Deutsche Lufthansa AG
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- Deutsche Lufthansa AG
Lufthansa Aviation Center
60546 Frankfurt / Main
Ph: +49 69 696 28010
Swiss Global Air Lines
Deutsche Lufthansa AG is a global aviation group which operates in five primary business segments: Passenger air transport, logistics, MRO, catering and IT services. Originally established in Jan-1926, Deutsche Lufthansa AG maintains its Corporate headquarters in Cologne, Germany while several departments are located in the Lufthansa Aviation Center at Frankfurt Airport. The company is listed on the Frankfurt Stock Exchange (FWB: LHA).
Although Lufthansa is involved in a range of industry segments, its core business is the provision of passenger air transport services, with the collective passenger airline group accounting for over two-thirds of the company's total revenue. These services are delivered through its numerous airline subsidiaries.
Deutsche Lufthansa AG holds majority stakes in a number of airlines including:
- Deutsche Lufthansa AG (100%, since 1954)
- Lufthansa CityLine GmbH (100%, since Mar-1992)
- Lufthansa Cargo AG (100%, since 1994)
- Air Dolomiti S.p.A. (100%, since Jul-2003)
- Eurowings Luftverkehrs AG (100%, since 1-Apr-2004)
- Eurowings Europe GmbH (23-Jun-2016)
- Swiss International Air Lines (Swiss Global Air Lines) (100%, since 1-Jul-2007)
- Edelweiss Air AG (100%, since Nov-2008)
- Germanwings GmbH (100% since 1-Jan-2009)
- Austrian Airlines AG (100%, since Sep-2009)
- Tyrolean Airways Tiroler Luftfahrt GmbH (merged with Austrian on 01-Apr-2015)
Deutsche Lufthansa AG also holds minority stakes in a number of airlines including:
- SunExpress (50%, since Apr-1990)
- Brussels Airlines (45%, since 15-Sep-2008)
- Aerologic GmbH (50%, since 19-Jun-2009)
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Part 1 of CAPA's Brexit follow-up report assessed the ASK exposure of UK and non-UK airlines to market segments where existing traffic rights could potentially change once the UK finally leaves the European Union. This second part reviews recent comments by leading European-listed airlines on how they see the impact of Brexit, both in the short term and in the longer term. Most of them acknowledge that there are considerable uncertainties, while simultaneously insisting that they will not be significantly affected in the long run.
There have been two initial impacts on airlines. First, Brexit has added to economic uncertainty, thereby muting demand and lowering yields. The magnitude and duration of this impact is unpredictable. Secondly, the consequent weakening of the GBP has made outbound international travel from the UK more expensive and less appealing, and lowered the value of GBP revenue earned by airlines.
The longer term impact will depend on whatever new traffic rights regime is negotiated between the UK and the EU. As a number of the airlines have acknowledged, this remains unknown and is, indeed, unknowable until the UK formally triggers its exit from the EU and then completes its two-year exit negotiations.
CAPA's previous analytical coverage of the UK referendum vote to leave the European Union flagged several questions surrounding UK airlines' future access to the European single aviation market. Traffic rights post-Brexit will depend heavily on the wider relationship between the UK and the EU and its markets. In turn, this may depend on how far the UK is prepared to go in embracing the EU's four key freedoms: the movement of capital, goods, services and people.
The UK has not yet triggered its formal two-year exit negotiation period and all aspects of its future relationship with the EU remain unknown. However, politicians in the UK are very reluctant to accept the continued freedom of movement of people, so existing airline market access is likely to be compromised in some way.
Rather than speculate on how negotiations might proceed, this report identifies the main market segments that could be affected by changes to the traffic rights regime, and evaluates the ASK exposure of airlines from the UK and from countries in Europe's single aviation market to these segments. A further report will review recent comments by Europe's leading listed airlines on how they see the impact of Brexit.
As airlines have embraced dual brand strategies to reach full service and low cost growth aviation IT has responded, as seen with Amadeus' acquisition of Navitaire, which mostly but not exclusively powered the passenger service systems (PSS) of LCCs. In the first six months since the deal closed Navitaire has added 230m passengers boarded, to Amadeus Altea's 393m. Navitaire passengers account for 37% of Amadeus' total.
Having significantly grown its market share, and with past LCC product forays not having worked out, Amadeus receives a new business stream. Some Navitaire customers (Ryanair, AirAsia, IndiGo) are larger than Altea customers and have high growth ahead of them. A second benefit is the Navitaire acquisition supporting Altea customers. By owning both products Amadeus can improve connectivity between Altea and Navitaire airlines. Most of Altea's large customers – Lufthansa, IAG, AF-KLM, Qantas and JAL – have an LCC operating Navitaire software. Of Navitaire's passengers – 35% are on airlines that are LCC units of full service airlines. Other airlines may be holding out on pursuing partnerships and connectivity until there is a cheaper, simpler and streamlined way.
It may seem that the Amadeus-Navitaire marriage is about full service and low cost segments, but its greatest strength is the role it will have in the hybrid segment. Hybridity is growing, and Amadeus-Navitaire could galvanise further expansion.
Lufthansa Group's detailed 2Q2016 results confirmed the headline numbers that it pre-released with a profit warning on 20-Jul-2016. After increasing its operating profit in 1Q, the group suffered a decline in 2Q. Among Europe's big three legacy airline groups, Lufthansa was the only one to report lower 2Q profits. In 1H2016, IAG again has the best operating margin of the three, followed by Lufthansa and then Air France-KLM. However, LCCs Ryanair and Wizz Air are more profitable than any of them.
Lufthansa's full 2Q report provides an opportunity to compare the capacity growth and unit revenue performance of each of the Lufthansa Group, Air France-KLM and IAG for 2Q2016. Unit revenue has been soft for some time for all three, but seems to be weakening further. Lufthansa cautioned that advance bookings, especially on long-haul, have declined significantly, citing repeated terrorist attacks in Europe and greater political and economic uncertainty.
Against this backdrop, IAG and Lufthansa have reduced their capacity growth plans, while Air France-KLM has retained its 1% ASK growth outlook for its network airlines. CAPA's analysis highlights the inverse relationship between capacity growth and RASK growth. Further capacity haircuts may follow.
Following easyJet's fall back into loss in 1H2016 (six months to Mar-2016), it still expected that the summer months would more than offset this, allowing another year of profit growth. A profit warning after the UK's Brexit vote dashed this hope in late Jun-2016. EasyJet's 3Q2016 (April to June) trading statement casts a bigger shadow over its outlook, as weak unit revenue is not being offset by unit cost reduction. According to CAPA calculations, easyJet's 3Q2016 pre-tax profit fell by 59% year on year.
European LCCs Norwegian and Wizz Air have reported improved profits for the same quarter and are on track to achieve stronger full year results, but easyJet is not alone among European airlines in lowering earnings expectations in recent weeks. IAG and Lufthansa have also issued profit warnings. Growing macroeconomic and geopolitical uncertainties are weighing on unit revenue. For some, there is no longer a sufficient release coming from lower fuel prices, which also contribute to unit revenue weakness by encouraging additional capacity.
The majority of European airlines have yet to report April-June results, most notably Ryanair, Air France-KLM and IAG. Nevertheless, the reporting season seems likely to herald a more cautious phase of the airline cycle.
Krakow John Paul II Balice International Airport (hereafter KIA) serves a heavily populated area of southern Poland and is the country’s second busiest, but is hardly a monopoly as it is challenged by both primary and secondary level airports catering to full service/network and budget airlines.
KIA’s passenger traffic growth was strong in 1Q2016 but several other Polish airports matched or even bettered it. With continuing air transport growth projected throughout Poland, staying ahead of the competition is the new objective.
KIA has a comprehensive investment programme to 2023, including the construction of a new runway.
This report examines KIA by way of several sets of metrics, looks at the airports that are rivals to it, at its construction activities and ownership.