Results overshadowed by current Covid-19 crisis
“The spread of the coronavirus has placed the entire global economy and our company as well in an unprecedented state of emergency”, Carsten Spohr, the Chairman of the Executive Board of Deutsche Lufthansa AG, said in his latest statement.
“No one can foresee the consequences. We have to counter this extraordinary situation with drastic and sometimes painful measures. At the same time, we must live up to the special responsibility that airlines bear in their home countries. We are doing everything we can to bring as many passengers as possible home on relief flights.”
“In addition, we are doing our utmost to help ensure that supply chains for many thousands of businesses do not break down by mobilizing additional capacity for air freight transport. The longer this crisis lasts, the more likely it is that the future of aviation cannot be guaranteed without state aid. In view of the massive impact of the Corona crisis, today’s publication of our results for the past financial year is unfortunately sidelined.”
2019 figures in line with the forecast
At 2.0 billion euros, the adjusted EBIT of the Lufthansa Group was in line with the forecast despite considerable charges. The main drivers for the decline were a 600 million euro increase in fuel costs and a noticeable economic slowdown, especially in the Group’s home markets. Earnings development was also impacted by high price pressure in the European market due to overcapacity and the weakening of the global airfreight market. Lufthansa Group revenue in 2019 rose by 2.5 per cent to 36.4 billion euros (previous year: 35.5 billion euros). The adjusted EBIT margin was 5.6 per cent (previous year: 8.0 per cent). Consolidated net profit fell by 44 per cent to 1.2 billion euros.
Unit revenues of the passenger airlines in the Group fell by 2.5 per cent in 2019, adjusted for exchange rate effects, in particular due to the overcapacity in the Lufthansa Group’s home markets. At the same time, unit costs adjusted for fuel and currency effects were reduced by 1.5 per cent in 2019, the fourth year in succession.
New aircraft investments
In 2019, the Lufthansa Group invested 3.6 billion euros (previous year: 3.8 billion euros), a large part of which in new aircraft. Adjusted free cash flow fell to 203 million euros (previous year: 288 million euros) due to lower profits and higher tax payments. Return on capital employed (adjusted ROCE) after taxes decreased to 6.6 percent (prior year: 10.8 percent).
At year-end, interest-bearing net liabilities amounted to 4.3 billion euros. Including lease liabilities of 2.4 billion euros recognized for the first time as a result of the application of IFRS 16, net debt thus amounted to around 6.7 billion euros (prior year: 3.5 billion euros). Pension liabilities rose by 14 percent to 6.7 billion euros (previous year: 5.9 billion euros), mainly due to the lower interest rate used to discount pension obligations, which fell to 1.4 percent (previous year: 2.0 percent).
“Financially equipped to cope with this crisis situation”
In order to secure its strong financial position, the Lufthansa Group has raised additional funds of around 600 million euros in recent weeks. In actuarial terms, the Group thus has liquidity of around 4.3 billion euros. In addition, there are unused credit lines of around 800 million euros. Further funds are currently being raised. Among other things, the Lufthansa Group will use aircraft financing for this purpose.
“The Lufthansa Group is financially well equipped to cope with an extraordinary crisis situation such as the current one. We own 86 per cent of the Group’s fleet, which is largely unencumbered and has a book value of around 10 billion euros. In addition, we have decided to propose to the Annual General Meeting that the dividend payment be suspended, and we are proposing short-time working in our home markets,” said Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG.