Lufthansa Group operating loss improves in first-quarter
Deutsche Lufthansa AG achieved an increase in its operating result for the first quarter of 2014, thanks to continued progress with its Score results-enhancement programmme.
In what is traditionally the weakest quarter of the year, the company posted an operating result of EUR -245 million, a EUR 114 million or 31.8% improvement on the same period last year.
Adjusted for non-recurring items, such as the cost for the accelerated installation of new Lufthansa Business Class seats, which accounted for some EUR 55 million in this period alone, the first-quarter operating result was improved by EUR 105 million to EUR -190 million.
The improved quarterly operating result can be largely attributed to an increase in profits at Lufthansa Technik and the positive impact of the revised depreciation policy for aircraft and spare engines which was adopted at the beginning of the year. In addition, the Lufthansa Group also improved its cost structures in the passenger segment.
Adjusted to eliminate fuel-price and currency factors, first-quarter unit costs for the passenger business segment were a 3.7% improvement on their prior-year level. The Group has set itself the goal of reducing such costs by 4% for 2014 as a whole by implementing various Score-related actions.
Total revenue for the quarter amounted to EUR 6.5 billion, a 2.5% decline on the prior-year period. Lower traffic revenues were generated for the period, not least as a result of adverse currency movements. The revenue result was achieved with a 1.2% reduction in total flights operated, owing mainly to fleet modernizations and the use of larger aircraft.
The Lufthansa Group has further confirmed its previous expectation of posting an operating profit of between EUR 1.3 and 1.5 billion for 2014 as a whole. The Group also remains confident of reporting a 2014 operating result adjusted for non-recurring items of between EUR 1.7 and 1.9 billion.
“Our advance passenger bookings saw sizeable declines during the Vereinigung Cockpit pilots’ strike,” Menne continues. “And, with the competition we face on our European network and the strong pricing pressures on our North American routes, we haven’t yet been able to raise them again. So, despite the currently tense market environment, we are doing our utmost to recoup these earnings losses in our ongoing business.” Some assistance should be provided here by the fall in fuel prices: full-year estimates for this cost item are now lower following the first-quarter results than they were in March.
The Group’s Passenger Airlines business segment reported an operating result for the quarter of EUR -332 million, a EUR 31 million improvement on the same period last year. The progress here was partially due to the revised Group depreciation policy, whose lower costs added EUR 86 million to the quarterly result.
At the same time, the decline in revenue per available seat-kilometre was offset by cost economies, which were reflected in a clear reduction in cost per available seat-kilometre. Among the Group’s member airlines, Lufthansa and Germanwings posted a quarterly operating result of EUR -286 million (a EUR 6 million year-on-year improvement), Swiss achieved an operating profit of EUR 6 million (up EUR 22 million) and Austrian Airlines posted an operating result of EUR -54 million (a EUR 2 million improvement on the prior-year period).
Lufthansa Technik made the most positive contribution to the Lufthansa Group’s first-quarter results, with an operating profit for the period of EUR 97 million, a EUR 16 million improvement on January-to-March 2013. The Group’s IT Services segment raised its first-quarter operating result by EUR 2 million to EUR 5 million.
LSG SkyChefs reported a first-quarter operating result of EUR -4 million, a EUR 7 million year-on-year decline which was in part attributable to adverse currency movements. And with rigorous cost discipline in a still-tough market environment, Lufthansa Cargo achieved a solid operating profit of EUR 21 million, which compares to EUR 28 million for the prior-year period.