Frankfurt The year 2022 was surprisingly good for Lufthansa, the current year should be even better. This shows the annual report of Europe’s largest airline group, which was published on Friday morning. Lufthansa expects a further significant improvement in adjusted earnings for the 2023 financial year, according to a statement.
“Lufthansa is back. There were only seven years in history in which we were able to present a better result,” said CEO Carsten Spohr, whose contract has just been extended for a further five years. The largest contribution to the further improvement in earnings this year will come from the passenger airlines.
This is good news for shareholders. In the past six months, the Lufthansa share has gained more than 60 percent in value. Analysts such as Barclays’ Andrew Lobbenberg had recently commented positively on the company’s future prospects. On Friday, the papers started trading with a plus of a good five percent. “Only in 2017 was the market capitalization higher than this morning,” said Spohr in the morning.
Lufthansa: Revenue increased by almost 95 percent in 2022
About three years ago, the group was on the verge of bankruptcy. More and more governments imposed entry restrictions, some of them radical, because of the pandemic, and air traffic came to a standstill. Within a few weeks, the group threatened to run out of money, only promised state aid of up to nine billion euros saved the airline group from the end.
It is now clear that Lufthansa has emerged from the crisis better and faster than expected. Sales increased by almost 95 percent to 32.8 billion euros in 2022. The bottom line is a consolidated result of 791 million euros, after a deficit of 2.2 billion euros in the previous year.
Adjusted earnings before interest and taxes (EBIT) ended up at 1.5 billion euros. The management had raised its own forecast shortly before the end of the financial year, referring to the good booking situation.
Apparently nothing has changed in that regard. “The demand for air travel will continue to be high in 2023,” said CEO Spohr. Lufthansa is also sticking to its goal of achieving an adjusted profit margin of eight percent in 2024; in 2022 this was 4.6 percent.
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However, the good result is mainly due to two divisions that do not transport people. The freight subsidiary Lufthansa Cargo achieved adjusted earnings of 1.6 billion euros. The company thus added another seven percent to the record value of the previous year. At Lufthansa Technik, a specialist in aircraft maintenance, it is 511 million euros, a significant increase of 41 percent.
The core business of passenger transport also recorded a rapid recovery in the past year, with significantly more tickets booked than expected. In addition, average yields remain high. On average, the Group’s airline brands earned 16 percent more per ticket than in the pre-crisis year of 2019.
According to Spohr, this will not change in the current year either: “Prices in air traffic will not fall, they will rather continue to rise slightly.”
The freight subsidiary made a decisive contribution to the good result in 2022.
(Photo: dpa)
As a result, the Passenger Airlines segment was able to significantly improve its result by a good three billion euros. However, the division remained in the red with an adjusted result of minus 300 million euros. Only the brands Swiss and Austrian achieved a positive operating result. This was more than offset by the losses of the core brand Lufthansa Airlines (minus 466 million euros), Brussels Airlines (minus 74 million euros) and the offshoot Eurowings (minus 197 million euros).
And another effect may have helped the result. Personnel expenses rose by around 28 percent to 8.1 billion euros, and thus at a slower rate than sales. On the other hand, the group had to spend significantly more on fuel – not only because of higher prices, more was also flown than in 2021. This balance sheet item rose by more than 200 percent to 7.6 billion euros.
But despite such burdens, the balance sheet of the airline group is again much more solid than in the previous year. The company achieved a cash inflow (operating cash flow) of almost 5.2 billion euros from its operating business. In the previous year, the value was still 399 million euros.
Key balance sheet ratios are looking good again
This enabled Lufthansa to once again finance the necessary capital expenditure of 2.4 billion euros from its own resources. This was not yet possible in 2021. On Thursday, the supervisory board approved the executive board’s plan to order 22 long-haul jets at a list price of 7.5 billion US dollars, the equivalent of almost 7.1 billion euros.
The equity ratio shot up from 10.6 percent to an impressive 19.6 percent. Net debt fell by 24 percent to 6.9 billion euros. That is only slightly more than in the pre-crisis year 2019 (6.7 billion euros). This is where it shows how well the group has now mastered the crisis.
This also applies to the liquidity cushion. It amounts to 10.4 billion euros and is even slightly above the target corridor of eight to ten billion euros. After experiencing the near-insolvency at the beginning of the pandemic, the management defined this as future security and recently even increased it somewhat – from up to eight to up to ten billion euros.
On the other hand, there is no new information on the planned takeover of ITA. Negotiations with the Italian state as the owner are ongoing, Spohr said. In traffic to Italy there is an increase of 30 percent in the business class. “Therefore, a stake in ITA remains strategically very important for us.”
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First publication: 03/03/23, 07:53 (last updated: 03/03/23, 11:23).