In 2017, total revenues for the Lufthansa Group in 2017 amounted to €35.6 billion, a 12.4 percent increase on the previous year. The Adjusted EBIT of €2.97 billion was a significant 69.7 percent year-on-year improvement. And the 8.4 percent adjusted EBIT margin was up 2.9 percentage points compared to previous year. EBIT for the year increased more than €1 billion to €3.3 billion.
Lufthansa stated that it expects stable future revenue development with a 1-2% reduction in unit cost. Higher fuel costs of €700 million, which the company expects to be largely compensated by improved operating performance.
“Our endeavors of the past few years are paying off. Our modernization has a sustainable impact. We have achieved the best result in the history of our company. 2017 was a very good year for our customers, our employees and our shareholders,” says Carsten Spohr, Chairman of the Executive Board & CEO of Deutsche Lufthansa. “Last year we were able to reduce costs again, while at the same time becoming the first – and the only – airline in Europe to be awarded a five-star rating. We are lowering our costs where this does not affect the customer, and are simultaneously further investing in our product and service quality.”
“We are particularly pleased that we were again able to lower our passenger airlines’ unit costs excluding fuel and currency factors last year. This is in particular as passenger related costs were actually up due to higher load factors, the variable remuneration was higher in light of strong result development, and additional costs because of compensation paid for the flight cancellations at Air Berlin burdened our cost as well,” adds Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa.
“Excluding these one-off effects, we reduced our unit costs by 1.8 percent.” The Lufthansa Group invested some €3 billion in 2017, around a third more than in the previous year. This is partly due to investments of some €900 million into aircraft from the Air Berlin flight operations. “These higher investments also reflect the increased size of our Group. But investments relative to revenue remain on one level with the world’s most successful airlines,” comments Ulrik Svensson. “Important is that the return on capital continues to increase. In 2017, our Adjusted ROCE (after tax) improved by 4.6 percentage points to 11.6 percent.”
Despite the higher capital expenditure, free cash flow almost doubled in 2017 to EUR 2.3 billion. Net financial debt rose 6.8 percent to EUR 2.9 billion. This figure includes an initial EUR 1.7 billion funding for the new defined contributions model of the flight attendants’ pension fund. Total pension provisions decreased by EUR 3.2 billion in 2017. The year-end equity ratio stood at 26.5 percent, an increase of 5.9 percentage points.
The Group’s Network Airlines – Lufthansa, SWISS and Austrian Airlines – increased their Adjusted EBIT by nearly 50 percent to €2.3 billion. With strong demand and a positive pricing environment, the Network Airlines raised their EBIT margin 2.6 percentage points to almost ten percent.
Despite the significant expenses in the context of acquiring capacities from Air Berlin, Eurowings reduced its unit costs excluding fuel and currency factors by 6.5 percent. On the back of this and strong market demand, Adjusted EBIT increased by €200 million. Despite adverse one-off factors related to market consolidation, the Group’s Point-to-Point Airlines improved their Adjusted EBIT margin by 7.3 percentage points and achieved a positive Adjusted EBIT of around €100 million.
A combination of cost reductions and strong demand helped Lufthansa Cargo to improve its Adjusted EBIT by almost €300 million to €242 million. The €415 million earnings of Lufthansa Technik were broadly in line with prior-year levels. Against the background of the continuing transformation of its European operations, the LSG Group sustained a €38 million decline in its earnings for the year to €66 million.