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Simone Menne

Chief Officer Finances and Aviation Services

Christoph Franz
Chairman of the Executive Board and CEO

Stefan Lauer
Chief Officer Group Airlines and Corporate Human Resources

Carsten Spohr
CEO Lufthansa German Airlines

Letter to the Shareholders

An exciting year is behind us. European aviation is in a structural crisis with far-reaching consequences. Consolidation is continuing apace. Smaller, weaker airlines are leaving the market. O vercapacities are being eliminated. Every European network carrier is going through a tough restructuring process. Average yields are rising for both low-cost airlines and the classic network carriers. We at Lufthansa Group are playing an influential role in shaping this process. We are restructuring. Weare investing. We are changing. And we are doing all of this from a position of strength: Our base isatthe heart of the strongest European economies. We have the strongest balance sheet and are the only European airline with an investment grade rating. We are profitable, and are one of the few European airlines able to report positive earnings. We are investing more than ever before in order to offer our c ustomers the best Lufthansa there has ever been. And we not only have first-class products, but also first-class employees. In 2011, we analysed the state of the Company together and began systematically to sell, close or restructure the biggest loss-makers within Lufthansa Group. Some of these processes were brought to a con clusion in 2012: bmi was successfully sold to International Airlines Group, Jade Cargo entered insolvency and Austrian Airlines emerged strengthened from an intense restructuring process. In 2012, we went a step further with the launch of SCORE, an earnings improvement programme that will fundamentally change the organisation, the structure and the way people work together in the Lufthansa Group. It aims to build on our leading role in European and global air transport and to finance the necessary investment in our customers, our fleet and our product by substantially increasing the profitability ofour core business segment. This will create an attractive company for our shareholders and secure long-term employment. SCORE activities have been defined and initiated everywhere in all business segments and between them, in Group functions and across the Group. They include a diverse range of projects, such as strengthening joint purchasing, improving fuel efficiency, pooling and streamlining administrative functions or outsourcing them to more cost-effective sites, creating a more efficient IT structure, harmonising the fleet or reviving loss-making European traffic with the new Germanwings. No exceptions are being made. All the activities are picking up speed. An intense, all-encompassing process of change is underway. Looking back on 2012, it is clear that once again we performed better than most of our competitors. Revenue increased at nearly all our companies. Those cost items that we can influence, we have under control. They are either falling or are rising more slowly than revenue. At the same time, our products again meet the highest standards of quality Lufthansa Passenger Airlines, for instance, is the only European airline whose First Class has been awarded five stars for outstanding service from the renowned Skytrax institute for testing airline quality.

Destination future: Its all about a successful and secure f uture for our Company in a fascinating, but highly competitive i ndustry. And achieving this together is something we all have to put our hearts and minds into.

However, one look at the results of the 2012 financial year also shows how necessary SCORE is. The Lufthansa Groups operating result of EUR 524m is 36.1 per cent lower than the previous year. This is notsomething we can be satisfied with. The reasons for the fall in earnings are two cost items largely beyond our control: the fuel costs as well as the fees, charges and taxes that impose such a burden on our core business. Fuel expenses alone went up by 17.8 per cent in 2012, costing the Lufthansa Group an additional EUR 1.1bn. Taxes, fees and charges accounted for another EUR 167m despite a reduction inthe number of flights. On a positive note, the broad formation of the Lufthansa Group again had a stabilising effect on overall earnings for 2012: all the service companies are profitable and increased their operating result against the previous year. The earnings situation in our core business segment, the airlines, is rather different. SWISS and Lufthansa Cargo reported positive, albeit lower, results for the reasons mentioned above. Austrian Airlines generated a profit for the first time since its acquisition in 2009 and earlier than planned although this was mainly due to positive non-recurring effects of the restructuring. Lufthansa Passenger Airlines, our largest single company, incurred a loss in 2012. This means that we did not reach our targets for 2012. Although SCORE is already having a significant effect, its benefits were undermined by the negative factors. Without SCORE our results would look a great deal worse. So this year, we will further intensify our process of change. We are aiming for a much higher earnings contribution, even though we already know that the full extent of this improvement will notbe immediately visible due torestructuring costs. The stock market is watching our process of change very closely. And the market believes in us. Last year, our share put in the fourth best performance of all the companies in the DAX, with an increase of 55 per cent. Including the dividend, the shareholders of Deutsche Lufthansa AG had a total shareholder return of nearly 58 per cent. Our aim is and remains to boost profitability to a much higher level: by 2015 we want to increase our operating result by EUR 1.5bn. To do so, it is vitally important to keep investing in our core business segment at the current pace. We will therefore table a proposal at the Annual General Meeting not to distribute a dividend this year. In order to ensure that the Lufthansa Group is able to pay dividends in thefuture, it is essential to invest all available funds in our Company today and so to contribute to making our future programme a success. Massive efforts are needed to reach our targets. Everyone involved will have to make a contribution to maintaining our future viability. We nevertheless will assume our social responsibility going forward, too, with advice and support for those personally affected by the changes and restructuring. We are on the right path. Shaping the future together is the mission statement we have chosen for our annual report for you, our shareholders, for our customers and for our staff. Stay with us as we forge ahead on this exciting journey. We thank you for your trust. Frankfurt, March 2013

Christoph Franz Chairman of the Executive Board of Deutsche Lufthansa AG

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