Lufthansa reduces planned growth for 2019 as Eurowings drags results down

posted on 31st October 2018 by Justin Burns
Lufthansa reduces planned growth for 2019 as Eurowings drags results down

Lufthansa Group achieved an adjusted (earnings before interest and taxes) EBIT of €2.4 billion for the first nine months of 2018 – a 7.7 per cent decline on the prior-year period – which is primarily attributable to the integration costs at Eurowings.

Adjusted EBIT margin for the period amounted to 8.8 per cent. Nine-month results were also burdened by a €536 million rise in fuel costs, an increase in the costs incurred in connection with flight delays and cancellations, and higher maintenance expenses.

Lufthansa Group generated total revenues of €26.9 billion in the first nine months of 2018. Total revenues increased by six per cent on the prior-year period, while traffic revenues were up seven per cent.

The airlines of Lufthansa Group transported 108.5 million passengers in the first three quarters of 2018, a new record volume. Nine-month seat load factor was also at a record high of 82 per cent.

Deutsche Lufthansa chairman of the executive board and chief executive officer, Carsten Spohr said: “We expect to see our full-year costs increase by more than €1 billion in 2018 due to fuel costs and the extra expenses incurred from delays and cancellations alone.

“But despite this, we achieved an Adjusted EBIT of €2.4 billion for the first three quarters of this year, the second-best nine-month result in our history.

“And had it not been for the losses at Eurowings, we would have posted another record earnings result. This is a clear testament to our sustainable financial strength – a strength that we have demonstrated even under challenging conditions this year.”

Eurowings dragged the results down as reported an adjusted EBIT loss of €65 million for the first nine months of 2018. The €210 million decline on the prior-year period is attributable in particular to a non-recurring expense of €170 million for completing the integration of parts of the former Air Berlin, and to additional costs incurred as a result of flight delays and cancellations.

“Future growth in the air transport sector will need to pay far more regard to the capacities of the infrastructure in the air and on the ground,” Spohr said. “At the same time, we aim to secure the profitability of our airlines through capacity discipline. We also expect the substantial rises in fuel costs to lead to higher ticket prices from 2019 at the latest.”

Lufthansa Group said according to current market expectations, airlines in Germany are likely to expand their capacities by over 10 per cent for the 2018/19 winter timetable period, a development that is still being driven by the demise of Air Berlin, but airlines of Lufthansa Group will raise their capacity by a more modest eight per cent, and reduce their capacity growth to 3.8 per cent for the 2019 summer timetable period.

Fuel costs are projected to be around €850 million higher in 2018 than in 2017 and the Lufthansa Group expects its fuel costs to rise by a further €900 million in 2019.