Lufthansa Group benefits from significant increase in demand during the first quarter of 2022

Lufthansa Group benefits from significant increase in demand during the first quarter of 2022

Carsten Spohr, CEO of Deutsche Lufthansa AG, said:
“The world is currently witnessing the importance of understanding and collaboration among people. Aviation makes an important contribution to this – it strengthens the exchange between people. We continue on our mission to connect people, cultures and economies in a sustainable way.

The restrictions on air traffic have largely been overcome. We are now mentally ticking off the crisis and once again leading the way – more focused, more efficient and more sustainable than before the pandemic. The past few weeks in particular have clearly shown how great people’s desire to travel is. New bookings are increasing from week to week – among business travelers, but especially for vacation and leisure travel.

Supply chains around the world are still disrupted while demand for freight capacity remains high. This makes our strategic decision to further strengthen Lufthansa Cargo even more valuable.”

First Quarter Results 2022
The Lufthansa Group recovered from the spread of the Omicron variant over the course of the first quarter of 2022. After the beginning of the year was still burdened by high infection rates especially in the Group’s home markets, customer demand started to recover strongly, especially in March. In addition to high touristic demand, the business travel segment also recorded an increasing recovery.

Compared to the previous year, the Group more than doubled its revenue to 5.4 billion euros (previous year: 2.6 billion euros). Adjusted EBIT amounted to
-591 million euros and thereby also improved noticeably compared to the prior year quarter, despite the effects of the pandemic (previous year:
-1.0 billion euros). The Adjusted EBIT margin increased accordingly to
-11.0 percent (previous year: -40.9 percent). Net income of -584 million euros also improved compared to the same quarter in the prior year (previous year: -1.0 billion euros).

Group airlines quadruple passenger numbers
The number of passengers on board the Group airlines more than quadrupled in the first quarter compared to the same period last year. Between January and March, the airlines of the Lufthansa Group welcomed 13 million passengers on board (previous year: 3 million).

As a result of the strong increase in demand for air travel during the first quarter, the available capacity was also significantly increased towards the end of the quarter. Between January and March 2022, passenger airline capacity averaged 57 percent of the pre-crisis level (171 percent up on the previous year).

The Adjusted EBIT of the passenger airlines amounted to -1.1 billion euros (previous year: -1.4 billion euros). The result was burdened by low seat load factors especially at the beginning of the quarter, rising fuel costs and the non-recurrence of short-time work subsidies in the prior year. However, yields were close to pre-crisis levels. On long-haul, yields even exceeded the 2019 level.

Lufthansa Cargo strength continues, Lufthansa Technik achieves clearly positive result
The positive earnings development in the logistics business segment continued in the first quarter of 2022. Cargo capacities worldwide continue to be limited by the lack of belly capacity in passenger aircraft and disruption in global supply chains, while demand remains high. This benefited Lufthansa Cargo which again achieved a record result. Adjusted EBIT rose by 57 percent in the first quarter to 495 million euros (previous year: 315 million euros).

The business of Lufthansa Technik continued to recover in the first quarter of 2022. Demand for maintenance and repair services increased as airlines worldwide prepare for further market recovery in the coming months. Lufthansa Technik achieved a positive Adjusted EBIT of 120 million euros in the first quarter of 2022 (previous year: 45 million euros). The business unit thus improved its earnings by 167 percent.

The LSG Group’s result was down on the previous year with an Adjusted EBIT of -14 million euros (previous year: -8 million euros) due to the absence of government support measures in the USA. Without this effect, the result would have improved.

Strong free cash flow, liquidity continues to increase
In the course of the first quarter of 2022, the number of bookings increased sharply – especially towards the end of the quarter. Many people booked their long-awaited Easter and summer holidays during this time. Driven by the high level of incoming bookings, Adjusted free cash flow was clearly positive at 780 million euros (previous year: -953 million euros). As a consequence, net debt declined to 8.3 billion euros at March 31, 2022 (Dec 31, 2021: 9.0 billion
euros).

At the end of March 2022, the company’s available liquidity amounted to 9.9 billion euros. Thereby, liquidity continues to exceed the target range of 6 to 8 billion euros. This does not yet include the signing of a revolving credit facility at the beginning of April, which increases the volume of available credit lines by 1.3 billion euros. At the end of December 2021, the available liquidity of the Lufthansa Group amounted to 9.4 billion euros.

Due to the positive liquidity development, the company intends to terminate the stabilization measures in Switzerland ahead of schedule in the second quarter. At the end of the first quarter, SWISS had drawn down 210 million Swiss francs of the state-backed loan facility amounting to 1.5 billion Swiss francs in total. After the repayment of the drawn portion, the entire credit line shall be terminated in full.

Remco Steenbergen, CFO of Deutsche Lufthansa AG:
“Demand has recovered faster and stronger than expected in recent weeks. The current level of bookings gives us confidence that our financial results will further improve in the coming quarters.

We must pass through rising costs to customers. In addition, the implementation of the remaining cost reduction measures amounting to a good half billion euros will contribute to making our company as resilient as possible in the current uncertain environment.”

Outlook
The desire for people to travel is great. In recent weeks, more flight tickets were bought than at any time since the beginning of the pandemic. Last week (CW17), the company sold more flight tickets in one week as in the same period in 2019. With over 120 classic holiday destinations, the airlines of the Lufthansa Group are offering more choice of tourist destinations than ever before. Destinations in the USA, South America and the Mediterranean are in particularly high demand. This summer, more people are expected to fly on holiday with the airlines of the Lufthansa Group than ever before. The volume of business travel in the Group is also expected to recover by the end of the year to around 70 percent of its pre-crisis level. Due to continued high demand in the premium segment and rising price levels, the Lufthansa Group expects an at least high-single-digit percentage rate increase of average yields in the remainder of 2022 compared to 2021. As result, yields will exceed the pre-crisis level of 2019.

The company plans to offer around 75 percent of the pre-crisis capacity in the second quarter of 2022. This should significantly improve the passenger airlines’ result. In the Logistics and MRO segments the positive trends of the past three months should continue.

For the full year 2022, the Lufthansa Group is planning an annual average passenger airline capacity of around 75 percent. In the summer, around 95 percent of the pre-crisis capacity will be offered on European short-haul routes and around 85 percent on the Transatlantic.

Nevertheless, uncertainties remain for the company’s further business development. In view of the extreme changes in the price of kerosene in recent weeks, the development of fuel costs in particular cannot be accurately forecasted for the year as a whole. Equally, the effects of the war in Ukraine and the significant increase in inflation on consumer behavior cannot be predicted precisely. The financial forecast for the full year remains unchanged for an improvement in Adjusted EBIT compared to the previous year.

Source : Breakingtravelnews