Lufthansa remains deep in the red

Airbus A321 (Photo: Jan Gruber).
Airbus A321 (Photo: Jan Gruber).

Lufthansa remains deep in the red

Airbus A321 (Photo: Jan Gruber).
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The Lufthansa Group closed the 2021 financial year with an adjusted EBIT of EUR -2,2 billion. This was significantly better than in the first year of Corona, because in 2020 there was a loss of 5,5 billion euros. Sales increased by 24 percent to 13,6 billion euros.

Compared to the pre-crisis level, the structural decline in personnel expenses was 10%, without taking into account one-off restructuring expenses, the effects of short-time work and temporary measures. With the implementation of further planned measures, the decrease will be 15 to 20 percent. At the end of last year, the Lufthansa Group employed around 105.000 people, a good 30.000 fewer than before the start of the corona pandemic.

“2021 was a challenging year for the Lufthansa Group and its employees. And 2022 will also begin with developments that worry us as citizens of this continent. Our airlines connect people, cultures and economies. We stand for international understanding and peace in Europe and the world. Our thoughts are with the people of Ukraine and with our colleagues on the ground, to whom we offer every possible support. The Lufthansa Group used the past financial year to continue to renew itself. We have resolutely and consistently advanced and implemented the transformation and restructuring of the company. The Lufthansa Group is more efficient and sustainable today than it was before the pandemic. Even in the financially most difficult two years of our history, in which painful cuts were inevitable, we acted in a socially responsible manner and secured 105.000 jobs in the Lufthansa Group over the long term. We are very sure that air traffic will experience a strong upswing this year. Our strategy of expanding the private travel segment has proven itself and is paying off. People want to travel. They are looking for and need personal contact - especially after two years of the pandemic and the associated social restrictions. The catch-up effect for holidaymakers and business travelers was already clearly noticeable in 2021 - this development will intensify further in 2022. The Corona crisis has put a lot of strain on all of us. The pandemic has presented our customers, shareholders and employees with extreme challenges. Now we are leaving the crisis behind us both mentally and - in view of the strong booking figures this year - also commercially and face the next challenge with renewed strength," says CEO Carsten Spohr.

Freight division made a profit

The positive earnings development in the Logistics business segment continued in the 2021 financial year. High demand for freight capacity in combination with a restriction of supply due to a global lack of freight capacity in passenger aircraft and disruptions to supply chains, especially in shipping, ensured that average yields continued to rise. Lufthansa Cargo benefited from this and was able to almost double the Adjusted EBIT compared to the previous year to EUR 1,5 billion (previous year: EUR 772m). This is her best result in history.

In contrast, the result of the network airlines in the 2021 financial year was still heavily influenced by the corona pandemic. Adjusted EBIT was still clearly negative at -3,5 billion euros, but improved by 25 percent compared to the previous year (previous year: -4,7 billion euros).

Eurowings benefited in particular from the recurring demand in the private travel segment, especially last summer. The cost reductions as part of the restructuring program also contributed to the increase in earnings. Adjusted EBIT improved by 67 percent to EUR -230 million (previous year: EUR -703 million).

Lufthansa Technik posted a clearly positive result last year. The provider of aircraft maintenance, repair and overhaul services benefited from the recovery in air traffic. Lufthansa Technik achieved an adjusted EBIT of 210 million euros (previous year: -383 million euros).

The catering division LSG also made a profit again and was able to post an Adjusted EBIT of EUR 27 million (previous year: EUR -284 million), mainly thanks to the recovery in air traffic in North America.

Passenger numbers and traffic development

In the past year, significantly more passengers flew with the airlines of the Lufthansa Group than in 2020. A total of 47 million passengers were welcomed on board. That was 29 percent more than in the previous year. The number of flights in 2021 rose by 18 percent compared to 2020. As a result of the significant increase in demand, 32 percent more seat kilometers were offered last year than in the previous year.

With the dynamically increasing demand for air travel, the number of flights offered was significantly increased over the course of the year. While the available capacity at the beginning of 2021 was only 21 percent (compared to 2019), the airlines had an available capacity of 60 percent at the end of the year. As expected, 40 percent of the 2019 capacity was offered on average over the year.

“We used the past year to significantly strengthen our balance sheet. Our financing measures on the equity and debt side show that we once again have very good, broad market access. Our liquidity is more than double the pre-crisis level. Together with our structural cost savings, we have a very good financial basis to further expand our strong market position," says Remco Steenbergen, CFO of Deutsche Lufthansa AG.

The company continues to examine the sale of subsidiaries that are not part of the core group. AirPlus and LSG's remaining catering business after the sale of the European part are to be sold as soon as market conditions allow. A partial sale or partial IPO is still planned for Lufthansa Technik. The transaction is expected to close in 2023.

A significant recovery is expected

The Lufthansa Group expects a significant increase in demand for air travel in the current year. In February, our customers booked more flight tickets than at any time since the beginning of the pandemic. The total number of bookings for the Easter and summer holiday periods has almost reached the level of 2019. For some destinations, the number of bookings has even tripled (compared to 2019). Lufthansa alone will be offering more than 50 additional flights for the Easter holidays in order to meet all booking requests. All in all, the airlines in the Lufthansa Group are offering a greater selection of tourist destinations than ever before this year, with more than 120 classic holiday destinations. Destinations in the USA and the Mediterranean region are particularly in demand.

With the growing demand, the flight schedules are also being expanded. For the summer, the company is expecting a capacity of around 85 percent compared to 2019. On short and medium-haul routes, it will probably be around 95 percent in the summer. Eurowings will offer even more capacity in the summer than in 2019. For the year as a whole, the Lufthansa Group expects an average capacity offer of more than 70 percent compared to 2019.

The entire airline industry will face increasing external costs in 2022. Air traffic control and airport charges are increasing drastically in some cases. Significant additional burdens also result from the increased oil price. However, the Group assumes that it will be significantly less affected by this cost inflation than its competitors, partly because it has hedged extensively and early on against rising fuel prices and the increase in the cost of emission certificates.

Large uncertainties regarding the dramatic developments in Ukraine and the economic and geopolitical consequences of the conflict as well as remaining uncertainties regarding the course of the pandemic do not allow a detailed financial outlook at the moment.

Nevertheless, the company expects a further improvement in Adjusted EBIT and Adjusted Free Cash Flow in 2022 compared to the previous year. After a challenging first quarter, which was still characterized by the spread of the Omikron variant, the Lufthansa Group expects a significant improvement in operating results in the following quarters.

Building on the progress forecast for 2022, the Lufthansa Group confirms the targets set for 2024 (adjusted EBIT margin of at least 8 per cent and an adjusted ROCE of at least 10 per cent).

“Our ambition is clear – we want to return to positive results as soon as possible. We have created the conditions for this, above all with the implementation of our cost-cutting program. The strong recovery in demand over the past few weeks also makes us optimistic. We cannot yet foresee how the significantly increased geopolitical uncertainties will affect demand and the economic environment. Nevertheless, we will be able to continue and accelerate our economic recovery in 2022,” says Remco Steenbergen.

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Editor of this article:

Amely Mizzi is Executive Assistant at Aviation Direct Malta in San Pawl il-Baħar. She previously worked in the Aircraft and Vessel Financing division at a banking group. She is considered a linguistic talent and speaks seven languages ​​fluently. She prefers to spend her free time in Austria on the ski slopes and in summer on Mediterranean beaches, practically on her doorstep in Gozo.
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Amely Mizzi is Executive Assistant at Aviation Direct Malta in San Pawl il-Baħar. She previously worked in the Aircraft and Vessel Financing division at a banking group. She is considered a linguistic talent and speaks seven languages ​​fluently. She prefers to spend her free time in Austria on the ski slopes and in summer on Mediterranean beaches, practically on her doorstep in Gozo.
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