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Lufthansa FY Net Group Result Down

Lufthansa Group (DLAKF,DLAKY) reported that its net Group result for the year 2018 declined to 2.2 billion euros from the prior year's 2.3 billion euros.

The Adjusted EBIT for the year of around 2.8 billion euros was only slightly below the record 3.0 billion euros of the previous year, despite an increase of some 850 million euros in fuel costs and 518 million euros of expenses incurred through delays and cancellations. In addition, the Eurowings result was burdened by some 170 million euros one-off costs related to the integration of parts of the former Air Berlin fleet.

Adjusted EBIT was affected by a change in the accounting of engine overhauls, which increased Adjusted EBIT for 2018 by 122 million euros and decreased Adjusted EBIT for 2017 by 4 million euros. Without this accounting change, Adjusted EBIT for 2018 would have amounted to 2.7 billion euros.

Total Group revenues for 2018 were a six-percent increase on the previous year. Burdened by the first-time application of the IFRS 15 accounting standard, total revenues were one percent up on 2017, at 35.8 billion euros.

Unit revenues adjusted for the first-time adoption of IFRS 15 and currency effects declined 0.5 percent for 2018 owing to lower unit revenues at Eurowings. Unit revenues were slightly above their prior-year level at the Group's Network Airlines, where higher unit revenues on long-haul routes (over the North Atlantic and to and from Asia) more than made up for lower short-haul unit revenues, especially in the second half of the year.

"In view of these favorable results, which were achieved in a challenging market environment, we will propose to the 2019 Annual General Meeting that a stable dividend of 80 cents per share be distributed for the 2018 financial year," said Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG.

The Lufthansa Group said it will be focusing in 2019 on achieving sustainable quality growth. Therefore, the Group is further reducing the capacity growth for its airlines for the upcoming summer to 1.9 percent. Despite this, the Group expects to report mid-single-digit percentage annual revenue growth.

Cost reductions will make a sizeable contribution to offsetting the EUR 650 million of additional costs that are expected to be incurred by the airlines owing to higher fuel costs. Overall, the Group expects to post an Adjusted EBIT margin for the year of between 6.5 and 8.0 percent. Eurowings is expected to achieve a breakeven Adjusted EBIT, which would be a substantial improvement on its 2018 earnings result.

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