Who would have thought earlier this year that the first six months of 2017 would deliver the best results in Lufthansa’s company history. A turnaround for both cargo and passenger revenues and bottom line figures, this is what the German national carrier presented last week to investors and customers alike.
Free cash flow doubled and net financial debt halved
One can imagine there were only smiling faces in the Lufthansa Group’s boardroom when the January to June figures were laid before those sitting there. The mood six months before was surely more sombre and at the start of this year there was not the optimism that the carrier would come up with only positive results by the middle of this year.
The Lufthansa Group, which among others includes Swiss International Airlines, Austrian Airlines, Brussels Airlines and Eurowings, and also thanks to a strong cargo contribution, ended the first half year with a net profit of €672 million. Compared to the same period in 2016 this represents a 56.6% increase. In a statement to investors and the media the carrier said that the good results were mainly due to a strong demand and lower unit costs within the group’s passenger airlines. This, said CFO Ulrik Svensson ensured that “we have achieved the best first half year results in our company’s history.” The carrier’s cash flow from the 1st half year operations went up by just over 47% to €3.2 billion. Group revenues increased by 12.7% to €17 billion and actual unit costs (excluding fuel & currency effect) decreased by 1.2%. At the end of the day, adjusted EBIT was more or less doubled to more than €1 billion.
LH Cargo also plays a positive role
Fighting to get yields up again and lowering costs, this was and still is the aim of Lufthansa Cargo’s management as laid out in their 2016 published C40 savings programme. It seems that the first six months of this year have brought this plan a few steps nearer to fruition.
Cargo yields grew by 9.3% and continued cost saving measures ensured that LH Cargo contributed a net result of €78 million. Compared to last year’s first half results of minus €45 million, this is a giant step in the right direction. The cargo department has been fighting to get yields up to a point where they actually contribute to the carrier’s bottom line. The half year figures show that they are on the right road. Actual yields went up by 10.3% or on average by €0.25 per kilo. However, they have to rise even further.
Actual revenues rose to €1.15 billion, an increase of almost 19%. Lufthansa Cargo even increased their capacity by 2% by bringing back into service one of their mothballed MD-11 freighters. With their freighter fleet of 5 B77Fs and 14 MD-11Fs, the carrier was able to add capacity into the Asia Pacific region as well as to the Americas.
Cargo CEO sticks to restructuring measures
Peter Gerber, LH Cargo’s CEO and Chairman of the LH Cargo Executive Board, summed up the first half year results by stating: “We have seen time and time again over recent years just how volatile the air cargo market can be. Following an extended period with a particularly challenging market environment, we are pleased that our tough restructuring programme is bearing fruit at the same time we are being bolstered by a positive economic climate. We want to be the first choice for our customers when it comes to air cargo in the future as well. That is why we are constantly striving to improve - such as by significantly expanding our Cool Center in Frankfurt for example. We want to win business in the future as well with our far-reaching and closely meshed network, top class service and innovative products.”
The message is clear, “no time to rest on their laurels,” - a lot of work to do and the hope that the second half of this year will prove as positive as the first.
John Mc Donagh