LHs strategy: discussion thread for customers, investors, consultants & armchair CEOs
Jun 24, 2019, 7:29 am
#2431
Join Date: Mar 2016
Location: Cologne
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Jun 24, 2019, 7:38 am
#2432
Suspended
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Posts: 996
I wonder if there is any focus on Eurowings looking to more leisure routes. It was interesting to note how much GDP is generated in Nordrhein-Westfalen and yet unless you're traveling to FRA or MUC you get Eurowings. I've always thought it was a mistake to hand all those routes over and with them the premium traffic that high GDP usually brings with it.
Jun 24, 2019, 9:03 am
#2433
Join Date: Aug 2008
Location: Geneva
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Jun 26, 2019, 9:31 am
#2434
Join Date: Dec 2016
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If Lufty shares keep nosediving they might even be worth buying at some point. They've now lost all their gains for the last 2 years. Just wondering what a good entry point might be. €11 perhaps?
Jun 27, 2019, 4:05 pm
#2435
Join Date: Nov 2016
Location: MUC
Programs: A3*G, HH Gold
Posts: 74
They did already pull out of CGN a year or two ago when they shifted the leisure long haul operated by the SunExpress A332 to DUS and then eventually to MUC and soon FRA. And they already confirmed on German media that they don't really cut long-haul, merely shifting the commercial responsibility to an unnamed network airline, likely LH for the MUC/FRA ops and SN for the DUS ops. So actually no change for the customer as flights will apparently keep the EW code.
Jun 28, 2019, 2:07 am
#2436
Moderator: Lufthansa Miles & More, India based airlines, India, External Miles & Points Resources
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Jul 2, 2019, 1:54 am
#2438
Join Date: Jul 2010
Location: BSL/FRA or PHL
Programs: LH Miles and More, DL SkyMiles, Bonvoy, Hilton
Posts: 2,335
Looking at this CAPA chart you recoil. Yikes. No wonder so many EU airlines are folding:
https://twitter.com/CAPA_Aviation/st...57792299257856
https://twitter.com/CAPA_Aviation/st...57792299257856
Fortunately EW has a very forgiving and optimistic parent.
Jul 2, 2019, 3:09 am
#2439
Join Date: Aug 2009
Location: between DM464 and DM463 on the NAPSA26 RNAV TRANS in EDDM
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For those here that are able to read German, check out this link (or the series of articles) I find very interesting:
Aviation Management - Was kostet eigentlich ein Flug? (4) - airliners.de
Here's the quick Google translate version:
As much as I dislike FR the unbundling strategy did really shake up the market and is causing a lot of issues for the industry, especially the network carriers. I think that any attempt to be a successful player in the LCC space is depending on the following basic principles:
- point to point only
- no longhaul ops
- just one aircraft type (purchased significantly below market price in biiiig lots)
Aviation Management - Was kostet eigentlich ein Flug? (4) - airliners.de
Ryanair erwirtschaftet demnach den gesamten Gewinn mit den Nebenerlösen. Dies weist auch der Geschäftsbericht 2016, S. 53, entsprechend aus. Einer "Average booked passenger fare" in Höhe von 46,67 Pfund stehen "Costs per booked passenger" in Höhe von 47,69 Pfund gegenüber - rund 100 Millionen Verlust, die sich allerdings aus dem gesamten operativen Aufwand des Unternehmens (S. 145) errechnen und damit auch die Kosten beinhalten, die durch die Ancillary Services bedingt werden.
Bei 1,57 Milliarden Pfund "Ancillary Revenues" wird entsprechend ein operatives Gesamtergebnis von 1,46 Milliarden Pfund ausgewiesen. Das weitere Studium des Geschäftsberichts zeigt, dass die lukrativen Nebenerlöse überwiegend aus sogenannten "Non-flight scheduled" Produkten stammen, unter denen Ryanair Kommissionen für den Verkauf von Bahn- und Bustickets, Hotelreservierungen, Mietwagenreservierungen und "andere Quellen", einschließlich Übergepäckerlöse und Verwaltungsgebühren versteht, die sich im direkten Zusammenhang des "low-fares business" ergeben (S. 187).
Bei 1,57 Milliarden Pfund "Ancillary Revenues" wird entsprechend ein operatives Gesamtergebnis von 1,46 Milliarden Pfund ausgewiesen. Das weitere Studium des Geschäftsberichts zeigt, dass die lukrativen Nebenerlöse überwiegend aus sogenannten "Non-flight scheduled" Produkten stammen, unter denen Ryanair Kommissionen für den Verkauf von Bahn- und Bustickets, Hotelreservierungen, Mietwagenreservierungen und "andere Quellen", einschließlich Übergepäckerlöse und Verwaltungsgebühren versteht, die sich im direkten Zusammenhang des "low-fares business" ergeben (S. 187).
Ryanair earns the entire profit with ancillary services. This is also shown in the Annual Report 2016, p. 53. An average booked passenger fare of Ł 46.67 equals Ł 47.69 "cost per booked passenger" - approximately Ł 100 million of loss, but from the total operating expenses of the Company (p. 145). and thereby also include the costs that are caused by the Ancillary Services.
At 1.57 billion pounds of Ancillary Revenues, a total operating income of 1.46 billion pounds is reported. Continuing to study the annual report shows that the lucrative ancillary revenues are predominantly from so-called "non-flight scheduled" products, under which Ryanair counts commissions for the sale of rail and bus tickets, hotel reservations, car rental reservations and "other sources", including excess baggage revenue and management fees which arise in the direct context of "low-fares business" (p. 187).
At 1.57 billion pounds of Ancillary Revenues, a total operating income of 1.46 billion pounds is reported. Continuing to study the annual report shows that the lucrative ancillary revenues are predominantly from so-called "non-flight scheduled" products, under which Ryanair counts commissions for the sale of rail and bus tickets, hotel reservations, car rental reservations and "other sources", including excess baggage revenue and management fees which arise in the direct context of "low-fares business" (p. 187).
- point to point only
- no longhaul ops
- just one aircraft type (purchased significantly below market price in biiiig lots)
Last edited by cas_de; Jul 2, 2019 at 3:46 am Reason: integrated Oliver2002's comment
Jul 2, 2019, 3:21 am
#2440
Moderator: Lufthansa Miles & More, India based airlines, India, External Miles & Points Resources
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Add:
- just one aircraft type (purchased significantly below market price in biiiig lots)
To the equation
- just one aircraft type (purchased significantly below market price in biiiig lots)
To the equation
Jul 2, 2019, 3:45 am
#2441
Join Date: Aug 2009
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Jul 30, 2019, 6:54 am
#2442
Join Date: Oct 2009
Location: SJJ/AMS
Posts: 4,647
Lufthansa second quarter earnings fall
Lufthansa Group achieves an Adjusted EBIT of EUR 754 million in the second quarter
https://investor-relations.lufthansa...d-quarter.html
– Long-haul business sees further growth – Lufthansa Technik increases results – Network Airlines and Eurowings substantially improve first-half year punctuality – Price wars on short haul routes especially in Germany and Austria as well as rising fuel and MRO costs burden results – 2019 full-year forecast confirmedThe Lufthansa Group enjoyed a continuing strong performance in its long-haul business in the first half of 2019, particularly on its key North American and Asian routes. On short-haul routes in Europe, the price war in Germany and Austria in particular had a negative impact on earnings.
“Our earnings are feeling the effects of tough competition in Europe and sizeable overcapacities, especially on our short-haul routes out of Germany and Austria,” says Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG. “We are responding to this by further reducing our costs and increasing our flexibility. And with the turnaround plan which we recently presented, we also intend to make Eurowings a sustainably profitable airline.”
In the second quarter, Group revenues rose by 4 percent to EUR 9.6 billion (prior-year period: EUR 9.3 billion). Adjusted EBIT amounted to EUR 754 million (prior-year period: EUR 1 billion). The adjusted EBIT margin for the second quarter was thus 7.8 percent (prior-year period: 10.8 percent). Fuel costs alone were EUR 255 million higher in the second quarter of 2019 than in the previous year.Key figures for the first half-yearIn the first half of 2019, total revenues of the Lufthansa Group rose 3 percent to EUR 17.5 billion (EUR 16.9 billion in the prior-year period). First-half year Adjusted EBIT, however, declined to EUR 418 million (prior-year period: EUR 1,052 million). The higher price of jet fuel added just under EUR 450 million to costs for the period Group-wide. Adjusted EBIT margin amounted to 2.4 percent (prior-year period: 6.2 percent). The Group’s net profit for the first-half year period amounted to EUR -116 million (prior-year period: EUR 713 million), not least owing to a revaluation of a tax risk in Germany for which provisions of EUR 340 million were required.Network AirlinesThe Group’s Network Airlines – Lufthansa, SWISS and Austrian Airlines – reported an aggregate Adjusted EBIT of EUR 565 million for the first-half year period (prior-year period: EUR 989 million). Adjusted EBIT margin amounted to 5.1 percent, 4.2 percentage points down on the prior-year period (prior-year period: 9.3 percent). Total capacity was expanded 4.9 percent, and seat load factor also rose by 0.9 percentage points. With yields declining, however, especially in Europe, first-half year currency-adjusted unit revenues were 3.2 percent down on their 2018 level. Long-haul business continued to show positive performance. Currency-adjusted unit costs (ex fuel) declined 0.2 percent, owing not least to lower flight irregularity costs: flight cancellations in the first-half year period saw a 28-percent decline.EurowingsEurowings generated an Adjusted EBIT for the first half of 2019 of EUR ‑273 million (compared to EUR ‑220 million in the same period last year). Capacity was raised 3.8 percent for the period, and seat load factor rose 0.9 percentage points to 80.7 percent. With yields on short- and medium-haul routes seeing substantial declines, however, currency-adjusted unit revenues were 5.0 percent below their prior-year level. The decline eased in the second-quarter period, thanks primarily to improvements in the long-haul business. First-half year currency-adjusted unit costs (ex fuel) were 6.1 percent below their 2018 levels, owing mainly to the absence of the prior year’s integration expenses and to a reduction in irregularity-related costs. Flight cancellations for the period were down 23 percent, while punctuality was improved by 7 percentage points, making Eurowings one of Europe’s most punctual airlines for the 2019 first-half year period.Aviation ServicesFirst-half year Adjusted EBIT for the logistics segment with Lufthansa Cargo declined to EUR 15 million (prior-year period: EUR 127 million), owing mainly to falling demand on the routes between Europe and Asia. Lufthansa Cargo responded to the adverse development of the airfreight market by adjusting its capacities accordingly.
Adjusted EBIT for Lufthansa Technik improved 7-percent on the prior-year period at EUR 243 million (prior-year period: EUR 227 million) in particular due to a positive development of the engine maintenance business.
First-half year Adjusted EBIT for the catering business of the LSG Group declined to EUR 33 million (prior-year period: EUR 40 million). The reduction is attributable to the restructuring of the Group’s European business, which is centralizing production sites and bringing more flexibility to logistics processes.
The first-half year Adjusted EBIT for Other Businesses & Group Functions declined 53 percent to EUR ‑135 million (prior-year period: EUR -88 million).Full-year outlookAs communicated in June, the Lufthansa Group expects to report a low single-digit percentage increase in total revenues and an Adjusted EBIT margin of 5.5 to 6.5 percent for the full year 2019.
Persistent overcapacities, aggressive competition and increasingly price-sensitive demand continue to pressure yields on the European routes of the Network Airlines and Eurowings, particularly in the German and Austrian home markets. The Lufthansa Group expects the European market to remain challenging until at least the end of this year.
At the Network Airlines, the long-haul business is expected to continue its currently above-average development in the second half of the year. But with the overall economic prospects growing gloomier in the Group’s home markets, the risks of second-half year business trends falling short of their first-half year levels have increased. Actual developments in the long-haul business will depend to a large extent on short-term bookings (especially for the premium cabins) whose development is currently impossible to fully predict. The Group expects the Network Airlines to report an Adjusted EBIT margin of between 7 and 9 percent for 2019 as a whole.
Eurowings will be concentrating on implementing the actions presented at the end of June to accelerate its financial turnaround. These include a clearer focus on European point-to-point short-haul routes, reducing complexity and raising productivity, not least by streamlining German operations to one AOC. Unit costs should be reduced by 15 percent by 2022. The first actions are already being taken: a phase-out of older and now inefficient aircraft has already begun. For the second-half year period Eurowings expects to see further burdens on its short-haul business, at least some of which should be offset by improvements on the long-haul front. For the year as a whole, Eurowings expects to report an Adjusted EBIT margin of -4 to -6 percent.
The logistics segment with Lufthansa Cargo should post a full-year margin of between 3 and 5 percent. This is contingent, however, on demand stabilizing in the fourth-quarter period, in which – for seasonal reasons – this business segment tends to generate a substantial part of its earnings.
https://investor-relations.lufthansa...d-quarter.html
– Long-haul business sees further growth – Lufthansa Technik increases results – Network Airlines and Eurowings substantially improve first-half year punctuality – Price wars on short haul routes especially in Germany and Austria as well as rising fuel and MRO costs burden results – 2019 full-year forecast confirmedThe Lufthansa Group enjoyed a continuing strong performance in its long-haul business in the first half of 2019, particularly on its key North American and Asian routes. On short-haul routes in Europe, the price war in Germany and Austria in particular had a negative impact on earnings.
“Our earnings are feeling the effects of tough competition in Europe and sizeable overcapacities, especially on our short-haul routes out of Germany and Austria,” says Ulrik Svensson, Chief Financial Officer of Deutsche Lufthansa AG. “We are responding to this by further reducing our costs and increasing our flexibility. And with the turnaround plan which we recently presented, we also intend to make Eurowings a sustainably profitable airline.”
In the second quarter, Group revenues rose by 4 percent to EUR 9.6 billion (prior-year period: EUR 9.3 billion). Adjusted EBIT amounted to EUR 754 million (prior-year period: EUR 1 billion). The adjusted EBIT margin for the second quarter was thus 7.8 percent (prior-year period: 10.8 percent). Fuel costs alone were EUR 255 million higher in the second quarter of 2019 than in the previous year.Key figures for the first half-yearIn the first half of 2019, total revenues of the Lufthansa Group rose 3 percent to EUR 17.5 billion (EUR 16.9 billion in the prior-year period). First-half year Adjusted EBIT, however, declined to EUR 418 million (prior-year period: EUR 1,052 million). The higher price of jet fuel added just under EUR 450 million to costs for the period Group-wide. Adjusted EBIT margin amounted to 2.4 percent (prior-year period: 6.2 percent). The Group’s net profit for the first-half year period amounted to EUR -116 million (prior-year period: EUR 713 million), not least owing to a revaluation of a tax risk in Germany for which provisions of EUR 340 million were required.Network AirlinesThe Group’s Network Airlines – Lufthansa, SWISS and Austrian Airlines – reported an aggregate Adjusted EBIT of EUR 565 million for the first-half year period (prior-year period: EUR 989 million). Adjusted EBIT margin amounted to 5.1 percent, 4.2 percentage points down on the prior-year period (prior-year period: 9.3 percent). Total capacity was expanded 4.9 percent, and seat load factor also rose by 0.9 percentage points. With yields declining, however, especially in Europe, first-half year currency-adjusted unit revenues were 3.2 percent down on their 2018 level. Long-haul business continued to show positive performance. Currency-adjusted unit costs (ex fuel) declined 0.2 percent, owing not least to lower flight irregularity costs: flight cancellations in the first-half year period saw a 28-percent decline.EurowingsEurowings generated an Adjusted EBIT for the first half of 2019 of EUR ‑273 million (compared to EUR ‑220 million in the same period last year). Capacity was raised 3.8 percent for the period, and seat load factor rose 0.9 percentage points to 80.7 percent. With yields on short- and medium-haul routes seeing substantial declines, however, currency-adjusted unit revenues were 5.0 percent below their prior-year level. The decline eased in the second-quarter period, thanks primarily to improvements in the long-haul business. First-half year currency-adjusted unit costs (ex fuel) were 6.1 percent below their 2018 levels, owing mainly to the absence of the prior year’s integration expenses and to a reduction in irregularity-related costs. Flight cancellations for the period were down 23 percent, while punctuality was improved by 7 percentage points, making Eurowings one of Europe’s most punctual airlines for the 2019 first-half year period.Aviation ServicesFirst-half year Adjusted EBIT for the logistics segment with Lufthansa Cargo declined to EUR 15 million (prior-year period: EUR 127 million), owing mainly to falling demand on the routes between Europe and Asia. Lufthansa Cargo responded to the adverse development of the airfreight market by adjusting its capacities accordingly.
Adjusted EBIT for Lufthansa Technik improved 7-percent on the prior-year period at EUR 243 million (prior-year period: EUR 227 million) in particular due to a positive development of the engine maintenance business.
First-half year Adjusted EBIT for the catering business of the LSG Group declined to EUR 33 million (prior-year period: EUR 40 million). The reduction is attributable to the restructuring of the Group’s European business, which is centralizing production sites and bringing more flexibility to logistics processes.
The first-half year Adjusted EBIT for Other Businesses & Group Functions declined 53 percent to EUR ‑135 million (prior-year period: EUR -88 million).Full-year outlookAs communicated in June, the Lufthansa Group expects to report a low single-digit percentage increase in total revenues and an Adjusted EBIT margin of 5.5 to 6.5 percent for the full year 2019.
Persistent overcapacities, aggressive competition and increasingly price-sensitive demand continue to pressure yields on the European routes of the Network Airlines and Eurowings, particularly in the German and Austrian home markets. The Lufthansa Group expects the European market to remain challenging until at least the end of this year.
At the Network Airlines, the long-haul business is expected to continue its currently above-average development in the second half of the year. But with the overall economic prospects growing gloomier in the Group’s home markets, the risks of second-half year business trends falling short of their first-half year levels have increased. Actual developments in the long-haul business will depend to a large extent on short-term bookings (especially for the premium cabins) whose development is currently impossible to fully predict. The Group expects the Network Airlines to report an Adjusted EBIT margin of between 7 and 9 percent for 2019 as a whole.
Eurowings will be concentrating on implementing the actions presented at the end of June to accelerate its financial turnaround. These include a clearer focus on European point-to-point short-haul routes, reducing complexity and raising productivity, not least by streamlining German operations to one AOC. Unit costs should be reduced by 15 percent by 2022. The first actions are already being taken: a phase-out of older and now inefficient aircraft has already begun. For the second-half year period Eurowings expects to see further burdens on its short-haul business, at least some of which should be offset by improvements on the long-haul front. For the year as a whole, Eurowings expects to report an Adjusted EBIT margin of -4 to -6 percent.
The logistics segment with Lufthansa Cargo should post a full-year margin of between 3 and 5 percent. This is contingent, however, on demand stabilizing in the fourth-quarter period, in which – for seasonal reasons – this business segment tends to generate a substantial part of its earnings.
Jul 30, 2019, 7:51 am
#2443
Moderator: Lufthansa Miles & More, India based airlines, India, External Miles & Points Resources
Join Date: Dec 2002
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Crazy how little money there is in the shorthaul business, all legacies are getting mauled in this segment.
Jul 30, 2019, 6:28 pm
#2444
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But isn't that partly a result of how legacy airlines (choose to) attribute revenue? IIRC airlines generally attribute revenue based on the distance of each sector, while the costs are much higher per mile flown on short-haul flights. Therefore the revenue attribution for a pax flying DUS-FRA-JFK would be rather scewed.
Jul 31, 2019, 1:18 am
#2445
Moderator: Lufthansa Miles & More, India based airlines, India, External Miles & Points Resources
Join Date: Dec 2002
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Posts: 48,155
Why flights like NUE/DUS/STR-FRA exist is mysterious to me in the first place. I don't think the pro rated revenue assignment is the reason why the shorthaul business is tanking, but rather the high cost of production. LCCs who are competing in this segment have one aircraft type, crews on low wage contracts and high aircraft utilisation. With such a setup you can produce at a killer unit costs. In the P2P business they pick which routes they want to operate on (ie where they can make a killing) and don't have to think if it is also suited to catch the west bound TATL departure wave in the hub at 10 am or 1pm.