Europe’s leading airline holds AGM in Berlin

— Shareholders meet to discuss the financial state of their company

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The 2011 Annual General Meeting of Lufthansa took place at the International Congress Centre (ICC) in Berlin today.

In his annual report, Dr Christoph Franz, Chairman of the Executive Board and CEO of the company told the assembled shareholders that prospects for the Group in 2010 were positive resulting in a net profit of 1.1 billion euros and an operating result of 876 million euros, a fivefold increase in comparison to the previous year’s figure.

A dividend of 60 cents per share was proposed despite the difficult operating year. This, he revealed was in accordance with the Group’s dividend policy, it was also equivalent to a percentage of 31% of the operating result and a dividend yield of 3.7%

The CEO told the meeting that success of the year under review “has not come easy” adding that “it was a difficult twelve months during which we had to overcome many major challenges.

“The airspace lockdowns, the pilot’s strike, the hard winters at the beginning and end of the year, and the aftermath of the global economic and financial crisis all demanded a great deal of us.”

Despite all that the CEO said the Group “kept its promise” by promptly reacting to the changes and by adopting its processes as well as adjusting its structures.

Luthansa, says Dr Franz, benefited from its established strengths, namely, the Group’s solid financial basis, its financial and operational flexibility, a strong airline group, a strong alliance and an excellent product.

He announced that the Cash Value Added, that is, the value creation of the company was 71 million euro, meaning the Group was able to create value again “a mere one year after the global and financial crisis.”

Group invested 2.3 billion euros during the year under review, the greatest part of which was invested in fuel-efficient aircraft.

In addition, the operation cash flow increased by over 54% to a record level of 3.1 billion euros, placing it significantly above the Group’s gross capital expenditure.

Dr Franz said the Group’s net indebtedness of 2.2 billion euros in 2009 was reduced to 1.6 billion euros in 2010 and its percentage of equity capital increased by almost five percentage points to 28.4%, a reflection of the solid financial foundations of Luthansa.

He said the number of passengers during the past year rose to a record level, with over 91 million passengers using the Group’s services. These, he said, “are record figures even without the consolidation effects.”

Dr Franz announced that the Group’s overall success was contributed by all of its business segments, the largest contribution coming from its core business segments namely, the Passenger Airline Group, closely followed by the Logistics business segment, MRO, IT Services and Catering, also contributed a combined total of over 350million euros to he operating result.

The CEO said the Luthansa share also reflected the “pleasing” developments in he Group during the past year.

“It recorded a rise in value of around 39% during the past year and increased twice as much as the DAX – in what was really a good year at the stock exchanges,” asserts Dr Franz.

He told the shareholders that the company was healthy and built onsolid foundations, adding that “we have not only proven that we can successfully manage crisis, but also that we can increase thrust when the winds change.”

He said the Group have significantly improved its market position, its earning power has increased considerably and it has invested in the future and made provisions at the same time, turning Lufthansa into Europe’s leading airline.

Dr Franz said within the Passenger Airline Group, Lufthansa Passenger Airlines made an essential contribution to the result increasing its revenue by recording an operating result of 382 million euros. The Climb 2011 cost-cutting programme, he said also contributed to the improvement of the result.

“We expect additional savings of at least 350 million euros here in 2011”, adding “The entire potential of the programme will become visible in the economic ratios in 2012.”

SWISS, he revealed also had a very successful year and was able to triple its operating profit to 298 million euros. He told the shareholders that both Austrian Airlines and British Midlands are continuing to work “intensively on the restructuring and reorganization of their airlines.”

Dr Franz said the Group’s low-cost subsidiary, Germanwings, was severely hit by last year’s “unexpected events and ended the year with an operating loss of 39 million euros.”

He mentioned that the “measures to safeguard earnings, the cost-saving programmes and the programmes to increase efficiency are being intensified” at all of the airlines.

He said Lufthansa Cargo mastered the changes in the market, both during the crisis and during the upswing, “with great success”.

The CEO said “Our Logistics business segment realized a highly impressive turn around in 2010. The swift reactions of the Management allowed the company to secure a significant lead in the face of its competitors.

“The business segment’s operating profit of 310 milion euros represents a major contribution to the overall Group result.”

He announced that during the past year, Lufthansa Systems reacted to the altered market conditions in the IT industry and introduced a comprehensive restructuring programme to secure long-term profitability.

Lufthansa Systems, he said contributed 10 million euros to the Group’s operating profit. Another impressive performance was by the LSG Sky Chefs which posted an operating profit of 76 million euros for 2010, double the previous year’s figure.

Turning his attention to the current financial year, Dr Franz said any hopes that 2011 might turn out to be a ‘normal’ year for “our airline were obliterated at the latest by the events that occurred in Japan.”

He said the sad conclusion following these events is that ‘business at usual’ does not exist in “our core business segment and extended periods of normal operation are more likely than not to remain the exception.

“We have adjusted to this fact and made the necessary provisions. It is also for this reason that the financial stability of the company is so important for us. For it is only in this way that we can confront all the crises, natural disasters and other imponderables that await us and overcome the hard times that they bring with them.”

Speaking on the overall economic development regarding the global economy, Dr Franz said all the experts forecasts recovery, albeit at a “slower speed”.

He said growth is expected to lie between 3% and 4% stressing that the economic momentum of the Asian economies was expected to remain high with expected growth pegged at 5%, making Asia the number one growth market for Lufthansa.

He told the shareholders that IATA expects average growth of around 6% per year in international air transport until 2014, double the figure forecast for global economic growth adding that similar growth rates are expected for freight

By ANA Economic Correspondent, Berlin