Thanks to its professional capacity and cost management strategy, Lufthansa succeeded in posting an…
Thanks to its professional capacity and cost management strategy, Lufthansa succeeded in posting an operating profit of 65 million euros in the second quarter of 2003. This positive result for the period April to June reaffirmed the Group`s leading position, after it had recorded an operating loss of -415 million euros in the first quarter. Despite weak macroeconomic momentum, the Iraq war and SARS, we achieved a fine result and thereby strengthened our position in international competition. But even though we fared better in the second quarter than many other carriers, we must remain on our guard. The aviation industry is still operating in a difficult economic environment. But it looks like we have now come through the worst, Lufthansa`s Chairman and CEO Wolfgang Mayrhuber said when presenting the interim figures.
Mayrhuber expressed confidence in the future, yet at the same time cautioned against exaggerated optimism: The key requirements at the moment are clear and prudent judgement, a correct assessment of the markets and professional risk provisioning. Ongoing strict cost discipline is required for all corporate units. This was crucial given that for the first six months of the year Lufthansa turned in a negative operating result of -354 million euros and that a lasting global economic recovery is still not in sight. The current booking figures indicate that no marked improvement can be expected in the second half of the year. Despite the capacity adjustments and cost-curbing measures, Lufthansa does not anticipate a positive operating result for 2003 as a whole. The present business trend has a gratifying counterweight in our Group`s persistently high degree of financial stability.
Wolfgang Mayrhuber emphasised that, along with all Lufthansa`s staff around the world, he is driven each day anew by an uplifting motivating force: That motivating force comes from our customers. They are at the focus of our attention, it is their needs that we work for and serve. Satisfied passengers are and remain our greatest incentive. He added that Lufthansa is currently in the middle of an innovation and quality offensive.
Lufthansa`s Chairman said that broadband Internet on board, the worldwide equipping of Lufthansa airport lounges with wireless LAN links as well as the enhanced comfort and short transfer times of the new Lufthansa terminal at Munich Airport are examples of the systematic implementation of the innovation strategy. The new Lufthansa Business Class, which will be installed aboard long-haul flights as from this autumn, signifies a marked increase in quality for our passengers. Wolfgang Mayrhuber identified flexibility, high innovativeness and a pronounced service culture as the factors that would successfully strengthen Lufthansa`s international competitiveness and enable it to seize the opportunities that present themselves. Lufthansa`s products are future-compatible, Mayrhuber concluded.
The first half of 2003 in figures
Between January and June the Lufthansa Group generated revenue of 7.6 billion euros, a year-on-year drop of 7.4 per cent. Amid a difficult market environment, passenger and cargo business contributed traffic revenue of 5.4 billion euros. This amounts to a decline of 7.5 per cent. Other operating income doubled to 896 million euros. It includes book profits of 79 million euros from the disposal of the stake in Start Amadeus and 66 million euros from the sale of aircraft.
Cost reductions achieved in all business segments pushed down operating expenses in the second quarter. They were 0.3 per cent lower than in the corresponding period of last year. Taking the first two quarters together, costs increased by 4.8 per cent vis-a-vis the first half of 2002 to 8.6 billion euros. Staff costs rose by 7.0 per cent to 2.3 billion euros in the first six months, mainly as a result of the first-time consolidation of additional companies. In the second quarter the implemented cost curbs limited the growth of staff costs to 2.5 per cent, and adjusted for the consolidation changes they actually fell by 3.3 per cent. The Group spent 658 million euros on fuel in the first six months, which was 3.5 per cent more than in the first half of 2002. Without the price-hedging measures that were taken, the fuel bill would have been 68 million euros higher.
The Group`s net result for the first six months of 2003 amounts to -392 million euros, compared with -27 million eurosat the interim stage last year. Net indebtedness currently stands at the outstandingly low level 1.3 billion euros. Lufthansa invested a total of 515 million euros in modernising the fleet and in acquiring financial assets.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
