Lufthansa held its own very well in 2008. Although the second half-year, in particular, was defined by market uncertainty, the consequences of the strike activities in the summer and the worsening financial and economic crisis, we are nevertheless able to present a top-class result for the full financial year. An operating profit of EUR 1.35bn is only just below the record figure of the previous year and is the second-best result in the history of your Company. This result has a very special quality in view of the worldwide economic turmoil. We have achieved or even exceeded important targets despite adverse conditions, and are much better placed than our main competitors.
Lufthansa is well prepared – strategically, financially and operationally.
- Our financial basis is solid: we run our business with prudence and foresight – profitability has priority over size.
- Our strategic orientation is paying off: we focus on developing our core business, the airlines, and in the current environment benefit from the Group’s business segments at the same time.
- The number of passengers broke new records, reaching 70.5 million for the Group. Lufthansa enjoys outstanding customer loyalty and in 2008 again received best marks for customer satisfaction.
- The Lufthansa brand is stronger than ever. It stands for trust and reliability, for quality and safety, for technical competence and willingness to serve – in all business segments.
The Lufthansa crane is valued and appreciated, too, as a business partner and an employer. Before the crisis unfolded we were able to recruit 4,000 new staff in the first half-year – people who want to assume responsibility and make a contribution to mobility.
In addition to flexible clauses in wage agreements, a far-sighted fleet policy and strictly market-oriented capacity and revenue management, we are also continuing to work on currently about 120 projects to safeguard and increase profitability lastingly as part of the “Upgrade to Industry Leadership” initiative launched in 2007.
Altogether, we are very pleased with the Company’s performance in 2008, but we are working on the assumption that 2009 will be one of the most economically difficult years for the whole industry – with major challenges for Lufthansa as well. Given the tense economic situation worldwide and the uncertainties on the financial markets, but also appropriately for the very good result, the Supervisory Board and Executive Board are proposing a dividend of 70 cents for your consideration.
Wolfgang Mayrhuber (Chairman of the Executive Board and Chief Executive Office),
Stefan Lauer (Member of the Executive Board, Chief Officer Aviation Services and Human Resources),
Stephan Gemkow (Member of the Executive Board, Chief Financial Officer)
It is gratifying that all the business segments in the Lufthansa Group have positioned themselves well and held their own in the market.
The Passenger Transportation business segment has put in a stable performance and delivered good results. SWISS plays a special role in this respect, having become a central pillar of our airline group and having made a key contribution to the good operating result for the whole segment.
At the end of the financial year we deliberately reduced thrust on our growth track in order to respond flexibly to market changes. But this does not mean that we are casting our strategic orientation overboard. We remain convinced that air traffic will continue to grow over the medium and long term. We therefore review carefully the additional growth opportunities which arise, through partnerships for instance, and also through acquisitions, where they make sense.
Lufthansa made a number of key decisions concerning the consolidation process in 2008. The agreement on the phased acquisition of Brussels Airlines and the planned takeover of Austrian Airlines were important milestones. These acquisitions are still pending, as a number of conditions have not yet been met. When all obstacles have been successfully cleared, both airlines will provide us with the chance to connect the Belgian and Austrian markets better with the Lufthansa network. With its strong presence in Africa, Brussels Airlines is a valuable partner for us, and with Austrian Airlines we would gain another mainstay in Eastern Europe.
Lufthansa is also making a commitment to the Italian market. With Lufthansa Italia and a considerably broader range of direct flights to European destinations, we are making ourselves more attractive to our customers. The first flights started in February 2009.
The Group’s other business segments also have good news to report. They have all contributed to our remarkable overall result.
Lufthansa Cargo has stayed very firm in an increasingly difficult market environment. Our Logistics business segment was able to improve again on the previous year’s good operating result. Cargo’s profitability has developed positively and our freight company has set itself up well for the future by building on its strategic partnerships. We are countering the persistent weakness in demand for global airfreight, which began to bite in the final quarter of 2008, by reducing freighter capacities and by introducing short-time work.
Lufthansa Technik performed well despite difficult conditions, such as the depreciation of the US dollar, and was able to improve its operating result compared with the previous year. It is world market leader in its segment and well prepared for the future thanks to its modern product portfolio, low-cost locations and numerous programmes to cut costs and increase efficiency.
Lufthansa Systems substantially improved its result, which was impaired by write-downs in the previous year. Our IT business segment consolidated its strong market position, made progress on product developments and was increasingly able to market its expertise in other sectors with comparable requirements, such as health care or media. In the medium term the proportion of external clients is to increase to 60 per cent.
The world market leader in catering, LSG Sky Chefs, continued successfully to implement its strategy in 2008. Unprofitable activities were cut back and our caterers underwent moderate expansion in growth markets. After many years of sometimes heady growth the global airline catering market has been in retreat since the end of 2008. In view of the difficult overall conditions LSG Sky Chefs achieved a good operating result, but one that was lower than in the previous year.
Despite all these positive developments, our Company’s market value declined in 2008, as did that of all other publicly listed companies. The share price fell by nearly 39 per cent. This is a bitter reality, expressing as it does the fact that macroeconomic conditions count for much more than our own performance in this difficult environment. The share price reflects neither the sound foundations of the entire Group and its stable earnings development, nor our potential for the future. Even so, we have still managed to increase the distance between ourselves and our competitors on the stock market in 2008.
In the future, we will continue to act prudently, adjust capacities to requirements and keep costs in line with income, which cannot be taken for granted in our industry given the heavy dependence on fixed costs. But we will manage that, too, and continue on our strategic course.
We want to justify your trust as shareholders and that of our customers in the future as well, by our thorough and judicious work. The year 2009 will make great demands of us all. No one can predict how long the global economic crisis will last and what profound hardship it will yet cause. We are realists. We are adaptable. And we remain confident, because we can count on a practised, dependable and highly motivated team of staff and managers. We want to continue to impress with our quality and performance. We want to make the successful Lufthansa brand even stronger worldwide. We feel an obligation to our locations and will, therefore, continue to be active in the political arena, for example in Brussels and Berlin, in the interests of fair competition.
Crises are always also times of momentous decisions. We intend to make the right decisions so that you, our shareholders, and our clients and staff can all benefit equally. Please accompany us as we move forward. Stay with us!
Wolfgang Mayrhuber
Chairman of the Executive Board and CEO of Deutsche Lufthansa AG
