To our shareholders
Letter from Dennis Weber,
Head of Investor Relations
In the aviation industry, the first quarter is the weakest of the year due to seasonal factors. However, our company's quarterly loss of EUR 849m was significantly higher than expected, mainly due to the strikes. We had already communicated this in advance on April 15.
Lufthansa Group revenues reached EUR 7.4bn – an increase of 5 percent over the previous year. Demand for air travel remained strong. We welcomed 24 million guests on board – 12 percent more than in the first three months of 2023. Adjusted free cash flow was lower than in the same period of the previous year, but still clearly positive at EUR 305m. The Adjusted EBIT loss of EUR 849m was significantly influenced by the financial impact of strikes, primarily at our core brand Lufthansa Airlines, but also at Austrian Airlines and Brussels Airlines, Discover Airlines and Lufthansa CityLine. Not forgetting the strikes by security staff at German airports. The effects from strikes on earnings amounted to a total of EUR 350m.
In total, six percent of all planned flights were affected. And we disappointed hundreds of thousands of passengers whom we have not been able to offer the reliability they expect and deserve. In addition, many customers were hesitant to book flights because of the strikes and the uncertainty they created. In particular, the number of higher-priced short-term bookings decreased significantly in the first quarter. These are financial burdens and losses in demand that no company can simply make up for. Accordingly, we also had to adjust our full-year forecast to reflect the impact of the strikes on earnings. The Lufthansa Group is now forecasting an Adjusted EBIT of around EUR 2.2bn for the full year 2024.
We have now been able to conclude long-term wage agreements for Lufthansa Airlines employees on the ground as well as in the cabin and cockpit. This gives both our guests and the company planning certainty. Although we still expect the wage disputes to have an impact on earnings in the second quarter, we are convinced that we have reached a turning point.
We can now focus exclusively on our strategic priorities again - in particular on improving products and services for our customers. Last Thursday, we were finally able to present the first A350 with our new Allegris cabin. Tomorrow, it will start its scheduled service: from Munich to Vancouver – the second destination will be Toronto, followed by Chicago and Montreal. With Allegris at Lufthansa Airlines and SWISS Senses at SWISS – whose product launch is scheduled for the second quarter of 2025 – we are once again setting premium standards in the industry. Because every guest has his or her own understanding of premium, we focus on maximum individuality. With Allegris, our guests can choose from a dozen different seat variants to find the one that best suits their needs. In total, we will install more than 31,000 new seats in our Group's long-haul aircraft.
For our large-scale product offensive, we are investing EUR 4.5bn, more than ever before in just one year: in new aircraft, in our cabin interiors, lounges, ground processes and in our personal and digital services.
The expansion of our capacity in the second quarter is likely to be somewhat lower than originally planned, partly due to ongoing delays in the delivery of new aircraft. Nevertheless, we continue to grow strongly and are confident that another very good summer lies ahead of us. We are already seeing significantly more bookings than in the previous year.
We are pleased that you are accompanying us on our journey. And we look forward to welcoming you on board our aircraft again.
Head of Investor Relations
Deutsche Lufthansa AG
Revenue €m
Adjusted EBIT €m
The Lufthansa Group posted a decline in operating and financial performance in the first quarter of 2024, with a number of strikes by different employee groups of the Lufthansa Group and by employees at system partners having a particularly negative impact.
Capacity in the passenger business was increased by 12% compared to the previous year. Compared with the pre-crisis level in 2019, capacity was 84%. However, capacity failed to meet the original plan, mainly due to strikes. Overall, revenue at the Lufthansa Group increased by 5% year-on-year to EUR 7,392m (previous year: EUR 7,017m), 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 quarter of 2024. Adjusted EBIT was EUR -849m (previous year: EUR -273m). The strikes had a negative impact of around EUR 350m on earnings. The Adjusted EBIT margin in the reporting period was -11.5% (previous year: -3.9%).
The MRO business segment reported positive Adjusted EBIT also in the first quarter of 2024 due to continued strong demand for MRO services. However, earnings in the Logistics business segment declined owing to a challenging industry environment in relation to the high basis for comparison from the previous year.
Despite the operating loss, Adjusted free cash flow in the first quarter of 2024 was positive at EUR 305m (previous year: EUR 482m). Inflows from advance ticket payments in particular compensated for the negative result.
The balance sheet was further strengthened in the first quarter of 2024. Net indebtedness was EUR 151m lower than at the end of 2023 at EUR 5,531m (31 December 2023: EUR 5,682m) due to the positive free cash flow. Net pension obligations fell by EUR 253m to EUR 2,423m (31 December 2023: EUR 2,676m) due to the interest rate.
| Jan – Mar 2024 | Jan – Mar 2023 | Change in % | ||
|---|---|---|---|---|
| Total revenue | €m | 7,392 | 7,017 | 5 |
| of which traffic revenue | €m | 5,903 | 5,708 | 3 |
| Operating income | €m | 8,175 | 7,691 | 6 |
| Operating expenses | €m | 9,011 | 7,946 | 13 |
| Adjusted EBITDA | €m | -279 | 272 |
|
| Adjusted EBIT | €m | -849 | -273 | -211 |
| EBIT | €m | -871 | -304 | -187 |
| Net profit/loss | €m | -734 | -467 | -57 |
| Jan – Mar 2024 | Jan – Mar 2023 | Change in % | ||
|---|---|---|---|---|
| Total assets | €m | 47,358 | 44,904 | 5 |
| Equity | €m | 9,574 | 7,550 | 27 |
| Net indebtedness | €m | 5,531 | 6,717 | -18 |
| Net pension obligations | €m | 2,423 | 1,992 | 22 |
| Net debt+net pension obligations/equity | ratio | 45:55 | 54:46 |
|
| Cash flow from operating activities | €m | 1,311 | 1,581 | -17 |
| Gross capital expenditure | €m | 924 | 1,000 | -8 |
| Net capital expenditure | €m | 940 | 1,040 | -10 |
| Adjusted free cash flow | €m | 305 | 482 | -37 |
| Jan – Mar 2024 | Jan – Mar 2023 | Change in % | ||
|---|---|---|---|---|
| Adjusted EBITDA margin | % | -3.8 | 3.9 | -7.7 pts |
| Adjusted EBIT margin | % | -11.5 | -3.9 | -7.6 pts |
| EBIT margin | % | -11.8 | -4.3 | -7.5 pts |
| Jan – Mar 2024 | Jan – Mar 2023 | Change in % | ||
|---|---|---|---|---|
| Share price as of 31 March | € | 7.28 | 10.26 | -29 |
| Earnings per share | € | -0.61 | -0.39 | -56 |
| Jan – Mar 2024 | Jan – Mar 2023 | Change in % | ||
|---|---|---|---|---|
| Employees as of 31 March | number | 98,739 | 112,392 | -12 |
| Jan – Mar 2024 | Jan – Mar 2023 | Change in % | ||
|---|---|---|---|---|
| Flights | number | 196,971 | 185,085 | 6 |
| Passengers | thousands | 24,359 | 21,728 | 12 |
| Available seat-kilometres | millions | 66,871 | 59,447 | 12 |
| Revenue seat-kilometres | millions | 53,273 | 47,405 | 12 |
| Passenger load factor | % | 79.7 | 79.7 | 0.0 pts |
| Available cargo tonne-kilometres | millions | 3,810 | 3,457 | 10 |
| Revenue cargo tonne-kilometres | millions | 2,259 | 2,031 | 11 |
| Cargo load factor | % | 59.3 | 58.7 | 0.6 pts |
Date of publication: 30 April 2024.
Starting from a closing price of EUR 8.05 at the end of 2023, the Lufthansa share declined over the course of the first three months of the 2024 financial year.
The Lufthansa share price has fallen since the beginning of the year, reaching its low of EUR 6.74 in the first quarter in mid-March, one week after the publication of the 2023 annual results. Although record results were presented for 2023 and the financial outlook was in line with market expectations, the fall in the share price reflects the market's fears that demand could weaken over the course of the year. Analysts also see the strong capacity growth on long-haul routes as a risk to the development of yields for European network airlines. Furthermore, the large number of strikes in the first quarter had an additional negative impact on the Lufthansa share price. Some analysts also cited uncertainties in connection with the personnel changes in the Executive Board as a reason for the share price declines. In the same period, the shares of European low-cost airlines performed more positively, as the majority of the market expects that the foreseeable supply restrictions on the European short-haul market could lead to a higher price level. By contrast, the shares of the main competitor AirFrance-KLM suffered above all from concerns about persistently high cost inflation.
In the second half of March, the European airline market recorded a slight upward trend, which also benefited the Lufthansa share price. This was driven by a more optimistic view of the remainder of the year among some market participants, according to which demand is expected to remain strong and unit revenues relatively stable compared to the previous year.
On 31 March 2024, the Lufthansa share was quoted at EUR 7.28. The share price thus recorded a loss of 10 % in the period under review. The MDAX benchmark index was quoted at almost the same level on 31 March 2024 as at the end of 2023 (-0.3%).
In view of the short booking cycles in the passenger business, the fact that freight business is driven mainly by the spot market, and uncertainties in the macroeconomic and geopolitical environment, the financial outlook for the Lufthansa Group is subject to a high degree of uncertainty.
The operating and financial performance is also subject to the further developments in Russia’s war of aggression against Ukraine and the Middle East conflict, particularly their impact on fuel costs.
Uncertainty in the macroeconomic outlook, particularly the effects on the economy of the steps taken by the major central banks worldwide to combat inflation, may potentially have a material influence on customer demand.
Notwithstanding the uncertainties mentioned above, 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, a contribution will come from the further recovery in demand in the business travel segment. 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 around 92% of its pre-crisis level in 2019.
The Group assumes that the airlines of the Lufthansa Group will receive up to 30 new aircraft in 2024. However, due to production problems and delays in certification, there have been repeated postponements in planned aircraft deliveries throughout the industry, which means that the company’s capacity forecast is still subject to uncertainties despite the reduction already made compared with the original assumption. These uncertainties also apply to the expectation that the European air traffic system will be stable enough to support the planned increase in traffic.
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.
The Lufthansa Group expects that revenue growth will be offset by ongoing cost inflation. However, the additional strain caused by various strikes, both by various employee groups within the Group and by the employees of system partners, during the first half of 2024 will probably lead to a year-on-year decline in earnings. Overall, the Lufthansa Group expects Adjusted EBIT of around EUR 2.2bn for financial year 2024.
The Lufthansa Group stands by its goal of generating a sustainable Adjusted EBIT margin in excess of 8%. The Group is striving to achieve this target margin as soon as possible.
Net capital expenditure by the Lufthansa Group in 2024 is expected to be roughly the same as in the previous year. This will mainly be for capital expenditure in aircraft. Cash inflows from sale-and-lease-back agreements will partly offset higher gross investments.
Including the forecast earnings development, Adjusted free cash flow for the Group is projected to be at least EUR 1.0bn in the 2024 financial year, depending largely on the earnings performance and advance ticket payments. Cash flow from advance ticket payments in 2024 depends above all on demand in the second half of the year, which is subject to high forecasting uncertainty at the time of reporting.
The Supervisory Board of Deutsche Lufthansa AG voted to carry out a wide-ranging reorganisation of the Executive Board at its meeting on 22 February 2024. The Executive Board will be reduced from six to five members and areas of responsibility will be reorganised.
Christina Foerster, Harry Hohmeister and Detlef Kayser will leave the Executive Board as of 30 June 2024, and Remco Steenbergen will leave the Executive Board at the close of 7 May 2024, the date of the Annual General Meeting.
New members Grazia Vittadini and Dieter Vranckx will be appointed to the Executive Board as of 1 July 2024. Grazia Vittadini, previously at Rolls-Royce Holdings plc, London, as Chief Technology Officer and member of the Executive Team and most recently active as a special consultant, will lead the MRO and IT function as Chief Technology Officer, which also includes responsibility for sustainability. She will receive a contract with a term of three years. Dieter Vranckx, currently CEO of SWISS International Airlines, has been appointed to the Executive Board for Global Markets and Commercial Management Hubs. He will also receive a three-year contract. The areas of Customer Experience and Group Brand Management, which were previously part of Brand Management & Sustainability, are now also his responsibility.
A new appointment is to be made for the Executive Board member responsible for Finance. Until the position is filled, Michael Niggemann will lead the finance function provisionally in addition to his responsibility on the Executive Board for Human Resources, Logistics and Non-Hub Traffic (previously Human Resources and Infrastructure).
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.
On 28 March 2024, Employers’ Federation for Air Transport Companies (AGVL) and the trade union Vereinigte Dienstleistungsgewerkschaft e. V. (ver.di) reached a wage agreement for the approximately 20,000 ground staff of Deutsche Lufthansa AG, Lufthansa Technik, Lufthansa Cargo and other companies following successful arbitration. The wage agreement has a term of at least 24 months and offers, in particular, average wage increases of around 12.5% in two phases as well as the payment of inflation compensation bonuses totalling EUR 3,000 net. Ver.di had previously called for multiple strikes.
In addition, AGVL and the cabin staff union Unabhängige Flugbegleiter Organisation e.V. (UFO) reached a long-term wage agreement for the approximately 19,000 cabin crew at Lufthansa Airlines on 11 April 2024. The wage agreement has a term of at least 36 months and offers a wage increase totalling 16.5% in several phases over this term. UFO had previously called for a two-day strike.
Furthermore, Austrian Airlines and the trade union vida and the works council Bord agreed on a collective agreement for around 2,400 flight attendants and around 1,000 pilots on 25 April 2024. The collective agreement runs until December 2026 and offers, in particular, average salary increases of around 19.4% in three stages and a peace obligation during the term of the agreement. The agreement is subject to a positive vote by the vida trade union.
Deutsche Lufthansa AG has invited its shareholders to the 71st Annual General Meeting on 7 May 2024 at 10:00 hrs. The meeting will again take place virtually.
The Annual General Meeting will be broadcasted as a livestream on the Lufthansa Group's website. Shareholders can participate in the voting via the Online Services. The registration closing date is 30 April 2024, 24:00 hrs.
The main content of the speech by Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG, will be published on the website in advance of the meeting. This gives shareholders the opportunity to refer to the content of the speech when asking questions. Questions on the agenda can be submitted via a live video contribution on the day of the Annual General Meeting using the Online Services, provided that the shareholder has duly registered for the Annual General Meeting.
One of the items on the agenda of the Annual General Meeting is the election of members of the Supervisory Board. The Supervisory Board of Deutsche Lufthansa AG recommends the election of Sara Hennicken, Chief Financial Officer of Fresenius Management SE. The mandate of Michael Kerkloh, former Chairman of the Executive Board of Flughafen München GmbH, expires at the end of the Annual General Meeting on 7 May 2024. In addition, the Supervisory Board recommends the re-election of 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.
Other items on the agenda include the appropriation of balance sheet profits and the distribution of a dividend of EUR 0.30 per share as well as the cancellation and creation of Authorised Capital A with the option to exclude shareholders' subscription rights and a corresponding amendment to the Articles of Association.
Lufthansa Allegris, the new travel experience on long-haul routes, will start its scheduled service on 1 May 2024. The first Airbus A350 equipped with Allegris will fly from Munich to the Canadian metropolis of Vancouver. The second destination is Toronto, which will be served alternately with Vancouver on selected flights in the first few months. With further A350s delivered, the Allegris cabin will also be used on flights to Chicago and Montreal in the summer.
For the first time, travelers can now also view a seat map for all Allegris flights from 1 May 2024 in the familiar booking channels with all special Allegris seats, such as the five options in Business Class. A photo gallery with important additional information on the various options gives travelers a detailed picture of the product benefits.
Guests who are already booked on these flights will be notified of their "upgrade" to the new cabin. Seat reservations in Business Class are free of charge in the first few months and can be made and changed conveniently via the familiar booking channels. Passengers can see whether a flight is equipped with the Allegris product three weeks before departure.
On 26 April 2024, Lufthansa Group published its annual factsheet “Sustainability in 2023” together with the TCFD and SASB reports on its website.
The factsheet summarizes the most important topics and key figures on sustainability in the Lufthansa Group for the reporting year 2023. In addition to current key figures from the areas of environment, transport performance and personnel, further facts and figures are supplemented with selected highlights from the Lufthansa Group that go beyond the aviation sector.
In the global climate ranking 2023 of the non-profit organization CDP (formerly Carbon Disclosure Project), the Lufthansa Group has once again received a top rating for its CO2 reduction strategy and its implementation. On a scale from "A" (best result) to "D-", the company was placed in the highest ranking band for the second year in a row with a scoring result of "A-". The top rating confirms the Lufthansa Group's global pioneering role in its commitment to more sustainable aviation. CDP has awarded the Lufthansa Group top marks for reporting in the following assessment categories: Scope 1 & 2 (direct emissions & indirect emissions from purchased energy), Scope 3 (indirect emissions within the supply chain), measures to reduce emissions and low-emission products as well as the disclosure of risks and opportunities.
One year after the launch of Green Fares at the Lufthansa Group, more than one million passengers have already opted for the new fare. In the first year, an average of three per cent of passengers have used the offer, making an important contribution to more sustainable travel. In Business Class, Green Fares tickets are already selected for eleven per cent of bookings via the Lufthansa Group portals. Green Fares are particularly popular on routes such as Hamburg-Munich, Zurich-London and Frankfurt-Berlin. Demand continues to rise steadily in all booking classes, underlining the success of the more sustainable fare. In total, travelers have offset more than 77,000 tonnes of CO2 since the launch of Green Fares by offsetting their flight-related CO2 emissions. This amount corresponds to the CO2 emissions of more than 12,000 flights from Hamburg to Munich with an Airbus A320neo.
The Green Fares are available with Lufthansa Airlines, Austrian Airlines, Brussels Airlines, SWISS, Edelweiss, Discover Airlines and Air Dolomiti on more than 730,000 flights per year within Europe and to Morocco, Algeria and Tunisia. The Lufthansa Group has also been testing Green Fares on selected long-haul routes since November 2023.
We are at your disposal to answer your questions.
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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