Carsten Spohr, CEO of the Lufthansa Group ($LHA (+3,4%) ) opened the conference with a description of 2024 as a year of ups and downs, with the core brand Lufthansa Airline due to labor disputes and infrastructure problems in Germany fell short of expectations due to labor disputes and infrastructure problems in Germany.
In contrast, the other airlines within the Group and Lufthansa Technik developed positively, with some even achieving new record results.
However, Spohr emphasized that a turnaround had been initiated, which had already led to significant improvements in the fourth quarter. Particular emphasis was placed on the successful acquisition of ITA Airways. In addition, operational stability had improved and investments in premium quality were increasingly paying off.
Nevertheless, Spohr acknowledged that an economic turnaround was urgently needed for Lufthansa Airline, as the majority of the Group's decline in profits was attributable to this brand. He mentioned a turnaround program that had been initiated and referred to the strong growth forecast for the global aviation industry. The Lufthansa Group's passenger airlines had benefited from this demand and had increased their capacity by 9%.
Revenue rose by 6% to 37.6 billion euros, a new record. Adjusted Group EBIT amounted to 1.6 billion euros. Spohr highlighted the results of SWISS, Eurowings, Brussels Airlines, Austrian Airlines and Lufthansa Technik as particularly positive, while Lufthansa Cargo reported a strong end to the year. He emphasized that the Group was in a position to achieve a result of 1.6 billion euros even without a contribution from the core airline, which would have been unthinkable a few years ago.
Spohr also explained the strategic capacity allocation, whereby the strong demand on the North Atlantic route was utilized and capacities were reduced due to competitive disadvantages in Far East traffic. Within Europe, the Lufthansa Group has expanded its leading position and benefited from its focus on the tourist travel segment. The Group also sees further potential in the southern hemisphere through the integration of ITA. Another important point is the improvement of the cost structure through the use of City Airlines and Discover Airlines, which offer a more competitive feed and de-feed system.
Till Streichert, CFO of the Lufthansa Group, then presented detailed financial figures. He spoke of revenue growth of 6%, which was, however, overshadowed by a 9% increase in operating costs. Despite lower fuel costs, material costs rose due to higher maintenance costs and fees. Personnel costs also rose due to collective wage agreements and an increase in the number of employees. Streichert mentioned that costs rose by EUR 840 million due to strikes and operational instabilities. Adjusted EBIT amounted to 1.6 billion euros, a decrease of 40% compared to the previous year. Net profit for the year amounted to 1.4 billion euros, which is why a dividend payment of 0.30 euros per share was proposed.
Streichert went into more detail about the individual business segments. Capacity at the passenger airlines was increased by 8.5%, with growth being reduced in the second half of the year in order to stabilize earnings. SWISS achieved a strong margin of 12.4%, while Lufthansa Airlines did not achieve a positive margin. Streichert cited inefficiencies, operational instability, capacity bottlenecks at service partners, a high number of technical failures due to older aircraft and strikes as reasons for the decline in earnings at Lufthansa Airline.
He explained the turnaround plan for Lufthansa Airline, which aims to stabilize operations, increase efficiency and realize financial potential. A gross EBIT effect of around EUR 1.5 billion is expected by 2026 and EUR 2.5 billion by 2028. Initial progress has already been made in stabilizing operations, which has led to an improvement in punctuality and a regularity of 99% in the first two months of 2025.
Measures have also been taken to increase efficiency and revenue, such as greater fuel efficiency, digitalization and the renegotiation of contracts. On the revenue side, eight routes from Munich will be served with the new Allegris cabin from 2025, which should lead to higher yields and additional revenue.
Lufthansa Cargo can look back on a successful year, with an adjusted EBIT of EUR 251 million. The main driver was the strong Asian e-commerce business. Lufthansa Technik achieved an adjusted EBIT of 635 million euros. Operating cash flow amounted to 3.9 billion euros, while net CapEx was 2.7 billion euros. Adjusted free cash flow amounted to 840 million euros. Net debt remained stable at 5.7 billion euros. A fuel bill of around 7.9 billion euros is expected for the full year 2025.
Moderate capacity growth of around 4% is expected for 2025, which should support sales growth and stabilize earnings. Despite headwinds, a significant increase in adjusted EBIT is expected. A Capital Markets Day is planned for fall 2025.
Spohr gave a strategic outlook and discussed fleet development. The bottlenecks at manufacturers are expected to last until the end of the decade. The Lufthansa Group is particularly affected by the loss of 41 Boeing long-haul aircraft. A total of 26 new aircraft are expected to be delivered over the course of the year. The long-haul fleet is to be comprehensively renewed by summer 2028.
From the summer timetable, all routes from Munich to the USA will be served either by A350s with the new Allegris cabin or by Airbus A380s. The response to the new Allegris cabin has been consistently positive. There have also been numerous digital advances within the Group.
Spohr emphasized that the Lufthansa Group structure is unique, as it unites many national airlines and brands under one roof. The integration of ITA is a prime example of this. The Group is continuously working on improving the customer experience, e.g. through the "One IT" project to standardize the digital infrastructure. A new umbrella brand strategy will also be introduced in 2025.
In the subsequent question and answer session, the analysts addressed various aspects.
- Jarrod Castle from UBS asked about the significance of the "significant" EBIT increase in 2025, the timetable for the acquisition of the remaining shares in ITA Airways and an update on TAP. Streichert replied that a significant increase means double-digit growth compared to 2024. would mean. Spohr added that the exercise of the option to acquire the remaining ITA shares had not yet been decided and that the privatization of TAP would probably take longer.
- Ruxandra Haradau-Doser from HSBC inquired about the status of the feeder contract with Condor, the NPS trend at Lufthansa Airline and blocked business class seats in the new Boeing 787s. Spohr explained that the contract with Condor had been terminated and that the EU Commission had concluded its investigation in this regard. In addition, Lufthansa's NPS had risen by 10 points this winter. The blocked Business Class seats were due to a lack of certification.
- Jaime Rowbotham from Deutsche Bank asked about the potential impact of the German economic stimulus programs on the Lufthansa Group and when the profit trend at Lufthansa Airline would develop positively. Spohr replied that the economic stimulus programs were fundamentally positive for Lufthansa. Streichert added that he expected a positive result for Lufthansa Airline in 2025.
- Andrew Lobbenberg from Barclays asked about the status of talks with the Lufthansa crew on productivity and the outlook for the cargo business. Spohr replied that talks with the crew were ongoing but that no agreement had yet been reached. He was optimistic about the cargo business and expected that the reduced predictability of the global economy would lead to strong demand.
- Muneeba Kayani from Bank of America inquired about the costs associated with flight irregularities and the status of business travel. Streichert stated that costs related to flight irregularities are expected to decrease and that business travel is at about 65% of pre-COVID-19 levels.
- Alex Irving from Bernstein asked about the strategic priorities for M&A activities and the topic of technology. Spohr replied that the priority is the integration of ITA and that Lufthansa has no disadvantages in technological development due to its size.
- Ruairi Cullinane from RBC Capital Markets asked about the contribution from the reversal of provisions and the development of the margin in the logistics segment. Streichert explained that the fourth quarter of 2023 had benefited from the reversal of provisions and that the strong demand in the logistics segment had led to a good margin development.
- Antonio Duarte from Goodbody asked about Lufthansa Technik's growth and earnings in the Asia-Pacific region. Streichert explained that Lufthansa Technik wanted to grow above the market average and that earnings in the premium segment were better than in the non-premium segment.
To summarize, the Lufthansa Group is facing a year of transition in which the course for future growth and higher profitability will be set. The The integration of ITA Airways, the restructuring of Lufthansa Airline and investments in modern aircraft are central elements of the strategy. Despite short-term challenges such as delivery delays and cost increases, the management is optimistic about the future.
