Lufthansa Group Boosts 2016 Net Profit

Lufthansa Group made a net profit of EUR€1.78 billion (USD$1.91 billion) for 2016, a 4.6 percent increase on the previous year.

Annual revenue fell 1.2 percent to €31.66 billion, as traffic revenue dropped 3.3 percent. Operating expenses came in 5.3 percent lower at €31.75 billion, with fuel costs down 15.5 percent and staff costs down 8.9 percent.

Although staff numbers rose 3.1 percent during the year, costs were reduced partly by a change to retirement and transitional benefits for cabin crew at Lufthansa mainline. This led to a saving of €652 million over the year.

The group carried 109.7 million passengers in 2016, a year-on-year increase of 1.8 percent. Capacity, in available seat km (ASK), rose 4.6 percent as the group introduced larger aircraft on some routes.

Lufthansa said capacity growth was particularly strong to the Americas, but Middle East and Africa region traffic shrank. Europe and Asia capacity growth was in line with the average.

Group revenue passenger km (RPK) were up 2.8 percent, but yields contracted by 5.0 percent as load factor dropped 1.4 percentage points to 79.1 percent.

The airline said the push by low-cost airlines into higher-value business travel segment, such as Ryanair into Lufthansa’s Frankfurt hub, “puts severe structural pressure on the airlines in the Passenger Airline Group.”

The full takeover of Brussels Airlines and the expansion of Eurowings as a low cost carrier are part of Lufthansa’s fight to retain market share amid the bruising competition in Europe.

Lufthansa Group owned or operated 617 aircraft at the end of 2016, an increase of 17 from 2015. Group airlines took delivery of 47 new aircraft, including eight long-haul. The current order list totals 205 aircraft for delivery by 2025.

During the year, Lufthansa and Air Berlin agreed a deal for Eurowings and Austrian Airlines to wet-lease 33 Air Berlin aircraft for six years.

The Lufthansa Group includes Austrian Airlines, Brussels Airlines, Eurowings, Germanwings and Swiss.