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Lufthansa on course with its SCORE programme

14.03.13

• The Lufthansa Group increases revenue by 4.9 per cent to EUR 30.1bn in 2012 • SCORE delivers earnings contribution of EUR 618m in its first year • Operating profit falls to EUR 524m (-36.1 per cent) due to higher fuel prices • The Lufthansa Group expects to make further progress with SCORE and to improve its operating result in 2013

The Lufthansa Group increased its revenue by 4.9 per cent to EUR 30.1bn in the past financial year. At EUR 524m, the Group’s operating result was down 36.1 per cent on the figure for the previous year. The net result for the period went up from EUR -13m in the previous year to EUR 990m, primarily as a result of non-recurring effects from the disposal of shares in Amadeus IT Holding, S.A. and the sale of the loss-making British Midland Ltd. 

“With our SCORE programme, we have launched a comprehensive, if not one of the largest, process of change ever seen in the history of Lufthansa. In addition to measures concerning costs and income, we have set up a number of major strategic projects, such as the new Germanwings, the turnaround of Austrian Airlines and the pooling of administrative activities in the areas of HR, purchasing and finance,” said Christoph Franz, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG during the presentation of the earnings figures for the 2012 financial year in Frankfurt. “With SCORE, we are creating the financial basis for our extensive investment plans. Our aim: we will make Lufthansa strong. We want to expand our position as Europe’s leading aviation group and considerably boost our profitability in every business segment.”

As part of SCORE, the Group implemented around 800 measures in 2012 to improve earnings and cut costs. As a result, the Company was able to achieve a structural earnings improvement of EUR 618m in the first year of the programme, around EUR 300m more than originally planned. Making better use of synergies in purchasing, coordinating flight plans being between airlines, adjusting capacities and lowering staff costs through more efficient processes in administrative areas have all played a role here, as have numerous measures which had been initiated before the official launch of SCORE, but whose positive effects on earnings were only felt in 2012. One example of this is the closure of Lufthansa Italia.  

Simone Menne, Chief Financial Officer and responsible for Aviation Services at Deutsche Lufthansa AG, emphasised: “The Lufthansa Group has achieved a solid result in a difficult market environment. The SCORE programme delivered an earnings contribution of EUR 618m in its first year. However, the operating result fell sharply compared with the previous year. For this reason, we will continue to press ahead with SCORE in 2013 and boost our operating profit.”

The primary cause of the fall in Group profits was the price of fuel, which was EUR 1.1bn higher than in the previous year. The airlines suffered as a result: the Passenger Airline Group segment generated an operating profit of EUR 258m, which was 26.1 per cent lower compared with the previous year. The largest single company, Lufthansa German Airlines, reported an operating loss of EUR 45m, which represents a decline of EUR 161m on the previous year. SWISS posted an operating result of EUR 191m. Profit fell by EUR 68m year on year. Austrian Airlines’ operating result of EUR 65m was an improvement of EUR 127m, mainly thanks to the transfer of operations to the cheaper Tyrolean Airways platform. 

In the Logistics segment, the Group reported a profit of EUR 104m, down EUR 145m. 

Christoph Franz said: “SCORE strengthens our core business segment and makes us less susceptible to external factors. Initial measures were implemented in 2012, with more being prepared and vigorously promoted. This includes modernising our fleet with 236 new, modern aircraft which are currently on our order list. In this year alone, we will bring 34 new, fuel-efficient and low-noise aircraft into service, which will replace older models. The major part of the operating result for the year will be generated by the passenger and cargo airlines of the Lufthansa Group in 2013.” 

The broad strategic formation of the Lufthansa Group had a positive effect on the result. All the service segments increased their operating result compared with the previous year. Lufthansa Technik, LSG SkyChefs and Lufthansa Systems generated higher year-on-year profit contributions of EUR 318m (+23.7 per cent), EUR 97m (+14.1 per cent) and EUR 21m (+10.5 per cent), respectively. 

“In the current year, our main focus will be on ensuring the successful implementation of individual projects and measures. 2013 will be a particularly challenging year for the companies and their employees,” emphasised Christoph Franz. According to him, restructuring and project costs will have a negative impact on earnings in the current year. At the same time, the oil price is expected to remain high and the underlying economic conditions for air traffic challenging. Global economic performance is fraught with great uncertainty and the crisis in Europe has not yet been overcome, he continued. Nevertheless, the Lufthansa Group expects to achieve an operating profit in 2013 which is higher than that of the previous year. “SCORE gained considerable momentum during the past year. Early successes are already visible and can be measured. Our goal remains the same: with an operating profit of at least EUR 2.3bn which we intend to achieve with SCORE, we will actively promote and shape the process of change in the European airline industry,” underlined Franz. 

2012 in figures

Revenue for the Lufthansa Group in the financial year 2012 came to EUR 30.1bn – an increase of 4.9 per cent on the previous year. Traffic revenue improved by 4.3 per cent to EUR 24.8bn. Overall, the Group’s operating income went up to EUR 33.0bn in the reporting period, an increase of 5.9 per cent. 

Operating expenses rose by 4.3 per cent in the previous year to EUR 31.7bn. One of the main reasons was the EUR 1.1bn rise in fuel costs, which came to EUR 7.4bn in total. This represents an increase of 17.8 per cent. Included in this amount is a positive contribution of EUR 128m from fuel hedging. Government-imposed fees and charges rose by 3.3 per cent on the previous year, despite a lower number of flights operated. 

The Lufthansa Group generated an operating result of EUR 524m in 2012, down by EUR 296m compared with the previous year. The net profit for the period was EUR 990m, an increase of more than EUR 1bn. Earnings per share improved to EUR 2.16. The disposal of shares in Amadeus IT Holding, S.A. made a very positive contribution to the net profit for the period, with book gains of EUR 623m. In addition to this, the previous year’s result was affected by a EUR 285m loss from British Midland Ltd., which has since been sold. 

Lufthansa invested EUR 2.4bn in the reporting period. Of this sum, EUR 2bn went on modernising the fleet. Cash flow from operating activities came to EUR 2.8bn and free cash flow (cash flow from operating activities less net capital expenditure) to EUR 1.4bn. For the year 2012, the Group has net debt of EUR 2.0bn. Its equity ratio is 29.2 per cent.

Lufthansa Group   January–December
2012        2011
Change
Total revenue in €m 30,135 28,734 1,401
of which traffic revenue in €m 24,793 23,779 1,014
Result from operating activities in €m 1,311 773 538
Operating result in €m 524 820 -296
Adjusted operating margin* in %    2,3 3,4 -1.1 pp
Net profit for the period in €m 990 -13 1,003
Capital expenditure in €m 2,359 2,566 -207
Cash flow from operating activities in €m 2,842 2,356 486
Employees as of 31.12.   116,957 120,055 -3,098
Earnings per share  2,16 -0,03 2,19

*) Operating result plus write-backs of provisions, divided by revenue

The 2012 annual report is available for download on the internet at www.lufthansagroup.com/investor-relations. Photo material can be downloaded from www.lufthansagroup.com/presse. The press conference to present our financial statements will be broadcast live on the internet from 10.00 a.m. at www.lufthansagroup.com

Deutsche Lufthansa AG
Media Relations Lufthansa Group

Disclaimer in respect of forward-looking statements 

Information published in this press release concerning the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of definitive historical facts. These forward-looking statements are based on all discernible information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication. Since forward-looking statements are by their nature subject to uncertainties and imponderable risk factors – such as changes in underlying economic conditions – and rest on assumptions that may not occur, or may occur differently, it is possible that the Group’s actual results and development may differ materially from the forecasts. Lufthansa makes a point of checking and updating the information it publishes. It cannot, however, assume any obligation to adapt forward-looking statements to subsequent events or developments. Accordingly, it neither explicitly nor implicitly accepts liability, nor gives any guarantee, for the actuality, accuracy or completeness of this data and information. 


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