LuxairGroup reports positive 2018 but warns of pressure on activities

posted on 16th May 2019 by Justin Burns

LuxairGroup has reported in its annual results for 2018 that it closed on a positive result despite experiencing an enormous amount of pressure on all of its activities.

LuxairGroup closed 2018 with an operating profit of €0.8 million and a net result of €12.5 million. Operating profit from sales was down by €1.2 million compared with 2017, however the net result which includes financial results is up by €3 million.

This result it said reflects the pressure that all of LuxairGroup’s activities are currently undergoing. LuxairServices, which handles airport services, and LuxairTours, its tour operator activity, both though saw an upswing compared with 2018.

However, LuxairGroup’s Airline entity, its core activity, and LuxairCARGO, its airfreight handling entity, both experienced a downturn despite an increase in production.

Luxair Luxembourg Airlines is suffering from increased competition, especially from low-cost airlines at Luxembourg airport, and from a constant increase in production costs caused by volatile kerosene prices amongst other things.

LuxairGroup president and chief executive officer, Adrien Ney said: “We managed to increase all our activities in 2018 – whether it was in terms of passenger numbers, or tonnage handled – but operating growth and profitability no longer go hand in hand, due to a sharp rise in costs and pressure on profit margins.

“But we know how to overcome these difficulties, and despite a sharp decrease forecasted for 2019, I am confident about the future, because LuxairGroup is a strong and dynamic company with a healthy and sound balance sheet situation.”

LuxairServices, in charge of airport services, has accompanied the rapid growth of Luxembourg Airport over the past decade. Passenger numbers have more than doubled in eight years, going from 1,792,000 passengers in 2011 to 4,040,000 in 2018.

In 2018, 15 airlines in total operated regular flights from Findel Airport and transported 12 per cent more passengers than in 2017, with a nine per cent increase in aircraft movements.

This growth has had an impact on the airport’s results which have increased by 20 per cent, thus allowing necessary investments in logistics and digital solutions to optimise and make passenger and luggage flows smoother, as well as security, safety and aircraft rotations during stopovers.

LuxairGroup’s catering entity produced six per cent more meals than in 2017, but despite almost 2.3 million meals loaded onto aircraft, its profit is slightly down.

Looking ahead, a 6.5 per cent increase in passengers at Luxembourg Airport has been estimated for 2019. LuxairServices is investing in logistics and digital solutions in close collaboration with the airport to keep a pace with growth and guarantee continued improvement in service quality. Business Lounge refurbishment work started in 2019. 150,000 passengers frequented the facility in 2018.

In 2018, Luxair Luxembourg Airlines once again saw competition grow at Luxembourg Airport. Competitor airlines offered five new destinations, including three already operated by Luxair.

Luxair’s market share has therefore been almost halved since 2011, despite a 78 per cent increase in the number of passengers over the same period. In 2018, Luxair was in direct competition on 11 of its routes compared with just 4 in 2011.

Luxair provided 12 per cent more seats in 2018 compared with 2017. This additional capacity was absorbed by the market, with an 11 per cent increase in the number of passengers and a stable seat load factor of 64 per cent. However, the airline’s operating profit remains negative.

Additional revenue from the increase in passengers could not counteract rising costs, mainly from a decrease in unit revenue, an increase in wages, a sharp increase in kerosene prices, as well as CO2 emission certificates, the price of which has increased by 257 per cent over two and a half years.

The company said 2019 is already set to be a very difficult year for Luxair Luxembourg Airlines. Passenger numbers are down by two per cent compared with the first quarter of 2018. Competition is gaining momentum with seven new destinations to be operated by competitor airlines from Luxembourg this year, including four in direct competition with Luxair.