Lufthansa takes off with 'best results in history'

A cost-cutting programme has helped Lufthansa achieve its best ever results. Photo / 123RF

German airline Lufthansa boasted its best ever results thanks to a successful cost-cutting programme but optimism was tempered for 2018 due to an expected hike in its fuel bill.

Chief executive Carsten Spohr hailed the fruits of the company's turnaround plan which has seen it slash costs in the past few years in a bid to become more competitive with its newer low-cost rivals, according to the Daily Telegraph.

Its Swiss, Eurowings and Austrian Airlines brands helped group sales rise more than 12 per cent to €35.6 billion ($60.3b) in 2017 while a major €582 million collective bargaining deal with the German airline pilot union Vereinigung Cockpit helped earnings before interest and taxes leap 70 per cent to €3b.

The deal with the union led to the closure of the airline's defined benefit "final salary" pension scheme, and the creation of a defined contribution one. This helped Lufthansa reduce its pension liabilities "by a high three-digit million euro amount", according to Spohr.

But the cheer didn't last long, with the chief executive claiming the airline's fuel bill would be roughly €700m higher this year at €5.9b. The rise would be "largely offset" by cost cuts but not entirely, meaning the record performance was unlikely to be repeated.

The company's shares rose a remarkable 150 per cent in 2017 as its modernised fleet and purchase of more than half of Air Berlin powered investor confidence in the stock.

Spohr said the company would continue its modernisation plans to help it reduce costs.

"This is the only way to sustainably increase our profitability," he said. "From a position of strength, we will continue to drive consolidation in Europe."

The chief executive also drew notice to the fact that, even though it had cut costs, it had become the only airline in Europe to be awarded a five-star rating for its service by industry monitor Skytrax. Just another nine carriers globally have been awarded five stars.

Spohr said roughly €3b had been invested in the group in 2017, a third more than in 2016 although partly skewed by the €900m it spent on the Air Berlin assets.

"These higher investments also reflect the increased size of the group but investments relative to revenue remain level with the world's most successful airlines," Spohr said.

Elsewhere, the Lufthansa Cargo business performed strongly too, with a €300m improvement in earnings leading it to turn a loss in 2016 to a €242m profit in 2017.