F 
R

7
- 
9 
9

LUFTHANSA PROFITS SOAR, BUT TOUGHER TIMES AHEAD

During the press conference, in which he announced the annual balance, Lufthansa Chairman Jürgen Weber again was able to present to the media a result, which could be called "the best in the company's history". For the first time the result was given according to the International- Accounting-Standards-System (IAS), in order to give the report more transparency and offer shareholders a better chance for comparison with other international companies. The figures, which were announced on 29 April in Frankfurt, are impressive. Turnover in 1998 rose by 4.8 percent to DM22.7bn compared with 1997. With tight cost management and low kerosene prices pre-tax profits could be improved by 42 percent to DM2.48bn, which is DM700 million more than the 1997 result. Profit after tax was DM1.4bn. Lufthansa's operational result rose by 26 percent to DM2.1bn. Although the operational cash flow is with DM3.6bn almost 7.7 percent below that of the previous year, 91 percent of the DM4bn investments, (DM2.9bn of which were for new aircraft), were financed by the cash flow.

Weber attributes the good result among other things to alliances and partnerships of Lufthansa, which according to his words contributed about DM500 million to the 1998 result. As important as the general rise in productivity is the 4.4 percent rise of traffic proceeds to DM19.6bn. This contributes 86 per cent to the company's turnover. Although Condor is not included in the balance, the structure of the traffic proceeds is practically unchanged: Passage 80.6 and cargo 19.4 percent. The passage capacity reached a new record with a seat-loading factor of 73 percent, which meant 40.5 million transported passengers. At the same time costs in the entire company could be lowered by DM1.5 bn. The targeted savings of the cost management action, "Program 15", initiated in 1996, which aimed to lower each seat km to 15 Pfennigs, had already been achieved before the official date of 2001.

According to Weber this success does not allow the company to stand still. After sanitising and re-structuring the company, "we are now entering a third phase of securing our position". To prevent the negative effects of a recession in this cyclical industry the airline boss sees the future Lufthansa as an aviation group with seven business areas. The segments passage, logistic, technology, catering, IT-Services and ground services are to lead in their respective fields and should safeguard growth potentials on a long-term basis.

However, all this will only be possible if the framework is conducive of positive developments. This is where Jürgen Weber sees Lufthansa surrounded by disadvantages and shortcomings. This is why the LH Boss demands rules for global competition in order to end the disputes over airline alliances between airlines and regulatory authorities and the availability of sufficient airport capacities in Germany. The Lufthansa Hub Frankfurt is given priority, because "if nothing happens in this country, growth at Frankfurt Rhein/Main will come to an abrupt standstill". This would result in the traditional airline falling back on alternatives like Munich or Berlin.

Weber wants to see the role of the European Union strengthened as far as "unbearable" infrastructure problems are concerned. The recommendations of Euro Control should be followed in unison by all member states.

Because of difficulties in air traffic control, tighter competition and the resulting pressure on prices, Lufthansa will, according to Dr. Karl-Ludwig Kley, not be able to continue on her record course. Since there are these rising uncertainties he is expecting a moderate pre tax profit of DM2bn for 1999.

From page 32 of FLUG REVUE 7/1999