The global corona pandemic continued to have a considerable impact on the Lufthansa Group’s earnings development in the third quarter. However, compared to the second quarter, losses were reduced due to substantial cost savings and an expansion of the flight schedule in the summer months of July and August.
Lufthansa Group reports Group result of minus 2 billion euros
Adjusted earnings (Adjusted EBIT) amounted to minus EUR 1.3 billion (previous year: plus EUR 1.3 billion). The average monthly operating cash drain, before changes in working capital and investments, was EUR 200 million. In the same period, sales fell to EUR 2.7 billion (previous year: EUR 10.1 billion). Net income was minus EUR 2 billion (previous year: plus EUR 1.2 billion).
Operating expenses were cut by 43 percent in the third quarter compared to the previous year, partly as a result of significantly lower fuel costs, fees and a reduction in other costs that vary based on the extent of flight operations. Using short-time work for a large portion of the personnel in combination with other measures resulted in a reduction of fixed costs by more than a third. In addition, strict liquidity management limited the cash outflows.
2020: minus 5.6 billion euros so far
In the first nine months of this year, the Lufthansa Group generated revenues of EUR 11 billion (previous year: EUR 28 billion). Adjusted EBIT in this period was minus EUR 4.1 billion (previous year: plus EUR 1.7 billion). Net profit was minus EUR 5.6 billion (previous year: plus EUR 1 billion). The result was impacted by non-cash special items. This included, among other things, impairment losses of EUR 1.4 billion on 110 aircraft or rights of use, which are not expected to resume operations.
Hope in logistics
The development of the Logistics business segment stood out positively from the rest of the Group. Despite a 36 percent decline in freight capacity, triggered by a loss of freight capacity in passenger aircraft (“bellies”), Lufthansa Cargo’s revenue rose by 4 percent in the first nine months. This positive development was driven by the operation of one of the largest and most modern freighter fleets, comprising of 13 Boeing B777Fs (incl. Aerologic) and six MD-11s. Yields increased in all regions, also due to the global loss of cargo capacity in passenger aircraft. Earnings after nine months rose to EUR 446 million (previous year: minus 33 EUR million).
In contrast, Lufthansa Technik’s result for the same period fell to minus EUR 208 million (previous year: plus EUR 351 million). The result of the LSG Group was also burdened by the worldwide decline in air traffic and the associated decrease in demand for catering services, falling to minus EUR 269 million (previous year: plus EUR 93 million) in the first three quarters.
Lufthansa Group carried 8,7 Mio. Passengers
In the third quarter of 2020 the Lufthansa Group airlines carried 8.7 million passengers, 20 percent of previous year. Offered capacity fell to 22 percent of the previous year’s level. The seat load factor was at 53 percent, 33 percentage points below the previous year’s figure.
Winter will be challenging
In the upcoming winter months, demand for air travel is expected to remain low due to the global increase of infection rates and the associated travel restrictions. The airlines of the Lufthansa Group will therefore be adjusting their original planning and will offer a maximum of 25 percent of last year’s capacity from October to December. This consistent capacity reduction will ensure that flight operations continue to make a positive contribution to earnings. The Lufthansa Group is benefiting from its hub strategy, which enables it to offer connections that would otherwise be uneconomical as point-to-point connections during this current market environment. Network Airlines benefit from bundling passenger streams at the Group’s hub airports.
The Group remains on track for returning to a positive operating cash flow during the course of 2021. The prerequisite for this is that the pandemic situation allows for an increase in capacity to around 50% of pre-crisis levels.
“We are now at the beginning of a winter that will be hard and challenging for our industry. We are determined to use the inevitable restructuring to further expand our relative competitive advantage. We aspire to remain the leading European airline group following the end of the crisis,” says Carsten Spohr.