Lufthansa on a recovery path

25 February 2004

FRANKFURT – German air carrier Deutsche Lufthansa said Wednesday it is continuing its recovery from the post-11 September slump in aviation business despite posting a net loss of EUR 980 million in 2003 after major writedowns.

Europe’s third-biggest airline said it would have to forego any dividend this year, after last year’s EUR 0.60 payout, in absorbing the red ink from writing down EUR 800 million worth of assets.

The net loss, coming after net income in 2002 of EUR 717 million, came at the same time that Lufthansa said it was continuing to boost its operational earnings and improve its competitiveness.

In the fourth quarter of 2003, Lufthansa posted operating profits of EUR 180 million, giving the airline a EUR 30 million operating surplus for the year as a whole.

The figures come as Lufthansa strived to revive its fortunes after the sharp downturns in business. Besides the 11 September 2001 terror attacks, the aviation industry had also been hit by the overall world economic slump and then by the SARS crisis in Asia.

“After the massive declines in world aviation since 11 September, the Lufthansa Group – thanks to is high level of responsiveness – has a stronger position in international competition today,” company chairman Wolfgang Mayrhuber stated.

The Lufthansa CEO added that he expected the airline “will be among the winners in this process of change in the airline industry”.

The company was showing “above average financial power” as well as strict cost management, Mayrhuber said, with Lufthansa now poised to invest in innovative products and tap into the “growth opportunities in a recovering market”.

Lufthansa said there had been a “visible” recovery of demand in the first quarter of 2004, applying especially to intercontinental routes. The airline was now planning an increase of its seat capacity and adding new routes for the summer season.

Lufthansa, which will issue its final full-year 2003 financial and business figures on 25 March, said that of writedowns totalling EUR 800 million last year, the revamping at the catering subsidiary LSG Sky Chefs had cost EUR 700 million.

Some 8,000 jobs, chiefly in the United States, were cut in the revamping at LSG Sky Chefs.

At the same time, Lufthansa had cut its net debt load by EUR 550 million last year, to around EUR 600 million, the airline said. This left a year-end liquidity of EUR 2.7 billion.

Further cost reductions of EUR 150 million were being carried out, Lufthansa said. Among others, the airline is holding negotiations to sell the Chef Solutions division which supplies prepared food to supermarkets and restaurants in the United States.

DPA
Subject: German news