Lufthansa Group’s operating profit increased around 37% to €954 million ($1 billion) in 2014, but net profit declined 82% to €55 million compared with the previous year.
Last June, the German airline group had downgraded its operating profit target from €1.3-1.5 billion to €1 billion, citing lower-than-projected sales in its passenger and cargo businesses.
Adjusted operating profit rose just under 13% to €1.18 billion, while revenue remained flat at €30 billion in 2014. The group says it is facing “substantial” yield declines.
The earnings improvement was largely driven by a fuel bill reduction of €364 million due to lower oil prices, and last year’s decision to change the group’s aircraft and engine depreciation policy which delivered benefits worth €351 million.
The sharp decline in net profit is the result of several factors, says Lufthansa. This includes a reduction in the market value of exchangeable notes for shares in US budget carrier JetBlue Airways – which Lufthansa is redeeming earlier than previously planned as part of a debt reduction effort – and adverse effects from its fuel hedging activities, the group says.
Sale of Lufthansa Systems’ infrastructure division to IBM “further burdened” the net result, the group says.
Under German accounting regulations, Lufthansa Group delivered a €732 million net loss. It will not pay a dividend, while the loss was offset by capital reserves.
For the current year, Lufthansa Group is targeting an operating profit around €1.5 billion.
While all business segments in the group have generated profits, chief executive Carsten Spohr says the result in the group’s core airline business show that “we can no longer regard sticking to inherited uneconomic structures as an option for the future of the Lufthansa Group”.
Source: Cirium Dashboard
