German carrier, Lufthansa Group, has declared that it has achieved the best result in its history of operation in the global aviation industry.
The airline group in a press release said results for its 2017 showed that adjusted Earnings Before Interest and Tax (EBIT) increased around 70 percent to some EUR b billion and adjusted EBIT margins raised 2.9 percentage points to 8.4 percent.
“Our endeavors of the past few years are paying off. Our modernization has a sustainable impact. We have achieved the best result in the history of our company. 2017 was a very good year for our customers, our employees and our shareholders,” says Carsten Spohr, Chairman of the Executive Board & CEO of Deutsche Lufthansa AG.
“Last year we were able to reduce costs again, while at the same time becoming the first – and the only – airline in Europe to be awarded a five-star rating. We are lowering our costs where this does not affect the customer, and are simultaneously further investing in our product and service quality.”
Total revenues for the Lufthansa Group in 2017 amounted to EUR 35.6 billion, a 12.4 percent increase on the previous year. The Adjusted EBIT of EUR 2.97 billion was a significant 69.7 percent year-on-year improvement. And the 8.4 percent Adjusted EBIT margin was up 2.9 percentage points compared to previous year. EBIT for the year increased more than EUR 1 billion to EUR 3.3 billion. The strong increase of EBIT includes the positive EUR 582 million one-off effect from agreeing on the collective labour agreement with the Vereinigung Cockpit union for the pilots of Lufthansa, Lufthansa Cargo and Germanwings, which was recognized in the income statement in December.
“We are particularly pleased that we were again able to lower our passenger airlines’ unit costs excluding fuel and currency factors last year. This is in particular as passenger related costs were actually up due to higher load factors, the variable remuneration was higher in light of strong result development, and additional costs because of compensation paid for the flight cancellations at Air Berlin burdened our cost as well,” adds Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG.
“Excluding these one-off effects, we reduced our unit costs by 1.8 percent.” The Lufthansa Group invested some EUR 3 billion in 2017, around a third more than in the previous year. This is partly due to investments of some EUR 900 million into aircraft from the Air Berlin flight operations. “These higher investments also reflect the increased size of our Group. But investments relative to revenue remain on one level with the world’s most successful airlines’,” comments Ulrik Svensson.
Important is that the return on capital continues to increase. In 2017, our Adjusted ROCE (after tax) improved by 4.6 percentage points to 11.6 percent.” Despite the higher capital expenditure, free cash flow almost doubled in 2017 to EUR 2.3 billion. Net financial debt rose 6.8 percent to EUR 2.9 billion. This figure includes an initial EUR 1.7 billion funding for the new defined contributions model of the flight attendants’ pension fund. Total pension provisions decreased by EUR 3.2 billion in 2017.
The year-end equity ratio stood at 26.5 percent, an increase of 5.9 percentage points. “On the basis of these very good results, we propose a dividend of EUR 0.80 per share to the Annual General Meeting,” says Ulrik Svensson. “This is a 60 percent increase of the pay-out compared to last year. This is the minimum level of dividend payment that we aim to maintain in the coming years.”
