Lufthansa increases its operating result to EUR 612m for the first nine months of 2010

Lufthansa Group generates an operating profit of 612 million Euros after nine months / Full-year operating result expected to exceed 800 million Euro threshold / Executive Board expect dividend payment for 2010

Lufthansa has posted an operating profit of 783 million Euros in the third quarter of the current business year, 565 million Euros more than in the same quarter of the previous year. The good result is the consequence of the increasingly positive development of demand in passenger and freight traffic, and the success of the cost-cutting programmes in all of the business segments, as well as of the realized synergy potentials in the Airline Group. Market-oriented offers meant that the Group’s companies were able to consolidate, and some even expand, their strong positions in their respective markets. Following the extreme winter, pilots’ strike and airspace lockdowns, which all burdened the result and led to an operating loss after the first six months, the Group has gone on to record an operating profit of 612 million Euros for the first nine months of the year. This represents a year‑on‑year increase of about 386 million Euros. Revenue increased by 4 billion Euros to 20.2 billion Euros. “The Lufthansa Group has successfully flown through the economic and financial crisis. The good result is the consequence of a targeted and determined reaction, and a remarkable team performance. A strong Airline Group and optimized cost structures are success factors that will also pay off in the future,” commented Lufthansa Chairman and CEO Wolfgang Mayrhuber, speaking at the presentation of the quarterly figures.

All the business segments of the Lufthansa Group contributed to the good result with operating profit. The Passenger Airline Group recorded an operating result of 218 million Euros during the first nine months of the year. Of this figure, 158 million Euros were contributed by Lufthansa Passenger Airlines and 194 million Euros by SWISS; Germanwings contributed a loss of 11 million Euros. Austrian Airlines and bmi posted the expected operating losses for the first nine months of the year – Austrian Airlines contributed a loss of 47 million Euros and bmi a loss of 90 million Euros; however, during the third quarter, both airlines posted a small operating profit for the first time. All of the airlines are benefiting from the efforts that were invested in increasing efficiency and reducing costs, as well as the acceleration in demand. Mayrhuber pointed out that: “We neither expect any change with regard to the highly intense global competition, nor any relief with regard to extreme price pressure in the short-haul segment. All of the airlines in the Passenger Airline Group shall therefore continue to implement their respective cost‑cutting programmes.”

The Logistics business segment recorded an operating profit of 230 million Euros during the first nine months. Lufthansa Cargo therefore presented a significantly positive result, just as it had already done after the first six months of the year. The MRO business segment posted an operating profit of 211 million Euros, a figure slightly below the previous year’s figure, and thus expectedly proving that it has a late cycle in the aviation industry. Despite a decline in revenue, the IT Services business segment recorded an operating profit of 12 million Euros, matching the previous year’s level. The Catering business segment recorded an increase in revenue and posted an operating result of 50 million Euros. The result was only slightly below the figure for the previous year, which did however include a one-off effect.

In the interim report for the third quarter, the Executive Board underlined that: “We have fulfilled our promise to not only render short-term crisis management, but to also always look ahead, and shape the future. In doing so, we have stuck to our principles, that are, solid financial structures, our orientation to quality and the customer, innovations, and long‑term increases in value.” For the future, the risks lie in an economic slowdown, in the possible negative influence on business of the air traffic tax, and in a possible high increase in fuel prices. However, in view of the positive contributions made by the cost-cutting and restructuring programmes in the Group, the increasing realization of synergy potentials within the Airline Group and the general recovery of the economy; the forecasts for the development of earnings performance for the full-year 2010 have improved. The Group’s Executive Board awaits a significant increase in revenue and expects the operating result to exceed the threshold of 800 million Euros – while maintaining the existing cost targets. Furthermore, the Executive Board expects that the annual result for 2010 shall meet all of the requirements to pay out a dividend to shareholders.

Third-quarter figures 2010

During the first nine months of 2010, the Lufthansa Group generated revenues totalling 20.2 billion Euros, a year-on-year increase of 24.9 per cent. The traffic revenue rose by 30.6 per cent to 16.4 billion Euros. During the reporting period, the Group’s operating income increased by altogether 23.3 per cent to 22.3 billion Euros. The adjusted figures without the consolidation effects were 13.8 per cent (revenue), 16.5 per cent (traffic revenue) and 12.6 per cent (operating income).

Operating expenses rose by 20.6 per cent to 21.5 billion Euros during the first three quarters. One important reason for this, besides the consolidation effects, were the fuel costs, which rose by 1.2 billion Euros to a total of 3.9 billion Euros. This was equivalent to a year-on-year increase of 47.7 per cent, which was both price and volume related. The fees and charges were 26.3 per cent above the previous year’s figure.

The Group’s operating result during the first nine months of the year was 612 million Euros, which was 386 million Euros more than during the same period last year. The Group posted a net profit of 524 million Euros; during the same period last year, it had stood at 31 million Euros.

Lufthansa’s capital expenditure during the reporting period totalled 1.8 billion Euros, of which 1.6 million Euros were spent on the expansion and modernization of the fleet. Operating cash flow totalled 2.4 billion Euros, the free cash flow (operating cash flow minus net investments) stood at 1.3 billion Euros. At the close of the third quarter, the Group’s net indebtedness stood at 1.5 billion Euros. In comparison to the figure at the end of 2009, the positive development of business and portfolio measures saw the Group’s equity ratio increase from 23.5 to 25.1 per cent.

*) Last year’s figures have been partly restated in line with measurement changes required by IAS 39.
**) Operating result plus write back of provisions divided by revenue

The complete interim report for the first nine months of the 2010 business year is available on the Internet at: www.lufthansa.com/investor-relations