Lufthansa profit down 17% in 2013 despite stable turnover

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Lufthansa’s operating profit fell nearly 17% to €697 million ($972 million) in 2013, but the German airline group insists it is “on track” to meet its earnings improvement objectives under the Score efficiency programme.

Revenues were virtually unchanged at just over €30 billion, while earnings from operating activities nearly halved from €1.62 billion in 2012 to €849 million last year. Net profit declined three quarters from €1.23 billion to €313 million.

Comparing the reported results offers “little informational value”, the carriers argues. While the 2012 earnings were “largely boosted by non-recurring income” from transferring Austrian Airlines’ operations to regional subsidiary Tyrolean Airways, last year’s operating profit was depressed by restructuring and project costs for new business-class seats, it says. Investments grew 7% to €2.5 billion.

Corrected for the various effects, operating profit rose from €643 million in 2012 to €1.04 billion last year, Lufthansa says. It adds that the decline in net profit largely resulted from the 2012 sale of shares in global distribution system specialist Amadeus, which generated €631 million.

Lufthansa and its short-haul subsidiary Germanwings raised their operating profit about 10-fold from €25 million to €265 million, which the airline calls the “most visible” efficiency improvement across the group.

Earnings from passenger flights across all airline divisions declined 11% to €495 million.

Austrian’s operating profit fell around 88% to €25 million, but the 2012 result was largely due to one-off effects from the operational transfer to Tyrolean. Lufthansa says Austrian generated an operating profit without positive one-off effects for the first time since 2007.

Swiss International Air Lines’ operating profit grew nearly 11% to €226 million.

Lufthansa Cargo’s operating profit fell around 27% to €77 million, while revenues declined 9%.

The group’s divisions for MRO, catering and IT services meanwhile improved their performance. Lufthansa Technik’s operating profit increased 23% to €404 million, LSG’s rose 4% to €105 million, and Lufthansa Systems’ was up 80% at €36 million.

The group plans to pay a €0.45 dividend per share.

Lufthansa aims to approximately double its operating profit in 2014, to between €1.3 and 1.5 billion. On an adjusted basis, the figure would rise around 40% to between €1.7 and €1.9 billion, it says.

Operating profit will gain €340 million from a change in the airline’s aircraft depreciation policy. The carrier extended the depreciation period from 12 to 20 years and reduced the residual book value from 15% to 5% of the aircraft’s purchase price. The resultant accounting benefit will raise 2015’s operating result by €350 million.

Lufthansa achieved its profit and restructuring targets for 2013 and “created the conditions that will enable us to keep increasing our profits in the years ahead”, says finance chief Simone Menne. She adds that the group is working on additional measures to cope with “greater headwinds”.

Departing chief executive Christoph Franz says Lufthansa Group is “well prepared” for future challenges after improving earnings performance and becoming “noticeably more dynamic” through the Score efficiency programme.

Franz will be replaced by Carsten Spohr, chief executive of Lufthansa’s passenger division, on 1 May. Franz decided to leave the airline after one term in office – in the middle of his signature Score scheme – to lead Swiss pharmaceutical giant Roche.