In the first nine months of the year, the Lufthansa Group generated an operating result of €628m, €96m less than in the first nine months of last year. Profits were hit particularly hard by record fuel prices. The persistently intense price pressure, the air traffic tax and the costs of EU emissions trading certificates also impacted on earnings. Christoph Franz, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG, said, “Despite strong headwinds, the Lufthansa Group has generated a respectable result, especially in comparison with the rest of the industry. The earnings contributions from our service segments were particularly helpful. The first projects in our SCORE program are also having an effect. We are making progress on the costs within our control. However, that is not enough to earn adequate margins.” The Group increased its revenue by 6.1 percent to €22.8bn and the net profit for the period of €474m was 64.6 percent higher than the previous year, which was characterized by one-off effects.
At the end of the third quarter, the service segments were all profitable and better than last year. As in prior quarters, they boosted the consolidated operating result. The MRO segment increased its operating profit to €227m. The Catering and IT Services segments also reported operating profits of €73m and €13m respectively.
In passenger traffic, the Group’s largest operating segment by revenue, the airlines Lufthansa Passenger Airlines, SWISS and Austrian Airlines earned a total operating profit of €345m in the first nine months of the year, down by 2.5 percent on the previous year. Positive effects included the sale of bmi, which lost money last year, and the restructuring of Austrian Airlines. With the decision to merge Lufthansa Passenger Airlines’ decentralized traffic outside the hubs in Frankfurt and Munich under the Germanwings brand, the stage was set for a return to profitability in this segment. Continually high fuel prices were nonetheless extremely testing for the airlines. This was particularly visible in the nine-month operating result for Lufthansa Passenger Airlines. It closed the third quarter with an operating profit of €64m, which was less than half of last year’s figure. Alongside the high oil price in conjunction with the weak euro, earnings were depressed by the persistently intense pressure of competing with low-cost airlines and carriers from the Middle East. “We are tackling the challenges posed by the changes in our industry head on. We are in the process of modernizing our organization and making it more efficient, and we are reinventing the way in which we work together”, said Franz.
Austrian Airlines’ operating result of €73m was an improvement of €107m on the same period in the previous year, mainly thanks to the transfer of operations to the cheaper Tyrolean Airways platform. “Following a difficult restructuring process, Austrian Airlines is on the right track”, emphasized Franz. SWISS reported a profit of €163m. This was nonetheless 33.2 percent lower than last year.
Whereas demand in the passenger business increased over the first nine months of the year, the Logistics segment saw a fall in demand. Targeted capacity reduction stabilized the load factors for the aircraft, but the operating result nonetheless fell by 61.8 percent to €66m.
In view of the slump in profits and dwindling demand, which is normally a sign of an impending downturn in the macroeconomic environment, CEO Christoph Franz announced that the steps to improve earnings would be intensified. “The environment in which we have to operate is getting more and more demanding. And we don’t yet have the level of profitability we need to be able to make the required investments. So we will have to intensify our efforts. This applies in particular to the airlines which are directly exposed to these external factors, but also to our service companies.” For 2012 alone, the Group estimates that fuel costs will be €1.1bn higher than in 2011. Fuel hedging, which makes kerosene costs more predictable for the company, also loses its effect when prices remain high for an extended period. Franz said, “We really have to shift up a gear to engage with the international competition and keep doing justice to the expectations of our shareholders, customers and employees.”
Thanks largely to the service segments’ stabilizing effect on earnings, the Group is still expecting higher revenue and an operating profit in the mid three-digit million euro range for the full year. This forecast does not include the projected restructuring costs for the reduction of jobs planned as part of the SCORE program. However, it is currently assumed that the amount recognized in the operating result will not exceed €100m for 2012.