Macroeconomic opportunities and risks


In view of its worldwide operations, Lufthansa is heavily exposed both to global and regional macroeconomic developments. Of great significance is growth in gross domestic product (GDP) in the different economic regions of the world. This in turn determines growth in demand for air transport. For example, based on historical data GDP growth of 1 per cent is positively correlated with growth of around 1.5 per cent in passenger air traffic in mature markets and up to 2.5 per cent in the growth markets of Asia, Latin America and Eastern Europe.

The world economy experienced a rapid, robust recovery in 2010 but the pace of global economic growth slowed considerably in the first half of 2011. This was accompanied by sluggish expansion rates in world trade. Since mid 2011 the debt and bank crisis has worsened in Europe and the USA, triggering worldwide falls in business and consumer confidence.

Further details on past and forecast economic performance can be found in the chapters “Macroeconomic situation” and “Macroeconomic outlook”.

The implementation of consolidation plans by over-indebted countries in the European Union also risks making the macroeconomic situation even more debilitating and depressing growth rates in Europe even further. At the same time, the risk of contagion affecting other economies in the global airline group cannot be ruled out. If these developments come to pass, there is a risk that demand for airline services will turn out to be lower than currently expected.

Given that demand from airlines would then sink, new orders in the other business segments would in this scenario also be expected to turn out lower than originally planned for 2012. Their different business models mean that the segments’ results would be affected to a different extent and at different times, however.

Changes in global economic growth rates regularly lead to changes in parity between currencies and in interest rates. For the effects and the management of these risks we refer to the section “Financial opportunities and risks” of this report.

The diminishing pace of the economy in 2011 has not had any substantial effect on the price of aircraft fuel, which has remained at a comparatively high level. Lufthansa was again able to derive considerable financial benefits from its long-established hedging policy in 2011 compared with its unhedged competitors. At the same time, the principle of rolling three-year hedges means that the level of hedging income generated cannot be sustained in the long term. Further explanations of the principles and effects of fuel hedging can be found in the section “Financial opportunities and risks”.

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