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Lufthansa FY19 Profit Down, Says Can't Predict FY20 Earnings; Stock Up

lufthansagroup march19 lt

Deutsche Lufthansa AG (DLAKF,DLAKY) Thursday reported lower profit and margin in fiscal 2019, despite higher revenues. Looking ahead for fiscal 2020, the German airline said it can not currently predict the magnitude of the expected decline in adjusted EBIT due to the Coronavirus pandemic. The company previously said its adjusted EBIT in 2020 would be significantly below last year. Lufthansa shares were gaining around 6 percent in the German trading.

Carsten Spohr, Chairman of the Executive Board, said, "The spread of the coronavirus has placed the entire global economy and our company as well in an unprecedented state of emergency. At present, no one can foresee the consequences....The longer this crisis lasts, the more likely it is that the future of aviation cannot be guaranteed without state aid."

To meet the Covid-19 crisis, the company plans comprehensive savings measures including capacity reductions, short-time working mechanism in home markets and suspension of dividend. Lufthansa also announced drastic cutbacks in its flight operations due to entry restrictions in many countries and a collapse in demand. Around 700 of the Lufthansa Group's 763 aircraft will be temporarily parked.

The Lufthansa Executive Board has further decided to waive 20 percent of its basic remuneration in 2020.

Ulrik Svensson, Chief Financial Officer, added that the company is financially well equipped to cope with extraordinary crisis situation like the current one.

Further, the company said it is discontinuing its long-haul operations in Munich and will initially only offer long-haul flights from Frankfurt. Lufthansa said its airlines are currently offering around 140 special relief flights.

Meanwhile, Lufthansa Cargo continues to fly its regular program, except for cancellations to mainland China, keeping the entire freighter fleet in the air.

For fiscal 2019, Lufthansa's consolidated net profit declined 44 percent to 1.2 billion euros from previous year's 2.2 billion euros. Adjusted EBIT was 2.0 billion euros. Adjusted EBIT margin was 5.6 percent, down from 8.0 percent last year. The company attributed the decline to a 600 million euro increase in fuel costs and a noticeable economic slowdown, especially in home markets.

Fiscal 2019 revenue rose 2.5 percent to 36.4 billion euros from last year's 35.5 billion euros. Unit revenues of the passenger airlines declined 2.5 percent, adjusted for exchange rate effects, mainly due to overcapacity in its home markets.

Unit costs adjusted for fuel and currency effects were reduced 1.5 percent in 2019, the fourth year in succession.

In Germany, Lufthansa shares were trading at 8.75 euros, up 6.03 percent.

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