2021-03-07 by Daisy I.
Lufthansa Group gets ready for strong need development as compared to 2020
Lufthansa is thinking about efficient procedures to increase need development as compared to the previous year where they made an operating loss of 5.5 billion euros.
Carsten Spohr, CEO of Deutsche Lufthansa AG, states: “The past year was the most challenging in the history of our company – for our customers, our employees and our shareholders. Travel restrictions and quarantine have led to a unique slump in demand for air travel. Now internationally recognized, digital vaccination and test certificates must replace travel bans and quarantine so people can once again visit family and friends, meet business partners or learn about other countries and cultures.”
Looking at the future advancement of the Lufthansa Group, Carsten Spohr stated: “The unique crisis is accelerating the transformation process in our company. 2021 will be a year of redimensioning and modernization for us. The focus will remain on sustainability: We are examining whether all aircraft older than 25 years will remain on the ground permanently. From the summer onwards, we expect demand to pick up again as soon as restrictive travel limits are reduced by a further roll-out of tests and vaccines. We are prepared to offer up to 70 percent of our pre-crisis capacity again in the short term as demand increases. With a smaller, more agile and more sustainable Lufthansa Group, we want to maintain our leading position worldwide and secure the jobs of around 100,000 employees in the long term.”
Demand fell drastically in the year of the Corona pandemic and the associated travel constraints. Revenue at the Lufthansa Group was up to 13.6 billion euros in 2020 (previous year: 36.4 billion euros).
Despite fast and comprehensive expense decreases, the Lufthansa Group needed to report an Adjusted EBIT of minus 5.5 billion euros (previous year: earnings of 2.0 billion euros).
The Adjusted EBIT margin was minus 40.1 percent (previous year: plus 5.6 percent). The running money drain in the 4th quarter of 2020 was around 300 million euros each month. Progress in restructuring restricted the effect of the heightened pandemic circumstance on incomes.
Personnel expenses were considerably lowered through labor force decreases, crisis arrangements with social partners and short-time working. At year-end 2020, the variety of workers was 110,000, around 20 percent lower than the previous year.
The reported EBIT loss was around 1.9 billion euros lower at minus 7.4 billion euros, generally due to remarkable write-downs on airplane and goodwill. Net earnings totaled up to minus 6.7 billion euros (previous year: 1.2 billion euros).
Lufthansa Cargo attains record outcome
In contrast to the guest airline companies, the Group’s freight department took advantage of increasing need throughout the year. Buoyed by a strong boost in typical yields amidst constantly high need, Lufthansa Cargo accomplished a record outcome with an Adjusted EBIT of 772 million euros (previous year: 1 million euros) in spite of a 36 percent decrease in freight capability.
Capital expense at the Lufthansa Group was lowered by around two-thirds year on year in 2020 to 1.3 billion euros (previous year: 3.6 billion euros), generally on the basis of comprehensive arrangements with airplane producers.
These offer the post ponement of airplane shipments in 2021 and beyond, so that yearly capital investment will be lower than initially prepared likewise in future years. Adjusted complimentary capital was unfavorable 3.7 billion euros (previous year: 203 million euros), with around 3.9 billion euros paid for ticket repayments alone. This was balanced out by 1.9 billion euros in brand-new reservations. The staying money outflow was restricted by rigorous management of receivables and payables.
Net financial obligation consisting of lease liabilities increased to around 9.9 billion euros (previous year: 6.7 billion euros). Pension liabilities increased by 43 percent to 9.5 billion euros (previous year: 6.7 billion euros), generally due to the drop in the rate of interest utilized to mark down pension commitments to 0.8 percent (previous year: 1.4 percent).
As of December 31, 2020, the Lufthansa Group had offered liquidity of around 10.6 billion euros, of which 5.7 billion euros associated to unutilized federal government stabilization procedures. By completion of 2020, the Lufthansa Group had actually drawn down federal government stabilization funds of around 3.3 billion euros, of which 1 billion euros has actually currently been paid back in the meantime.
In the 2nd half of 2020, the Group effectively went back to the capital market and raised funds of 2.1 billion euros through bonds and airplane funding. In addition, on February 4 the Group put 2 bonds with an overall volume of 1.6 billion euros, the profits of which were utilized to name a few things to pay back the KfW loan of 1 billion euros. Overall, the long-lasting refinancing of all monetary liabilities due in 2021 is therefore protected.
“The latest transactions have shown how much confidence the market has in our company. The Lufthansa Group is well financed beyond 2021. This is also helped by the previously unused elements of the stabilization package, which we can draw on as needed to further strengthen our balance sheet,” stated Remco Steenbergen, Chief Financial Officer of Deutsche Lufthansa AG.
Traffic figures for 2020
In 2020, the airline companies of the Lufthansa Group used around one third of the flights or a capability (offered seat kilometers) of 31 percent compared to the previous year. At 36.4 million, the variety of travelers was 25 percent of the previous year’s figure, leading to a load element of 63 percent, 19.3 portion points lower than previous year.
Due to the removal of stubborn belly freight capability on guest airplane, freight capability decreased by 39 percent. Freight kilometers offered fell by 31 percent to 7,390 million metric loads in the very same duration. At the very same time, the load element increased by 8.4 portion indicate 69.7 percent. Average yields increased by around 55 percent due to the lack of supply.
The Lufthansa Group took advantage of its center system. Unlike rivals, who provide just point-to-point connections, the Lufthansa Group airline companies had the ability to bundle the low traffic volumes at their centers and therefore keep crucial connections. In addition, the close networking in between guest and freight traffic at the centers has actually made it possible to protect international supply chains.
Last year, the variety of workers fell by around 28,000. In Germany, a more 10,000 tasks will be lowered or the matching workers expenses will need to be compensated. The Group fleet will be lowered to 650 airplane in 2023. By the middle of the years, the Group anticipates the capability level to go back to 90 percent. In addition, the Group is taking a look at the disposal of subsidiaries that provide just small synergies with the core service.
Whenever constraints are gotten rid of, reservations tend to increase steeply in the particular traffic location. For the complete year 2021, the Group anticipates capability available to increase to 40 to half of 2019 levels, and the expectation stays that favorable operating capital will be created when capability available is above half. With the tactical growth of the tourist service and a continued strong Lufthansa Cargo, the Group remains in a position to make the most of market chances in the short-term. The boom in the freight sector continues.
The typical month-to-month operating money drain, leaving out operating capital modifications, capital investment and one-off and restructuring expenditures, is anticipated to be restricted to around 300 million euros in the very first quarter of 2021.
“Thanks to our recent financing measures, we have sufficient liquidity to withstand a market environment that remains difficult. The next step is to strengthen our balance sheet and reduce debt. In doing so, we will reduce our costs through successful restructuring. Our crisis and cost management has taken effect much faster than originally planned. At the same time, our business has recovered more slowly than we had initially hoped. In addition to repaying the government stabilization funds, the goal of our financial strategy is for the financial markets to re-evaluate our creditworthiness to investment grade in the medium term,” states Remco Steenbergen.
The Lufthansa Group anticipates the operating loss, determined in regards to Adjusted EBIT, to be lower in 2021 than in the previous year.