantly below EUR 1.0bn in the 2024 financial year, depending largely on the earnings performance, advance ticket payments and aircraft deliveries and financing. Cash flow from advance ticket payments in 2024 depends above all on the development of demand and ticket prices in the second half of the year, which is subject to a high level of forecasting uncertainty at the time of reporting.
On 6 May 2024, Till Streichert has been appointed by the Supervisory Board of Deutsche Lufthansa AG to the company’s Executive Board, and will assume the position of Chief Financial Officer (CFO) with responsibility for the company’s Finance Division with effect from 15 September 2024. Till Streichert has been appointed for a three-year term of office which runs to 14 September 2027.
The duties of the CFO of Deutsche Lufthansa AG are initially be performed by Executive Board member Michael Niggemann since the departure of Remco Steenbergen on May 7 of this year. Till Streichert will then assume responsibility for the Finance Division, which comprises Controlling & Risk Management, Corporate Finance, Corporate Accounting, Investor Relations, Corporate Taxes, Financial Services and Mergers & Acquisitions, from mid-September.
“In Till Streichert we are securing a reputed and internationally experienced financial specialist to serve as the new CFO of the Lufthansa Group,” says Karl-Ludwig Kley, Chairman of the Supervisory Board of Deutsche Lufthansa AG. “Till Streichert brings outstanding financial expertise from a wide range of companies and sectors to his new position; and he convinced our Supervisory Board on a personal level, too. Given the continuing challenges posed by the competitive environment worldwide, having a CFO like Till Streichert who is extensively experienced in the capital markets is of vital importance to the Lufthansa Group.”
The virtual Annual General Meeting of Deutsche Lufthansa AG took place on 7 May 2024. The shareholders approved all of the items on the agenda with a large majority.
The agenda items included the use of distributable earnings, with the distribution of a dividend of EUR 0.30 per share envisaged, as well as the election of Supervisory Board members. Sara Hennicken, CFO of Fresenius Management SE, was elected to the Supervisory Board for the first time. Dr Thomas Enders, former CEO of Airbus SE, Harald Krüger, former Chairman of the Executive Board of Bayerische Motorenwerke Aktiengesellschaft, and Britta Seeger, member of the Executive Board of Mercedes-Benz Group AG, were re-elected to the Supervisory Board.
On 3 July 2024, the European Commission’s competition authority approved Deutsche Lufthansa AG’s planned acquisition of a 41% stake in ITA Airways, subject to conditions. The transaction is due to be closed in the fourth quarter of 2024.
This is subject to Deutsche Lufthansa AG having previously fulfilled the conditions agreed with the European Commission as well as the consent of additional competition authorities outside of the EU. The Lufthansa Group and the Italian Ministry of Economy and Finance (MEF) have agreed options for the acquisition of the additional shares in ITA Airways and these may be exercised, at the earliest, over the course of 2025.
Following the closing of the transaction, ITA Airways will be closely integrated within the Lufthansa Group as a fifth network airline, while retaining its ITA Airways brand.
On 13 May 2024, Deutsche Lufthansa AG successfully issued an unsecured bond with an overall volume of EUR 750m. The bond with a denomination of EUR 1,000 bears interest at a rate of 4.0% per year and matures on 21 May 2030.
These favourable financing conditions are based on the investment-grade rating which Deutsche Lufthansa AG now once again holds according to all of the leading rating agencies.
Dr. Michael Niggemann, Chief Officer Human Resources & Infrastructure and interim Chief Financial Officer of Lufthansa Group says: “Deutsche Lufthansa AG is the only network airline in Europe with investment grade ratings by all leading rating agencies – Standard & Poor’s, Moody’s, Fitch und Scope. Based on that, we were able to issue this corporate bond at favorable terms. The tenor of six years complements our maturity profile perfectly. The great success of this transaction underlines the confidence of the capital market in our company and confirms our access to various favorable financing instruments. The proceeds will primarily be used to refinance maturing financial liabilities”.
Lufthansa City Airlines, the youngest airline in the Lufthansa Group, commenced flight operations on June 26, 2024. Passengers can look forward to the proven Lufthansa customer experience with one of the most modern and efficient aircraft for short and medium-haul flights.
After the first five aircraft of the Airbus A320 family, the fleet will be expanded to at least eight more A320neo and further A319s in the coming year. Delivery of the 40 new aircraft of the fuel-efficient Airbus A220-300 type ordered will start in 2026.
The Lufthansa Group is introducing an Environmental Cost Surcharge. The surcharge is intended to cover part of the steadily rising additional costs due to regulatory environmental requirements. These include the statutory blending quota of initially two percent for Sustainable Aviation Fuel (SAF) for departures from European Union (EU) countries from January 1, 2025, adjustments to the EU Emissions Trading System (EU ETS) as well as other regulatory environmental costs such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).
The Environmental Cost Surcharge applies to all flights sold and operated by the Lufthansa Group departing from the 27 EU countries as well as the UK, Norway and Switzerland. The amount of the surcharge varies depending on the flight route and fare and is between 1 euro and 72 euros. The Environmental Cost Surcharge will be levied on all tickets issued from June 26, 2024 and applies to departures from January 1, 2025. The exact amount of the Environmental Cost Surcharge is shown on the Lufthansa Group Airlines booking pages in the price details.
Lufthansa Airlines at the hubs in Frankfurt and Munich as well as Lufthansa CityLine have once again been successfully validated in accordance with the demanding European EMAS (Eco-Management and Audit Scheme) regulation. The airline is thus setting an important example of corporate environmental responsibility.
The external EMAS environmental report confirms the continuous development of the environmental management system and its in-depth implementation. Through audits and inspections, an independent and comprehensive picture of the processes is drawn up as part of an assessment and a comprehensive insight into the employees' understanding of values is provided in discussions with department specialists.
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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