Overview of the course of business

Non-recurring effects and the global economic slowdown undermine the course of business

The performance of the Lufthansa Group was severely affected in 2011 by non-recurring effects such as the political crises in Africa and the Middle East and the environmental catastrophes in Japan. The sharp reduction in global economic growth in the second half of the year had an adverse impact on business, especially for the airborne companies. Overall, the service companies had a stabilising influence on the course of business and earnings development.

Although market conditions were benign in early 2011, the Lufthansa Group’s operating segments were tested by the aforementioned events over the subsequent course of the year.

The companies in the Passenger Airline Group were hit particularly hard by the environmental disasters in Japan and the unrest in North Africa and the Middle East. The global economic downturn and high oil price also depressed earnings sharply for the Passenger Airline Group and led to cuts in its planned rate of growth.

These factors affected business in the Logistics segment as well. As expected, Lufthansa Cargo was not able to repeat its record profit of 2010. Despite the severe interruption to its operations in the final quarter from the night-flight ban at Frankfurt Airport, it was nevertheless able to make a substantial earnings contribution. The MRO segment also had a sound year. Its profit was slightly down on the previous year, however, mainly due to provisions for long-term contracts. Our IT Services segment worked hard on its new strategic orientation in 2011 and was already rewarded by a rise in its operating profit. The Catering segment also performed very well and was again able to beat the previous year’s result.

The financial year 2011 again showed that flexibility and steps to increase profitability are vital for survival in a competitive environment. The airborne companies continuously adapted their capacity planning to changes in demand and all companies increased their cost management efforts. At the same time, a necessary review and consolidation of the portfolio was carried out. The steps taken as a result included the planned sale of bmi and the closure of Lufthansa Italia. These efforts will remain with us in 2012 and the years thereafter. The new Group-wide programme SCORE represents an important milestone in this regard. Detailed information on this initiative can be found in the “Forecast” section.

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