Lufthansa PDF ENGLISCH - Investor Relations

Transcription

al Annual Report 1998
www.lufthansa.com
www.lufthansa-financials.de
The Strategic Business Segments
of the Lufthansa Group
Operating profit
in DM million
2,500
2,000
Passenger Business
Deutsche Lufthansa AG1)
Cologne
DM 1,908.0 million
Logistics
MRO
Lufthansa Cargo AG
Kelsterbach
Lufthansa Technik AG
Hamburg
100 %
100 %
DM 190.0 million
Catering
Leisure Travel
IT Services
C & N Touristic AG
Frankfurt/Main
Lufthansa Systems GmbH
Kelsterbach
GlobeGround GmbH
Frankfurt/Main
DM 300.0 million
LSG Lufthansa
Service Holding AG
Kriftel
100 %
DM 109.0 million
50 %*
100 %
100 %*
Lufthansa Airmotive
Ireland Holdings Ltd.
Dublin
100 %*
USD 27.1 million
LSG Lufthansa
Service Deutschland GmbH
Frankfurt/Main
100 % 2)
DM 60.0 million
Condor Flugdienst GmbH
Kelsterbach
START AMADEUS GmbH
Frankfurt/Main
10 %*
100 %
AMADEUS Global
Travel Distribution S. A.
Madrid
29,2 %* ESP 6,071.5 million
Hudson General LLC
New York, N.Y.
Lufthansa Engineering and
Operational Services GmbH
Frankfurt/Main
100 %*
DM 5.0 million
DM 25.0 million
DHL International Ltd.
Bermuda
Lauda Air Luftfahrt AG
Vienna
Lufthansa A.E.R.O. GmbH
Alzey
ATS 590.0 million
Hinduja Lufthansa
Cargo Holding B.V.
Amsterdam
40 %*
NLG 0.04 million
DM 20.0 million
LSG-Food & Nonfood
Handel GmbH
Frankfurt/Main
100 % 2)
DM 1.0 million
Luxair Société Luxembourgeoise de Navigation
Aérienne S.A. Luxembourg
13 %*
LUF 550.0 million
Airmail Center
Frankfurt GmbH
Frankfurt/Main
40 %*
DM 0.5 million
Condor/Cargo
Technik GmbH
Frankfurt/Main
30 %*
DM 1.5 million
LSG Lufthansa Service
Europa/Afrika GmbH
Kriftel
100 % 2)
DM 0.05 million
Lufthansa Consulting
GmbH
Cologne
100 %*
DM 0.5 million
Shannon Aerospace Ltd.
Shannon
IEP 33.0 million
LSG Lufthansa
Service Asia Ltd.
Hong Kong
100 % 2) HKD 98.2 million
Lido GmbH Lufthansa
Aeronautical Services
Frankfurt/Main
100 %*
DM 2.8 million
Aircraft Maintenance
and Engineering Corp.
Beijing
40 %*
USD 87.5 million
LSG Lufthansa
Service USA Corp.
Wilmington, Delaware
USD 19.8 million
100 % 2)
LRS Lufthansa Revenue
Services GmbH
Norderstedt
100 %*
DM 6.0 million
Lufthansa Technik
Logistik GmbH
Hamburg
100 %*
DM 4.0 million
Onex Food Services Inc.
Dover, Delaware
24,74 %* 3) USD 55.07 million
Lufthansa Process
Management GmbH
Neu-Isenburg
100 %*
DM 0.5 million
HEICO Aerospace
Holdings Corp.
Hollywood, Florida
20 %*
USD 45.0 million
Autobahn Tank & Rast
Holding GmbH
Bonn
33,33 %* DM 10.0 million
Lufthansa AirPlus
Servicekarten GmbH
Neu-Isenburg
48,8 %*
DM 2.05 million
20 %*
USD 0.1 million
100 %*
1,500
1,000
500
DM 220.0 million
Lufthansa CityLine GmbH
Kriftel
(Cologne from Jan. 7, 1999)
100 %
DM 50.0 million
25 %*
Ground Services
DM 140.0 million
DM 18.06 million
DM 40.0 million
Berliner Lufthansa
Airport Services GmbH
Berlin
49 %*
DM 12.0 million
49 %*
USD 20.0 million
0
million
1996
1997*
1998*
Return on equity
in per cent
25 %
20 %
15 %
10 %
A reassuring
glimpse inside the
cockpit makes for
greater confidence
– in flying and the
operating airline.
Lufthansa is pursuing
a similar aim with
this year’s Annual
Report. For greater
transparency, the
Group financial
statements have
been drawn up for
the first time in
accordance with
the International
Accounting Standards (IAS). This
furnishes investors
and analysts with
additional information to assess
the Group’s performance, making for
greater confidence
in Lufthansa shares.
50 %*
5%
0
1996
Other
Service Companies
Lufthansa Commercial
Holding GmbH, Cologne
Lufthansa Flight Training
GmbH, Frankfurt/Main
GOAL German Operating
Aircraft Leasing GmbH &
Co. KG, Grünwald
Delvag Luftfahrtversicherungs-AG, Cologne
Lufthansa Bombardier
Aviation Services GmbH
Berlin
51%*
DM 2.5 million
AirLiance Materials LLC
Wilmington, Delaware
40,25 %* USD 15.0 million
The list of subsidiaries and associates includes consolidated and non-consolidated (*)
companies with their nominal share capital and the Lufthansa stake in per cent;
“additional paid-in capital” is shown in the case of North American companies.
As of December 31, 1998
1)
Deutsche Lufthansa AG is the parent company of the Group, in which Lufthansa
German Airlines operates passenger services as an independent business unit.
2)
Consolidated within the LSG Group.
3)
Onex Food Services Inc., Dover, holds all the shares of Sky Chefs International
Services Inc., Arlington.
1997*
1998*
* 1997 and 1998 results
drawn up under IAS
Annual Report 1998 Contents
Contents
Group: Key Data
1998
Revenue
of which traffic revenue
Profit from ordinary activities
Net profit for the period
Capital expenditure
Cash flow*
Total assets
Capital and reserves
Average number of
employees
Staff costs
Earnings per share
1997
Change
in per cent
million
million
million
million
million
million
million
million
22,654
19,551
2,482
1,431
3,991
3,638
24,040
6,462
21,610
18,731
1,749
1,077
2,364
3,906
22,804
5,262
4.8
4.4
41.9
32.9
68.8
– 6.9
5.4
22.8
DM million
DM
54,867
5,608
3.75
55,520
5,522
2.82
– 1.2
1.6
33.0
DM
DM
1.10
0.47
0.90
0.04
22.2
1,075.0
1998
1997
Change
in per cent
million
million
million
million
million
million
million
million
11,583
9,996
1,269
732
2,041
1,860
12,292
3,304
11,049
9,577
894
550
1,209
1,997
11,660
2,690
4.8
4.4
41.9
32.9
68.8
– 6.9
5.4
22.8
EUR million
EUR
54,867
2,867
1.92
55,520
2,823
1.44
– 1.2
1.6
33.0
DM
DM
DM
DM
DM
DM
DM
DM
Dividend per share
Creditable corporation tax
Revenue
of which traffic revenue
Capital expenditure
Cash flow*
Total assets
Average number of
employees
Staff costs
Earnings per share
1
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
Dividend per share
Creditable corporation tax
* calculated as net cash from operating activities
as per cash flow statement
EUR
EUR
0.56
0.24
0.46
0.02
22.2
1,075.0
3
Chairman’s Statement
8
Adoption of IAS enhances transparency
9
23
28
32
36
Group Management Report 1998
The Lufthansa Share
Customers: Passengers, Airlines, Industry
Our Employees
Technology and Environment
46
Business segment Passenger Business:
Lufthansa German Airlines
Business segment Logistics:
Lufthansa Cargo AG
Business segment MRO:
Business segment Catering:
LSG Group
Business segment Leisure Travel:
C & N Group
IT Services: the new business segment
START Amadeus GmbH
Business segment Ground Services:
GlobeGround GmbH
Service and Financial Companies
52
54
57
60
62
64
65
67
68
69
70
72
73
74
78
79
80
121
Consolidated Financial Statements 1998 of Deutsche Lufthansa AG
Consolidated Income Statement for the 1998 Financial Year
Consolidated Balance Sheet
Group Statement of Fixed Assets Movements
Schedule of the Lufthansa Group Equity Capital
Lufthansa Group-Cash Flow Statement
Notes to the Consolidated Financial Statements
Independent Auditors’ Report
124
Report of the Supervisory Board
128
130
131
Supervisory Board and Executive Board
Other mandates of the Supervisory Board members
Mandates of the Executive Board members
132
Ten-year statistics
Annual Report 1998 Chairman’s Statement
3
Chairman’s Statement
The Executive
Board of Deutsche
Lufthansa AG
from left to right:
Dr. Karl-Ludwig Kley
(Chief Financial
Officer)
Dipl.-Ing.
Jürgen Weber
(Chairman and Chief
Executive Officer)
Dr. Heiko Lange
(Chief Executive
Human Resources)
Dear Shareholder,
Following the success achieved in 1997, your Company earned another record profit
last year. Even though we had set our sights very high, we managed not only to meet
the exacting pre-tax profit target of DM 2 billion but also to surpass it by almost
DM 500 million. This fine feat could not have been accomplished without the dedicated
and determined efforts of all our staff.
With a return on equity before taxes of 38.4 per cent (after taxes: 22.1 per cent) and a
profit-revenue ratio of 11.0 per cent, Deutsche Lufthansa not only recorded its own bestever scores but also established itself firmly as one of the front-runners in the aviation
business. Given this pleasing business performance, we are proposing to increase the
dividend for the 1998 financial year by 22 per cent from DM 0.90 per share to DM 1.10 –
which is another record high for Lufthansa.
The Annual Report of the Group for the past fiscal year marks a new stage in our
corporate history for another reason: it is the first time that the consolidated financial
statements have been drawn up on the basis of International Accounting Standards (IAS).
Lufthansa took up a new option under German accounting law to change over from
using the German Commercial Code. In adopting IAS we are meeting the demands
which the financial markets place on internationally active enterprises such as
Lufthansa.
For Lufthansa globalisation is not some vague or abstract notion: the number of international cooperation partners of our Group companies has increased further. For years
now we have been engaged in global competition on the procurement, sales and financial markets. What is more, 30.4 per cent of our equity capital is in the hands of nonGerman shareholders spread across the entire globe. They have a right to expect us to
provide figures that can be measured by a standard international yardstick.
4 Chairman’s Statement Annual Report 1998
The new accounting standards may perhaps be new to you – as they are to us. But the
efforts which the changeover entailed are well worthwhile, for rebasing our accounting
system on IAS gives the Lufthansa Group a degree of financial transparency that it has
never had before. Our intention is thus to offer you even more information relevant to
investing in Lufthansa stock. And we have also demonstrated our aim of enhanced
transparency in the design and layout of this year’s Annual Report.
There is yet another innovation to report: since the start of 1999 the financial markets
have been operating in euros. Lufthansa accomplished this first step towards creating a
single European currency without any difficulties, and as from January 1, 1999 accepts
the new currency as an equally valid means of payment in transactions with third parties.
The euro will create greater transparency in the financial markets and strengthen competition for shareholder capital and borrowed funds alike. In the absence of cross-currency
risks, investments in European assets can now be undertaken on the basis of more
efficient allocation mechanisms. This will make comparative strengths and weaknesses
more transparent and ensure a greater differentiation between competitors. And we are
well prepared for that test.
The strategy we have pursued so far is now bearing fruit. Clear corporate structures
have not only proved their worth in managing the Group as a whole but, more especially,
allow us to gauge the performance of the individual Group companies more precisely.
The prudent deployment of the resources entrusted to us and a flexibly but resolutely
pursued cost management regime have made Lufthansa fit for the future.
Meanwhile we have refined our strategy. It is our intention to make Lufthansa the world’s
leading aviation group. This includes the goal of making the Group less and less
dependent on cyclical fluctuations in air traffic. We want to be among the best in the
world in seven strategic fields of business: in passenger business, in logistics, in maintenance, repair and overhaul (MRO), in catering, in leisure travel, information technology
and airport ground services. We shall ensure that our companies further extend their
current premier positions by means of value-oriented management. As part of this
concept, stronger growth in aviation-related business segments will give the Group a
more balanced structure in future.
The underlying philosophy of our strategy, as hitherto, is to maintain a just equilibrium
between the interests of our shareholders, customers and employees. With high-quality
products and services, attractive and secure jobs and outstanding financial results,
we shall safeguard our ongoing growth and successful business performance.
Our network of alliances in the passenger business made a key contribution to the good
earnings performance in the year under review. They contributed some DM 500 million
to our profit. Our world-spanning alliance network is now being complemented by new
partners such as Ansett Australia, Air New Zealand and All Nippon Airways. With more
than 700 destinations, the Star Alliance will be able to offer more flight connections than
ever before. Its importance as a strategic factor in our success is increasing perceptibly.
That is why we must seek to extend the Star Alliance’s competitive edge. The creation of
a dedicated management structure will speed up decision-making and tap additional
revenue and cost-saving potential.
Annual Report 1998 Chairman’s Statement
5
All of the Group’s companies are distinguished by a high innovatory capability. For
example, Lufthansa Cargo together with international partners is in the process of positioning itself as a powerful provider of integrated logistics services. Lufthansa Technik
has demonstrated its international competitiveness by clinching a record number of new
contracts and has also formed successful joint ventures with US partners. In a fierce
international bidding contest, LSG was picked to take over the operational management
of the motorway service station chain Autobahn Tank & Rast. And its stronger involvement with its cooperation partner Sky Chefs will reinforce its global presence.
For much of 1998 the air transport market was buffeted by regional currency and
economic crises in Asia, Latin America and the CIS states. Nevertheless, the companies
of the Lufthansa Group succeeded in reinforcing and extending their market position.
This confirmed the correctness of their efforts to further reduce unit costs and to encourage sales partners and vendors to achieve similar cost savings. Fair competition on
world markets requires a level playing field for all participants. The entrepreneurial
success of airline companies must not be jeopardised by ideological prejudice, changing
political constellations or regulatory interference with smoothly functioning market
principles. In the future, as in the past, I shall personally try my utmost to ensure that the
same standards are applied throughout the world. Global players need global rules.
The aviation market is a growth industry. We intend to participate in that growth. This
requires extensions and improvements to the infrastructure on the ground and in the air
as well as an interlinking of the different suppliers of public transportation. We urgently
need adequate airport capacity. In order to establish a popular consensus for that need,
we pledge to maximise the ecological compatibility of our operations. Lufthansa has
undergone a fundamental transformation. The Company is in better shape than ever.
We are convinced that our experience, expertise and our enthusiasm for this Company
will pay off even in a more difficult operating environment.
The positioning of Lufthansa as an aviation group opens up new opportunities and growth
potential in future-oriented business sectors. We shall make good use of them in the joint
interests of our customers, staff and shareholders and in doing so also help reinforce
employment prospects in Germany as elsewhere. Our achievements to date give us cause
to look to the future with optimism, despite all the uncertainties that lie ahead.
Finally, I would like to thank you for your trust during a year in which Lufthansa made
great strides. But I must also thank our keen and competent employees. They will
continue to work hard to keep Lufthansa on the path of success – to an increasing
extent as fellow shareholders.
Yours faithfully,
Jürgen Weber
Chairman of the Executive Board, Deutsche Lufthansa AG
The Lufthansa Group
Transparency in air space
Modern aviation relies increasingly on
satellite navigation. Jets are therefore
fitted with flat antennae no larger than
the palm of one’s hand. They pick up
satellite signals, thus determining the
exact position of the aircraft.
The satellite–based navigation system
GPS (Global Positioning System) also
reduces flight time, since it enables a jet
to take a direct route to its destination
airport, without having to rely on beacons
on the ground. New on–board systems –
TCAS and EGPWS – increase flight
safety. TCAS (Traffic Alert and Collision
Avoidance System) gives pilots an early
warning of potential mid-air collisions,
while EGPWS (Enhanced Ground Proximity
Warning System) prevents so called
controlled flight into terrain accidents.
All Lufthansa jets are already fitted with
TCAS. EGPWS will be installed by the
year 2001.
8 Annual Report 1998
Annual Report 1998 Group Management Report
Adoption of IAS enhances transparency
Group Management Report
1998
This year the consolidated financial statements have been drawn up for the first
time on the basis of the International Accounting Standards (IAS) in accordance
with the option provided under the new
Section 292 a of the German Commercial
Code. This obviates the need to compile
a separate set of certified consolidated
financial statements based on the German
Commercial Code.
Profit before taxes lifted by 42 per cent to DM 2.5 billion – operating
result improved from DM 1.6 billion to DM 2.1 billion – net profit for the
period increased by 33 per cent to DM 1.4 billion.
Lufthansa is also applying many provisions
of the IAS standards – the use of which is
not yet compulsory in German accounting
– in order to improve the comprehensiveness and transparency of the information
it publishes. However, a direct comparison
of the year-on-year figures is possible
only with the specially recompiled consolidated financial statements for 1997
(which are likewise based on IAS) but not
with the financial statements of earlier
years. The adoption of IAS has effects
both on the consolidated balance sheet
and the consolidated income statement.
Effects on the balance sheet
The consolidated balance sheet under IAS
is affected in particular by the different
treatment of leasing agreements and the
adjustment of retirement benefit obligations.
Thus the capitalisation of leased aircraft,
which hitherto were not included in the
balance sheet, substantially increases
fixed assets. The associated financial
obligations are now shown as liabilities.
On the other hand, the provisions for
anticipated losses in respect of leasing
agreements and the inclusion under
prepaid expenses of prepaid leasing
instalments, which were shown previously
in the consolidated balance sheet drawn
up in line with German commercial law,
are superfluous under IAS.
The use of a more dynamic accounting
rule for pension obligations required by
IAS has led to a sharp increase in retirement benefit obligations.
IAS adjustments affecting earnings in
past years were shown net of offsetting
deferred taxes and charged directly
against retained earnings. On the other
hand, the portion of earnings retained
from last year’s net profit partly counterbalances this effect.
Impact of IAS on income statement
The use of IAS accounting standards also
has an impact on the consolidated income statement. The increase in the profit
from operating activities and the concurrent deterioration in the financial result
are caused by several factors. Firstly, the
transfers to retirement benefit obligations,
which in the past were recorded in total
as staff costs, are now split into current
service costs (under staff costs) and
interest expenses. Secondly, obligations
arising from financial leasing agreements
are now included in the balance sheet.
Hence the interest component of the
leasing instalments, which was formerly
included under operating expenses, is
now allocated to the financial result.
Leasing expenses are no longer included
under the cost of materials; however,
depreciation and amortisation now also
include the depreciation on aircraft
acquired under finance leasing agreements.
Revenue increases. This is because
under IAS the pro rata revenue earned
from partly completed customer orders,
including the proportional contribution to
earnings, has to be shown, too.
Changes in the group of consolidated
companies
Important changes in the group of consolidated companies compared with the
consolidated financial statements published in 1997 according to the German
Commercial Code concern the deconsolidation of Condor Flugdienst GmbH
and the Delvag companies. By contrast,
START was consolidated for the first time.
Economic environment and global air
traffic trends
The world economy grew at a much
slower rate in 1998 than in the previous
year. Regional economic and monetary
crises, at first in Asia, then in Latin
America and Russia, seriously impaired
the international trade and service flows –
a development that was not fully offset
by the continuing robust growth in North
America and (to a lesser extent) in
western Europe. According to current
estimates, the rate of growth of world trade
slowed abruptly from eight per cent in
1997 to around three per cent from the
beginning of 1998. Moreover, the air traffic
industry was hit harder than world trade
as a whole by the crisis-like developments: it responded with a deceleration
Earnings breakdown of the Lufthansa Group
in DM million
Operating income
Operating expenses
Profit from operating
activities
Financial result
Profit from ordinary
activities
Profit before income
taxes
Income taxes
Minority interest
1998
1997
Change in
per cent
25,314
– 22,469
23,577
– 21,446
7.4
– 4.8
2,845
– 363
2,131
– 382
33.5
5.0
2,482
1,749
41.9
2,447
– 1,015
–1
1,431
1,687
– 606
–4
1,077
45.1
– 67.5
75.0
32.9
9
of its pace of expansion by seven percentage points to just one per cent. This
was primarily attributable to a decrease
of one per cent in the transportation of
air cargo. This contrasted with an increase of two per cent in passenger traffic
in general and of three per cent on international routes. The sharp expansion of
capacity by some rival carriers noticeably
intensified the pressure of competition in
the second half of the year.
Exchange rate movements
Despite pronounced specific exchange
rate movements, the external value of the
German Mark against the currencies of
the major industrial nations showed little
change on balance last year. Consequently, the Group result for 1998 was
largely unaffected by currency swings –
in contrast to the year before.
Profit exceeds expectations
In the 1998 financial year the Lufthansa
Group raised revenue by 4.8 per cent to
DM 22.7 billion (1997: DM 21.6 billion),
above all thanks to a marked improvement
in the rate of utilisation of flight capacity.
As costs increased more slowly owing to
the ongoing rigorous cost management
programme and also favourable kerosene
prices, the Group managed to post a new
record profit before taxes (profit from ordinary activities) of DM 2.5 billion. Despite
a steep rise in the tax bill, the Lufthansa
Group was also able to boost the net
profit for the period by the sizeable margin
of 32.9 per cent to DM 1.4 billion.
Traffic revenue up by 4.4 per cent
As in 1997, the growth in revenue was
generated principally through an increase
in traffic revenue, which rose by 4.4 per
10 Group Management Report Annual Report 1998
World trade and passenger traffic
Change from previous year in per cent
Index 1993 = 100
150 %
140 %
130 %
120 %
110 %
100 %
1994
1995
1996
1997
1998
Revenue passenger-kilometres
in worldwide air traffic
Revenue passenger-kilometres/scheduled traffic
Lufthansa Group
World trade
Gross domestic product for Germany
cent in 1998 to DM 19.6 billion. It accounted for 86 per cent of revenue. Even
though Condor is no longer included in
the consolidated accounts, the breakdown of traffic revenue was virtually unchanged: passenger business brought in
80.6 per cent of the traffic revenue, while
the freight business of Lufthansa Cargo
was responsible for the other 19.4 per cent.
World trade and cargo traffic
trend 1994–1998
Index 1993 = 100
150 %
140 %
130 %
120 %
110 %
100 %
1994
1995
1996
1997
1998
Revenue cargo tonne-kilometres
in worldwide air traffic
Revenue cargo tonne-kilometres/Lufthansa Group
World trade
Gross domestic product for Germany
Good performance of passenger
business
The growth of 5.8 per cent in revenue
from passenger business to DM 15.8 billion was based on a sharp increase in
traffic on the European continent and
across the North Atlantic. By contrast, the
revenue earned in the Asia/Pacific region
showed a slight year-on-year decrease
owing to the economic crisis in the area.
The total number of passengers carried
went up by 8.8 per cent to 40.5 million.
On account of the greater expansion of
traffic on short and medium-haul routes,
the amount of available capacity sold,
measured in revenue passenger kilometres, grew only by 5.8 per cent. This
nevertheless outstripped the growth in
capacity offered by the Group by 2.2 percentage points. The passenger load factor
improved as a result to the best-ever level
to date of 73.0 per cent.
Average yields largely stable
Owing to the disproportionately high
growth on short-range continental routes,
the average yields per passenger fell by
2.8 per cent. But in relation to capacity
sold – in terms of revenue passenger
kilometres – they were on a par with the
previous year.
Lufthansa Cargo holding its own
In the freight business the volume transported amounted to 1.7 million tonnes of
cargo and mail, which exactly matched
the 1997 figure. The volume of capacity
sold, measured in tonne-kilometres, increased by 2.2 per cent in spite of a contraction of the market. As the extra 4.6 per
cent of capacity offered was not fully
absorbed by the market, the overall load
factor declined by 1.5 percentage points
to 66.8 per cent. Lower average yields
due to changes in currency parities were
mirrored in a drop of 1.0 per cent in the
revenue generated by the carriage of
freight and mail to DM 3.8 billion.
11
Increase in other revenue
The increase of 7.8 per cent in other
revenue to DM 3.1 billion was once again
principally attributable to Lufthansa
Technik. The Group’s Maintenance,
Repair and Overhaul (MRO) wing raised
its external revenue by 10.4 per cent to
almost DM 1.6 billion. The IT Services
business segment – consisting largely of
the activities of Lufthansa Systems GmbH
and the electronic distribution group
START Amadeus – achieved a rise of
12.5 per cent in its external revenue to
DM 0.4 billion, which was the largest
relative growth. In the face of fierce price
pressure, revenue from catering business
remained at the prior-year level of DM 0.6
billion. Disregarding inter-segment
revenue, the passenger business generated 71.6 per cent of total revenue, cargo
16.9 per cent and MRO 7.0 per cent,
while catering and IT services accounted
for 2.8 and 1.7 per cent respectively.
Marked rise in other operating income
Other operating income, including changes
in inventories and work performed by the
enterprise and capitalised, soared by
35.2 per cent to DM 2.7 billion (1997:
DM 2.0 billion). In particular, the book
profits from the disposal of tangible
assets and financial assets climbed to
DM 698 million (1997: DM 469 million).
Capital gains from foreign currency
positions and the income from redebiting
of accounts payable likewise rose appreciably. Total operating income climbed
by 7.4 per cent to DM 25.3 billion.
Costs under control
Total operating expenses increased by
4.8 per cent compared with 1997 to
DM 22.5 billion. This was 2.6 percentage
points less than the increase in total
operating income and was attributable
Operating expenses Lufthansa Group
Increase on previous year
Revenue
22,654 DM million
Aircraft fuel
1,690 DM million
+ 4.8 %
– 8.8 %
Fees and charges*
3,775 DM million
+ 4.7 %
Staff costs
5,608 DM million
+ 1.6 %
Depreciation and amortisation
1,694 DM million
+ 0.5 %
Sales commissions to agencies
1,723 DM million
– 0.9 %
*The security charge levied at German airports
(DM 172 million in 1998, DM 170 million in 1997) is
included. The collection of this item was credited
to income.
first and foremost to the successful
implementation of the cost reduction
programmes and to lower fuel prices.
For example, the cost of materials rose
by a margin of just 2.6 per cent to
DM 9.2 billion. It benefited especially
from the 8.8 per cent fall in fuel costs to
DM 1.7 billion. By contrast, the consumption of materials and the cost of
merchandise purchased expanded by
11.8 per cent to DM 1.6 billion due to
higher material prices. Airport fees and
air traffic control charges went up by
4.7 per cent to DM 3.8 billion, which was
in line with the rate of increase in output
and revenue. The overall cost of services
purchased was 3.9 per cent higher at
DM 5.9 billion.
At DM 1.7 billion, depreciation and amortisation of tangible assets and financial
assets matched the prior-year level.
Moderate trend in staff costs
The number of staff employed on average
during the year decreased by 1.2 per cent
to 54,867 – partly as a result of structural
changes. Lufthansa spent a total of DM 5.6
billion on wages and salaries, social security and pension contributions and other
employee benefits; that was 1.6 per cent
more than in the previous year. The share
of staff costs in total operating expenses
fell by 0.7 percentage points to 25.0 per
cent. As a share of revenue, staff costs
came to 24.8 per cent, as opposed to
25.6 per cent in the previous year. Whereas wages and salaries went up by 2.1 per
cent and social security contributions rose
by 3.8 per cent, the year-on-year drop of
11.7 per cent in pension costs and other
employee benefits had a dampening
effect on the expenses side.
One-off effects in other operating
expenses
Other operating expenses climbed by
13.2 per cent to reach DM 6.0 billion
(1997: DM 5.3 billion). Operational and
production-related costs such as sales
commissions to agencies, rents and
EDP-based distribution systems either
decreased or recorded below-average
increases. By contrast, the expenses
incurred from redebited accounts payable
rose with the deconsolidation of Condor,
although this was offset by corresponding
income. Staff-related costs – especially
training expenses – as well as advertising
and sales promotion costs all went up. In
addition, the outsourcing of some service
units led to structural shifts in other
operating expenses. In the aggregate the
increase in other operating expenses
was cancelled out by the rise in other
operating income.
Successful cost management
Starting with the initiation of the cost
management project “Programme 15”,
convergent projects have been set up
since mid-1996 in all Group companies.
The overriding aims of Programme 15
were, on the one hand, to lower unit costs
per available seat-kilometre to 15 pfennigs
and, on the other, to achieve savings
totalling DM 1.5 billion by the end of 2001.
Sub-projects were concerned with analysing overhead costs, initiatives aiming at
cutting fees and charges, improving the
procurement position, the reduction of staff
costs and reducing costs of distribution
and information technology.
Judging by the measures implemented
so far, it may be assumed that the volume
objective will be achieved already during
the current year – that is, two years ahead
of schedule.
Record earnings result
Thanks to a pleasing revenue trend in
almost all business segments, muted cost
growth and a marked improvement in the
rate of capacity utilisation, Lufthansa succeeded in lifting the profit from operating
activities to well over DM 2.8 billion. This
bettered the record result earned in 1997
by a further 34 per cent. The chief contribution to the profit total was made by the
passenger business with DM 1.9 billion.
The IT Services business segment likewise
turned in a higher profit from operating activities. Lufthansa Cargo, Lufthansa Technik
and LSG did not quite repeat their good
earnings performances of the previous year.
With DM 0.5 billion, Lufthansa Commercial
Holding improved its profit before taxes
by DM 0.2 billion. This mainly reflected the
proceeds from the disposal of the shareholdings in Hapag Lloyd and Euro Lloyd.
The operating result of the Lufthansa Group
surged from DM 1.6 billion to DM 2.1 billion.
13
Financial result improved
The Group financial result improved by
five per cent from minus DM 382 million
to minus DM 363 million. The rise in the
income from subsidiaries, joint ventures
and associates to DM 260 million (1997:
DM 229 million) was due primarily to the
profit contribution from C & N Touristic AG.
The considerable decrease in the negative net interest by DM 165 million to
DM 383 million chiefly mirrors the decline
of DM 0.9 billion in net indebtedness.
On the other hand, the impact on income
of other financial items, at DM 210 million,
was burdened by the contractually stipulated revaluation of the corporate pension
scheme.
The net outcome of all these items was
that the profit from ordinary activities
climbed by more than 40 per cent to
DM 2.5 billion.
Sharp rise in tax charges
In connection with the higher consolidated profit, the income tax bill surged by
DM 409 million to DM 1,015 million. The
tax ratio jumped from 35 per cent in 1997
to 41 per cent, as inter alia the solidarity
surcharge was payable again in 1998.
Nevertheless, the Group’s net profit for
the period after taxes swelled to a new
record amount of DM 1,431 million. It
exceeds the 1997 net profit by a third.
Appropriation of the profit
Deutsche Lufthansa AG, the Group’s
parent company, recorded a net profit for
the year 1998 of DM 785 million (1997:
DM 863 million).
The operating profit before net changes
in special items with an equity portion
surged by 51 per cent to DM 1.3 billion.
The financial result declined by 19 per
cent to DM 0.6 billion. Owing to the
ending of the special depreciation facility
pursuant to Section 82 f of the German
Income Tax Ordinance and the exhaustion
of the remaining tax loss carryforwards,
the tax expenses by Lufthansa AG soared
by DM 1.1 billion to DM 1.2 billion. In consequence of this the net profit for the year
is lower than the 1997 figure. After transferring DM 365 million to retained earn-
ings, the distributable earnings come to
DM 420 million. The Executive and
Supervisory Boards will propose to the
Annual General Meeting to be held on
June 16, 1999 that this sum be used to
pay a dividend per share of DM 1.10
(1997: DM 0.90) on the dividend-bearing
nominal capital (now denominated in
euros) of EUR 975,544,909.32 (converted
from DM 1,908 million). After adding the
creditable corporation tax of DM 0.47,
shareholders fully liable to German tax
and entitled to offset corporation tax
payments will thus receive a gross dividend of DM 1.57 for each share held.
This represents an increase over 1997 of
67 per cent.
year under review total asset formation
came to DM 4.0 billion. After adjustment
for the reclassification of Condor in the
accounts, this was DM 1.6 billion more
than in the previous year.
The Lufthansa Group spent DM 2.9 billion
(1997: DM 1.6 billion) on purchases of
aircraft and advance payments on
aircraft; DM 0.1 billion was expended on
intangible assets (1997: DM 0.2 billion),
while DM 0.3 billion was allocated to
other tangible assets and DM 0.7 billion
to financial assets.
Capital expenditure focused on fleet
Capital expenditure on tangible assets
and financial assets was expanded
substantially throughout the Group. In the
“Cockpit live” – yet
another contribution
to transparency. In this
mock-up of a Lufthansa
Airbus A340 cockpit
visitors can enjoy the
first-hand experience
of flying, from a pilot’s
point of view.
Authentic sound effects,
constantly changing
instrument displays and
a detailed video projection make the “flight”
seem real. Lufthansa
uses the cockpit, which
can be set up in a matter
of hours, at numerous
events in Germany and
abroad.
The expansion and modernisation of the
fleet accounted for 73 per cent of the investment programme (1997: 67 per cent).
During the year under review the Group’s
airline companies took charge of 21 more
aircraft; eight aircraft were either sold or
taken out of service. Lufthansa German
Airlines acquired two Boeing 747-400s
and three Airbus A 340-300s for its longhaul routes, two Airbus A 321-100s and
three Airbus A 319-100s plus four secondhand Boeing 737-300s – from Condor
Flugdienst GmbH – for its continental
services. Lufthansa Cargo purchased five
Boeing MD11Fs and made advance payments on another nine Boeing MD11Fs.
CityLine added two Canadair Regional
Jets to its fleet last year. The Group’s
airlines received book profits of DM 126
million from the sale of eight aircraft.
Investments in financial assets increased
across the Group by DM 0.4 billion to
DM 0.7 billion. Among the major additions
to investments were:
15
– a loan from LSG Lufthansa Service
Holding AG to Tank & Rast Holding in
the amount of DM 137 million,
– a capital contribution to GlobeGround
GmbH of DM 62 million
– and equity acquisitions and capital increases made by Lufthansa Technik to
the tune of DM 53 million.
Growing importance of purchasing
In the wake of the constant reduction of
in-house production capacities, the share
of bought-in products and services, and
hence the direct importance of purchasing
activities for the overall earnings result, is
increasing in all the Group’s companies.
A focal point of the development of
purchasing to become an instrument of
strategic success is what is known as
“global sourcing”, which is gaining in
significance, in particular, in the context
of Lufthansa’s cooperation with its alliance
partners.
Lufthansa is also becoming increasingly
involved in purchasing collaboration ventures and is setting up inter-departmental
procurement teams for this purpose. The
segregation made in the previous year
between strategic purchasing, on the one
hand, and operational purchasing, on the
other, has proved beneficial and has led
to further price cuts amounting to a threedigit million sum.
Cash flow squeezed by high tax
payment
The resources generated from operating
activities as shown in the 1998 cash flow
statement totalled DM 3.6 billion; this was
DM 0.3 billion less than in the previous
year. The main reason for this was the
resumption of income tax payments in
the 1998 financial year, following the
exhaustion of the tax loss carryforwards
available from previous years, which
amounted to DM 0.3 billion more than in
1997. In consequence of this, incoming
funds exceeded net outflows for investment activities by DM 1.5 billion. DM 1.2
billion was spent on repayments on longterm loans. After adding the dividend
distributed for the 1997 financial year and
interest payments, the outflow of funds
used for financing activities increased to
DM 1.9 billion (1997: DM 0.9 billion).
As a result, the liquid funds (securities
and cash and cash equivalents) fell by
DM 0.4 billion to DM 3.3 billion.
Rise in fixed assets
Total assets expanded during the year
under review by 5.4 per cent to DM 24.0
billion. On the assets side, DM 1.4 billion
of this related to the item aircraft. Capital
expenditure on aircraft totalling DM 2.9
billion substantially exceeded depreciation
on aircraft of DM 1.4 billion.
No change in volume of financial assets
By contrast, the additions to financial
assets were almost equally counterbalanced by depreciation and disposals.
Equity ratio
Lufthansa Group in per cent
30 %
28 %
26 %
24 %
22 %
20 %
1994
1995
1996
1997*
1998*
* Owing to changes in the group of consolidated
companies and the adoption of IAS as the
reporting base for the 1997/1998 consolidated
financial statements, the figures for these years
cannot be compared with those of previous years.
The current assets contracted by DM 0.5
billion to DM 6.7 billion, primarily due to
the decrease in liquid funds.
Higher equity ratio
On the equity and liabilities side of the
balance sheet, capital and reserves were
enlarged by DM 1.2 billion to DM 6.5
billion. This resulted from the increase of
DM 0.8 billion in retained earnings plus
the rise by DM 0.4 billion in the net profit
for the period. In spite of the expansion in
the balance sheet total, the equity ratio
thus jumped by 3.8 percentage points to
26.9 per cent. The outside capital totalling
DM 17.6 billion is made up of provisions
amounting to DM 9.9 billion (1997: DM 8.4
billion), long-term loans of DM 4.7 billion
(1997: DM 5.9 billion) and other liabilities
including deferred income adding up to
DM 3.0 billion (1997: DM 3.3 billion).
Provisions for taxes swelled by
DM 900 million
As a result, the share of provisions in
outside capital swelled by more than
eight percentage points to 56.6 per cent.
The increase in provisions by DM 1.5
billion is attributable to higher retirement
benefit obligations and, specifically, to
the rise of DM 0.9 billion in provisions for
income taxes. On the reporting date,
long-term loans were reduced by DM 1.2
billion to DM 4.7 billion and now account
for 26.9 per cent of outside capital
(1997: 33.3 per cent). This means that –
after subtracting liquid funds – net indebtedness has been cut by a further
DM 0.9 billion to DM 1.4 billion. Liabilities
further include trade payables to subsidiaries plus miscellaneous liabilities.
Including long-term outside capital,
97.2 per cent of fixed assets are covered
(1997: 99.5 per cent).
procurement markets by diversifying its
purchasing activities as far as possible –
to an increasing extent jointly with our
Alliance partners.
Net indebtedness
Lufthansa Group in DM billion
7
6
5
4
3
2
1
0
billion
1994
1995
1996
17
1997*
1998*
*Accounts 1997 and 1998 prepared according to IAS,
previous years figures have been aligned.
Risk management system implemented
As a globally active group which provides
a wide range of services, Lufthansa is
naturally exposed to diverse risks. The
objective of Lufthansa’s risk management
system is to avoid risks wherever possible
or to render their consequences manageable through a set of appropriate instruments. In order to comply with the new
Act on Corporate Governance and Transparency, Lufthansa last year elaborated a
structured overview of the essential risks
to which its business operations are
exposed as the basis of an early warning
system for identifying potential risks.
The Group’s internal auditing department
regularly audits the suitability and effectiveness of these instruments as an independent and objective body.
General economic risks
As is the case for every company, uncertainties exist regarding the future course
of business in the general economic
situation on our main markets and in the
market demand for our products and
services. Lufthansa is attempting to level
out the fluctuations in the international
The task of the Group controlling department and the controlling units in all the
Group companies and divisions is the
ongoing monitoring, control and cost
variance analysis of business trends and
entrepreneurial developments. One of the
chief functions of Controlling is to initiate
countermeasures – notably including
adjustment measures – if actual trends
deviate from target.
For possible claims and liability risks, especially those arising from the operation
of our aircraft fleet, Lufthansa has arranged
for adequate insurance cover, the extent
and scope of which is continuously reviewed and adjusted.
In an industry characterised worldwide by
trends towards concentration and growing
international collaboration, risks connected with anti-trust legislation and the
activities of cartel boards play a major
role. Lufthansa is seeking to limit these
risks by maintaining an intensive dialogue
with the decision-making bodies through
the provision of relevant information. In
addition, Lufthansa employs the services
of external advisors and legal experts –
also in tandem with its cooperation partners – in order to avert the danger of an
impairment of the Company’s business
operations.
Tax risks
Comprehensive legal advice and the efforts of in-house experts and recognised
specialist advisors minimise the tax risks
inherent in a multiplicity of laws, regula-
tions and legal ordinances containing
frequent changes and interventions,
which sometimes have retroactive effects.
Use of derivatives
Lufthansa employs a variety of financial
derivatives in order to hedge its operational business. Detailed information on
the nature and scope of these instruments, which limit the risks associated
with interest rate, exchange rate and fuel
price fluctuations, are contained in the
Notes to the Consolidated Financial
Statements.
Introduction of euro unproblematic
so far
The launch of the single European currency – the euro – on January 1, 1999
represented a milestone in the creation of
European economic and monetary union
(EMU). As from January 1, 1999 Lufthansa
has the capability of conducting all transactions with its customers and vendors in
euros if they so wish. On January 1, 2000
Lufthansa will make the euro its Groupwide in-house currency. Besides the
technical conversion measures, the
adjustment to the changed market and
competitive conditions constitutes an
equally important part of the preparations.
The task of process adjustment and the
preparation of the data processing
systems are on schedule.
Preparation for the year 2000
Lufthansa recognised the complexity and
significance of the “Year 2000 problem”
at an early stage and set up a central
project management task force at Group
level to deal with it. In order to ensure
trouble-free operation during and after
the changeover to the new millennium,
an examination of the applications and
IT systems, the infrastructure and technical systems as well as the business
processes, including the major business
relationships, has been initiated. The
necessary measures are being carried out
on a decentralised basis in the individual
departments and Group companies. Our
aim is, by means of the measures and
projects that have been set in train, to
maintain our business operations and
ensure the functionality of our flight
network, systems and plant through the
changeover to the new millennium.
Strategic orientation as an aviation
group
The parent company of the Lufthansa
Group is Deutsche Lufthansa AG. As
parent company it operates Lufthansa
German Airlines in the form of an autonomously functioning but legally dependent
profit centre. This accords with the outstanding importance of the passenger
business in terms of resources, decisionmaking and strategic relevance. For all
other business segments Lufthansa AG
exercises its leading role by acting as a
strategic management holding company.
The Group’s business strategy is the
quintessence of a systematic forwardplanning process. It is updated and
refined each year at two master-strategy
conferences covering a time horizon of
five years.
The objective of Lufthansa’s business
strategy is to develop the Company into
the world’s premier supplier of air transport and related services. As an integrated aviation group, Lufthansa is active
in seven strategic business segments that
are evolving into a high-performing corporate network of separate but mutually
cooperating companies. Thus the path
towards decentralisation is being consistently pursued.
Additional enterprises providing financial
and other services support the operational
business units.
All the business segments are pursuing a
clear international growth strategy. Besides
internally generated growth, external expansion through strategic alliances and
equity links is envisaged in individual
business fields.
Our aim is that each of the seven business
segments
Y
Y
Y
Y
Y
Y
Y
Passenger Business
Logistics
MRO
Catering
Leisure Travel
Information Technology
Ground Services
shall occupy a leading position worldwide
in its respective market segment in the
medium term and generate profitable,
long-term growth. Activities that do not fit
in with the concept of the aviation group
will not be pursued on a long-term basis
but, if at all, only out of short-term tactical
considerations.
The philosophy underlying this business
strategy is the desire to take adequate
and harmonious account of the interests
of our shareholders, customers and employees.
The yields expected by the capital
markets, which are calculated using the
CAP (Capital Asset Pricing) method, are
translated into a target return on investment of at least twelve per cent for each
19
business segment. With a view to ensuring even more precisely in future that
each business segment is adding maximum value, the cost of capital specific to
each business segment is currently being
closely analysed. This will further improve
the transparency and financial comparability of the various business units and
thus provide the Group’s management
with an even more sophisticated tool for
allocating the scarce resource capital.
Outlook
Slowdown of global economic growth
Since mid-1998 global economic growth
has slowed distinctly under the impact
of the crises in Asia, Russia and Latin
America. The prospects for 1999 remain
subdued. If the momentum of growth in
the western industrial nations were to
weaken on account of a downturn in
exports to the crisis-ridden regions, this
would have an adverse effect on Germany
in particular. On the other hand, world
Air traffic industry remains on the growth path
4.7 growth p.a. worldwide until 2002
6.0
6.1
5.8
5.7
5.0
5.4
5.3
4.4
(Source: IATA Passenger Forecast 1998)
in per cent
Air traffic within a continent
Air traffic between continents
4.3
trade is expected to expand a little more
strongly in the coming two years as
a slight overall economic recovery is
anticipated, notably in the Asian emergingmarket countries. All the forecasts indicate
that the world air traffic industry, too, will
experience a certain impetus, although the
growth of air transport will be noticeably
lower than the average rate in recent years.
Against this background, the pressure of
international competition will intensify
further for all the Group companies.
Profitable growth is the aim
Lufthansa is seeking to counter the continuing price pressure through stringent
cost management and a more flexible
cost structure. The extension of our
alliances and the further optimisation of
the Group’s structure are likewise intended to serve this purpose. In the coming
year those Group companies that are
directly engaged in aviation business
plan to significantly improve their market
position through stronger expansion. The
other business segments, too, envisage
strengthening their competitive position in
their respective market segments. For
IT Services a double-digit rate of growth
is targeted during the planning period. Up
to the end of the year 2001 the Lufthansa
Group intends to invest a total of DM 10.1
billion. Nearly 68 per cent of this capital
spending is earmarked for purchases of
and advance payments on new aircraft.
From the present planning perspective,
the capital investment programme will
be financed in full from the cash flow
generated.
Greater uncertainty
Based on the trends in demand and
revenue in the first few months of the
current year, Lufthansa is anticipating a
moderate rise in revenue of four per cent
in 1999. The operational course of business is subject to greater uncertainty
compared with last year; hence a repeat
of the record earnings result achieved in
1998 should not be automatically expected. Nevertheless, Lufthansa is confident
that in 1999, too, it can achieve the target
rates of return derived from the weighted
capital costs. The aim remains to conclude the current financial year with a
profit before taxes of DM 2 billion.
Outlook for the business segments
Passenger Business
Current global economic developments
point for 1999 to only a slight overall
growth in international passenger traffic.
The different trends in the various traffic
regions require a flexible growth strategy.
The Passenger Business segment is thus
pursuing a mixed policy.
In the North Atlantic region seat occupancy rates are so high at the moment
that there is a danger of having to turn
passengers away. Lufthansa is therefore
responding to this situation with a higherthan-average increase in its capacity on
offer. In the other traffic areas structural
adjustments to the flight programme will
strengthen our market position.
All in all, Lufthansa will step up its available flight capacity in 1999 by more than
ten per cent, with the emphasis on intercontinental traffic.
The contribution of Lufthansa’s alliance
partners to the expected traffic growth will
increase again. In particular, the addition
of Ansett Australia, Air New Zealand and
All Nippon Airways to the Star Alliance
will have a positive effect.
The cost management project “Programme 15” will continue to enjoy a high
priority; given the greater uncertainty
surrounding the future course of business,
it will gain further in importance.
Lufthansa CityLine will expand its capacity
only moderately in 1999. From the year
2000 onwards CityLine will expand more
strongly in line with the growth path plotted
by the Lufthansa Group for the European
market. The fleet development programme ties in with this plan. It envisages
the commissioning of up to 60 more regional jets for the five-year period starting
in 2002. Based on the present state of
planning, these jets will replace the Avro
fleet and provide capacity for market
growth. The final choice of the type of
aircraft to be procured will be made in
the second quarter of 1999.
Logistics
Lufthansa Cargo has repositioned itself
in the international air freight market with
its new logistics service and Business
Partnership Programme. This includes the
aim of integrating the distribution and
logistics functions of Lufthansa Cargo,
SAS and Singapore Airlines. Given the
weak state of the market at present, its
economic performance in the current
year will depend greatly on how far it
manages to keep capacity in line with
demand.
Maintenance, Repair and Overhaul
Lufthansa Technik is continuing to generate a very buoyant demand for its MRO
services and has a very high level of
orders in the current year. Even after 1999
the dynamism of the market is expected
to slacken only slightly.
The difficult earnings position of some
major customer groups is leading to
fiercer price pressures, however. Nevertheless, Lufthansa Technik sees a good
21
chance of raising both revenue and
earnings further in the current financial
year.
Catering
LSG Sky Chefs will benefit from the projected worldwide increase in the volume
of passenger traffic. The Group’s catering
specialist is countering the reduction in
the service budgets of its clients through
the optimisation of its purchasing activities and an efficient system of cost
management. LSG Sky Chefs intends to
maintain and extend its market leadership in airline catering by means of a
flexible pricing policy and the expansion
of its global service network. The raising
of its participating interest in Onex Food
Openness is the aim
of the new design of
the Lufthansa Terminal
at Frankfurt. Dark
corridors with cramped
waiting rooms have
been transformed into
light and spacious
areas. Come rain or
shine, the clear view of
the airport apron gives
passengers marvellous
insights into the life of
a major international
airport.
Annual Report 1998 The Lufthansa Share
23
The Lufthansa Share
Services, Inc., in particular, will strengthen
its market position. In addition, SAS
Scandinavian Airlines Systems has been
won as a new customer from the year
2000. To this end an extensive service
network is to be built in Scandinavia.
On the basis of current trends, LSG Sky
Chefs expects to raise both its revenue
and its earnings contribution to the Group
in 1999.
Leisure Travel
The persistently low interest-rate level, a
slight lessening of the tax burden in the
lower and middle income groups, an
increase in child benefit allowances and
the continuation of the very stable price
climate will boost disposable incomes in
Germany in the course of this year by
three to four per cent. As travel continues
to rank as one of the population’s most
favoured spare time pursuits, further
growth in travel spending seems likely.
This was confirmed by the very gratifying
trend during the past few months.
Notwithstanding the noticeably keener
competition in the marketplace, C & N will
deliver a growing earnings contribution.
IT Services
The IT Services business segment is
looking to extend its already significant
market position. Its efforts are focused on
achieving expansion in the market with
external (i. e. non-Group) clients. In the
growth markets of Lufthansa Systems the
management board expects to exceed
the 1998 profit by a clear margin in the
current year. The most important aim in
1999 for the START Amadeus travel distribution system is to secure its market
share in its present-day core business.
Added to this, the resolute implementation of cost retrenchment programmes
will strengthen its competitive position.
Ground Services
According to current forecasts, the freely
accessible world market for airport ground
services will expand vigorously in the
years ahead. It will be boosted not only
by the anticipated growth in air traffic but
also by the progressive deregulation of
this market.
Lufthansa’s stock was among the most widely traded equities in Germany
last year. In the summer it outperformed the German DAX index and on July 8
reached a year-best share price of DM 55.30 (EUR 28.27). The proposed
dividend for the year 1998 is DM 1.10.
In the 1998 trading year Lufthansa shareholders achieved an overall return of 10.3
per cent. This was composed of an 80 per
cent rise in the dividend from DM 0.50 to
DM 0.90 per share for 1997 and a share
price gain of 8.2 per cent. This calculation is based on the assumption that the
dividend payment was reinvested in
Lufthansa stock on the day of the payout.
For 1998 the Executive and Supervisory
Boards are proposing an increase of
22 per cent in the total amount distributed
to shareholders to DM 420 million. This
would raise the net dividend per share to
DM 1.10. After adding the tax credit for
stockholders liable to tax in Germany, this
amounts to a 67 per cent higher gross
dividend of DM 1.57.
In the context of the process of concentration that is occurring in this business
sector, GlobeGround is aiming to extend
its leading market position and to make
full use of the opportunities opened up by
EU-wide liberalisation.
Major events after year-end closure
On February 17, 1999, by way of a second
public offering, 23.5 per cent of the shares
in the Dutch data network operator
EQUANT N.V. were sold. During this transaction Lufthansa reduced its shareholding
of 2.34 per cent by 0.69 percentage
points and thereby made a book profit of
DM 171 million.
On March 10, 1999 the Supervisory Board
of Deutsche Lufthansa AG approved a
proposal to increase the equity stake held
by LSG Lufthansa Service Holding AG
in Onex Food Services, Inc. (OFSI) to
initially 48 per cent. Since 1986 OFSI
has been the controlling company of the
airline caterer Sky Chefs, with which LSG
has been collaborating since 1993.
It was further agreed that LSG will acquire
the remaining capital shares of Onex by
December 31, 2003 at the latest.
On March 19, 1999 GlobeGround GmbH
won a bidding auction to acquire 97.7 per
cent of the equity of Hudson General
Corporation, New York, USA. The transaction had a volume of US$ 134 million.
Stock-market value of Deutsche Lufthansa AG
at year-end
7.67
15
12
6.14
9
4.60
6
3.07
3
1.54
0
DM billion 1994
1995
1996
1997
1998
31. 3. 99
0
€ billion
Capital markets unnerved in 1998
Although the uncertainty surrounding the
implications of the Asian crisis led to a
decoupling of airline shares from the general stock market trend at the beginning
of the year, the Lufthansa share price
managed to outperform the German DAX
index for long periods in 1998. Buoyed by
the outstanding business performance
and the general euphoria in the western
equity markets, Lufthansa’s stock hit a
peak price of DM 55.30 (EUR 28.27) on
July 8.
However, the ensuing turbulence in the
international financial markets caused the
Lufthansa share price to drop to an allyear low of DM 27.95 (EUR 14.29) on
October 2. In the subsequent recovery
phase the stock price initially moved in
line with the DAX. But then uncertainty
about the course of the world economy,
especially in the CIS states and in Latin
America, led to a more critical assessment of aviation stock. This resulted in
renewed mark-downs in the share price
relative to the DAX.
In comparing Lufthansa with other airlines,
the financial markets nevertheless acknowledged the Company’s competitiveness: thus right from the start of 1998 the
Lufthansa share price gained significantly
greater value than the equity of all other
publicly listed European airlines. With a
stock market price of DM 36.80 (EUR 18.82)
at the close of the year, the Lufthansa
share was more than eight per cent higher
than it had been twelve months earlier.
24 The Lufthansa Share Annual Report 1998
The fact that Lufthansa’s shares are included both in the DAX Index and in the
Dow Jones Euro Stoxx 50 Index – the
sole European stock in the overall transportation sector to enjoy this privilege –
will continue to stabilise or boost our
Company’s share price in future.
Lufthansa share price trend
compared with the German DAX index
Despite some temporary doubts about
the airline sector, Lufthansa shares found
favour with financial analysts. In a direct
comparison with other global carriers,
Lufthansa stock has been flying high for
many months, with a clear majority of
analysts recommending investors to buy it.
The international rating agency Moody’s
shares this positive assessment. It gave
Lufthansa an “A 2” rating – the best valuation of all the airlines analysed.
Higher profit-related bonuses for
employees and management
With a view to achieving a harmonious
balance between the respective interests
DM 60
€ 30.68
DM 56
€ 28.64
DM 52
€ 26.59
DM 48
€ 24.55
DM 44
€ 22.50
DM 40
€ 20.46
DM 36
€ 18.41
DM 32
€ 16.37
DM 28
Jan
1998
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
1999
Feb
Mar
Lufthansa share
DAX Index
The experts see key fundamental strengths
in the Alliance strategy, the ongoing
reduction of unit costs and the Group’s
financial stability.
Management intensifies focus on value
enhancement
Whereas the operational steering of the
Group was refined further, the Company’s
top executives devoted special attention
to enhancing Lufthansa’s intrinsic value
through strategic management. Starting
from the current approach of pricing
capital costs on the basis of the CAP
(Capital Asset Pricing) model, a Groupwide project group is currently considering possible ways of implementing cash
flow-oriented management instruments.
25
Analysts need detailed
insights into a company’s financial position
in order to assess
share values and advise
on buying or selling.
Lufthansa also offers a
wealth of information
on the Internet. For
up-to-date reports and
financial data visit the
Lufthansa website at
of shareholders, customers and employees, Lufthansa is once more offering
its staff the opportunity of reinvesting
their 1998 profit-related bonus, which is
again higher than in the previous year,
in the Company in the form of employee
shares or as part of the “Lufthansa
Chance” equity participation programme
as agreed with the trade unions.
In addition, around 1,000 senior-level
managers throughout the Group have
again made use of the option of investing
part of their variable, profit-related remuneration in the “Lufthansa Performance”
programme under which they will gain a
cash bonus if Lufthansa’s stock outperforms a weighted basket of rival airline
shares over a three-year period.
Investor relations work stepped up
Our broad shareholder base, on the one
hand, and the global activities of the
Lufthansa Group, on the other, have
substantially increased worldwide investor
interest in Lufthansa’s stock. The Company has met these information requirements by stepping up its investor relations
work.
Lufthansa gave a detailed account of the
Company’s business situation at a total of
seven roadshows in the United Kingdom,
the United States, the Benelux countries
and Switzerland and at two conferences
of financial analysts. The comprehensive
range of information activities was complemented by presentations in Germany,
talks with expert analysts and investor
groups plus an international tele-conference.
Efforts to attract private investors were
also stepped up. Corporate presentations
carried out in cooperation with associations of retail investors and credit
institutions were well received by small
shareholders. In addition, a compact and
informative share news pack has been
sent twice yearly to interested stockholders since 1998.
Particular importance was attached to
displaying up-to-date financial information on the internet. At the website
“www.lufthansa-financials.de” the interested surfer can find, appearing both in
German and English on a timely basis,
all our regular publications, the current
share price, a data archive as well as
topical financial news about the Lufthansa
Group.
€ 14.32
26 The Lufthansa Share Annual Report 1998
Conversion to the euro
On September 15, 1998 Lufthansa converted its capital stock from shares with a
par value of DM 5 to non-par shares
(i.e. shares which simply represent a percentage of the total equity rather than
carrying a monetary par value) in preparation for the introduction of the single
European currency, the euro (EUR).
At its meeting on April 28, 1999 the Supervisory Board also decided to round up
the Company’s present capital stock total
of EUR 975,544,909.32 to the even figure
of EUR 976,896,000. A corresponding
motion is to be put before this year’s
Annual General Meeting. Each non-par
share would then have a nominal value of
EUR 2.56.
Wide shareholder base
In 1998 Lufthansa’s shares were among
the most widely traded stock in Germany.
In terms of the share turnover on the
German stock exchanges, the Company’s
equity ranked number 8 with a share of
5.6 per cent – a clear indication of the
attractiveness of Lufthansa’s stock. More
than a third of the now over 500,000
stockholders in the Company chose to
invest in Lufthansa’s equity for the first
time in 1998. The number of shareholders
increased by around ten per cent in net
terms in the course of last year.
Shareholder structure as of 31. 3.1999
Shareholder structure by nationality
Germany
Great Britain
USA
Switzerland
Belgium
Luxembourg
United Arab Emirates
Other
69.6 %
9.0 %
7.4 %
3.7 %
2.9 %
2.6 %
1.3 %
3.5 %
The Lufthansa share
Figures in DM per share
Result per share
Dividend
proposed/
paid
Share price:
Highest
Lowest
Year-end
1998
1997
1996
1995
1994
3.75
2.82
1.00*
1.98*
1.92*
0.90
0.50
0.50
0.40
54.95
27.95
36.80
37.85
20.67
33.80
25.83
19.75
20.78
22.75
17.35
19.75
22.30
16.80
19.50
381.6
381.6
381.6
381.6
381.6
381.6
355.0
355.0
26.6
26.6
7.5
7.4
No. of shares
in millions
381.6
of which
ordinary shares
381.6
of which
preference shares
–
Lufthansa’s market
value at year-end
in DM billion
14.0
1)
1)
1.10
–
12.9
–2)
7.9
DM 1.15 on preference shares
Preference shares converted into ordinary shares on
October 10, 1996
* As financial statements for the years 1997 and 1998 were
prepared according to IAS, the figures for these years cannot
be compared with those of previous years
2)
At the end of March 1999 the share
register showed the following breakdown
of our stockholders by nationality:
Germany 69.6 per cent, UK 9.0 per cent,
USA 7.4 per cent, Switzerland 3.7 per cent,
Belgium 2.9 per cent, Luxembourg 2.6 per
cent, United Arab Emirates 1.3 per cent
and others 3.5 per cent.
German private investors have increased
in importance for Lufthansa: their proportionate ownership of our Company
jumped by nearly six percentage points to
currently 30.7 per cent of the total capital.
It was they who snapped up the shares
relinquished by foreign institutional investors in the second half of 1998.
The confidence which these individual
shareowners showed in Lufthansa’s stock
was rewarded in the first quarter of 1999
with a surge of 7.6 per cent in the share
price to EUR 20.25.
27
Events
June 16, 1999
Annual General Meeting
Kölnarena
Cologne
August 20, 1999
Publication of
Interim Report
1st Half-Year 1999
November 18, 1999
Press Conference and
Analysts’ Conference on
Interim Report
3rd Quarter
May 4, 2000
Annual Press Conference
and Analysts’ Conference
on 1999 Result
June 15, 2000
Annual General Meeting
Berlin
28 Customers: Passengers, Airlines, Industry Annual Report 1998
Annual Report 1998 Customers: Passengers, Airlines, Industry
Customers: Passengers, Airlines, Industry
For an airline, as a service provider, the customer must at all times be the
focus of its strategic objectives. By offering a range of tailor-made products
all the companies in the Lufthansa Group have succeeded in widening their
customer base.
From the outset total customer orientation
has been a cornerstone of the philosophy
of Lufthansa German Airlines. The company aims to win new customers and keep
existing clients by offering them first-class
products and top-quality services. The
other Group companies, too, have developed successfully in line with market
requirements since being granted operational autonomy, and have won many new
corporate clients outside the Lufthansa
Group. To this end they have evolved a
variety of products and services which
meet the differing needs of their individual
customers.
Miles & More: Development since 1993
3.3 million members,
Growth rate: 20 per cent
4
3
3.3
2.7
2
2.2
1.7
1
1.3
0.8
0
million
Dec
1993
Dec
1994
Dec
1995
Dec
1996
Dec
1997
March
1999
Miles & More successful
Lufthansa introduced its Miles & More
frequent flyer programme in 1993 in order
to encourage customer loyalty. In no time
at all it had attracted one million members; today no fewer than 3.3 million
Lufthansa passengers worldwide enjoy its
benefits. In 1998, 600,000 bonuses were
redeemed (for flights, upgrades, Skyshop
articles and fantasy prizes). Partnerships
with 25 other airlines and 15 hotel operators and four car rental companies have
greatly enhanced the attractiveness of the
loyalty scheme. Further innovative projects
will optimise the programme and ensure
that Lufthansa Miles & More becomes the
leading custom reward scheme in Europe.
The Lufthansa Frequent Traveller and
Senator status are awarded on the basis
of flight mileage accumulated. Lufthansa
rewards its best customers with special
privileges, including access to exclusive
lounges, waitlist priority, a higher free
baggage allowance and designated
check-in counters. Lufthansa’s status
clients also enjoy these benefits when
travelling on any of the Star Alliance
carrier flights.
With an eye on future flyers, Lufthansa
has developed a Kid & Teen Service as
part of a life-cycle marketing concept.
It currently sends out information, graded
by age group, and birthday greetings to
30,000 children and youngsters.
All part of the flying
experience: Lufthansa
passengers try out
the new Economy seat
for long-haul aircraft.
Lufthansa presents its
new products to
customers early on –
at customer events,
trade fairs and exhibitions. It knows that is
the best way to gain
valuable, first-hand
insights into what
passengers expect on
board.
29
30 Customers: Passengers, Airlines, Industry Annual Report 1998
Star Alliance:
a new quality of business travel
For business travellers, in particular, the
crucial argument for choosing a specific
airline is a comprehensive flight programme and a global network. In recent
years Lufthansa has extended its programme enormously, both through its
own efforts and through its link-ups with
other airlines – especially the partners of
the Star Alliance. Once Air New Zealand,
Ansett Australia and All Nippon Airways
have become members of this extended
flying family in March and October 1999,
the Star Alliance partners will have a
combined route network comprising
some 700 destinations in more than 100
countries around the globe. Coordinated
timetables, short waiting times and the
boon of not having to change terminal
are just some of the customer benefits
already firmly established. The airlines’
frequent flyer programmes and customer
card systems have likewise been integrated. Status customers receive Gold
(at Lufthansa, Senator) or Silver (Frequent
Traveller) cards, so they can enjoy the
same level of service with all star alliance
partners throughout the world. Passengers
can therefore earn and redeem miles with
all Star Alliance members, and can use
these miles to gain Frequent Traveller or
Senator status.
High-quality service on the ground
and in the air
The service product for top-tier clients
has also been enhanced. This applies to
inflight service, where a comprehensive
refurbishment programme on long-haul
routes was completed last year, as well
as to ground service and travel preparations. Lufthansa is now making increased
use of computerised systems to shorten
check-in and transfer times, and to
ensure passengers can make reservations and receive information around the
clock. Via call centres and the electronic
Lufthansa InfoFlyway site on the Internet
(www.lufthansa.com), customers can call
up Lufthansa’s current flight offer, book
flights and hotels, hire cars and request
the service for passengers with special
needs.
The establishment of worldwide, interlinked call centres – most recently in
Melbourne – has raised Lufthansa’s
accessibility to 87 per cent. The success
of these efforts is confirmed by constantly
rising passenger numbers.
In order to maintain its position, Lufthansa
continuously monitors and reviews its
product by conducting frequent customer
questionnaires. The results of these surveys are collated in a Customer Service
Index and analysed regularly by the
Executive Board. Customer Advisory
Boards serve to maintain close contacts
with the company’s most important clients.
The insights gained are incorporated
directly into the redesign of products and
processes.
Special offers for private passengers
In the face of ever-increasing competition,
Lufthansa is extending its customer base
through selectively targeted campaigns –
Lufthansa Specials or the marketing of
spare capacity via the Internet. Thanks to
a sophisticated yield management
system, fare bargains can be offered
even outside the low season. In the
leisure travel segment, too, the Lufthansa
Group offers a differentiated programme
via C & N Touristic AG.
Annual Report 1998 Customers: Passengers, Airlines, Industry
Customised service for corporate clients
Lufthansa German Airlines devotes particular attention to corporate clients,
offering them customised EDP solutions
that reduce administrative and travel
costs, shorten preparation times and
streamline transactions. A case in point is
“Pay as you fly”, an enhanced version of
the ETIX® procedure for corporate clients,
which has been tested in a pilot phase
with the multinational Siemens AG. Other
major firms and a medium-sized enterprise will be added in the course of 1999.
Key Account Management Teams at
Lufthansa Cargo act as designated
contacts for global clients. They devise
special individual logistics concepts for
firms with branches in different traffic
regions. A call centre is available around
the clock to provide customers with
advice and information.
In urgent cases Lufthansa Technik even
sends its aeronautical experts direct to the
customer in the event of an engine problem. These “flying doctors”, known as
Airline Support Teams, rush to the “patient”,
perform boroscope checks to diagnose
the problem and restore the aircraft’s health.
With its new sales organisation, the company is also creating a firm foundation for
extending its customer base. Expert advisors are now on hand in the most important
markets in Asia and North America.
LSG Sky Chefs supplies 260 international
airlines with all the things that make a
flight an enjoyable experience. The company conducts direct passenger surveys
to test the quality of its inflight products.
This enables it to constantly refine its
range of products and services and
advise its clients accordingly.
Within the IT Services business unit the
various sections develop EDP solutions in
close cooperation with customers. On top
31
of this they actively seek new contacts
with other branches of industry that could
be potential customers for its products –
e. g. at trade fairs such as CEBIT. For
instance, the computerised systems
originally developed for crew deployment
planning are now also being used in
hospitals – after being specially tailored
to these clients’ requirements.
Since having been granted operational
independence, all the companies in the
Lufthansa Group have expanded their
business with external clients and sharply
raised their volume of non-Group revenue.
At Lufthansa Technik, for example, thirdparty business now accounts for almost
half of total revenue. At GlobeGround the
share of non-Group business has already
reached 75 per cent.
Lufthansa conveys
information about its
product and offers to
its regular customers
at Customer Advisory
Board meetings, as
here in Düsseldorf.
They provide a forum
for discussing criticism
and new ideas for
optimising service.
Transparency that
benefits both sides.
32 Our Employees Annual Report 1998
Annual Report 1998 Our Employees
33
Our Employees
Despite the personnel growth in service areas, productivity rose further in 1998.
By setting up the first corporate university in Germany, Lufthansa is setting
new standards in the career development of managers and budding executives.
same purpose is served by the instrument of semi-retirement. This very
equitable arrangement jointly agreed
between labour and management allowing older staff members to work fewer
hours or to take early retirement is
meeting with great interest among the
eligible age group.
Revenue per employee
Annualised average employee total
in DM thousand
420
400
The Lufthansa Group employed a total of
54,867 staff worldwide on average in 1998.
This was 1.2 per cent less than in the
previous year, calculated on a comparable basis.
time posts, the Group had an overall
personnel capacity of 49,439 equivalent
full-time employees on average during
the year under review; that was 1.5 per
cent fewer than in the previous year. On
an annual average 763 young people
were engaged in training, which was an
increase of 7.5 per cent over 1997.
On an annual average Lufthansa AG employed 27,955 men and women; this was
0.1 per cent more than in 1997. The Group’s
airlines recorded increases of 5.2 per cent
in their flight personnel. Between them,
Lufthansa German Airlines, Lufthansa
Cargo and Lufthansa CityLine had 14,611
cockpit and cabin staff. Forty-two per cent
of the Group-wide workforce are women,
while at the parent company Lufthansa AG
they are in a clear majority, at 62 per cent.
Outside Germany some 6,800 persons
were on Lufthansa’s staff – 2.4 per cent
less than a year earlier. As a result of the
international division of labour within the
Star Alliance, the individual member airlines are tending more and more to act as
the employer in their respective national
territory.
In 1998, 19 per cent of the staff employed
by the Lufthansa Group had part-time
contracts, and at the parent company the
percentage of part-timers was around
25 per cent. This reflects Lufthansa’s sense
of social responsibility and the desire to
make it easier to combine paid employment with family life. If the part-time jobs
are aggregated into the equivalent of full-
In 1998 Group revenue and the business
volume again expanded at a markedly
faster rate than personnel growth. Productivity rose further: turnover per employee in the Group increased by 6.1 per
cent. At the Group’s airlines the ratio of
available seat-kilometres to headcount,
calculated in employee-years, improved
by 3.9 per cent.
Personnel growth in service areas
Change in per cent Lufthansa Group 1997/1998
Personnel total
–1.2 %
Flight personnel
+ 5.2 %
Personnel at airports
in Germany
+ 4.4 %
Trainees
+ 7.5 %
Other
personnel
– 4.6 %
Lufthansa creates new jobs
The official headcount recorded throughout the Group in 1998 decreased in a
year-on-year comparison in nominal
terms. This was due to the spin-off of
some operating units to form autonomous
legal entities within the family of Lufthansa
companies (though outside the range of
consolidated companies). Within this
“greater Lufthansa family” 1,400 additional
jobs were created last year. Every suitable
trainee who, at the end of his/her training
or apprenticeship, applied for a job with
the Lufthansa Group in 1998 was given a
permanent contract.
380
360
340
320
DM000
1994
1995
1996
1997*
1998*
Greater employment prospects likewise
seem likely during 1999. The air traffic
industry remains set on a long-term growth
path – with Lufthansa in the vanguard. In
the next few years Lufthansa intends to
create 5,000 additional jobs to facilitate
the necessary growth in output. Above all,
the new recruits will be needed in the
operational units – i.e. flight crews working in the cabin or cockpit, but also station
crews – in other words, at the public
interfaces where customers encounter
Lufthansa most directly.
Modern methods of staff recruitment
and placement
Lufthansa now also makes use of the
Internet, via “Lufthansa InfoFlyway”
(www.lufthansa.com) and the electronic
job mart “Jobware” (www.jobware.de)
in order to attract suitable applicants.
A candidate call centre enables a more
efficient pre-selection to be made in
many cases – e.g. when a large number
of flight attendants are required. The
Group’s own central job placement office
contributes towards deploying the available human resources more effectively.
It also makes it easier to implement any
necessary restructuring measures. The
Moderate pay settlement
In line with the pay settlement of October
1996/April 1997, collectively negotiated
wage and salary rates were increased
from April 1, 1998 by 1.7 per cent. This
pay agreement, which had the long duration of 27 months and helped strengthen
Lufthansa’s competitiveness, formed the
starting basis for the 1999 pay round.
The new wage settlement agreed for the
52,000 employees of the Lufthansa
Group in Germany will run from January 1,
1999 to January 31, 2000. For the months
January/February the workforce will receive a one-off payment and from March 1,
1999 a linear rise in compensation of
3.5 per cent. In addition – as in previous
years – they will have a share in the
profits. This will take the form of a bonus
and a special payment – with the option
of choosing between cash, free shares
and participation in a dynamic equity
programme.
“Lufthansa Chance” again successful
Under the innovative profit-sharing model
“Lufthansa Chance”, our staff are given
some free shares and, in addition, can
buy more stock with a loan at guaranteed
prices. In 1998 almost 60 per cent of the
labour force opted to purchase Lufthansa
equity – 37 per cent through the programme “Lufthansa Chance” and 22 per
cent in the traditional form of employee
shares.
The two-year term of the first “Lufthansa
Chance” programme expired at the end
of 1998. The participants reaped a return
34 Our Employees Annual Report 1998
Annual Report 1998 Our Employees
on their investment of 379 per cent, which
they were entitled to cash in immediately
by selling their shares. But more than
50 per cent of them chose to keep hold
of their shares and to repay the loan.
Roughly half of the entire workforce are
already stockholders in Lufthansa.
School of Business: basis of change
process
With a view to placing the entire development of staff careers, executive advancement and organisational change on a
Group Statement of Value Added
in DM thousand
1998
1997
22,653,750
21,609,785
64,111
2,595,615
256,685
86,138
1,880,866
178,974
260,147
25,830,308
231,375
23,987,138
Cost of materials
9,185,956
Impairment losses relating to
financial assets and investments
held as current assets
240,200
Loss from subsidiaries,
joint ventures and associates
58
Other operating expenses
5,981,403
Input
15,407,617
8,955,249
2,792
5,283,948
14,305,312
10,422,691
9,681,826
Net value added
1,693,592
8,729,099
1,684,874
7,996,952
Utilisation:
Staff costs
Interest paid
Taxes
Minority interest
Net value added
5,607,663
639,360
1,050,414
967
1,430,695
8,729,099
5,521,598
726,690
668,281
3,749
1,076,634
7,996,952
Origin:
Revenue
Changes in inventories and
work performed by the
enterprise and capitalised
Other operating income
Income from interest
Income from subsidiaries,
Output
Gross value added
63,323
35
new footing, Lufthansa created an integrated concept in 1998 to underpin the
process of strategic and cultural transformation. The Lufthansa School of
Business was founded on April 1, 1998 as
the first corporate university in Germany.
It is located at the Lufthansa Training
Center in Seeheim, which celebrated its
25th anniversary last year as the focal
point of the Group’s cultural and educational activities.
The School of Business is active in five
business fields. With its Lufthansa Leadership Programmes it offers a comprehensive international career development
concept for all management cadres within the Group, but also for partner enterprises. Its learning and transforming
networks comprise hundreds of “transformers” with a view to accelerating the
strategic change and consciously nurturing the requisite leadership and performance culture. Via a cross-hierarchical
strategic and cultural dialogue, it acts as
a catalyst for the discussion, propagation
and implementation of key business
matters. Its “Lufthansa Future Generation”
programme promotes up-and-coming
talent, while employability initiatives are
aimed at individuals who wish to increase
their “market value” by taking courses
and gaining extra qualifications.
Benchmarking with 20 global players
One outstanding measure in 1998 was the
year-long part-time initiative “Climb 99”.
One hundred and seventy management
executives put Lufthansa’s leadership and
performance culture to the acid test of
benchmarking against 20 globally active
enterprises, implemented the insights
gained in their own field of activity and
shared their newly acquired knowledge
throughout the Group via the Intranet.
From 1999 the Lufthansa Summer School,
also established in cooperation with
renowned international business schools,
To ensure that your
outlook is clear staff at
Lufthansa Technik’s
window pane workshop
in Hamburg regularly
check the transparency
of the cabin windows
and remove any that
show possible signs of
damage. About 10,000
staff of the Lufthansa
Group are employed in
technical services.
will give all executives the opportunity
to deepen their strategic and personal
expertise.
Further refined performance management system for executive staff
The broad implementation of manager
assessment by their subordinates and the
fine-tuning of the system of setting agreed
targets are being bolstered by performance-oriented stock option schemes for
all executive staff. The introduction of the
“executiveNet”, a special Intranet for
managerial cadres, will make possible a
new quality of information and knowledge
management.
New profession:
Aviation Service Assistant
The Lufthansa Group is also committed to
evolving and extending modern vocational
training. For example, in 1999 the first
trainees will commence their careers in the
newly conceived profession of “Aviation
Service Assistant”. The constantly growing number of training places – in 1999
Lufthansa will recruit almost 20 per cent
more trainees than last year – not only increases the career prospects of the young
generation, it also ensures that in future
Lufthansa will remain an attractive enterprise also with respect to its excellent and
socially responsible training strategy.
36 Technology and Environment Annual Report 1998
Annual Report 1998 Technology and Environment
37
Technology and Environment
Electronic ticketing and cost-saving procedures for repairing modern jets
are just two examples from the wide spectrum of technological innovations
developed by the Lufthansa Group. With their high level of technical expertise,
Lufthansa staff are dedicated to protecting the environment.
Taking active steps to protect the environment has been an integral part of
Lufthansa’s corporate culture for more
than 20 years. Energy and raw materials
are deployed as sparingly as possible,
renewable natural resources used whenever possible and waste materials, waste
water, harmful emissions and noise pollution kept to an absolute minimum.
sales and distribution system of Lufthansa
German Airlines, is a pioneering venture.
For years one of the most frequently visited commercial websites in Germany, the
Internet address www.lufthansa.com
recorded no fewer than 219 million “hits”
in 1998. The number of booking queries
increased by almost 60 per cent to
6.5 million, while actual bookings trebled
to nearly 40,000. The Internet has proved
a highly useful tool for efficiently marketing remaining seat capacity. The trend
towards lower prices for telecommunication services, along with advances in
encryption technologies, point to aboveaverage growth in electronic commerce in
the near future. Thanks to the global market presence it has achieved, Lufthansa
will be able to extend its use of the internet
as a particularly cost-effective, high-yield
and flexible distribution channel.
InfoFlyway – the basis of electronic
commerce
Electronic systems play an increasingly
important role in air travel today. In an
ever-fiercer competitive environment they
are essential for achieving constant growth
in an economically efficient manner. Innovative systems are in place at all levels of
the vertical output chain. The InfoFlyway,
for example, the Internet-based direct
With this aim in mind, the “WebFly”
booking engine developed by Lufthansa
Systems offers a good starting base.
From mid-1999 it will simplify and speed
up reservations through the Lufthansa
InfoFlyway. Lufthansa Cargo also utilises
E-commerce for td.SameDay. The
express service for small consignments
within Europe is the first cargo service
which can be ordered online.
As a company engaged primarily in the
service sector of the airline industry,
Lufthansa has never pursued technology
as an aim in itself. Rather, it views technology as a means to support the Group’s
primary objectives.
The Group utilises state-of-the-art technical equipment and processes in order to
achieve its aims efficiently and in harmony with the environment.
Process automation progressing further
Another example of the advance of hightech in the services sector is the electronic ticketing facility ETIX®. It is particularly
well suited for what is known as “interlining”, i.e. flying with different airlines on
UV testing of engine
components. Once
they have been carefully cleaned in the
electroplating workshop, special paints are
then applied which
reveal all cracks and
damage when exposed
to UV light. Lufthansa
Technik in Hamburg
has developed procedures for cleaning
engine components
without using PER,
which is harmful to the
environment.
one ticket, as well as for cross-border
traffic. The aim is to introduce ticketless
flying throughout the Star Alliance network. Owing to its simplicity of use, its
reliability and the avoidance of waiting
times for ticket issue and check-in formalities, ETIX® is becoming more and
more popular – especially with business
travellers. Some 300,000 passengers a
month are already reaping the time-saving
benefits associated with ETIX® on flights
within Germany and to 44 destinations
abroad. In addition, ETIX® helps to optimise internal processes, thereby yielding
considerable productivity gains.
With its “Pay as you fly” system, which
has already been tested in a pilot phase,
Lufthansa has further refined its booking
system for corporate clients. The fare is
only debited to the client’s account if the
flight is actually taken. This obviates the
need for transfers and refunds, and the
customer gains an extra cash advantage.
More than 2,000 “Pay as you fly” ETIX®
transactions are already being handled
each week-day.
The existing automated check-in procedure was supplemented in 1998 by an
automated baggage handling system. In
order to shorten boarding times even
more, Lufthansa has also installed selfboarding terminals at Frankfurt and
Munich. These check boarding passes
electronically and thus create additional
access channels to the aircraft.
Shorter transfer times
Sophisticated computer technology is
also behind another Lufthansa service:
“Short Connex”, connecting flights with
shorter transfer times at Frankfurt and
Munich. In the 1999 summer timetable as
many as 800 connections a week have
reduced transfer times at Frankfurt to
between 35 and 40 minutes. This has a
direct benefit for the customer, and at the
same time it generates additional revenue
by ensuring flights have a higher priority
listing in the computer reservation
systems. Frankfurt is one step ahead of
the other major European airports in this
respect.
Lufthansa Cargo – integrated systems
assist transition to a logistics provider
Last year Lufthansa Cargo began its
transition from a leading air freight transportation company to an integrated
provider of logistics services. Lufthansa
Systems specialists are currently installing a new system – “Mosaik*View” –
to facilitate the expansion of the timedefinite freight products available since
April 1, 1998 and Lufthansa Cargo’s
express services. Cargo Future Communications operates Lufthansa Cargo’s
new call centre in Hahn and also offers
this expertise to other customers.
39
EDP solutions for corporate clients
Providing EDP services for the travel and
transport industry is the core competence
of Lufthansa Systems. The company is
able to meet the requirements of an
airline’s entire process chain. Systems’
portfolio of expertise further includes
finding technical solutions for a firm’s
entire EDP landscape and providing the
software for the various business processes. For example, Lufthansa Systems
runs an “SAP R/3 Competence Center”
that has been given a formal certificate of
approval by the standard software provider SAP.
The basis for Systems’ wide service
range is its own computer centre at
Kelsterbach near Frankfurt. It is one of the
most powerful of its kind and is equipped
with mainframe computers built by
Amdahl and IBM with a capacity of around
2,300 MIPS (= million instructions per
second), which means it can perform
2.3 billion computation steps per second.
Added to this are eleven Unisys computers with a capacity of about 600 MIPS.
The computer centre is in use 24 hours a
day, every day. It has a fail-safe security
system that guarantees continued operation even in the event of a disaster. Its
massive computing capacity is now
being used more and more by external
industrial customers as well.
Lufthansa AirPlus has launched a nationwide Extranet service which provides
firms with the capability to process their
own business operations or transactions
with customers, vendors or partners
online.
Drops of water on the
window of a Boeing
737 cockpit. The Rain
Repellent System,
which Lufthansa now
applies to all cockpit
panes, ensures the
pilot has a clear view at
all times. RRS prevents
dirt particles from
collecting on the pane
or water smears from
affecting transparency.
In addition, there is no
longer any need for
frequent cleaning with
agents containing
CFCs.
Technical competence in aircraft
maintenance and servicing
Lufthansa’s aeronautical engineers
collaborate closely with the aircraft
manufacturers on the design of aircraft
for the Lufthansa fleet. For instance,
Lufthansa invested some 30,000 aeroengineering man-hours in the design of
the Airbus A 340 alone.
However, this wealth of technical expertise
is not limited to new designs; it also encompasses maintaining and servicing the
fleets. Lufthansa Technik is licensed by
the aviation authorities both as an aircraft
maintenance company and as an aeronautical engineering and re-engineering
enterprise. Lufthansa Technik engineers
are thus authorised to make major alterations to aircraft and to modify maintenance systems. For example, the company
has developed countless intelligent testing
and repair procedures that save time and
money spent on aircraft maintenance.
A case in point is the method devised for
repairing components made of composite
materials. For a long time this was considered impossible due to the highly
41
Group Fleet
Number of commercial aircraft at December 31, 1998
Manufacturer/
Type
Airbus
Airbus
Airbus
Airbus
Airbus
Airbus
Boeing
Boeing
Boeing
Boeing
Boeing
Group
fleet
A 300
A 310
A 319
A 320
A 321
A 340
737
747
757
767
MD11F
McDonnell Douglas
DC10-30
Canadair Jet
Fokker 50
Avro RJ85
Total aircraft
complex inner structures of such materials.
The cost saving achieved by repairing –
as opposed to replacing – the radome of
an Airbus is 60 per cent. This process
also saves resources and the environment,
as the manufacture of new composite
components is very energy-intensive.
The method of repairing corroded fins in
the combustion chambers of CFM56
engines, which Lufthansa Technik developed jointly with its subsidiary Lufthansa
Shannon Turbine Technologies, likewise
saves the customer money – up to
US$ 62,000 per engine.
Over 200 engineers in development
teams
The engineering division at Lufthansa
Technik has separate development
organisations for avionics and electronics,
for aircraft cabins and systems. More
than 200 highly qualified aero-engineers
are involved in the team responsible for
such innovations as the “Patient Transport
Compartment” – a kind of airborne
intensive-care unit which is built into the
aircraft cabin – and the “Guideline”
emergency escape-route marking system
which functions without electricity.
Lufthansa Technik engineers also refit
older aeroplanes with FANS (Future Air
Navigation System), a state-of-the-art
navigation system. The system whereby
laptop computers can be plugged into
passenger seats without the need for an
adapter, which Lufthansa now offers in
the First and Business Class sections of
its long-range fleet, is likewise an in-house
invention.
Lufthansa Technik has extended its VIP
programme for refitting aircraft to the
client’s specifications, with office, conference room, bedroom, bathroom etc.
It is now marketing the expertise it has
Owner
Groupowned
LH
CFG
LCA
CLH
13
8
20
39
20
19
11
7
20
33
18
13
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11
8
20
33
18
13
–
–
–
6
2
6
80
43
18
9
5
75
23
–
–
–
–
–
15
8
–
–
6
–
–
5
–
–
–
–
–
75
29
15
8
5
2
–
2
–
–
34
–
11
–
18
–
339 200
–
–
–
26
–
–
–
11
11
5
8
24
Orders and options
Manufacturer/Type
Additions
1999
to 2004
Additional
options
–
6
6
21
20
18
14
7
Boeing 747
Boeing 757
Boeing MD11F
6
13
9
5
11
–
Canadair Jet
Total aircraft
22
83
10
85
Airbus
Airbus
Airbus
Airbus
A 319
A 320
A 321
A 340
Fin- Operance ating
Lease Lease
Operator
LH
CFG
LCA
CLH
2
–
–
–
–
–
13
7
20
33
20
19
–
1
–
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4
14
3
1
–
1
–
–
–
–
80
32
–
–
–
–
–
18
9
–
–
11
–
–
5
–
–
–
–
–
2
–
–
–
2
–
–
11
5
8
261
20
4
7
67
3
2
3
11
–
–
–
224
–
–
–
36
–
–
–
16
34
11
18
63
accumulated in this field as a new product
– the “XXL-Class” business or corporate
jet – specially for the Boeing 737 and the
Airbus A 319 series.
Innovations in the aircraft fleet
In the 1998 financial year a new aircraft
type was incorporated into the Lufthansa
Group’s fleet. Lufthansa Cargo put five
Boeing MD11Fs into service. This jet is
one of the most efficient and economical
freighter planes currently available. For
example, it uses about one-third less fuel
than the Boeing 747-200 to carry the
same payload. Nine more MD11 freighters
are to be delivered by the year 2001.
In order to further improve safety and
security, Lufthansa is currently equipping
its fleet with new warning systems. TCAS
(Traffic Alert and Collision Avoidance
System), the latest early warning system,
has already been installed in all Lufthansa’s
jets. TCAS gives a timely warning of
potentially dangerous situations in the air
and issues corresponding evasion instructions to the pilot – not only on
screen but also via his/her headphones.
The improved ground warning system
EGPWS (Enhanced Ground Proximity
Warning System) will be fitted in all
Lufthansa jets by 2001. It is designed to
reliably avoid so-called controlled flight
into terrain incidents. EGPWS continuously
compares its position, determined by a
satellite navigation system, with the data
on the territory over which the aircraft is
flying. As early as one minute prior to a
possible collision with terrain it issues an
acoustic warning signal and presents a
visual display of the danger scenario on
the pilot’s screen. The systems used
hitherto give a warning of between four
and eight seconds. A total of 185 aircraft
are being refitted with EGPWS.
Young fleet is kinder to the environment
The ongoing renewal of the Lufthansa
fleet provides customers with greater
comfort and dependability while at the
same time lowering operating costs and
reducing the impact on the environment.
This is because new airliners use less
fuel, emit fewer exhaust particles and are
also quieter than older models. In recent
years Lufthansa has continuously increased the environmental compatibility
of its fleets. With an average age of 6.6
years at the end of 1998, the Lufthansa
fleet is only half the average age of the
world fleet.
In 1998 the Lufthansa Group’s passenger
fleet required 4.9 litres of fuel on average
to transport one person 100 kilometres.
Lufthansa German Airlines had a specific
fuel consumption of 5.2 litres, CityLine
10.1 litres and Condor 3.5 litres. Cargo
transportation has also been made more
environment-friendly. With the introduction
of the Boeing MD11F in June 1998, kerosene consumption for transporting one
tonne of air freight was cut by 1.6 per cent.
Air traffic and environment
Lufthansa: From 1991 to 1998 revenue passengerkilometres rose more sharply than emissions
+ 80 %
+ 60 %
+ 40 %
+ 20 %
0
– 20 %
CFC-free maintenance and overhaul
The other Group companies, too, are
operating more and more in harmony
with the environment. In its maintenance
and overhaul work, Lufthansa Technik
does not use halogenic hydrocarbon
compounds, which are suspected of destroying the ozone layer. These chemicals
may now be used solely in aircraft fire
extinguishers because as yet no substitute
has been found that meets the stringent
aviation safety regulations. But a complex
recycling method developed by Lufthansa
Technik has considerably reduced the
amount of such substances released. The
ecologically harmful chemical perchloroethylene (PER) – which was formally
used for cleaning and crack detection in
the engine repair shop – has now been
replaced by ultrasonic scanning and
watery-alkaline cleaning agents.
Lufthansa Technik has achieved a recycling rate of 48.3 per cent and LSG Sky
Chefs of 49.5 per cent. At the Lufthansa
Cargo Center in Frankfurt this rate was as
high as 87 per cent. The consumption of
drinking water has also been reduced: at
Lufthansa Technik, for instance, it has
fallen by eight per cent since 1995 thanks
to the increased use of rainwater. LSG
Sky Chefs succeeded in cutting its water
consumption per passenger in 1998
from 11.2 to 10.7 litres. And measures
– 40 %
– 60 %
RevKeroenue
sene
passengerkilometres
Carbon Nitro- Carbon- Hydrodioxide gen
mon- caroxides oxide bons
introduced at all the Group’s companies
to reduce energy consumption are now
having an impact. Thus in the year under
review LSG Sky Chefs used 2.8 per cent
less energy than in 1997, while Lufthansa
Systems lowered electricity consumption
per transaction unit by 7.8 per cent.
Support for climate research projects
Lufthansa also supports numerous leading research institutions in their efforts to
measure the possible climatic effects of
an increase in air traffic volume and
provides technical equipment and facilities
to this end. One such example is the EU
research project MOZAIK (Measurement
of Ozone by Airbus-in-Service-Aircraft),
for which Lufthansa carries measuring
containers on two Airbus A 340s during
every scheduled flight. The project
supplies valuable insights into air mass
exchange processes between the stratosphere and the troposphere at cruising
altitude. The findings to date suggest that
the times that engine emissions linger in
43
the atmosphere are much shorter than
was previously assumed. It has also been
demonstrated that air mass pockets from
air strata near the ground can be transported to this height.
In March 1998 the German Aerospace
Centre (DLR) presented the results of its
multi-year research programme “Pollutants
in Air Travel”. It found that the effects of
today’s air travel on the climate are minor
compared with natural climatic fluctuations
and other man-made influences. The
key finding of the study is that global air
traffic accounts for four per cent of the
man-made contribution to the greenhouse effect. If natural sources such as
volcanoes and lightning flashes are
added to the equation, the proportion
attributable to air travel is reduced further
by at least the power of ten.
However, Lufthansa does not see this as
grounds for relaxing its efforts to preserve
the environment. On the contrary, as well
as operating highly modern aircraft it is
working to achieve greater integration of
the different providers of public transport
in line with their respective advantages.
Short-haul traffic will be transferred to the
rails wherever it makes sense to do.
A cooperation agreement to this effect
was signed with Deutsche Bahn AG
(German Rail) in the summer of 1998.
Business segments
of the Lufthansa Group
Transparency in logistics
Barcoding is an important prerequisite
for Lufthansa Cargo’s new service offers.
It speeds up handling, since the data
stored on the label can be read automatically by a scanner. And it enables
tracing and tracking of shipments.
The exact location of a consignment
is displayed in Lufthansa Cargo’s EDP
system.
Customers can thus call up the status
of their freight via their own PC or via
Lufthansa Cargo’s call centre.
46 Business segment Passenger Business Annual Report 1998
Annual Report 1998 Business segment Passenger Business
47
Passenger Business: Lufthansa German Airlines
With a new record capacity utilisation and slower cost expansion, Lufthansa
German Airlines (Deutsche Lufthansa AG) recorded another leap in profit
from operating activities of DM 1.8 billion.
Europe
In Europe, the most important growth
region, the amount of capacity sold expanded at 9.4 per cent by a far greater
margin than the available capacity, which
grew by only 5.2 per cent, with the result
that capacity utilisation went up by a
further 2.5 percentage points to 63.1 per
cent. The number of passengers carried
rose by 10.5 per cent.
Trend in average yields
Index 1994 = 100
115 %
110 %
Despite the fact that the world economy
was dogged for much of last year by regional economic crises, Lufthansa German
Airlines managed to surpass the good results that it had achieved in 1997 in scheduled passenger business. Revenue rose
by 4.7 per cent to DM 15.7 billion. Traffic
revenue, which – as in the previous year
– accounted for 96 per cent of revenue,
improved by 4.5 per cent over twelve
months to DM 15 billion. For the first time
in years all traffic regions posted a profit.
Thanks to the markedly slower overall
increase in costs, Lufthansa succeeded in
lifting the profit from operating activities by
more than 40 per cent to DM 1.8 billion.
Deutsche Lufthansa AG
1998
Revenue
in DM million
of which with
Group companies
Profit
from operating activities
in DM million
Capital expenditure
on tangible assets and
intangible assets
in DM million
Employees
Average number
during the year
Passengers
in millions
Available
seat-kilometres
in millions
Revenue passengerkilometres
in millions
Passenger load factor
in per cent
Change in
1997
per cent
15,699.2
14,997.6
4.7
1,085.9
1,046.0
3.8
1,760.5
1,229.0
43.2
1,607.2
1,770.0
– 9.2
27,955
27,921
0.1
36.1
33.3
8.2
97,566.7
94,574.4
3.2
71,897.0
68,266.9
5.3
73.7
72.2
1.5 pp.
The key factors responsible for this
successful course of business were:
– the selective expansion of the scheduled
passenger network
– the intensification of our alliances and
business partnerships
– a flexible pricing policy
– further productivity increases, and
– rigorous cost management.
105 %
100 %
95 %
90 %
Germany
Lufthansa registered marked increases on
its domestic routes. The Company at last
made an operating profit in this traffic
region again. Although Lufthansa German
Airlines kept its available capacity more
or less at the previous year’s level, it managed to push up the amount of capacity
sold by 8.4 per cent. The passenger load
1995
1996
1997
1998
Distance flown per passenger
Average yields per passenger
Average yields per revenue passenger-kilometre
Revenue trends
In the 1998 financial year sales abroad
again grew faster than domestic revenue.
In Europe and North America, in particular, Lufthansa German Airlines achieved
new record revenue figures; by contrast,
sales in the Asia/Pacific region declined
slightly.
Seat occupancy rates reached new
record levels, as the volume of available
capacity was increased by only 3.2 per
cent whereas the amount sold – measured in revenue passenger-kilometres –
was raised by 5.3 per cent. The passenger
load factor improved by 1.5 percentage
points to 73.7 per cent. The number of
passengers carried went up by 8.2 per
cent. Average yields per passenger fell,
although average yields per revenue
passenger-kilometre remained virtually
unchanged.
1994
factor climbed by 5.3 percentage points
compared with 1997 to reach 64.0 per cent.
Traffic revenue – including that earned by
Lufthansa CityLine – rose by four per cent
to DM 2.5 billion.
Internal procedures at
Lufthansa’s passenger
airline were made
transparent for the
some 6,000 staff
who took part in the
500 Dialogbilder
(dialogue images)
workshops in Frankfurt.
Here staff from all
areas – cockpit, cabin,
stations, sales and
administration – came
together to discuss
aviation matters and
their own work.
Poster-sized images
helped participants
focus their discussions
on the key topics. The
aim of the workshops
was to improve internal
communication and
therefore staff motivation.
With this rate of increase, which distinctly
exceeded the average figure for the airline industry, Lufthansa further extended
its strong market position in Europe.
Including CityLine, whose revenue from
European traffic soared by 18.3 per cent to
DM 1.5 billion, the traffic revenue earned
on the European routes grew by 8.7 per
cent to a total of DM 6.3 billion.
North Atlantic
On the North Atlantic routes Lufthansa
German Airlines recorded a seat occupancy rate of 81.0 per cent – the highest
of any airline affiliated to the Association
of European Airlines – AEA.
The volume of capacity sold was raised by
5.3 per cent and thus outstripped the 5.0
per cent increase in the flight programme
offered – despite the very high capacity
utilisation rate already achieved in 1997.
Owing to the stabilisation of average yields
and more economical route planning,
Lufthansa German Airlines generated a
record result in the North Atlantic region.
South America
Following a phase of consolidation,
Lufthansa stepped up its available flight
programme by 14.4 per cent. This extra
capacity was fully absorbed by the
market. Capacity sold jumped by 15.2 per
cent, while traffic revenue expanded by
12.7 per cent to DM 517 million.
Africa
Lufthansa German Airlines trimmed back
its capacity in Africa by five per cent
vis-à-vis 1997. While the passenger volume
Supply, demand and passenger load factor
in billions of passenger-kilometres and per cent
100
75
80
73
60
71
40
69
20
67
0
billion % 1994
1995
1996
1997
Available seat-kilometres
Passenger load factor in per cent
1998
and capacity sold declined slightly, the
seat occupancy rate improved by three
percentage points to 75.3 per cent.
Middle East
Lufthansa completely revised its flight
programme for the Middle East region.
Despite a huge rise of 37.0 per cent in
capacity offered, the passenger load
factor achieved 68.7 per cent – only
0.5 percentage points below the 1997
score. The number of passengers carried
increased by 40.1 per cent.
Asia
Lufthansa German Airlines responded
quickly to the downturn in Asian traffic
and reduced its programme by 1.6 per
cent against the previous year. Demand
was more or less on a par with 1997;
consequently, the passenger load factor
gained one percentage point to reach
75.8 per cent.
Below-average rise in costs
Expenditure grew more slowly than both
output and revenue. This was due to the
sharp fall in fuel prices, cost relief on the
currency front and the rigorous pursuit of
cost-cutting measures.
Fuel for aircraft totalled DM 1,334 million;
this was eight per cent less than in 1997.
Airport fees and air traffic control charges
increased by 3.8 per cent to DM 2,857
million. This rise was far smaller than the
expansion of output – a further success
of the campaign to curb fees and charges
that was launched in 1997, and in particular of the negotiations held with the airport operators. But the further extension
of our alliances and cooperative ventures
also contributed noticeably to containing
costs. Totalling DM 2,978 million, staff
costs were 1.4 per cent down on the year
before. The number of employees on an
annual average stood at 27,955; this was
marginally more than in 1997 (27,921).
49
However, the share of cockpit and cabin
crews and staff employed in customer
services grew at a disproportionately high
rate.
The reason for the drop in staff costs
was the outsourcing of service units as of
January 1, 1998. If this factor is disregarded, staff costs would have gone up by
0.8 per cent. Depreciation charges rose
by one per cent to DM 1,206 million
(1997: DM 1,194 million).
Product innovations
Improved long-haul service in all three
classes
Following the introduction of the new
long-haul service product in First and
Business Class, the refurbishing of the
Economy Class was also initiated last
year. The refashioning of the cabin
design, with new seats that recline more
deeply (by 23 °) and have vertically and
laterally adjustable headrests, is complemented by an enhanced in-flight
service concept featuring welcome
drinks, an aperitif/digestif service and a
movie snack.
Lufthansa terminal in Frankfurt
The redesign of the dedicated Lufthansa
terminal in Frankfurt is progressing further.
Thus 70 per cent of concourse A and
Lufthansa has placed
eye-catching signposts
at Frankfurt to point
passengers in the
direction of the Star
Alliance. Codeshare
flights are indicated in
the timetable, so
passengers can recognise immediately
if their flight is being
operated by Lufthansa
itself or by a Star
Alliance partner airline.
35 per cent of concourse B have already
been redesigned. With the new Senator
Lounge in concourse A and an additional
Business Lounge in concourse B, a total
of five lounges are now available. The
basic construction work for the extension
to concourse A, with twelve more gate
positions, has likewise already been
completed. As from April of last year
passengers can find the check-in desks,
sales counters and information booths of
the Star Alliance partners right next to
one another.
Cooperative ventures
Star Alliance
The international aviation market is now
characterised increasingly by competition
between different airline alliances. Within
this competitive scenario Star Alliance,
the global airline network of Lufthansa and
its partners Air Canada, Scandinavian
Airlines System, Thai Airways, Varig
Brazilian Airlines and United Airlines, has
assumed the leading role in the industry.
In March 1999 Air New Zealand and
Ansett Australia joined the Star Alliance,
and in October 1999 the Japanese airline
All Nippon Airways will also become a
member.
Although the redesigned airport offers
many attractions, Lufthansa is keen that
its guests spend less and less time
transferring from one aircraft to another.
In the 1999 summer timetable no fewer
than 800 flights a week are officially
designated as “short connections” with
a transfer time of only 35 minutes.
As a result, the number of coordinated
flight connections will expand to over
700 destinations in more than 100 countries around the globe. All the partners
are working intensively to be able to offer
their joint customers further service
improvements in the future.
An additional advantage is a cost-saving
potential within the Star Alliance, for instance through closer coordination in the
field of procurement.
To ensure that business operations in the
enlarged Star Alliance can be managed
and implemented efficiently in the future,
a new Star Alliance management structure
has been set up.
New partnerships outside the
Star Alliance
Alongside the Star Alliance Lufthansa has
also extended its bilateral partnerships.
An important business partner in Asia, for
example, is Singapore Airlines: codesharing links with the airline have supplemented Lufthansa’s service range in Asia
and Australia since October 1998. A com-
51
prehensive package of new cooperation
projects has been agreed with South
African Airways. And since February 1999
Lufthansa has been working together with
the airline Mexicana de Aviacion.
In 1998 the strategic alliances with partner airlines contributed the equivalent of
around DM half a billion to Lufthansa’s
successful business performance.
Team Lufthansa
For Lufthansa and its regional partners
flying under the banner of Team Lufthansa,
1998 was another successful year. The
number of passengers transported
increased to around 1.4 million. Approximately half of the 68 Team Lufthansa
routes feed Lufthansa’s two hubs Frankfurt
and Munich.
The hubs of Lufthansa Alliances
Trends in individual traffic regions
Lufthansa German Airlines and Lufthansa CityLine
Germany
of which CityLine
Europe
of which CityLine
Middle East
North America
South America
Africa
Asia/Pacific
Net traffic
revenue
in DM million
Revenue
passengerkilometres
in millions
Available
seat-kilometres
in millions
Passenger
load factor
in per cent
1998
1997
1998
1997
1998
1997
1998 1997
2,522.7
130.4
6,264.4
1,473.7
224.8
2,819.5
516.5
544.0
2,055.1
2,426.8
125.8
5,763.6
1,245.8
170.2
2,663.1
458.4
551.0
2,263.0
5,108.9
255.7
16,462.9
2,381.7
1,161.6
25,634.0
4,339.5
3,753.9
18,017.9
4,720.2
241.1
14,846.5
1,979.2
854.7
24,339.2
3,766.4
3,794.8
18,069.3
8,025.7
439.5
26,501.0
4,175.4
1,692.1
31,639.8
5,482.9
4,983.4
23,784.1
8,064.3
432.4
24,856.9
3,624.9
1,235.5
30,127.0
4,793.9
5,248.0
24,173.0
63.7
58.2
62.1
57.0
68.7
81.0
79.1
75.3
75.8
58.5
55.8
59.7
54.6
69.2
80.8
78.6
72.3
74.7
Number of
destinations
in the
Lufthansa
network
1998* 1997*
21
20
112
105
11
96
7
14
32
9
70
7
14
29
* incl. code-share services, without ground transportation (bus/train services); traffic regions according to
Lufthansa definition
In the 1999 summer timetable Lufthansa’s route network encompasses 313 destinations in 88 countries –
22 in Germany, 117 in Europe, 112 in America, 34 in the Asia/Pacific region and 13 cities in Africa. They are
served beyond the Lufthansa hubs Frankfurt and Munich and the hubs of Lufthansa’s partner airlines.
53
Passenger Business: Lufthansa CityLine GmbH
In the 40th year of its existence, Lufthansa CityLine earned a profit from
operating activities of DM 168 million – the best ever in its history.
In October the commercial administration division moved from Kriftel near
Frankfurt to Cologne.
Trend in average yields
Lufthansa CityLine
Index 1994 = 100
106 %
104 %
In 1998 Lufthansa CityLine celebrated its
40th anniversary. From the one-time
“island-hopper” which flew holidaymakers
to the East Frisian beaches, it has transformed itself – after several intermediate
stops – into a successful regional airline.
It is responsible for about a third of
Lufthansa’s European flights. Last year
81.1 per cent of CityLine’s passengers
travelled on cross-border routes. In
October the commercial administration
division relocated from Kriftel near
Frankfurt to the newly constructed office
complex at Cologne/Bonn Airport. The
company’s head office was simultaneously moved to Cologne; this was
entered into the Commercial Register
on January 7, 1999.
102 %
100 %
98 %
96 %
1994
1995
1996
1997
1998
Distance flown per passenger
Average yields per passenger
Average yields per revenue passenger-kilometre
1998
Revenue
in DM million
of which with
Group companies
Profit
in DM million
Capital expenditure
intangible assets
in DM million
Employees
Average number
during the year
Passengers
in millions
Available
seat-kilometres
in millions
Revenue passengerkilometres
in millions
in per cent
Change in
1997
per cent
1,600.1
1,371.2
16.7
– 6.4
– 2.4
166.7
168.4
141.1
19.3
115.8
217.6
– 46.8
1,607
1,491
7.8
4.4
3.8
14.5
4,787.7
4,175.6
14.7
2,771.4
57.9
2,314.5
55.4
19.7
2.5 pp.
Double-digit growth rates
In its jubilee year Lufthansa CityLine continued the fine performance it achieved in
1997 and again achieved double-digit
rates of growth. The number of passengers
carried climbed by 14.5 per cent to
4.4 million; the amount of capacity sold
soared by 19.7 per cent to 2.77 million
revenue passenger-kilometres. The seat
occupancy rate rose to 57.9 per cent; this
was 2.5 percentage points better than in
the previous year.
Revenue expanded by a corresponding
margin. It exceeded the 1997 figure by
16.7 per cent to reach DM 1.6 billion.
Thirteen per cent of the revenue was
generated in Italy, which thus remained
CityLine’s biggest market. It was followed
by France with 12.4 per cent, eastern
Europe with 11.8 per cent, just ahead of
Switzerland (11.3 per cent) and the United
Kingdom, which totalled 10.3 per cent.
The share of revenue accounted for by
domestic flights declined to 11.5 per cent.
As the deployment of an all-jet fleet led to
an above average increase in the average
distance of each journey, average yields
fell; they declined by 2.3 per cent per
revenue passenger-kilometre.
Earnings result
Last year the company generated total
operating income of DM 1,678 million
(1997: DM 1,446 million) against total
operating expenses of DM 1,510 million
(1997: DM 1,305 million). The profit from
operating activities therefore came to
DM 168 million (1997: DM 141 million).
Lufthansa CityLine
5
59
4
57
3
55
2
53
1
51
0
billion
% 1994
1995
1996
1997
1998
Employees
Lufthansa CityLine’s workforce totalled
1,607 on average last year, which was
7.8 per cent more than in the previous
year. The ground staff, including the productive technical staff, expanded at a rate
of 12.7 per cent (543 employees on an
annual average). This was faster than the
growth of the cabin crews, which increased
by 5.6 per cent to 1,064 persons.
Fleet
At the end of 1998 CityLine was operating
a fleet consisting of 32 Canadair Regional
Jets (CRJ 100) and 18 Avro RJ 85s.
In July 1998 a contract was signed for
the purchase of another ten Canadair
Regional Jet 100s (50-seater) and in
September 1998 for ten Canadair Regional
Jet 700s (70-seater), including options on
ten aircraft. CityLine concurrently negotiated with the manufacturers Fairchild
Dornier and Bombardier concerning the
purchase of 50 and 70-seat airliners.
A decision on the long-term development
of the regional jet fleet is expected to be
made in the second quarter of 1999.
54 Business segment Logistics Annual Report 1998
Annual Report 1998 Business segment Logistics
55
Logistics: Lufthansa Cargo AG
1998 was a successful year for Lufthansa Cargo. The company continued on
its modernisation course and, despite market-based problems and capital
investment burdens, posted a profit from operating activities of DM 271 million.
There was also a positive trend in fuel
costs, which fell by around DM 53 million,
a year-on-year drop of 16 per cent.
Average yields per
revenue cargo-kilometre
Index 1994 = 100
112 %
Smaller workforce
Lufthansa Cargo employed 4,971 staff
on average last year. The headcount
decreased by 0.6 per cent owing to the
transfer of staff to a new handling
company in London.
108 %
Market position further improved
Despite the difficult market environment,
Lufthansa Cargo again achieved a slight
expansion of its traffic share, including in
Germany, and thus further extended its
leading position in the air cargo market.
The volume of capacity sold was raised
by almost 2.2 per cent to reach 6.7 billion
tonne-kilometres.
This increase did not suffice, however, to
fully absorb the 4.6 per cent rise in capacity offered. This applied especially to the
freight capacity in the holds of passenger
Lufthansa Cargo AG
Revenue
in DM million
of which with
Group companies
Profit
in DM million
Capital expenditure
intangible assets
in DM million
Employees
Average number
during the year
Cargo and Mail
in thousand tonnes
Available
tonne-kilometres
in millions
Revenue
tonne-kilometres
in millions
Load factor
in per cent
1998
1997
Change in
per cent
3,843.3
3,913.7
– 1.8
4.4
27.7
– 84.1
271.4
276.0
– 1.7
1,291.1
91.6
1,309.5
4,971
4,999
– 0.6
1,703
1,704
– 0.1
10,021
9,583
4.6
6,696
6,550
2.2
66.8
68.3
– 1.5 pp.
aircraft, which reflected the different traffic
trends in passenger and cargo business.
The overall load factor declined slightly
by 1.5 percentage points to 66.8 per cent.
104 %
100 %
96 %
Average yields affected by currency
turbulence
In the 1998 financial year traffic revenue
fell compared with the previous year by
DM 67 million (1.7 per cent) to DM 3,791
million. The exchange rate changes in the
crisis-ridden regions caused losses of
DM 112 million. These were partly offset
by increases in demand. In the traffic
regions Asia/Pacific and South Atlantic
average yields declined, whereas on the
North Atlantic routes they went up, owing
to the appreciation of the US dollar.
Profit down slightly compared with 1997
Total operating income increased by
DM 40 million to DM 4,151 million. Total
operating expenses grew by DM 46 million
over twelve months to DM 3,880 million.
The profit from operating activities of
DM 271 million was DM 4.5 million down
compared with 1997.
Sharp rise in capital expenditure
In fiscal 1998 Lufthansa Cargo’s capital
expenditure rose to DM 1,291 million.
Most of this sum was invested in the new
Boeing MD11 dedicated freighter fleet.
In addition, Lufthansa Cargo spent DM 61
million on information technology and on
extending the ground infrastructure.
1994
1995
1996
1997
1998
Unit costs lowered
Lufthansa Cargo registered successes in
lowering unit costs: operating expenses
per available tonne-kilometre declined by
3.2 per cent compared with the previous
year. This owed much to the deployment
of the highly economical MD11 freighter
aircraft.
Fleet and capacity
In 1998 Lufthansa Cargo put five new
Boeing MD11 freighters into service and
ordered ten more aircraft of this type.
They will be delivered in the years 1999
to 2001. This will enable Lufthansa Cargo
to replace the capacity on former combi
aircraft and to prepare for the expansion
of the international air freight market that
is still anticipated.
56 Business segment Logistics Annual Report 1998
Annual Report 1998 Business segment MRO
57
MRO: Lufthansa Technik AG
Start of strategic reorientation to
become a provider of logistics services
With a new network strategy and innovative products and services, Lufthansa
Cargo commenced its transformation
from an air transport company into a
provider of integrated logistics services.
The principal business challenge in 1998
was the introduction of the new “timedefinite” services. At the same time
Lufthansa Cargo replaced its existing
computer systems with a uniform IT platform. The implementation of these two
projects gave rise to some disruptions of
routine operations during the start-up
phase. After overcoming these teething
troubles, the new “td” services will help to
counteract the further decline in average
yields. This has already been achieved in
the case of the express services, which
are meeting with a very positive response
from the market.
The Business Partnership Program was
also continued and extended. Agreements have now been concluded with
Supply, demand and freight/mail load factor
in billions of tonne-kilometres and per cent
12
73
10
Lufthansa Cargo’s strategic equity interest
in the globally operating logistics provider
DHL International Ltd., Bermuda likewise
showed pleasing progress. Both revenue
and earnings were increased once again.
Mutual collaboration was focused on
developing a common network strategy
and more closely interlinking the sales
and logistics activities of the two companies. With the German post office
Deutsche Post AG joining DHL International as a new shareholder, the company
was able to tap new sales channels and
to further extend its product portfolio.
Alliances extended progressively
Lufthansa Cargo and SAS took a major
joint step towards forging a Cargo Alliance
by stepping up the integration of their
distribution and handling organisations.
As from November 1, 1998 the two companies opened up their flight networks
for the express products of the partner
airline.
In March 1999 Lufthansa, Singapore
Airlines and SAS signed a Memorandum
of Understanding for closer co-operation
in the air cargo business. The intention is
a wide-ranging integration of network
managing, marketing and sales and the
harmonisation of products and IT-infrastructure.
71
08
69
06
67
04
65
02
63
00
billion % 1994
nine global and six regional partners, and
a careful expansion will occur up to the
end of 1999. The objective is to ally the
forwarders more closely with Lufthansa
Cargo and to jointly offer an integrated,
one-stop freight product.
1995
1996
1997
Available tonne-kilometres
Revenue tonne-kilometres
Cargo/Mail load factor in per cent
1998
Lufthansa Technik further strengthened its leading position in the aircraft
maintenance market in 1998. It raised its revenue by seven per cent
from DM 3 billion to over DM 3.2 billion and posted a profit from operating
activities of DM 55.8 million.
The market for maintenance, repair and
overhauling services is still growing,
despite regional economic crises. At the
same time, the aircraft maintenance
market is undergoing a transformation.
Suppliers are extending their regional
presence and hence their proximity to the
customer. The market is characterised by
trends towards vertical and horizontal
concentration. The demand for complex
service packages is increasing – and
with it the trend towards maintaining
long-term ties with a competent partner.
Lufthansa Technik’s product portfolio is
excellently suited to this challenge.
Revenue
in DM million
of which with
Group companies
Profit
in DM million
Capital expenditure
intangible assets
in DM million
Employees
Average number
during the year
1998
1997
Change in
per cent
3,261,1
3,042.7
7.2
1,676.9
1,607.4
4.3
55.8
141.8
– 60.6
88.2
51.3
71.9
9,947
10,314
– 3.6
Market position extended
Lufthansa Technik possesses a product
range comprising all the technical services
necessary in order to fly aeroplanes.
Besides aircraft maintenance, these include fleet management, logistics, training
and consultancy and support services in
many different fields. As an approved
design agency and authorised manufacturer of components, Lufthansa Technik
also provides complex modification and
conversion programmes as an allround
package right from the drawing board to
the operating licence.
The different types of aircraft maintained
and repaired by Lufthansa Technik comprise the fleets of the Lufthansa Group, but
also Boeing 777s and the latest versions
of the Boeing 737, inclusive of engines
and components. The new generation of
business executive aircraft based on the
Boeing 737 and the Airbus A 319, which
Lufthansa Technik markets under the
name “The XXL-Class”, is tapping a new
market potential for the company. The
same applies to Lufthansa Bombardier
Aviation Services GmbH in Berlin.
This joint venture between Lufthansa
Technik and Bombardier specialises in
the technical upkeep and servicing of
business jets.
Contracts with 31 new airline customers
The success of this strategy is manifested
by the growing number of contracts signed
and the ever-widening customer base,
which meanwhile embraces 230 airlines
and other operators of commercial
aircraft.
58 Business segment MRO Annual Report 1998
DM 3.26 billion. The share of revenue
generated with clients outside the
Lufthansa Group swelled to 49 per cent,
or DM 1.58 billion.
Revenue of Lufthansa Technik AG
in DM million
3,500
3,000
2,500
2,000
1,500
1,000
500
0
million
1995
1996
1997*
Annual Report 1998 Business segment MRO
1998*
Internal revenue
External revenue
In 1998 Lufthansa Technik concluded 89
agreements – 31 of them with new airline
clients. This was 39 more than in 1997.
Twenty-two contracts relate to the premium products Total Technical Support,
Total Component Support and Total
Engine Support.
Business outside the Group expanded
to nearly 50 per cent
By virtue of its qualitative differentiation
from the bulk of its rivals, Lufthansa
Technik was able to raise its revenue by
7.2 per cent over twelve months to
Earnings result
The profit from operating activities decreased to DM 55.8 million, which was
60.6 per cent down on the previous year.
The main reason for this was the disproportionately high increase in expenses for
raw materials, supplies and merchandise
caused by currency-related rises in the
cost of purchased materials. Higher depreciation was also charged against extra
material stocks designed to safeguard the
company’s market position. In addition,
non-recurrent extraordinary burdens were
incurred by the need to set up provisions
for semi-retirement costs.
Lufthansa Technik’s capital expenditure
on tangible and intangible assets amounting to DM 88.2 million was 72 per cent
higher than in 1997.
New solutions for higher cost-efficiency
Given the sharp rise in prices of spare
parts, the more cost-effective repair of
components is gaining increasing importance. Lufthansa Technik devised innovative repair methods in the past and will
continue to do so in the future. The joint
venture AirLiance Materials in Chicago,
formed together with United Airlines and
Air Canada, will enable Lufthansa Technik
to position itself as a global supplier in
the heavily fragmented market for highvalue certificated spare parts. HEICO
Aerospace, a subsidiary of Lufthansa
Technik based in Hollywood/Florida,
designs and produces engine components – with the official approval of the
US aviation authority FAA.
Indirect transparency:
using a mirror an
engineer inspects the
underside of the
cabin floor of the
Boeing 747-400 before
installing the floor rails
for the rows of seats.
The combi jet is being
converted into an allpassenger version at
Lufthansa Technik’s
Hamburg base.
59
60 Business segment Catering Annual Report 1998
Annual Report 1998 Business segment Catering
61
Catering: LSG Group
For the first time the consolidated financial statements of the LSG Group
were prepared according to International Accounting Standards (IAS). The
group earned a profit from operating activities of DM 67 million.
LSG: Rising productivity
Number of passengers served/flights handled
per employee in Germany 1994 –1998
6,000
sells its expertise in the field of food and
kitchen health to diverse sectors such as
the food industry, communal catering, facility management and the medical service.
55
In the 1998 financial year the LSG Group,
comprising 22 fully consolidated enterprises, achieved a revenue of DM 1.3 billion. This was roughly DM 200 million less
than in 1997. This decline was caused by
the change in the business relationship
with Deutsche Lufthansa AG at the beginning of 1998. As LSG Holding, acting
as an agency on behalf of and for the
account of Lufthansa, now concludes all
contracts with external suppliers, it has
lost the revenue which it generated hitherto from purchasing for its own account.
After adjusting the revenue figures for 1997
accordingly, the LSG Group increased its
LSG Lufthansa Service Holding AG
Revenue
in DM million
of which with other
Lufthansa Group
companies
Profit*
in DM million
Capital expenditure
intangible assets
in DM million
Employees
Average number
during the year
1998
1997
Change in
per cent
1,314.2
1,521.3
– 13.6
678.8
891.8
– 23.9
72.0
73.6
– 2.2
22.7
24.5
– 7.3
8,484
8,832
– 3.9
* Profit from operating activities plus income from investments
accounted for using the equity method
revenue by 1.4 per cent. LSG closed the
1998 financial year, just as it did in 1997,
with a profit from operating activities. It
totalled DM 66.9 million. All the business
units contributed to LSG’s positive
earnings result.
LSG Sky Chefs world market leader in
Airline Catering
The LSG Group markets its services in
its core Air Catering business under its
quality brand-name LSG Sky Chefs. Last
year it once again maintained its position
as leading airline caterer with a global
market share of about 33 per cent.
Worldwide LSG Sky Chefs served some
365 million in-flight menus in 1998 and
numbered around 260 airlines among its
customers.
LSG-Sky Food GmbH is also involved in
the Airline Catering business segment.
It operates a state-of-the-art refrigerated
food production facility and supplies not
only airline companies but also major
wholesale/retail customers as well as
industrial catering clients.
In the Airline Catering business segment
the loss of demand from some airlines
had a direct negative impact. But the
major factor was the changeover to the
agency model in LSG’s business dealings
with Lufthansa AG. This was the principal
cause of the decline in revenue in this
business segment by 17.2 per cent to
DM 1.1 billion. The segment result from air
catering business amounted to DM 58.4
million.
5,000
45
4,000
35
3,000
Passengers flights 1994
1995
1996
1997
1998
Flights handled per employee
Passengers served per employee
Complementary business segments
The LSG Group is also engaged in the
Distribution and Airport Catering business
segments, which are allied to the airline
catering business and in which the core
competencies food processing, logistics
and service can be put to profitable use.
The Airport Catering business unit operates food outlets – restaurants and snack
bars – at German and international airports
through various subsidiaries. Another line
of business is the provision of catering
services to theatres in Düsseldorf, Munich
and Berlin. LSG Airport Gastronomie GmbH
fared well – in contrast to the trend in the
industry as a whole. The earnings result
from this segment totalled DM 5.5 million,
compared with DM 3.2 million in 1997.
LSG-Food & Nonfood Handel GmbH
likewise succeeded in improving its
operating profit, which rose to DM 4.5 million (1997: DM 3.4 million). This division
focuses on specialised retail trade and
distribution business as well as operating
Lufthansa Party Service.
LSG-Hygiene Institut is responsible for
ensuring the hygienic monitoring of the
LSG-Sky Chefs Group. But in addition it
Higher capital expenditure
In the year under review the LSG Group
increased its capital expenditure on
tangible assets and financial assets from
DM 62 million to DM 207 million. The
largest single capital formation project
was the acquisition of a 33.3 per cent
stake in the motorway service station chain
Autobahn Tank & Rast Holding GmbH,
Bonn. With this move, the LSG Holding
extended its business interest for the first
time outside the airline sector, and in
doing so has opened up new sales
markets for the expertise and know-how
that it has gained in the airline industry.
LSG chef Alois Strobl
(right) and top chef
Joachim Wissler of
Schloss Reinhartshauen
in Eltville add the final
touches to their latest
creations.
Joachim Wissler’s
special menus will be
served in First Class in
May/June.
Special promotions
with top chefs were
introduced a year ago
and are very popular
with passengers.
62 Business segment Leisure Travel Annual Report 1998
Annual Report 1998 Business segment Leisure Travel
63
Leisure Travel: C & N Group
The newly merged company C& N Touristic AG has made a successful start.
Profit before taxes in the first truncated business year totalled
DM 267 million.
Condor
1994–1998 months 1–12
30
The C & N Group, in which Lufthansa and
Karstadt each hold a 50 per cent stake,
comprises Condor Flugdienst GmbH and
NUR Touristic GmbH, together with their
respective subsidiaries, in an integrated
leisure travel group. The earnings result
of the C & N Group, drawn up under the
German Commercial Code, is included in
the Lufthansa Group’s financial statements “at equity”.
The company has very good growth prospects in the European tourism market.
C & N embraces all the value-adding links
in the tourism chain: tour operating, air
transport, travel distribution as well as
hotel and club management. This structure
creates considerable earnings potential
for the company through internal process
optimisation. In particular, the coordinated
capacity planning of all resources and
the joint centralised purchasing of hotel
accommodation for all C & N tour operators will have a positive effect on future
profitability.
Growth at all levels of the value-adding
chain
In 1998, as in previous years, the market
for organised leisure travel once again
proved to be a growth industry in Europe.
The C & N Group also profited from this.
In its first year of business it generated
revenue of DM 7.5 billion and posted a
profit from ordinary activities of DM 267 million. Growth – sometimes on a sizeable
scale – was achieved at all the various
levels of the value-adding chain. The
group invested DM 364.8 million in its
first business year – mainly in new aircraft
and in club and hotel sites.
C & N Touristic AG*
1998
Revenue
in DM million
7,514.4
of which tour operator
6,172.9
flight
1,076.8
in DM million
267.0
Total assets in DM million
3,448.0
Capital expenditure in DM million
364.8
Passengers in thousands**
9,469.5
Number of travel agencies
approx. 1,440
Employees average number during the year
8,545
* Annual accounts under the German Commercial Code
(HGB) for the first business year (1.1.– 31.10.1998)
** in the period 1.11.1997 to 31.10.1998
C & N started trading on January 1, 1998
and commenced operational business on
November 1, 1998. As its financial year
begins on November 1 – as is customary
in the tourist industry – the results presented here cover the truncated business year
from January 1, 1998 to October 31, 1998.
In a comparison over twelve months, the
tour operators combined within the C & N
network recorded a rise in revenue of five
per cent and an increase in the number of
guests of 4.4 per cent. The tour operators
include Neckermann, Aldiana, Terramar,
Bucher, Fischer, Kreuzer and Air Marin.
In the Travel Distribution business segment,
C & N has a network (including franchise
operations) of around 540 group-owned
travel agencies plus a further 900 travel
offices belonging to C & N’s two shareholders. The Hotel and Club division is
composed of 51 facilities with 34,500
beds. This enables C & N to participate in
85
25
83
20
81
15
79
10
77
05
75
00
billion
% 1994
1995
1996
1997
1998
the attractive revenue-earning potential in
this business sector and also secures a
permanent stock of high-quality accommodation for the group.
Condor matches prior-year earnings
performance
In the Carrier business segment, Condor
(in which Lufthansa retains a residual
direct shareholding of ten per cent)
matched the high volume of carriage that
it had achieved in the previous year. In
the period from November 1, 1997 to
October 31, 1998 Condor transported
7 million passengers and achieved a seat
occupancy rate of 81.5 per cent. It employed 2,353 staff on an annual average.
On the balance sheet date (October 31,
1998) its fleet consisted of 39 aircraft.
They are maintained by Condor/Cargo
Technik GmbH, a joint subsidiary of
Condor and Lufthansa Technik AG.
64 Business segment IT Services Annual Report 1998
Annual Report 1998 Business segment IT Services
IT Services: the new business segment
IT Services: Lufthansa Systems GmbH
On January 1, 1999 Lufthansa’s principal activities in the field of
information technology within Lufthansa Commercial Holding GmbH
were merged to form the strategic business segment IT Services.
The positive trend continued in 1998. Revenue rose to DM 646 million,
while the year-on-year profit from operating activities soared by almost
46 per cent to DM 47 million.
By bundling all the IT units of the Lufthansa
Group into a powerful network, Lufthansa
has improved its business prospects on
this forward-looking market. The aim is to
be among the top three service providers
in the travel and transport segment of
the global IT market. The IT Services
business segment consists of four distinct
units:
Infrastructure embraces the provision of
computer capacity, the installation and
operation of EDP systems and networks
plus the design of complex IT systems
and the implementation of expert consultation services.
Airline Services is an amalgamation of
all IT services for passenger, freight and
charter airlines; it provides support to
ancillary functions such as travel offices
and forwarding agencies. The range of
services offered comprises all the business
processes of clients, including revenue
and output accounting, aeronautical
services, consulting and training.
Distribution Services is concerned with
the distribution and accounting processes
of tourist operators, travel agencies and
event organisers.
Consumer & Corporate Services develops IT solutions for both individual and
corporate customers. It also includes providing support to call centres and developing electronic commerce products for
direct marketing via the Internet.
65
In the 1998 financial year Lufthansa
Systems GmbH strengthened its market
position and established itself as a competitive provider of IT services. In the year
under review Lufthansa Systems raised
its revenue by 15.3 per cent to DM 646
million. Revenue generated from outside
business developed especially successfully, surpassing the 1997 figure by as
much as 84.3 per cent. Revenue with
other companies in the Lufthansa Group
likewise increased. All three of Lufthansa
Systems’ core business units (application
development, computer centre and infrastructure service) contributed to the company’s positive business trend.
Thanks to a rigorously pursued cost
management regime, productivity, in terms
of revenue per employee, rose to almost
DM 500,000.
Lufthansa Commercial Holding
Lufthansa IT Services
Infrastructure
y Lufthansa Systems
y Lufthansa Systems
Network
y START Amadeus
y DERDATA
Airline
Services
y Lufthansa Systems
y Lido
y Lufthansa Systems
AS
y Lufthansa Revenue
Services
y Lufthansa Process
Management
y Lufthansa
Consulting
y Lufthansa Systems
Berlin
y Reservation Data
Maintenance
y Lufthansa Systems
Hungaria
y Simat, Helliesen &
Eichner (SH & E)
Distribution
Services
START Amadeus
START Ticket
DERDATA
Lufthansa Systems
Lufthansa Systems
Berlin
y Amadeus Global
Travel Distribution
y
y
y
y
y
Consumer &
Corporate Services
Lufthansa AirPlus
START Media Plus
Lufthansa Systems
Lufthansa Systems
AS
y Cargo Future
Communications
y
y
y
y
Revenue
in DM million
of which with other
Group companies
Profit
in DM million
Capital expenditure
intangible assets
in DM million
Employees
Average number
during the year
1998
1997
Change in
per cent
646.1
560.2
15.3
509.2
486.0
4.8
47.2
32.4
45.7
96.7
62.2
55.5
1,302
1,284
1.4
The new business unit
Lufthansa IT Services
presented itself for
the first time at the
CEBIT’ 99 in Hanover –
via a computer animations and staff on
the stand.
Marked improvement in earnings result
In the 1998 fiscal year Lufthansa Systems
continued the successful course of business it had achieved in the previous year.
It posted a profit from operating activities
of DM 47.2 million, which represented a
handsome year-on-year improvement of
45.7 per cent. Lufthansa Systems’ equity
investments also developed positively.
66 Business segment IT Services Annual Report 1998
Annual Report 1998 Business segment IT Services
67
IT Services: START Amadeus GmbH
Employees
On an annual average during 1998
Lufthansa Systems GmbH employed
1,252 staff and 50 trainees. Lufthansa
Systems scored a first in Germany by
training 18 young people for the new
profession of information technology
specialist and offering them a job with
a secure future.
Trend in mainframe computer capacity
Lufthansa Systems 1995–1998
Capacity in MIPS
2,500
2,000
1,500
1,000
Last year the travel distribution system surpassed the targets it had set itself
and raised both revenue and profit despite the falling number of travel agencies.
The profit from operating activities climbed by over 40 per cent to DM 69 million.
START Amadeus GmbH
1998
1997
Change in
per cent
379.7
361.1
5.2
141.1
101.5
39.0
69.1
49.2
40.4
35.1
25.0
40.4
594
672
– 11.6
500
0
MIPS
1995
1996
1997
1998
Capacity of IBM computers in MIPS
Capacity of UNISYS computers in MIPS
High level of capital expenditure
The capital expenditure volume of
Lufthansa Systems GmbH in tangible and
intangible assets climbed by 55.5 per cent
compared to last year to DM 96.7 million.
The company is thereby safeguarding its
long-term competitiveness.
The global renewal of the local EDP infrastructure of Lufthansa German Airlines
will ensure that Lufthansa Systems plays
a leading role in the future-oriented
market “Outsourcing of local EDP infrastructures”.
In the travel & transport market the
products MultiHost (inventory services),
BagScan (baggage handling) and the
travel bureau system IBIZA were successfully established.
Revenue of Lufthansa Systems GmbH
in DM million
700
600
Designed as an aid for flight and fleet
planning, the “NetSched” system was
further developed for airlines of different
sizes.
500
400
300
200
100
0
million
Innovative products
By extending its portfolio of equity interests
to a total of six subsidiaries, Lufthansa
Systems established itself as a one-stop
provider of information technology
services.
1995
1996
1997*
1998*
Internal revenue
External revenue
“WebFly” and “TravelEx” are new products
for the promising future market of electronic commerce. Lufthansa InfoFlyway –
Lufthansa’s travel information system on
the Internet – is now also looked after by
Lufthansa Systems.
Revenue
in DM million
of which with other
Group companies
Profit
in DM million
Capital expenditure
intangible assets
in DM million
Employees
Average number
during the year
START Amadeus, the leading travel distribution system in Germany, clearly exceeded
the operational targets it had set itself in the
financial year 1998. A total of 128.9 million
bookings (1997: 124.8 million) were handled
via the electronic distribution system. The
group’s profit from operating activities
totalled DM 69.1 million – a year-on-year
increase of more than 40 per cent. The
revenue generated by START Amadeus in
1998 amounted to DM 379.7 million.
Market share maintained in 1998
Despite the growing consolidation of the
travel agency industry, START Amadeus
GmbH successfully maintained its market
share last year. Although the number of
travel agencies decreased, the company
increased the number of START PCs and
terminals by 4.4 per cent to 40,234.
Extended service range and new
technologies
In close cooperation with its subsidiary
DERDATA Informationsmanagement
GmbH, START Amadeus is extending its
product range in its core business by
adding the components Back Office and
Management Information Systems
(SIM/SFM).
After modernising its hardware and software, START Amadeus also renewed the
technology of its computer centre in 1998
in order to achieve a lasting reduction in
the unit costs per transaction. All in all,
more than 3.2 billion transactions were
processed in 1998; the peak load reached
was 460 transactions per second.
Employees
START Amadeus employed a workforce
of 594 on an annual average last year.
A high priority is attached to career development. Promising young executives can
nurture their personal and professional
skills in the career advancement programme JUMP. Another forward-looking
concept concerns the computer-based
self-training programmes (CBTs) which
many members of staff use to expand
their knowledge base – even outside their
working hours.
68 Business segment Ground Services Annual Report 1998
Annual Report 1998 Service and Financial Companies
69
Ground Services: GlobeGround GmbH
Service and Financial Companies
GlobeGround GmbH is extending its worldwide market leadership. It raised
both the profit from ordinary activities (based on German Commercial Code)
and income.
The activities concentrated on the various strategic business segments are
given support by companies providing financial and other services which are
grouped together in Lufthansa Commercial Holding GmbH (LCH).
Ground Services, that is airport services
for passengers as well as aircraft and
freight handling, form one of the seven
strategic business segments of the
Lufthansa Group. With GlobeGround
GmbH, which arose from the previous
Lufthansa Airport and Ground Services
GmbH (LAGS), Lufthansa has the leading
global service provider in this market
segment.
and other equity interests. The profit from
ordinary activities rose by 9.5 per cent to
DM 9.2 million. The companies run by
GlobeGround as a financial holding
company generated 75 per cent of their
revenue with customers outside the
Lufthansa Group.
Lufthansa Commercial Holding turns in
new record earnings result
The realignment of the equity portfolio
in the travel agency and tourism sector
yielded book profits totalling DM 417.1
million. The profit before taxes reached a
new record level of DM 496.8 million.
External growth accelerated
The rise by DM 76 million in financial
assets to DM 136 million testifies to the
strong growth of this field of business.
Key items in this were the acquisition of a
49 per cent stake in B.L.A.S. (Berliner
Lufthansa Airport Services GmbH), the
take-over of a majority shareholding in
the London Cargo Centre and the raising
of the equity involvement in Hudson
General LLC, New York by a further
23 per cent.
The past year was characterised by
active management of the portfolio of
equity interests. Thus the strategic business segment Lufthansa IT Services was
created under the aegis of Lufthansa
Commercial Holding by merging the
main activities in the field of information
technology (IT). On the other hand,
Lufthansa’s own involvement in the travel
agency and tourism sector was termi-
The new neutral market branding underscores the group’s desire to extend its
global market leadership. GlobeGround
sees particular opportunities arising in
the wake of the liberalisation of ground
services at European airports. Other focal
points of growth are America and Asia.
Higher income and earnings
As a financial holding company,
GlobeGround GmbH generated total
income of DM 32 million in the 1998
fiscal year, which was 12.2 per cent more
than in the previous year. The increase
in income was due exclusively to the
dividends received from its subsidiaries
GlobeGround GmbH*
GlobeGround
Revenue 1998 by business segments
1998
Income
in DM million
Profit
from ordinary activities
in DM million
Financial assets
in DM million
Lufthansa Commercial Holding GmbH
Owing to its small weighting relative to
the other business segments in the
Lufthansa Group, GlobeGround GmbH
was not consolidated last year; instead,
it was included in the earnings result of
Lufthansa Commercial Holding.
1997
Change in
per cent
32.1
28.6
12.2
9.2
8.4
9.5
135.9
59.6
128.0
* Annual statements prepared in accordance with the
German Commercial Code (HGB)
Security services
and other
airport services
13 %
Aircraft handling
43 %
Cargo handling
21 %
Passenger services
23 %
Total assets
in DM million
Financial assets
in DM million
Profit
from ordinary activities
in DM million
Equity ratio
in per cent
Capital expenditure
in DM million
1998
1997
Change in
per cent
993.1
794.0
25.1
413.0
497.4
– 17.0
496.8
269.8
84.1
45.6
32.0
13.6 pp.
131.8
106.2
24.1
nated by the disposal of its shareholding
in EuroLloyd and refocused on C & N
Touristic AG. As a consequence of this,
LCH’s other business fields were defined
anew.
Total income amounted to DM 530.7
million, while total expenses came to
DM 33.9 million. Hence Lufthansa
Commercial Holding achieved a profit
before taxes in 1998 of DM 496.8 million.
In order to bolster its financial reserves
for future tasks in the business fields
Lufthansa IT Services, ground handling
and infrastructure, LCH transferred
DM 137.7 million of the profit for 1998 to
retained earnings. After taxes, the sum of
DM 42.6 million was transferred to the
parent company Deutsche Lufthansa AG.
As the two business segments Lufthansa
IT Services (Lufthansa Systems GmbH
was assigned to LCH only as from
January 1, 1999) and Ground Services
are allocated to LCH, the earnings results
of these two segments – except that of
Lufthansa Systems – are included in the
earnings result of LCH.
The activities in the aircraft leasing business will increase in importance for LCH.
With a view to optimising aircraft management and marketing, GOAL German
Operating Aircraft Leasing GmbH & Co. KG
was set up in 1998 jointly with KG Allgemeine Leasing GmbH & Co. (LCH shareholding: 40 per cent).
In the year under review Lufthansa
Leasing GmbH made an earnings contribution of DM 4.7 million.
Consolidated Financial Statements 1998
of Deutsche Lufthansa AG
Transparency for passengers
and investors
Lufthansa invests large amounts of
money and time so that passengers can
enjoy a clear outlook. Cabin windows are
constantly checked to ensure the panes
are transparent. If they reveal scratches or
any other damage they are removed and
touched up – to provide a clear view.
Before installation, Lufthansa engineers
check the thickness of the panes to make
sure they can withstand high pressure
during a flight. Lufthansa works closely
with the manufacturers to guarantee
constant improvements in quality.
The 1998 annual financial statements
have been prepared for the first time
according to the International Accounting
Standards (IAS). To provide greater
transparency, and for ease of comparison,
the 1997 statements have also been
drawn up along the new lines.
72 Consolidated Income Statement Annual Report 1998
Annual Report 1998 Consolidated Balance Sheet
Consolidated Income Statement
for the 1998 Financial Year
Traffic revenue
Other revenue
Revenue
Changes in inventories and work performed
by the enterprise and capitalised
Cost of materials
Staff costs
Depreciation and amortisation expense
Profit from operating activities
Income from investments accounted for using
the equity method
Other income from subsidiaries, joint ventures
and associates
Net interest
Impairment losses relating to financial assets
and investments held as current assets
Financial result
Consolidated Balance Sheet
as of December 31, 1998
Notes
1998
DM000
6)
7)
19,551,154
3,102,596
8)
9)
10)
11)
12)
13)
–
–
–
–
1998
DM000
1997
DM000
22,653,750
18,730,830
2,878,955
21,609,785
64,111
2,595,615
9,185,956
5,607,663
1,693,592
5,981,403
+2,844,862
86,138
1,880,866
– 8,955,249
– 5,521,598
– 1,684,874
– 5,283,948
+2,131,120
14)
+ 163,069
+
14)
15)
+
97,020
– 382,675
+ 134,814
– 547,716
21)
–
73
240,200
93,769
– 362,786
–
63,323
– 382,456
+2,482,076
+1,748,664
Other taxes
Profit before income taxes
16)
–
35,305
+2,446,771
–
62,092
+1,686,572
Income taxes
Minority interest
16)
– 1,015,109
–
967
+1,430,695
– 606,189
–
3,749
+1,076,634
Assets
Intangible assets
Aircraft
Other tangible assets
Investments accounted for using the equity method
Other financial assets
Fixed assets
Notes
21)
21)
17) 18)
31.12.1998
DM000
19)
20)
20)
21)
22)
Income tax assets
Prepaid expenses
16)
23)
Issued capital
Capital reserve
Retained earnings
Notes
31.12.1998
DM000
24)
25)
25)
1,908,000
1,331,493
1,791,387
1,430,695
Minority interest
Retirement benefit obligations
Provisions for income taxes
Other provisions and accruals
Provisions and Accruals
595,540
17,040,312
620,222
15,544,361
6,662,582
366,144
2,042,558
1,076,329
986,531
2,648,419
7,119,981
261,608
75,805
38,197
101,949
24,040,307
22,804,488
31.12.1998
DM000
31.12.1997
DM000
6,461,575
1,908,000
1,331,493
946,007
1,076,634
5,262,134
19,415
5,653
9,927,963
5,041,614
89,648
3,291,498
8,422,760
7,122,150
5,844,370
1,387,236
1,350,613
8,582,219
509,204
531,722
24,040,307
22,804,488
5,398,849
1,001,414
3,527,700
26)
Long-term borrowings
Trade payables
Other liabilities
Liabilities
27)
28)
28)
Deferred income
29)
Total equity and liabilities
16,444,772
246,470
11,506,942
958,665
947,565
1,264,497
14,924,139
388,081
2,061,456
953,253
2,004,855
1,254,937
Total assets
Equity and liabilities
31.12.1997
DM000
243,692
12,920,648
934,946
1,127,838
1,217,648
Repairable aircraft spare parts
Inventories
Trade receivables
Other receivables and other assets
Securities
Cash and cash equivalents
Current assets
31.12.1998
DM000
4,644,802
1,292,363
1,184,985
74 Group Statement of Fixed Assets Movements Annual Report 1998
Annual Report 1998 Group Statement of Fixed Assets Movements
75
1998
Disclosures in DM000
Acquisition costs development
Balance
Currency
Additions
1.1.1998
translation
differences
Intangible assets
Acquired concessions, industrial property rights,
similar rights and assets, and licences thereunder
Goodwill from consolidation
Advance payments
Disposals
Transfers
Balance
31.12.1998
Accumulated depreciation development
Balance
Currency
Additions
1.1.1998
translation
differences
Disposals
Transfers
Write-ups
Carrying amount
Balance
Balance
31.12.1998
31.12.1998
358,788
160,622
32,873
552,283
–
–
– 27
– 27
43,862
21,418
28,691
93,971
44,117
–
8,967
53,084
24,523
–
– 25,512
– 989
383,056
182,040
27,058
592,154
231,033
74,620
160
305,813
–
–
– 12
– 12
46,481
28,773
39
75,293
32,680
–
–
32,680
48
–
–
48
–
–
–
–
244,882
103,393
187
348,462
138,174
78,647
26,871
243,692
14,906,011
–
1,786,565
416,132
719,034
16,995,478
7,399,052
–
974,527
286,130
216,719
–
8,304,168
8,691,310
39,348
–
12,489
–
50,381
102,218
5,902
–
15,342
–
18,736
–
39,980
62,238
5,549,404
–
–
–
– 368,705
5,180,699
2,110,750
–
356,575
–
– 224,332
–
2,242,993
2,937,706
115,800
–
–
–
– 23,300
92,500
49,886
–
6,552
–
– 11,691
–
44,747
47,753
461,969
21,072,532
–
–
1,098,499
2,897,553
847
416,979
– 377,980
– 570
1,181,641
23,552,536
–
9,565,590
–
–
–
1,352,996
–
286,130
–
– 568
–
–
–
10,631,888
1,181,641
12,920,648
Land and buildings
Leased buildings
Land and buildings
576,465
220,969
797,434
– 718
–
– 718
27,988
–
27,988
48,615
–
48,615
22,880
–
22,880
578,000
220,969
798,969
305,382
58,487
363,869
– 336
–
– 336
25,347
7,257
32,604
35,157
–
35,157
–2
–
–2
45
16,000
16,045
295,189
49,744
344,933
282,811
171,225
454,036
Technical plants and machines
Leased technical plants and machines
558,378
109,267
667,645
– 319
–
– 319
39,823
–
39,823
17,647
44,267
61,914
20,686
–
20,686
600,921
65,000
665,921
452,800
75,660
528,460
– 296
–
– 296
42,987
8,843
51,830
13,256
44,267
57,523
10
–
10
–
–
–
482,245
40,236
522,481
118,676
24,764
143,440
1,359,456
– 370
192,090
162,746
7,786
1,396,216
1,044,116
– 274
176,514
138,372
512
–
1,082,496
313,720
28,953
1,388,409
–
– 370
–
192,090
–
162,746
–
7,786
28,953
1,425,169
13,659
1,057,775
–
– 274
4,355
180,869
–
138,372
–
512
–
–
18,014
1,100,510
10,939
324,659
55,281
2,908,769
– 388
– 1,795
13,626
273,527
5,915
279,190
– 49,793
1,559
12,811
2,902,870
–
1,950,104
–
– 906
–
265,303
–
231,052
–
520
–
16,045
–
1,967,924
12,811
934,946
680,417
235,729
173,353
18,317
650,250
12,204
183,102
17,091
16,492
620,410
37,062
2,644,427
–6
–
– 7,012
–
– 14,551
–
–1
–
–
64
–
– 21,506
97,298
73,809
503,530
137,805
212,296
1,990
110
16,644
–
48,773
688
1,092,943
450,502
3,012
1,880
100
37,195
–
129,931
25,258
3
143,937
2,389
794,207
– 34,400
– 28,200
–
3,000
1,470
–
32,930
25,200
–
–
–
0
292,807
278,326
667,991
159,022
812,270
14,194
86,210
33,677
16,489
525,310
35,361
2,921,657
87,797
7,003
2,209
4,677
193,434
–
15,294
2,318
–
119,633
–
432,365
–
–
–
–
–
–
–
–
–
–
–
–
–
4,800
14,457
–
8,365
690
95
131
–
213,970
–
242,508
65,127
3
–
–
–
–
2,793
–
–
29,391
–
97,314
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,388
–
1,388
22,670
11,800
16,666
4,677
201,799
690
12,596
2,449
–
302,824
–
576,171
270,137
266,526
651,325
154,345
610,471
13,504
73,614
31,228
16,489
222,486
35,361
2,345,486
27,178,011
– 23,328
4,357,994
1,543,460
0
29,969,217
12,253,872
– 918
1,936,100
647,176
0
17,433
13,524,445
16,444,772
Aircraft and spare engines
Aircraft and spare engines leased
to third parties
from third parties
Leased aircraft and spare engines
subleased to third parties
Advance payments on aircraft and assets
under construction
Other equipment, office and plant equipment
Leased other equipment,
office and plant equipment
Payments on account and assets
under construction
Financial assets
Investments in subsidiaries
Loans to subsidiaries
Investments in joint ventures
Loans to joint ventures
Investments in associates
Loans to associates
Investments in other equity investments
Loans to other equity investments
Securities
Other loans
Prefinancing of leasehold
Fixed assets
76 Group Statement of Fixed Assets Movements Annual Report 1998
Annual Report 1998 Group Statement of Fixed Assets Movements
77
1997
Disclosures in DM000
Acquisition costs development
Balance
Currency
Additions
1.1.1997
translation
differences
Intangible assets
Acquired concessions, industrial property rights,
similar rights and assets, and licences thereunder
Goodwill from consolidation
Advance payments
Disposals
Transfers
Balance
31.12.1997
Accumulated depreciation development
Balance
Currency
Additions
1.1.1997
translation
differences
Disposals
Transfers
Write-ups
Balance
31.12.1997
Carrying amount
Balance
31.12.1997
327,998
68,272
22,828
419,098
–
–
52
52
42,865
92,350
29,903
165,118
28,504
–
326
28,830
16,429
–
– 19,584
– 3,155
358,788
160,622
32,873
552,283
202,733
61,325
105
264,163
–
–
17
17
51,769
13,295
38
65,102
21,563
–
–
21,563
– 1,906
–
–
– 1,906
–
–
–
–
231,033
74,620
160
305,813
127,755
86,002
32,713
246,470
14,210,248
–
1,176,574
1,184,028
703,217
14,906,011
7,108,277
–
942,424
702,063
50,414
–
7,399,052
7,506,959
–
–
39,348
–
–
39,348
–
–
5,902
–
–
–
5,902
33,446
5,353,542
–
281,698
–
– 85,836
5,549,404
1,770,692
–
391,085
–
– 51,027
–
2,110,750
3,438,654
115,800
–
–
–
–
115,800
41,683
–
8,203
–
–
–
49,886
65,914
707,069
20,386,659
–
–
372,894
1,870,514
–
1,184,028
– 617,994
– 613
461,969
21,072,532
–
8,920,652
–
–
–
1,347,614
–
702,063
–
– 613
–
–
–
9,565,590
461,969
11,506,942
Land and buildings
Leased buildings
Land and buildings
642,368
235,212
877,580
1,418
–
1,418
39,761
–
39,761
125,186
14,243
139,429
18,104
–
18,104
576,465
220,969
797,434
340,149
44,753
384,902
540
–
540
23,326
27,977
51,303
58,633
14,243
72,876
0
–
0
–
–
–
305,382
58,487
363,869
271,083
162,482
433,565
Leased technical plants and machines
551,920
109,267
661,187
591
–
591
18,339
–
18,339
20,018
–
20,018
7,546
–
7,546
558,378
109,267
667,645
440,439
53,837
494,276
516
–
516
30,937
21,823
52,760
18,678
–
18,678
– 414
–
– 414
–
–
–
452,800
75,660
528,460
105,578
33,607
139,185
1,703,090
708
168,736
526,600
13,522
1,359,456
1,307,672
562
165,936
432,987
2,933
–
1,044,116
315,340
28,953
1,732,043
–
708
–
168,736
–
526,600
–
13,522
28,953
1,388,409
11,500
1,319,172
–
562
2,159
168,095
–
432,987
–
2,933
–
–
13,659
1,057,775
15,294
330,634
74,244
3,345,054
40
2,757
46,219
273,055
29,818
715,865
– 35,404
3,768
55,281
2,908,769
–
2,198,350
–
1,618
–
272,158
–
524,541
–
2,519
–
–
–
1,950,104
55,281
958,665
609,499
81,083
83,229
79,882
892,830
12,162
166,464
16,532
1,695
654,134
36,819
2,634,329
457
–
9,145
–
38,140
–
4
–
–
–
–
47,746
106,076
178,800
19,913
–
137,803
67
64
1,160
14,820
23,096
2,585
484,384
42,382
19,229
4,643
1,172
334,274
–
155
100
23
117,712
2,342
522,032
6,767
– 4,925
65,709
– 60,393
– 84,249
– 25
16,725
– 501
–
60,892
–
0
680,417
235,729
173,353
18,317
650,250
12,204
183,102
17,091
16,492
620,410
37,062
2,644,427
53,178
–
2,209
65,570
257,012
–
21,474
2,516
–
111,186
–
513,145
–
–
–
–
–
–
–
–
–
–
–
–
34,619
7,003
–
–
10,706
–
8
287
–
46,997
–
99,620
–
–
–
–
74,284
–
5
–
–
36,060
–
110,349
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
60,893
–
–
6,183
485
–
2,490
–
70,051
87,797
7,003
2,209
4,677
193,434
–
15,294
2,318
–
119,633
–
432,365
592,620
228,726
171,144
13,640
456,816
12,204
167,808
14,773
16,492
500,777
37,062
2,212,062
26,785,140
50,555
2,793,071
2,450,755
0
27,178,011
11,896,310
1,635
1,784,494
1,358,516
0
70,051
12,253,872
14,924,139
to third parties
from third parties
Leased aircraft and spare engines
subleased to third parties
Advance payments on aircraft and assets
under construction
Leased other equipment,
office and plant equipment
Payments on account and assets
under construction
Financial assets
Investments in subsidiaries
Loans to subsidiaries
Investments in joint ventures
Loans to joint ventures
Investments in associates
Loans to associates
Investments in other equity investments
Loans to other equity investments
Securities
Other loans
Fixed assets
78 Schedule of the Lufthansa Group-Equity Capital Annual Report 1998
Annual Report 1998 Lufthansa Group-Cash Flow Statement
Schedule of the Lufthansa Group Equity Capital
Balance on
January 1, 1997
Dividends
Currency translation
Other neutral changes 2)
Balance on
December 31, 1997
Transfers
Dividends
Other neutral changes 2)
Balance on
December 31, 1998
1)
2)
Issued
Capital
Capital
reserve
Retained
earnings
DM000
DM000
1,908,000
79
Lufthansa Group-Cash Flow Statement
Group
profit
Total
DM000
Currency
translation
differences1)
DM000
DM000
DM000
1,331,493
1,264,303
– 7,511
0
4,496,285
–
–
–
–
–
–
–
–
– 190,800
–
–
– 136,257
–
–
16,272
–
–
1,076,634
–
–
– 190,800
1,076,634
16,272
– 136,257
1,908,000
1,331,493
937,246
8,761
1,076,634
5,262,134
–
–
–
–
–
–
–
–
–
–
733,194
–
–
–
120,286
–
–
–
– 8,100
–
– 733,194
– 343,440
1,430,695
–
–
–
– 343,440
1,430,695
– 8,100
120,286
1,908,000
1,331,493
1,790,726
661
1,430,695
6,461,575
disclosed in the balance sheet under retained earnings
neutral changes result largely from changes in the capital of investments accounted for using the equity method
1998
DM000
1997
DM000
Cash and cash equivalents at beginning of period
2,648,419
1,839,346
Profit before income taxes
Depreciation and amortisation of, and impairment losses
relating to fixed assets (net of reversals)
Depreciation of repairable aircraft spare parts
Result from fixed assets disposal
Non-cash results from investments accounted for using the equity method
Non-cash interest result
Income taxes paid
Change in inventories
Change in receivables, other assets and prepaid expenses
Change in provisions and accruals
Change in liabilities (without borrowings)
Other
Net cash from operating activities
2,446,771
1,686,572
1,917,749
38,483
– 676,862
– 137,619
302,189
– 310,733
–
21,937
– 437,636
800,827
– 260,501
–
22,818
3,637,913
1,715,979
24,805
– 425,804
–
93,769
289,851
–
56,645
130,437
– 509,735
680,542
539,931
–
76,535
3,905,629
Purchase of tangible assets and intangible assets
Purchase of financial assets
Additions to repairable aircraft spare parts
Proceeds from sale of non-consolidated equity investments
Acquisitions of non-consolidated equity investments
Proceeds from disposal of intangible assets, tangible assets and
other financial assets
Interest received
Dividends received
Net cash used in investing activities
– 3,243,544
– 278,389
–
13,801
695,310
– 183,261
– 2,306,704
– 464,318
–
89,220
126,514
– 100,555
511,264
263,714
122,470
–2,126,237
1,417,267
121,737
42,563
– 1,252,716
Investments in securities
Net cash used in investing activities including investments in securities
– 1,018,324
–3,144,561
– 961,564
– 2,214,280
Proceeds from long-term borrowings
Repayments on long-term borrowings
Dividends paid
Interest paid
Net cash used in financing activities
4,369
– 1,203,937
– 343,440
– 344,200
–1,887,208
4,791
– 306,585
– 190,800
– 379,602
– 872,196
Net decrease / increase in cash and cash equivalents
–1,393,856
819,153
Effects of exchange rate changes
Cash and cash equivalents at end of period
374
1,254,937
Securities
Total liquid funds
2,004,855
3,259,792
986,531
3,634,950
375,158
1,770,637
Net decrease / increase in total liquid funds
–
–
10,080
2,648,419
80 Notes to the Consolidated Financial Statements Annual Report 1998
Annual Report 1998 Notes to the Consolidated Financial Statements
81
Notes to the Consolidated Financial Statements
of Deutsche Lufthansa AG 1998
1)
Fundamentals and
methods
The consolidated financial statements of Deutsche Lufthansa AG and its
subsidiaries have been prepared in accordance with the International
Accounting Standards (IAS) and the interpretations of the Standing Interpretations Committee (SIC). The provisions set out in SIC-8 concerning
the first-time application of IAS have been observed whereby the following new or revised Standards have been voluntarily applied before their
effective date: IAS 1 (Presentation of Financial Statements), IAS 14
(Segment Reporting), IAS 17 (Accounting for Leases), IAS 19 (Employee
Benefits) and IAS 36 (Impairment of Assets). Standards relevant for the
first time in the 1998 financial year have also been applied for 1997.
Continuation . . .
1)
Fundamentals and
methods
The requirements set out in section 292 a, German Commercial Code
(HGB) are met; thus the consolidated financial statements prepared in
accordance with International Accounting Standards have an exempting
effect. The assessment as to whether group accounting is consistent
with the 7th EU Directive was based on the interpretation of the contact
committee for accounting of the European Commission effective at the
time of preparation of financial statements.
2)
Consolidation
methods
All significant subsidiaries under legal and/or actual control of the
Deutsche Lufthansa AG are included in the consolidated financial statements. Significant joint ventures and associates are accounted for using
the equity method if the group holds a share of between 20 and 50 per
cent. Other equity investments are valued at acquisition costs. A list of
significant subsidiaries, joint ventures and associates is shown on pages
122/123 of this report.
The following accounting and valuation methods in the present consolidated financial statements deviate from German law:
– Translation of foreign currency receivables and liabilities as at the
closing rate
– Accounting for internally generated intangible assets in the balance
sheet
– Revenue recognition by reference to the stage of completion of longterm customer orders
– Valuation of long-term provisions and accruals and of high or low
interest-bearing liabilities at present value
– No recognition of other provisions if the probability of the outflow of
resources is below 50 per cent
– Recognition of deferred tax assets and liabilities in accordance with
the balance sheet liability method
– Recognition of assets and of corresponding liabilities resulting from
finance lease agreements according to IAS 17
– Valuation of retirement benefit obligations according to the projected
unit credit method.
For the purpose of initial consolidation or valuation on the basis of the
equity method, acquisition costs of equity investments are compared to
the Group’s share in the carrying amount of the respective company’s
equity. The difference between acquisition costs and prorated equity is,
as a rule, initially allocated to the subsidiary’s or the equity investments’
assets and liabilities up to the amount of their fair values, and then
carried forward accordingly. Any excess of the costs of acquisition over
the acquirers interest in the fair value of the identifiable assets and
liabilities acquired is recognised as goodwill and amortised over its
expected useful life according to the straight-line method; any negative
goodwill is treated as deferred income and recognised as income on a
systematic basis over five years. Any goodwill arising from first-time
application of the equity method remains a component of the equity
investments’ acquisition costs and is amortised over its expected useful
life applying the straight-line method.
The valuation of some items changed as a result of the transition to IAS
at January 1, 1997. The respective changes were treated as adjustments
to the opening balance of retained earnings of the earliest period presented.
Capital and Reserves
Equity according to HGB as at 31.12.1996
(without minority interest)
Changes in the consolidated group
Valuation using the equity method
Finance leases of aircraft and buildings
Other accounting and valuation differences
Deferred taxes
Equity according to IAS as at 1.1.1997
Effects resulting from intra-group transactions are eliminated. Receivables
and liabilities between consolidated companies are offset; inter-company
profits and losses in fixed assets and inventory are eliminated, intragroup profits are set off against the corresponding expenses. All temporary differences from consolidation are subject to the required tax
deferrals.
DM000
5,339,322
133,848
11,545
– 722,148
– 1,088,805
202,413
51,983
568,127
4,496,285
3)
For the purpose of foreign currency translation to DM, in-house exchange
rates are set monthly according to the rates of exchange on international
stock exchanges. The acquisition costs of assets purchased in foreign
currency (mainly aircraft invoiced in USD) are determined by translation
according the exchange rates in effect at the time of payment. Ratehedged payments are reported within the framework of separate valuation
units.
Continuation . . .
3)
4)
Group of consolidated
companies
The balance sheets of foreign group companies are translated at
average rates at the balance sheet date in accordance with the concept
of functional currency. Profit and loss accounts are translated at annual
average rates. Differences resulting from currency translation and the
differences from the currency translation of amounts carried forward from
the previous year are recorded within the balance sheet under equity
without effects on earnings. Goodwill arising at foreign subsidiaries from
capital consolidation is carried forward at historical acquisition costs.
In addition to the Deutsche Lufthansa AG as the parent company, the
group of consolidated companies includes 14 domestic and 14 foreign
companies (previous year: 16 domestic and 14 foreign companies).
Changes in the companies consolidated in 1998 result from the merger
of START Amadeus Vertrieb GmbH and START Informatik GmbH to
START Amadeus GmbH (formerly START Holding GmbH) as at January 1,
1998. In addition, shares in nine (previous year: six) specialised securities funds have been consolidated as special purpose entities; taking an
economic approach, these funds’ assets are to be allocated to the
group.
Condor Flugdienst GmbH and two other subsidiaries of the Condor
Group were accounted for under the equity method in order to enhance
the comparability with previous year’s figures since they were omitted
from the range of consolidated companies on January 1, 1998 after
contribution of 90 per cent of the shares held in Condor Flugdienst GmbH
to C & N Touristic AG.
5)
Accounting and
valuation methods
83
Income and expense recognition
Revenues and other operating income are recognised upon performance
of services or passage of risk to the customer. Revenue from customerrelated long-term construction is recorded according to the current
stage of completion in accordance with the percentage of completion
method.
Operating expenses are recognised in the income statement upon
utilisation of the service or at the date of their origin. Warranties are
recognised when the respective revenue is recognised. Interest income
and expenses are reported on an accrual basis. Income or expenses
from profit or loss transfer agreements are recognised at the end of the
financial year. Dividends are, as a rule, recognised as received.
Intangible assets
Acquired intangible assets are recognised at acquisition costs, internally
generated intangible assets, from which the Group expects future benefits, are recognised at manufacturing costs and amortised in accordance
with the straight-line method over the expected useful life of five years.
Manufacturing costs include all costs directly or indirectly attributable to
the manufacturing process. Borrowing costs are not capitalised.
Goodwill from consolidation is amortised over its expected useful life, i.e.
over four, five, seven or fifteen years, using the straight-line method.
Inclusion of the remaining subsidiaries was unnecessary due to their
overall insignificance.
Tangible assets
Investments in 29 joint ventures and 40 associates are included in the
consolidated financial statements of which five joint ventures and 19
associates are carried at equity. Owing to their overall insignificance for
accounting purposes, the remaining joint ventures and associates were
carried at cost. The total amount of fixed assets to be allocated to the
Group due to its interest in the respective joint venture is DM 1,659,288
thousand (previous year: DM 238,369 thousand), of current assets
DM 824,855 thousand (previous year: DM 210,814 thousand), of liabilities
DM 1,967,959 thousand (previous year: DM 325,597 thousand), of expenses DM 4,559,498 thousand (previous year: DM 644,502 thousand)
and of earnings DM 4,656,693 thousand (previous year: DM 664,167
thousand).
Tangible assets serving business operations which are used for more
than one year are recorded at acquisition or manufacturing costs
reduced by scheduled straight-line depreciation. Manufacturing costs
include all costs directly or indirectly attributable to the manufacturing
process. Borrowing costs are not capitalised. The tangible assets’ useful
lives correspond to the expected useful lives in the Group. Exclusively
tax-based depreciation is not recognised.
New aircraft and spare engines are depreciated over 12 years to a residual
value of 15 per cent.
Continuation . . .
5)
Accounting and
valuation methods
Buildings are assigned a useful life of between 20 and 45 years. Buildings and leasehold improvements are depreciated according to the term
of the lease or a lower useful life. In general, depreciation rates are between ten and twenty per cent a year. The useful life of technical plants
and equipment is up to ten years. Office and plant equipment is depreciated under normal conditions over three to ten years. Reconstruction
commitments resulting from leasehold improvements are recognised on
a pro rata basis over their useful lives through setting up accruals.
Continuation . . .
5)
Accounting and
valuation methods
85
Repairable aircraft spare parts
Rotatable parts (repairable spare parts) required for specific aircraft
types are recorded at continually adjusted prices based on prevailing
average purchase costs. For valuation purposes, the parts are assigned
to the individual aircraft types and depreciated in accordance with the
depreciation rate for aircraft.
Current assets
Finance leasing
In accordance with IAS 17, the economic ownership in leased assets is
transferred to the lessee if the lessee bears substantially all the risks and
rewards incident to the ownership of the leased asset. If the economic
ownership is transferred to the Lufthansa Group, the asset is recognised
at the inception of the lease at the present value of the lease payments
plus incidental payments, if any, which are to be borne by the lessee.
Depreciation methods and useful lives correspond to those applied to
comparable acquired assets.
Impairment of assets
Intangible assets and tangible assets are written down at the balance
sheet date if the recoverable amount of the asset is below its carrying
amount. The recoverable amount is determined as the higher of an
asset’s net selling price and the present value of the expected cash
inflow.
Financial assets
Financial assets are recognised at cost. Long-term low or non-interest
bearing loans are recognised at their present value. Marketable listed
securities are measured at the lower cost or market value on portfolio
basis as at the balance sheet date. Other financial assets are written
down to a lower value at the balance sheet date if a permanent impairment in value may be assumed. The retention option is exercised.
Current assets include inventories, receivables, securities and liquid
funds.
Inventories
The item includes non-repairable spare parts, raw materials and supplies, purchased merchandise and payments made on account of inventories. Valuation is based on acquisition costs determined on the basis
of average prices or on manufacturing costs. Manufacturing costs include all costs which can, either directly or indirectly be attributed to the
manufacturing process. Borrowing costs are not capitalised. Subsequent
measurement is based on the lower of costs and the realisable selling
price less costs yet to be incurred. As a rule, valuation is based on the
net realisable value of the finished product.
Receivables
Short-term receivables are carried at cost. Low or non-interest bearing
monetary receivables with a maturity of more than one year are measured
at present value.
Customer receivables from manufacturing or service orders which are
not yet completed at the balance sheet date are recognised at manufacturing costs plus a mark-up that corresponds to the stage of completion
provided that the outcome of the contract can be reliably assessed.
Other unfinished customer orders are recognised at the amount of the
manufacturing costs incurred which are expected to be recovered.
If it is uncertain whether the receivables can be collected, the customer
receivables are carried at the lower realisable value.
Continuation . . .
5)
Accounting and
valuation methods
In addition to necessary individual allowances, all recognisable risks
from the general credit risk are accounted for by recognising flat rate
itemised allowances.
Foreign currency receivables are measured at the middle rate of the
buying or selling rate at the balance sheet date.
Securities held as current assets
Securities held as current assets are carried at the lower of cost or
market price determined on the basis of individual or portfolio valuation.
Continuation . . .
5)
Accounting and
valuation methods
87
Fuel price hedging arrangements have been made in the form of fixed
price and option transactions on the crude and heating oil market. The
results from fuel price hedging operations are included in fuel expense.
Premiums paid upon conclusion of interest rate, currency or fuel price
hedging operations are capitalised up to the exercise or expiry of the
option, and valued at the lower value from acquisition cost and market
value at the balance sheet date. Conversely, a premium paid by the
contracting party is carried as a liability and valued at the higher value
from acquisition and market value at the balance sheet date. Upon
execution or expiry of the option, the respective amount is recorded in
the income statement as interest rate or exchange rate difference or fuel
expense.
Derivative financial instruments
Provisions and accruals
In the Lufthansa Group, derivatives are used exclusively for the hedging
of interest rate and currency risks on the basis of an intra-group guideline, and for the hedging of fuel price risks on the basis of a safety policy
defined by the Executive Board and supervised by a price hedging committee. Interest rate and currency hedging transactions are also effected
with non-consolidated group companies.
Interest rate risks are largely hedged on the basis of interest rate swaps;
the variable interest rate on which the underlying asset is based, is
exchanged for a fixed interest rate over the entire term. The resulting
interest rate gap is recorded as it accrues, affecting the earnings result;
as pending transactions, future interest rate gaps are not recorded in the
balance sheet. Interest rate swaps with non-consolidated companies, by
contrast, are valued on the basis of rules applicable to pending transactions if there is no corresponding counter-transaction.
Forward exchange transactions and currency options are used to hedge
currency risks; also, fluctuation band options are used which represent
the combination of a purchase and simultaneous sale of currency options
of the same currency. Fluctuation band options are concluded as zero
cost options, i.e. the option premium to be paid equals the premium
resulting from the sale of the option. If hedging transactions are allocated
to future fixed contracted investments, the respective exchange gain or
loss is included in the investment’s acquisition costs and thus affects the
earnings result over the scheduled useful life of the asset. If hedging
serves the purpose of future liquidity surplus or under-coverage, the risk
of having to buy or sell currencies at rates higher or lower than those of
the balance sheet date is recognised with an effect on results. The same
applies to currency hedging transactions with non-consolidated group
companies if there is no corresponding counter-transaction.
Retirement benefit obligations are valued in accordance with the
accrued benefit valuation method stipulated in IAS 19 (revised 1998) for
performance-oriented pension plans. The interest share included in
pension expense is shown in the financial result as interest expense.
Provisions for income taxes and other provisions and accruals are set
up to cover commitments to third parties which are likely to lead to an
outflow of economic resources provided this outflow can be reliably
assessed. If the provision or accrual was not recognised because one of
the recognition criteria was not met, the respective commitments are
disclosed as contingent liabilities.
Provisions for commitments which are not expected to result in an outflow of resources in the following year, are measured at the amount of
the present value of the expected cash outflow.
The amount of provisions and accruals recognised is reviewed at each
balance sheet date. Provisions in a foreign currency are translated at
current rates.
Liabilities
Short-term liabilities are carried at their nominal amount. Liabilities with
maturities of more than one year are recorded at their present values.
Foreign currency receivables are recorded at the middle rate of the
selling and buying rate at the balance sheet date.
Annual Report 1998 Notes to the Consolidated Income Statement
89
Notes to the
Consolidated Income Statement
Continuation . . .
5)
Accounting and
valuation methods
Deferred tax items
6)
Traffic revenue
In accordance with IAS 12, deferred tax items are recognised for all
valuation differences between the tax balance sheets of the individual
companies and the consolidated financial statements. Tax loss carryforwards which are likely to be utilised in future are recognised to the
amount of the deferred tax assets. Deferred tax assets or tax liabilities
resulting from the split corporation tax rates in Germany are recognised
to the amount of the difference to the distribution tax rate. The tax rates
for deferred tax items in the Group amount to 40 per cent domestically
and 16 to 35 per cent abroad.
7)
Other revenue
By sector
1998
DM000
1997
DM000
Passenger
Freight
Mail
15,756,512
3,513,201
281,441
19,551,154
14,895,687
3,543,979
291,164
18,730,830
Scheduled
Charter
18,976,612
574,542
19,551,154
18,143,813
587,017
18,730,830
1998
DM000
1997
DM000
1,445,317
558,080
249,536
365,121
143,874
340,668
3,102,596
1,353,335
558,678
233,587
323,254
145,029
265,072
2,878,955
By sector
Maintenance
Catering services
Travel (commissions)
EDP services
Ground handling
Other
Other revenue includes revenue from unfinished services to the amount
of DM 137,839 thousand (previous year: DM 144,031 thousand) which
was determined taking into account estimated order revenue or estimated order costs respectively. The stage of completion was determined
on the basis of cost already incurred.
The accumulated costs for unfinished orders amount to DM 138,967
thousand (previous year: DM 137,208 thousand), the respective profits to
DM 17,431 thousand (previous year: DM 12,560 thousand). DM 74,475
thousand (previous year: DM 55,955 thousand) have already been paid
by customers.
8)
Changes in inventories
and work performed
by the enterprise and
capitalised
Changes in inventories and work performed
by the enterprise and capitalised
1998
DM000
1997
DM000
Increase in finished and unfinished goods
Work performed by the enterprise and capitalised
1,778
62,333
64,111
348
85,790
86,138
90 Notes to the Consolidated Income Statement Annual Report 1998
9)
Other operating
income
Income from disposal of fixed assets
Income from write-ups to fixed assets
Foreign currency translation gains
Release of provisions
Redebiting of charges for EDP distribution systems
Income from redebiting of accounts payable
Hiring out of staff
Compensations received for damages
Rental income
Utilisation of provisions
Income from the subleasing of aircraft
Income from disposal of short-term financial assets
10)
Cost of materials
Cost of materials
Fuel for aircraft
Raw materials and supplies and
purchased merchandise
Cost of services purchased
1998
DM000
1997
DM000
697,646
17,433
462,258
202,196
182,849
205,109
62,144
49,676
74,225
50,878
28,299
49,319
513,583
2,595,615
469,263
70,051
202,495
171,373
169,246
58,669
43,523
68,428
59,074
51,948
27,545
2,079
487,172
1,880,866
1998
DM000
1997
DM000
1,689,767
1,854,184
1,645,107
5,851,082
9,185,956
1,470,323
5,630,742
8,955,249
Continuation . . .
11)
Staff costs
Ground personnel
Flight personnel
Trainees
12)
Depreciation and
amortisation expense
13)
Other operating
expenses
Staff costs
Wages and salaries
Social security
Pension costs and other employee benefits
1998
DM000
1997
DM000
4,579,974
764,698
262,991
5,607,663
4,487,475
736,590
297,533
5,521,598
Pension costs and other employee benefits largely include additions to
retirement benefit obligations (cf. item 26). DM 283 thousand (previous
year: DM 636 thousand) were recognised for executive officers in 1998.
14)
Income from subsidiaries, joint ventures
and associates
1998
1997
39,493
14,611
763
54,867
40,924
13,886
710
55,520
The depreciation and amortisation of intangible assets, aircraft and other
tangible assets is detailed in the statement of fixed assets movements.
Depreciation of land and buildings in the 1997 financial year include an
impairment loss of DM 16,000 thousand to the net realisable value of a
building. All other expenses relate to scheduled depreciation or amortisation.
Sales commissions to agencies
Rents and maintenance costs
Staff-related expenses
Expenditure on EDP distribution systems
Advertising and sales promotion
Foreign currency translation losses
Audit, consulting and legal fees
Expenses incurred from redebited accounts payable
Allowances for receivables
Losses from disposal of assets
Losses from disposal of short-term financial assets
Losses from disposal of other current assets
Cost of purchased merchandise includes DM 49,282 thousand (previous
year: DM 56,171 thousand) operating lease expenses for aircraft.
11)
Staff costs
Average number of employees
91
Income from subsidiaries,
Income from profit transfer agreements
Income from joint ventures
Income from associates
Income from other equity investments
Expenses from loss transfer
1998
DM000
1997
DM000
1,722,688
856,071
784,892
319,431
269,193
385,716
147,603
193,113
86,304
15,923
41,421
12,822
1,146,226
5,981,403
1,737,542
840,396
671,914
311,980
249,177
399,421
132,354
98,020
65,719
43,459
2,334
38,110
693,522
5,283,948
1998
DM000
1997
DM000
77,664
+ 118,099
+ 58,725
+ 5,659
–
58
+260,089
92,357
+ 25,532
+ 65,237
+ 48,249
– 2,792
+228,583
92 Notes to the Consolidated Income Statement Annual Report 1998
Continuation . . .
14)
Income from subsidiaries, joint ventures
and associates
15)
Net interest
Income and expenses from profit transfer agreements include subsidiaries’ tax contributions/credits. The income from joint ventures includes
profit shares to the amount of DM 114,197 thousand (previous year:
DM 19,273 thousand) and the income from associates includes profit
shares of DM 48,872 thousand (previous year: DM 56,608 thousand)
which were calculated under the equity method. The 1997 financial year
included, in addition, profit shares from investments accounted for using
the equity method to the amount of DM 17,888 thousand which was
disclosed under income from other equity investments.
Net interest
Income from other securities and long-term loans
Other interest and similar income
Interest and similar expenses
16)
Taxes
1998
DM000
1997
DM000
98,222
158,463
– 639,360
– 382,675
56,736
122,238
– 726,690
– 547,716
1998
DM000
1997
DM000
39,897
4,323
269
35,305
–
35,305
74,025
7,856
427
65,742
– 3,650
62,092
1998
DM000
1997
DM000
1,227,165
– 2,707
–
37
– 209,312
1,015,109
77,718
– 2,218
–
530,689
606,189
Other taxes
Current tax expenses
Release of tax provisions/tax liabilities
Refunds for previous years
Taxes redebited to subsidiaries
Income taxes
Current income tax expenses
Release of tax provisions
Refunds for previous years
Deferred taxes
–
–
–
–
The following table shows a numerical reconciliation from the expected
to disclosed tax expense for 1998 and 1997, respectively. The expected
tax charge is determined by multiplying profit before income taxes by
the applicable domestic tax rate of 40 per cent given full distribution.
The 40 per cent rate consists of 30 per cent corporation tax (distribution
rate) and trade tax on earnings of 10 per cent.
Continuation . . .
16)
Taxes
Expected income tax expenses
Tax free income and
other deductible amounts
Non-deductible amortisation
of goodwill
Earnings retained by foreign
subsidiaries which are not
imposed with deferred taxes
Solidarity surcharge
Release of deferred tax liabilities
Other
Disclosed income tax charge
93
1998
DM000
Basis of
assessment
1998
DM000
Tax
charge
1997
DM000
Basis of
assessment
1997
DM000
Tax
charge
2,446,771
978,708
1,686,572
674,629
35,049
– 14,020
53,464
– 21,386
51,595
+ 20,638
13,244
+ 5,298
120,936
–
–
– 48,374
+ 38,463
+ 8,391
+ 31,303
1,015,109
58,398
–
–
– 23,359
–
–
– 28,993
606,189
Deferred tax liabilities on earnings which were retained by foreign
subsidiaries in order to strengthen the capital base and which are tax
creditable in Germany have not been taken into account. In applying the
equity method, deferred tax items were recognised on the retained
earnings of the equity investments to the amount of taxes due at distribution to the extent that it was not assumed that profits would not be
distributed within a foreseeable time.
Deferred tax assets from valuation differences resulting at January 1, 1997
from first-time application of IAS provisions are included to the amount
of DM 568,127 thousand with a neutral effect on profits. Deferred tax
assets, neutral in their effect on earnings, were recognised in the 1998
financial year to the amount of DM 16,022 thousand (previous year
deferred tax liabilities: DM 7,982 thousand).
The 1998 and 1997 deferred tax assets and liabilities are allocated as
follows:
31.12.1998
DM000
assets
Losses carried forward and
tax credits
Equity capital taxed above the
distribution rate
Equity capital taxed below the
distribution rate
Tax-based depreciation,
tax free reserves
Finance leases aircraft
Other
31.12.1998
DM000
liabilities
31.12.1997
DM000
assets
31.12.1997
DM000
liabilities
11,816
–
1,188
168,859
–
162,515
–
3,300
–
–
7,333
–
– 833,218
456,873
319,993
– 66,977
38,197
–
–
–
8,740
8,740
– 15,330
–
– 828,933
537,528
322,261
71,751
261,608
4,649
–
–
6,657
6,818
–
94 Notes to the Consolidated Balance Sheet Annual Report 1998
Annual Report 1998 Notes to the Consolidated Balance Sheet
95
Notes to the Consolidated Balance Sheet
Assets
17)
Fixed assets
Changes in fixed assets during the financial years 1998 and 1997
respectively are shown in the statement of fixed assets movements.
The tangible asset items aircraft, land and buildings, and technical
plants also include leased assets which, due to the form of the underlying lease contracts as finance leasing are allocated to the Group’s
economic ownership rather than to its legal ownership. The amount of
DM 235 thousand (previous year: DM 4,890 thousand) of the item land
and buildings disclosed under assets in the statement of fixed assets
movements is subject to suppliers’ reservation of ownership. In addition,
the amount of DM 13,864 thousand under the item technical plants was
also subject to suppliers’ reservation of ownership in the previous year.
The values of firmly ordered tangible assets which are not yet under the
Group’s economic control are as follows:
Aircraft
Land and buildings
Technical plants
Office and plant equipment
18)
Leased and hired out
assets
31.12.1998
DM000
31.12.1997
DM000
6,757,069
3
10,618
53,529
6,821,219
3,022,003
4,100
9,404
53,095
3,088,602
Leased assets to be allocated to the Group’s economic property in
accordance with IAS 17 are disclosed separately in the statement of fixed
assets movements to the total amount of DM 3,192 million (previous
year: DM 3,716 million); of which DM 2,985 million (previous year:
DM 3,505 million) concern aircraft. In accordance with the aircraft finance
lease agreements, the fixed basic lease term is at least four years; the
agreements are non-terminable; the maximum lease term is twelve
years. After expiry of the lease term the lessee is entitled to acquire the
asset at the respective residual value plus 25 per cent mark-up on the
difference between market value and residual value as stipulated in the
lease agreement. If this option is not executed by the lessee, the lessor
may sell the aircraft at the best possible price on the market. The lessee
is entitled to 75 per cent of the sales surplus exceeding the residual
value. If the sales revenue is below the residual value the difference is to
be paid by the lessee. Some of the lease agreements provide for variable
lease payments as much as the included interest share is linked to
market interest rate developments, generally to the 6-months LIBOR rate.
In addition, various forms of finance lease agreements have been concluded for buildings and parts of buildings, technical plants and office
and plant equipment.
Continuation . . .
18)
assets
The lease terms for buildings and parts of buildings are between seven
and thirty-one years. In general, the lease payments are based on
variable interest rates and on a buy option at the end of the contractual
lease period. The agreements are either non-terminable or can be terminated only upon payment of an early repayment penalty. There are no
agreement extension options, or these can be agreed upon solely by the
lessor.
The lease terms for technical equipment are between four and fifteen
years. The lease agreements stipulate fixed lease payments and buying
options at the end of the lease term. An extension of the lease term by
the lessee is provided for in two cases. The agreements are, as a rule,
non-terminable; if at all, they may only be terminated for good cause.
The lease terms for office and plant equipment are between six and
seven years. The agreements include fixed lease payments and buying
options at the end of the lease term. The lessee may extend the lease;
the agreements are non-terminable.
The following payments from finance lease agreements will become due
in the next years whereby variable lease payments on the basis of the
last valid interest rate were extrapolated.
Lease payments
Discounts
Net present values
Payments from sublease agreements
1999
DM000
2000–2003
DM000
as from 2004
DM000
553,438
– 25,147
528,291
8,865
2,884,698
– 390,613
2,494,085
10,952
1,192,612
– 389,322
803,290
–
Sublease agreements have been concluded for four aircraft in the form
of operating lease agreements at lease terms between four and five
years.
In addition to finance lease agreements, a considerable number of
lease agreements was concluded which, according to their economic
contents, qualify as operating lease agreements. In addition to further
eleven aircraft, the agreements primarily concern buildings.
The term of operating lease agreements for aircraft is between three and
ten years. Usually, the agreements are terminated automatically after
expiry of the lease term, in some cases lease extension options were
agreed upon. Four of eleven aircraft are subleased by way of operating
lease. The sublease terms are between three and 6.5 years.
Continuation . . .
18)
assets
The lease term regarding building rental agreements is, as a rule, five to
ten years. Facilities at the Frankfurt, Hamburg and Munich airports are
leased for a period of 30 years.
Amounts due in the following accounting periods:
1999
DM000
Aircraft
Buildings
Other lease agreements
Payments received from sublease
of aircraft
2000–2003
DM000
as from 2004
DM000
46,369
419,830
189,289
655,488
111,684
1,695,024
713,994
2,520,702
–
415,990 p.a.
176,962 p.a.
592,952 p.a.
5,551
9,300
–
Five aircraft which are in the economic and legal ownership of the
Group are subleased by way of operating lease. The following payments
result from these agreements, the lease terms are between four and
seven years:
20)
Receivables and
other assets
Receivables and other assets
Trade receivables
of which from work in progress
less advance payments received
Receivables from subsidiaries
Receivables from joint ventures
Receivables from associates
Receivables from other equity investments
Other assets
Receivables and other assets
Payments from
operating lease agreements
19)
Inventories
Raw materials and supplies
Finished goods, work in process
Advance payments
1999
DM000
2000–2003
DM000
as from 2004
DM000
10,150
30,232
–
31.12.1998
DM000
31.12.1997
DM000
331,880
50,661
5,540
388,081
301,320
62,611
2,213
366,144
Inventories were measured at the lower net realisable value; the cost are
DM 286,138 thousand (previous year: DM 258,830 thousand).
Trade receivables
Receivables from subsidiaries
Receivables from joint ventures
Receivables from associates
Receivables from other equity investments
Other assets
31.12.1998
97
DM000
of which due
in more than
one year
DM000
2,061,456
360
(98,716)
366,893
2,665
(904)
50,539
11,341
(234)
31,403
3,013
(449)
37,389
–
(3,456)
467,029
3,014,709
70,845
88,224
31.12.1997
DM000
of which due
in more than
one year
DM000
2,042,558
2,631
(752)
500,300
530
(1,021)
12,950
209
(398)
15,668
3,908
(2,216)
9,392
–
(670)
538,019
3,118,887
56,488
63,766
DM 22,088 thousand (previous year: DM 12,461 thousand) of receivables from subsidiaries, DM 13,075 thousand (previous year: DM 6,747
thousand) of receivables from joint ventures, DM 18,835 thousand
(previous year: DM 5,082 thousand) of receivables from associates and
DM 4,875 thousand (previous year: DM 9,204 thousand) of receivables
from other equity investments are trade receivables.
Continuation . . .
20)
Receivables and
other assets
Other assets include tax assets from tax authorities to the amount of
DM 63,701 thousand (previous year: DM 63,300 thousand).
21)
Financial assets and
securities held as
current assets
The item loans and prefinancing of leasehold includes amounts of
DM 82,933 thousand (previous year: DM 88,555 thousand) and
DM 1,573 thousand (previous year : DM 1,573 thousand) which have a
remaining term of less than one year.
The carrying amount of the monetary financial assets disclosed under
these items correspond to their market value.
The following table compares the carrying amount and the market value
of financial items disclosed under financial assets or investments held
as current assets:
Loans
Equity investments
Securities held as fixed assets
Loans
Equity investments
Securities held as fixed assets
31.12.1998
Carrying
amount
DM000
31.12.1998
Market
value
DM000
31.12.1998
Unrealised
gains
DM000
688,089
1,605,547
16,489
35,361
2,004,855
4,350,341
716,489
1,605,547
560,762
35,361
2,096,175
5,014,334
28,400
–
544,273
–
91,320
663,993
31.12.1997
Carrying
amount
DM000
31.12.1997
Market
value
DM000
31.12.1997
Unrealised
gains
DM000
770,119
1,388,389
16,492
37,062
986,531
3,198,593
785,524
1,719,334
16,492
37,062
1,001,499
3,559,911
15,405
330,945
–
–
14,968
361,318
The market values of equity investments and securities for which no
active market and thus no current market value determination exists
could not be ascertained; they correspond to the carrying amount stated
in the tables above. In three cases the saleability of financial assets was
limited (previous year: two cases). The carrying amount of these investments totals DM 58,236 thousand (previous year: DM 27,600 thousand).
In two cases the respective co-shareholder has a right of first refusal;
in the third case, the approval of the co-shareholder is required.
99
Continuation . . .
21)
Financial assets and
securities held as
current assets
Impairment losses of DM 20,514 thousand (previous year: DM 554 thousand) were recognised in order to show short-term financial investments
at the lower value from cost and market value, or at DM 219,686 thousand
(previous year: DM 62,769 thousand) to write-down the value of longterm financial investments respectively.
22)
Cash and cash
equivalents
At the balance sheet date, cash and cash equivalents mainly concerned
short term DM deposits and overnight money in various credit institutions;
interest rates were between 3.32 and 4 per cent (previous year: 3.38 to
4.5 per cent). Foreign currency balances are valued at the reporting date
rate.
23)
Prepaid expenses
In addition to a loan discount of DM 2,422 thousand (previous year:
DM 2,547 thousand) this item contains prepaid amounts of which the
corresponding expense is allocated to following years. DM 23,914
thousand (previous year: DM 42,672 thousand) have a remaining term
of more than one year.
101
Notes to the Consolidated Balance Sheet
Equity and Liabilities
24)
Issued capital
The issued capital of Deutsche Lufthansa AG amounts to DM 1,908 million.
At the Ordinary Annual General Meeting held on June 17, 1998 it was
decided to convert the previous nominal shares to no-par stock. The
issued capital is now divided into 381,600,000 registered shares.
Continuation . . .
24)
Issued capital
On January 1, 1998, 164,373 shares, and on December 31, 1998, a total
of 319,707 shares were held by senior executives under the two programmes. Provisions for cash payments which may become due as a
result of these programmes are not recognised.
At the balance sheet date no own shares remained in the portfolio.
With the consent of the Supervisory Board, the Executive Board is
authorised to increase the issued capital before and on July 5, 1999 by
DM 133 million by the issue of new registered shares (Authorised Capital A)
and by a further DM 50 million through the issue of new registered shares
to employees of Deutsche Lufthansa AG (Authorised Capital B).
25)
Reserves
According to the Stock Corporation Law, the amount of dividends payable to shareholders is based on the net profit for the year as disclosed
in the commercial annual financial statement of Deutsche Lufthansa AG.
The Executive Board and the Supervisory Board propose to the Annual
General Meeting that the net profit for the year of DM 420 million shall
be used to pay a dividend of DM 1.10 per share.
At the Ordinary Annual General Meeting held on June 17, 1998, the
Supervisory Board was authorised to adjust the share capital, and the
nominal amount for the approved capital in the Articles of Association
after determination of the official conversion rate from Euro to DM.
In the 1998 financial year, Deutsche Lufthansa AG successively acquired
a total of 1,763,149 shares of its own stock between January and September at an average price of DM 38.41. This corresponds to 0.46 per
cent of the issued capital.
The shares were utilised as follows:
– 1,178 shares as a residual allocation to employees of Deutsche
Lufthansa AG and of seven subsidiaries as part of the 1996 profit
sharing scheme at a price of DM 35.65.
– 1,597,791 shares as an offer to the employees of Deutsche Lufthansa
AG and of 30 subsidiaries and associates from the 1997 profit-sharing
scheme at a price of DM 40.80.
– 164,180 shares as a part of the performance-based variable remuneration of the senior executives of Deutsche Lufthansa AG and of 37
subsidiaries and associates at a price of DM 34.40. Deutsche Lufthansa
AG and its Group companies have granted an outperformance option
on these shares giving the beneficiary option at the end of the programme to receive a cash payment depending on the development of
the Lufthansa share value compared with that of an index of rival airlines. The programme covers a period of three years.
154,373 shares have been acquired as an investment by the senior
executives of Deutsche Lufthansa AG and of nine Group companies,
for which Deutsche Lufthansa AG and its Group companies have also
granted an outperformance option which corresponds to the option
mentioned above. The term of the programme is also three years.
The capital reserve contains the premiums resulting from capital increases only. The legal reserve contained in retained earnings continues
to amount to DM 50 million; the remainder are other retained earnings.
26)
Provisions and
Accruals
Provisions and Accruals
and similar commitments
Liabilities for current taxes
on income
Provisions for deferred taxes
Liabilities for other taxes
Provisions for unearned
transportation revenue
Other accruals
31.12.1998
of which
due in the
following
year
DM000
DM000
31.12.1997
of which
due in the
following
year
DM000
DM000
5,398,849
168,088
5,041,614
149,059
994,596
6,818
22,757
994,596
–
22,757
80,908
8,740
20,754
80,908
–
20,754
1,318,766 1,318,766
2,186,177 1,799,834
9,927,963 4,304,041
1,443,386 1,443,386
1,827,358 1,414,677
8,422,760 3,108,784
A corporate pension scheme was set up for employees working in
Germany or seconded abroad. The plan formula follows the so-called
VBL scheme which is the supplementary pension scheme for all state
employees and was adapted by Deutsche Lufthansa AG as a corporate
pension scheme after privatization for all employees who joined the
Group before 1995.
Continuation . . .
26)
Provisions and
Accruals
Flight personnel is, in addition, entitled to a transitional pension
arrangement for the period between the end of their active service and
the commencement of the statutory/corporate retirement plan.
Benefits in both cases depend on final salary before retirement
(final salary plans).
For employees who joined the Group after 1994, a new corporate
pension scheme (different from the VBL scheme) was installed. In this
scheme, a certain percentage of current salary is converted into a retirement benefit component, and retirement benefit ist the sum of those
components accumulated during the period of active service (average
salary plan). According to IAS 19 such a scheme has to be classified as
defined benefit plan and thus included in measuring retirement benefit
obligations and pension expense.
Retirement benefit obligations for employees abroad depend, in general,
on years of service and final salary.
The corporate pension schemes as well as the transitional pension
arrangement are financed exclusively by pension accruals in the balance
sheet. The defined benefit obligation for all commitments is evaluated
annually applying the projected unit credit method.
The determination of the pension expense is based on the 10 %-corridorrule, actuarial gains and losses are only charged as an income or
expense if they exceed 10 per cent of the defined benefit obligation.
Funded status
Defined benefit obligations
Actuarial gains not yet recognised
1998
DM000
1997
DM000
4,835,536
+ 563,313
5,398,849
4,941,760
+ 99,854
5,041,614
Actuarial gains result from headcount variations, changes in the
assumptions and, in 1998, from an amendment in the VBL scheme.
Pension accruals have developed as follows in 1998 and 1997:
Continuation . . .
26)
Provisions and
Accruals
Carryforward
Exchange rate differences carryforward
Pensions paid
Addition
Release
Transferred obligations
Balance
103
1998
DM000
1997
DM000
5,041,614
–
1
– 139,799
+ 527,834
–
1,426
–
29,373
5,398,849
4,590,336
+
2
– 123,082
+ 554,227
–
267
+ 20,398
5,041,614
The total pension expense as recognized in the income statement reconciles as follows:
Current service cost
Interest cost
1998
DM000
1997
DM000
238,989
288,936
527,834
238,348
315,879
554,227
The current service cost is shown under staff costs, the interest cost is
shown under interest expense.
Actuarial assumptions
Interest rate
Trend in salary increase
Trend in pension increase
31.12.1998
in per cent
6.0
2.5
1.5 – 2.5
31.12.1997
1.1.1997
in per cent in per cent
6.5
3.0
2.0 – 3.0
7.0
3.5
2.5 – 3.5
As biometric tables the VBL 1996 R tables were used; fluctuation was
taken into account based on best estimates depending on the age and
sex of the active workforce.
Short-term other provisions and accruals largely contain commitments
from invoices outstanding, credit notes and commitments vis à vis
employees such as holiday accruals. Long-term other provisions and
accruals include commitments from environmental protection measures to
the amount of DM 68,500 thousand (previous year: DM 71,000 thousand),
provisions for restructuring measures amounting to DM 46,126 thousand
(previous year: DM 95,728 thousand), provisions for anticipated losses
relating to incomplete contracts to the amount of DM 32,415 thousand
Continuation . . .
26)
Provisions and
Accruals
27)
Long-term
borrowings
(previous year: DM 79,901 thousand) and long-term commitments to
employees such as anniversary accruals and liabilities for old-age
part-time work to the amount of DM 192,927 thousand (previous year:
DM 111,087 thousand).
Long-term borrowings
Liabilities to banks
Liabilities to subsidiaries
Other liabilities
31.12.1998
31.12.1997
DM000
of which
due in less
than
one year
DM000
DM000
of which
due in less
than
one year
DM000
453,227
514,653
3,676,922
4,644,802
32,649
–
210,214
242,863
521,311
1,263,601
4,059,458
5,844,370
66,534
748,948
315,403
1,130,885
The following tables contain terms and conditions of long-term borrowings as well as their carrying amounts and market values:
Weighted
average
interest rate
Maturities
7.20
6.34
6.75
6-months-DM-LIBOR
7.21
6.84
1998
2000
2001
2002
2003
2004
Carrying
amount
31.12.1998
DM000
Market
value
31.12.1998
DM000
Carrying
amount
31.12.1997
DM000
Market
value
31.12.1997
DM000
–
100,000
21,749
121,478
170,000
40,000
453,227
–
105,776
22,277
121,478
199,220
48,184
496,935
34,000
100,000
30,466
146,845
170,000
40,000
521,311
34,579
105,695
30,896
146,845
191,370
46,209
555,594
Interest rate
Maturities
6-months-DM-LIBOR
6.75
6-months-DM-LIBOR
7.03
1998
1998
2001
2006
Carrying
amount
31.12.1998
DM000
Market
value
31.12.1998
DM000
Carrying
amount
31.12.1997
DM000
Market
value
31.12.1997
DM000
–
–
272,328
242,325
514,653
–
–
272,328
291,107
563,435
264,348
484,600
272,328
242,325
1,263,601
264,348
488,908
272,328
270,444
1,296,028
Continuation . . .
27)
Long-term
borrowings
105
The listed items concern liabilities to Lufthansa International Finance
(Netherlands) N.V., Amsterdam, from the passing on of funds from bonds
issued by this company to the nominal amount of DM 523 million
(previous year: DM 1,288 million).
Other liabilities (finance lease agreements)
Weighted
average
interest rate
Maturities
Carrying
amount
31.12.1998
DM000
Market
value
31.12.1998
DM000
Carrying
amount
31.12.1997
DM000
Market
value
31.12.1997
DM000
6-months-DM-LIBOR
6-months-DM-LIBOR
7.7
7.4
6-months-DM-LIBOR
6.8
6-months-DM-LIBOR
5.5
6-months-DM-LIBOR
1.8 (YEN)
6.6
6-months-DM-LIBOR
7.3
8.1
6-months-DM-LIBOR
6-months-DM-LIBOR
7.8
1998
1998
1999
2000
2000
2001
2001
2002
2002
2002
2003
2003
2004
2005
2005
2006
2014
–
–
75,014
713,516
29,074
80,695
318,690
482,958
123,084
184,238
278,713
169,966
183,221
73,100
545,615
276,168
58,074
3,592,126
–
–
78,437
761,305
29,074
87,214
318,690
515,450
123,084
191,388
307,360
169,966
213,160
85,336
545,615
276,168
75,002
3,777,249
150,390
13,809
81,721
772,080
32,744
86,467
343,859
506,991
130,136
171,657
305,693
180,709
191,739
80,608
575,295
285,940
58,787
3,968,625
150,390
13,809
87,225
829,854
32,744
92,448
343,859
523,176
130,136
179,181
326,114
180,709
213,557
90,992
575,295
285,940
69,834
4,125,263
Carrying
amount
31.12.1998
DM000
Market
value
31.12.1998
DM000
Carrying
amount
31.12.1997
DM000
Market
value
31.12.1997
DM000
9,511
75,285
84,796
9,511
87,214
96,725
10,188
80,645
90,833
10,188
89,092
99,280
Remaining other liabilities
Weighted
average
interest rate
Maturities
62 % of prime rate
7.125 (USD)
2015
2018
The market rates indicated in the tables above were determined on
the basis of interest swap rates valid at the balance sheet date for the
respective residual maturities.
107
Other disclosures
28)
Other liabilities
Other liabilities
31.12.1998
DM000
56,547
Payments received on account
of orders
43,901
Trade payables
1,292,363
219,358
Liabilities to joint ventures
16,861
Liabilities to associates
32,800
Liabilities to other equity
investments
50,031
Other Liabilities
765,487
of which from taxes
(101,795)
of which referring to
social security
(107,006)
2,477,348
of which
due in less
than
one year
DM000
31.12.1997
DM000
of which
due in less
than
one year
DM000
55,584
107,261
106,300
43,901
1,292,295
197,989
16,861
22,467
65,792
1,387,236
244,962
12,874
16,210
65,600
1,387,162
205,458
12,874
14,849
36,493
756,323
(101,785)
15,679
887,835
(126,295)
11,112
769,402
(126,295)
(106,496)
2,421,913
(105,720)
2,737,849
(103,438)
2,572,757
Payments received on account of orders also include the liabilities side
balance from payments received and receivables from work in progress to
the amount of DM 20,332 thousand (previous year: DM 25,712 thousand).
DM 9,672 thousand (previous year: DM 17,257 thousand) of liabilities to
subsidiaries, DM 16,835 thousand (previous year: DM 1,907 thousand) of
liabilities to joint ventures, DM 22,408 thousand (previous year: DM 1,019
thousand) of liabilities to associates and DM 36,185 thousand (previous
year: DM 5,812 thousand) of liabilities to other equity investments are
trade liabilities.
DM 3,866 thousand (previous year: DM 5,500 thousand) of liabilities to
other equity investments are collateralised through the assignment of
claims on net profits.
The carrying amounts of the monetary liabilities included in these items
correspond to market values.
29)
Deferred income
Deferred income mainly includes accrued book profits from finance
leasing transactions which are released with an effect on the earnings
result over the term of the respective lease agreement in accordance
with IAS 17. DM 105,465 thousand (previous year: DM 118,395 thousand)
have a remaining term of less than one year.
30)
Contingencies and
events occuring after
the balance sheet date
Contingent losses
31.12.1998
DM000
31.12.1997
DM000
from guarantees, bills and cheque charges
from warranty agreements
from collateralisation of third party liabilities
2,102,715
1,532,186
255,000
2,093,452
1,633,012
255,000
Guaranties with the amount of DM 394,377 thousand (previous year:
DM 458,808 thousand) include warranties with the amount of DM 243,088
thousand (previous year: DM 256,519 thousand); both of which represent
contingent liabilities vis à vis creditors of joint ventures. The disclosure
includes, to the total amount of DM 967 million (previous year: DM 1,027
million) the assumption of co-debtor’s guaranties in favour of NorthAmerican fuelling and handling fees. Offsetting this amount are compensatory claims against the other co-debtors of DM 948 million (previous
year: DM 1,007 million). Owing to accounts still pending, the aforementioned amounts are to some extent provisional.
Due to the unlikeliness of utilisation, various provisions with a possible
overall effect on financial results of DM 56,216 thousand (previous year:
DM 10,099 thousand) for following years were not recognised.
Profits from the probable realisability of claims provable in bankruptcy
from sublease agreements concluded with Fokker Aircraft BV have not
yet been recognised in the 1998 financial year. The debt amounting
DM 19,501 thousand is expected to be realised in following years.
On the occasion of the second stock market flotation of EQUANT N.V. on
February 17, 1998, 30 per cent of the shares held in this company were
sold; this transaction resulted in an inflow of funds of DM 171,436 thousand for the Group; the gain on disposal is DM 170,962 thousand.
In April 1999, 34 per cent of the consolidated START Amadeus GmbH
was sold to Amadeus Global Travel Distribution S.A. The resulting inflow
of funds is expected to amount to DM 130,000 thousand, the expected
gain on disposal will be DM 112,500 thousand.
On March 10, 1999 the Supervisory Board of Deutsche Lufthansa AG
agreed to increase the investment in the associate Onex Food Services Inc.
up to 48 per cent.
109
31)
Other financial
commitments
As of December 31, 1998 the commitment to order investments in
tangible assets and intangible assets amounted to DM 6.8 billion
(previous year: DM 3.1 billion). Equity and shareholder loan commitments from participating interests amount to DM 153 million (previous
year: DM 55 million).
32)
Hedging policy and
financial derivatives
As an internationally operating group, the Lufthansa Group is exposed
to price and currency fluctuations. Corporate strategy aims at providing
for the resulting currency, exchange rate and price risks through
corresponding hedging transactions.
The risk incurred by Lufthansa in the event of an unfavourable trend in
fuel prices is hedged by applying various hedging instruments for the
crude and heating oil market. The Group strategy aims at hedging up to
90 per cent of future fuel demand on a revolving basis.
Price risk
Credit risk
Due to its international activities, the Lufthansa Group is exposed to
exchange rate fluctuations between foreign currencies and Deutsche
Marks, as well as to interest rate fluctuations on international money and
capital markets. The general hedging rules regarding currency and
interest rate risks are defined in a group-internal guideline. The respective financial transactions are concluded only with first-rate counterparties. Hedging transactions are concluded for the purpose of limiting
the currency and interest rate risks, for example in the form of financial
derivatives.
The sale of passage and freight documents is largely processed through
agencies which are usually linked to country-specific clearing systems
for the settlement of passage and freight sales. Individual agents are
checked by clearing centres. The respective credit risk concerning sales
agents is world wide relatively low because of the wide/broad distribution.
DM write-ups in comparison to foreign currencies have, in general, an
adverse effect on Group results. The exchange rate risk with respect to
the US Dollar is, to a certain extent, limited by the fact that the price of
aircraft, spare parts and fuel has to be paid in US Dollars. Therefore the
Lufthansa Group is in a net payer position with respect to the US Dollar.
Fixed contracted USD aircraft investments are hedged up to 100 per
cent. Depending on the extent to which planning of the expected net
cash flow in individual currencies is possible, 50–75 per cent of the
respective currency exposure can be hedged for a maximum period of
18 months.
Fixed contracted variable interest payable is hedged up to 100 per cent.
Liquidity deficites and surpluses can be hedged up to 50 per cent for a
maximum period of 24 months.
Fuel expenses accounted for 7.5 per cent (previous year: 8.6 per cent) of
the Lufthansa Group’s operating expenses in the 1998 financial year;
marked US Dollar fuel price increases may therefore have a substantial
effect on Group results. However, Lufthansa benefits from having one of
the youngest fleets of all large-scale airlines and has therefore a correspondingly low fuel demand.
Continuation . . .
32)
Hedging policy and
The fuel price hedging strategy for the Group is defined by the Deutsche
Lufthansa AG Executive Board; a price hedging committee actualises
and controls the price hedging process within the defined framework.
The responsible dealers submit monthly reports to the Executive Board
and the price hedging committee.
Receivables and liabilities between airlines, unless otherwise stipulated
in the respective agreements are settled on a bilateral basis or by
settlement through a clearing house of the International Air Transport
Association (IATA). All receivables and liabilities are set off against one
another at monthly intervals which leads to a considerable reduction of
the default risk. In individual cases, special collateral is provided for in
the respective service contract.
For all other service relationships, additional collateral is asked for depending on the type and extent of the service rendered, credit reports/
references are obtained or historical data from the previous business
relationship, in particular referring to payment behaviour, is used to
avoid non-performance.
Recognisable risks are accounted by allowances on receivables.
The credit risk from derivative financial instruments lies in the insolvency
of the contracting party and as a consequence, in the amount of the
sum, on balance, of positive market values vis à vis the respective
business partners. At December 31, 1998 this credit risk amounted to
DM 13,725 thousand and at December 31, 1997 to DM 158,391 thousand.
Transactions are concluded with first rate counter-parties only; in
addition, counter-party limits are defined so that the risk of loss is
actually low.
Continuation . . .
32)
Hedging policy and
Liquidity risk
In order to recognise future liquidity in good time, the Lufthansa Group
uses complex financial planning instruments. These systems show the
expected liquidity development within a planning horizon of one to four
years. The twelve-month liquidity planning is updated daily on the basis
of actual data. According to current planning, no further financing need
is expected for the coming four years. The non-utilised short-term credit
arrangements of Lufthansa Group amount to approximately DM 400
million.
At December 31, 1998, hedging transactions were performed in order to
cover risks with respect to currency, interest rate and fuel price fluctuations. The market value of a financial instrument shown in the following
tables corresponds to the price that one party would pay for the rights
and/or obligations from this financial instrument to another party. The
market values were determined on the basis of the market information
available on the balance sheet date. Negative signs mean a possible
commitment upon opting out of the financial instrument at the balance
sheet date. The following currency hedges classified by type of business
exist vis à vis banks and consolidated Group companies; some of the
transactions with banks are counter-transactions to the transactions
concluded with non-consolidated companies.
Continuation . . .
32)
Hedging policy and
111
Exchange rate hedges
Maturities
Carrying amount
31.12.1998
DM000
Market value
31.12.1998
DM000
USD million
2,079.7
USD million
446.3
USD million
8.0
USD million
140
Yen million
23,700
Yen million
9,182
Yen million
5,218
Yen million
5,218
GBP million
15.0
GBP million
7.5
IEP million
2.8
IEP million
9.6
ESP million
369.0
ESP million
369.0
Fluctuation band options
(currency purchase)
(currency sale)
Forward sales
maximum
2004
maximum
2000
1999
– 20
– 22,442
Forward purchases
Forward purchases
maximum
2001
maximum
2000
maximum
2002
2000
Forward sales
2000
669
(currency sales)
Forward sales
1999
187
1999
882
Forward purchases
2000
– 10
– 23
Forward sales
against USD
Forward purchases
2000
– 417
– 1,072
1999
– 10
Forward sales
1999
13
(currency sales)
Sold call options
Exchange rate hedges
Maturities
USD million
1,214.4
USD million
663.5
USD million
12.7
USD million
32.5
Yen million
10,990
Yen million
9,182
Yen million
2,625
Yen million
5,218
GBP million
29
GBP million
6
(currency purchase)
(currency sale)
Forward purchases
maximum
2000
maximum
2000
1998
Forward sales
1998
(currency sale)
Sold call options
1998
Forward purchases
Forward sales
Purchased
put options
Forward sales
maximum
2002
maximum
2000
maximum
2000
1998
1998
– 32,307
– 252
28
– 236
– 6,087
– 12,516
– 13,537
– 13,537
– 617
Carrying amount
31.12.1997
DM000
Market value
31.12.1997
DM000
157,936
– 289
– 113,944
1,315
– 1,181
– 1,281
4,463
– 12,154
– 12,154
– 1,008
572
445
445
– 291
41
Continuation . . .
32)
Hedging policy and
Other hedging transactions at December 31, 1997 concern, on balance,
currency sales, (ECU 9.2 million; ITL 2,500 million; ESP 6,640 million;
PTE 150 million) or completely carried out closed transactions (TND 4.1
million; GRD 7,200 million) with maturities up to 1998; on balance they
represent a negative market value of DM 296 thousand and have been
recognised in the balance sheet in the form of provisions amounting to
DM 316 thousand.
Continuation . . .
32)
Hedging policy and
113
Interest rate hedging transactions with non-consolidated companies:
Carrying amount Market value
31.12.1997
31.12.1997
DM000
DM000
DM million Swaps
20
average
5.085 per cent
against
6-months LIBOR
maximum
expiry date
1998
–
171
Interest rate hedges
Hedges of variable rate loans:
Fuel price hedges
31.12.1998
31.12.1998
DM000
DM000
DM million
470
Swaps
average
5.55 per cent
USD million Swaps
30.5
average
6.02 Prozent
against
6-months LIBOR
against
6-months LIBOR
maximum
expiry date
2001
maximum
expiry date
1999
–
– 19,743
–
– 126
Hedging arrangements existed at December 31, 1998 with respect to the
products gas oil or crude oil for the financial years from 1999 – 2003 in
the form of fixed price transactions, fluctuation band and call options.
Call options and
fluctuation band options
Fixed price transactions
Hedges of variable rate cash investments:
DM million
9
Swaps
average
6.28 Prozent
against
6-months LIBOR
expiry
date
2000
–
403
31.12.1997
31.12.1997
DM000
DM000
Swaps
average
5.976 per cent
USD million Swaps
32.1
average
6.02 per cent
against 6-months
or 3-months
LIBOR
against
6-months LIBOR
maximum
expiry date
2001
maximum
expiry date
1999
–
– 15,386
–
168
expiry
date
2000
expiry
date
January 1998
–
497
Call options
–
* For every calendar day on which the 3-months LIBOR rate lies within a range of
2.8 per cent to 3.5 per cent
– 69
8,292,100
1,479,600
1999–2003
1999–2003
31.12.1998
31.12.1998
DM000
DM000
– 98,698
– 18,734
– 92,322
– 18,734
Tonnes
Maturities
3,014,000
81,300
1998
1998
31.12.1997
31.12.1997
DM000
DM000
2,645
–
2,645
n. a.
The market value is determined on the basis of current conditions on the
financial market at December 31, of the financial year. The basis is the
middle value of the respective futures and the corresponding volatilities
reported by several international banks at monthly intervals. The market
value of fluctuation band options at December 31, 1997 could not be
determined retroactively.
Hedges of variable rate cash investments:
DM million Swaps
against
9
average
6-months LIBOR
6.28 per cent
DM million Range-Swap*
against
50
3-months-LIBOR 3-months LIBOR
plus 1.25 per cent
Maturities
At December 31, 1997 hedging arrangements referred to the products
gas oil or crude oil respectively for the 1998 financial year in the form of
fluctuation band options and call options.
Hedges of variable rate loans:
DM million
730
Tonnes
33)
Segment reporting
In the 1998 and 1997 reporting years, the Lufthansa Group was engaged
in five business segments: in passenger business through Deutsche
Lufthansa AG and Lufthansa CityLine GmbH, in freight traffic (“Cargo”)
through Lufthansa Cargo AG, in aircraft maintenance and repair (“MRO”)
through Lufthansa Technik AG, in catering through LSG Lufthansa
115
Service/SKY Chefs Group and in the field of EDP services/ information
technology (“IT Services”) through Lufthansa Systems GmbH and the
companies of START Informatik-Group. Lufthansa Commercial Holding
and other equity investments which supplement Lufthansa Group’s
operating business are summarised in “Other”.
Sales and revenue between business segments are, as a rule, based on
prices that would also have been agreed upon with third parties. Administration services are charged in the form of cost allocations.
Primary reporting format – Information about business segments for the 1998 financial year in DM000:
Passenger business
Deutsche Lufthansa
Lufthansa AG
CityLine
External revenue
14,613,298
Inter-segment
revenue
1,085,896
Total revenue
15,699,194
Other
segment income
1,674,064
– of which reversal
of impairment losses
–
– of which from investments accounted for
using the equity method
–
Segmentexpenses
15,611,808
Segment results
1,760,450
–
Segment assets
11,428,013
–
Segment liabilities
8,249,476
– of which on investments accounted for
–
Capital
expenditure
1,607,191
–
Depreciation and
amortisation
1,205,704
– of which
impairment losses
–
Other significant
non-cash expenses
150,648
Cargo
Lufthansa
Cargo
MRO Catering
Lufthansa
LSGTechnik
Group
1,606,532 3,838,861 1,584,218
IT Services
Lufthansa
START
Systems AMADEUS
Other
Total
of
segments
635,392
136,869
238,580
– 22,653,750
– 6,414
4,436 1,676,855 678,832
1,600,118 3,843,297 3,261,073 1,314,224
509,234
646,103
141,079
379,659
– 4,089,918
– 26,743,668
78,226
307,682
229,791
82,785
26,823
26,540
658,488
3,084,399
–
–
–
16,045
–
–
–
16,045
–
–
13,675
5,067
–
–
144,327
163,069
1,509,972 3,879,558 3,421,425 1,325,034
168,372
271,421
69,439
71,975
625,718
47,208
337,089
69,110
33,854 26,744,458
624,634 3,083,609
–
–
13,675
1,377,347 2,548,982 1,907,153
5,067
552,822
–
190,611
–
129,486
144,327
163,069
1,850,743 19,985,157
161,364
398,287
–
217,530
–
98,128
858,017 1,127,838
491,103 11,960,117
–
265,129
–
–
108,457
704,292 1,536,172
3,254
–
–
–
–
–
3,254
115,780 1,291,100
88,223
24,303
96,719
35,079
131,810
3,390,205
–
–
–
1,645
–
–
–
1,645
119,091
137,363
83,893
32,817
67,661
24,858
3,469
1,674,856
–
–
–
–
–
–
–
–
22,193
12,250
29,508
18,205
5,954
83
128
238,969
Primary reporting format – Information about business segments for the 1997 financial year in DM000:
Passenger business
Deutsche Lufthansa
Lufthansa AG
CityLine
External revenue
13,951,615
Inter-segment
revenue
1,045,986
Total revenue
14,997,601
Other
segment income
1,510,335
–
–
Segmentexpenses
15,278,979
Segment results
1,228,957
–
Segment assets
11,019,418
–
Segment liabilities
8,040,386
–
Capital
expenditure
1,770,004
–
Depreciation and
amortisation
1,194,191
– of which
impairment losses
–
Other significant
non-cash expenses
161,918
Cargo
Lufthansa
Cargo
MRO Catering
Lufthansa
LSGTechnik
Group
1,373,526 3,886,024 1,435,273
IT Services
Lufthansa
START
Systems InformatikGroup
Other
Total
of
segments
629,495
74,248
259,604
– 21,609,785
– 2,367
27,653 1,607,429 891,779
1,371,159 3,913,677 3,042,702 1,521,274
485,957
560,205
101,481
361,085
– 4,157,918
– 25,767,703
75,068
196,865
118,850
74,066
25,362
53,086
384,061
2,437,693
–
–
–
–
–
–
–
–
–
846
7,316
– 4,609
–
–
90,216
93,769
1,305,173 3,833,735 3,012,411 1,521,704
141,054
276,807
149,141
73,636
553,139
32,428
364,984
49,187
40,672 25,910,797
343,389 2,294,599
–
846
7,316
1,384,400 1,448,927 1,813,331
– 4,609
562,487
–
145,914
–
95,114
90,216
93,769
1,479,675 17,949,266
158,298
371,571
–
187,030
–
86,205
685,961
947,565
531,672 11,937,362
–
266,233
–
103,306
996,895 1,457,370
–
3,254
–
–
–
–
–
3,254
217,627
91,616
51,273
24,519
62,184
25,012
106,244
2,348,479
–
–
–
–
–
–
–
–
115,986
148,447
79,472
53,195
63,892
29,837
336
1,685,356
–
–
–
16,000
–
–
–
16,000
126
12,831
37,358
18,631
7,282
105
200
238,451
Reconciliation between segment information and consolidated financial statements in DM000:
Total of
segments
External revenue
Inter-segment revenue
Total revenue
Other income
Expenses
Result
Assets
Liabilities
Reconciliation
Consolidated
financial
statements
1998
Secondary reporting format – geographical segments for the 1998 financial year in DM000:
Germany
1998
1997
1998
1997
22,653,750
4,089,918
26,743,668
3,084,399
21,609,785
4,157,918
25,767,703
2,437,693
–
– 4,089,918
– 4,089,918
– 424,673
–
– 4,157,918
– 4,157,918
– 470,689
22,653,750
–
22,653,750
2,659,726
21,609,785
–
21,609,785
1,967,004
16,045
–
–
–
16,045
–
163,069
26,744,458
3,083,609
93,769
25,910,797
2,294,599
– 163,069
– 4,275,844
– 238,747
– 93,769
– 4,465,128
– 163,479
–
22,468,614
2,844,862
–
21,445,669
2,131,120
163,069
19,985,157
93,769
17,949,266
– 163,069
4,055,150
– 93,769
4,855,222
–
24,040,307
–
22,804,488
1,127,838
11,960,117
947,565
11,937,362
–
5,599,200
–
5,599,339
1,127,838
17,559,317
947,565
17,536,701
3,254
3,254
–
–
3,254
3,254
The reconciliation includes effects resulting from consolidation procedures and amounts resulting from the different interpretation of contents
of segment items in comparison to the associated Group items.
117
Europe
North
Central
America and South
America
Asia/
Pacific
Middle
East
Africa
Other
Sum
total of
segments
576,819 2,500,281
99,200
390,604
5,860
51,414
278,313
167,075
5,691
499,904
135,902
7,228
938,512 19,551,154
– 3,102,596
268,789 2,822,795
–
163,069
871 19,985,157
1997
Traffic revenue
6,282,377 5,626,798 2,848,150
Other operating revenue 1,287,353 745,988
276,474
Other segment revenue 2,317,025
68,513
98,275
87,571
17,457
36,605
Segment assets
17,819,764 749,540
718,742
using the equity method 428,400 112,743
445,230
Capital expenditure
3,361,847
13,838
4,537
–
–
–
–
89,703
21,501
420,919
–
87,520
– 65
98,098
–
881
139,766
6,891
–
541
1,699
927
–
743
1,127,838
3,390,205
–
1,645
–
–
–
1,645
Secondary reporting format – geographical segments for the 1997 financial year in DM000:
Germany
Europe
North
Central
America and South
America
Traffic revenue
6,375,347 5,170,817 2,580,084
Other operating revenue 1,244,379 595,954
191,409
Other segment revenue 1,471,015
89,382
66,396
18,734
18,004
42,222
Segment assets
15,483,675 916,671
678,818
using the equity method 407,303
98,796
314,618
Capital expenditure
2,299,024
14,892
7,066
–
–
–
Asia/
Pacific
Middle
East
Africa
Other
Sum
total of
segments
530,496 2,541,213
82,014
457,011
3,872
46,404
298,349
193,697
2,666
483,226
114,481
5,113
751,298 18,730,830
10 2,878,955
375,925 2,060,773
–
93,769
27,060 17,949,266
–
75,136
14,492
538,972
–
115,100
317
113,834
–
1,384
126,236
4,577
–
880
612
2,680
–
17,976
947,565
2,348,479
–
–
–
–
–
–
The allocation of traffic revenue to regions is based on the original place
of the sale, the allocation of other operating revenue is based on the
geographical location of the customer, and the allocation of other segment revenue on the place of service. Items resulting from investments
accounted for using the equity method are allocated to the regions,
depending on the head office of the respective company.
Regions are, in principle, defined on the basis of geographic rules.
Deviating from this principle, the allocation of traffic revenue of the
previous Soviet Union, Turkey and Israel is allocated to Europe in
accordance with provisions set out by the International Air Transport
Association.
Continuation . . .
34)
Related party
transactions
The volume of services rendered to or obtained from related parties is
shown in the following table:
Company
The column “Other” includes items which cannot be allocated to a
specific region.
34)
Related party
transactions
The Lufthansa Business Segments render numerous services to nonconsolidated subsidiaries within the scope of their ordinary activities.
The respective investments, in turn, render services to the Lufthansa
Group within the scope of their business purpose. These extensive
delivery and service relationships are processed on the basis of market
prices.
In addition, the Group and non-consolidated subsidiaries have concluded
numerous settlement agreements which govern the mutual utilisation of
services. The administration services rendered in such cases are charged
as cost allocations.
The Lufthansa Group cash management is centralised and thus Lufthansa
Group also assumes a “banking function” vis à vis non-consolidated investments. Included, non-consolidated subsidiaries invest their available
cash in the Group or borrow cash funds from the Group, carrying out
their derivative hedging transactions. All transactions are processed on
the basis of market conditions.
Due to the spatial proximity, a large number of sublease contracts have
been concluded between Lufthansa Group and related parties; in these
cases, Lufthansa Group redebits rental costs and incidental costs on a
pro rata basis to the respective companies.
119
Condor Flugdienst GmbH
Condor/Cargo Technik GmbH
Lufthansa Flight Training GmbH
Lufthansa Technik Logistik GmbH
Lufthansa Revenue Services GmbH
Delvag Luftfahrtversicherungs-AG
Lufthansa AirPlus
Servicekarten GmbH
LIDO GmbH Lufthansa
Aeronautical Services
Lufthansa Catering Logistik GmbH
Lufthansa Consulting GmbH
Lufthansa Engineering and
Operational Services GmbH
Lufthansa Technical Training GmbH
Lufthansa LOEWE Druck und
Distribution GmbH
Lufthansa Systems AS GmbH
Lufthansa Shannon Turbine
Technologies Limited
Shannon Aerospace Ltd.
Lufthansa Airmotive Ireland Ltd.
Volume of services
rendered
1998
1997
DM000
DM000
Volume of services
utilised
1998
1997
DM000
DM000
224,412
90,479
56,653
46,825
24,434
25,230
255,934
100,340
46,230
–
–
18,949
50,938
17,844
115,697
131,319
101,888
15,158
42,827
27,904
96,809
–
–
27,114
27,144
26,527
69,613
3,527
15,434
13,098
7,966
–
12,707
7,232
47,491
84,152
14,721
–
83,106
12,982
5,885
5,413
8,119
5,682
50,443
15,033
48,068
16,644
5,360
2,149
2,383
330
27,765
21,800
18,627
2,470
1,285
1,003
790
1,164
789
575
13,400
27,327
40,393
8,862
30,983
35,451
In addition, Deutsche Lufthansa AG acquired four Boeing 737-300s from
Condor Flugdienst GmbH in the 1998 financial year; the market price
amounted to a total of DM 105,894 thousand; in the 1997 financial year,
three McDonnell Douglas DC10s were sold to Condor Flugdienst GmbH
for a market price totalling DM 92,940 thousand. The book profits from
the disposal were DM 81,044 thousand.
Annual Report 1998 Independent Auditors’ Report
121
Independent Auditors’ Report1)
Continuation . . .
34)
Related party
transactions
The members of the Supervisory Board and the Executive Board are
listed on pages 128/129. For discharging their duties in the parent
company and at the subsidiary companies, in the financial year 1998
members of the Executive Board received remuneration amounting
to DM 4,353 thousand for 1998 and in the financial year 1997
DM 1 thousand for 1997, and DM 325 thousand for 1996.
Members of the Supervisory Board received in the financial year 1998
DM 754 thousand for 1998 and DM 215 thousand for 1997, in the financial
year 1997 DM 298 thousand for 1997. These figures include benefits
from concessionary travel in line with the appropriate IATA regulations.
Members of the Executive Board who left the Board received DM 3,550
thousand.
Accruals for pensions to former members of the Executive Board and
their surviving dependants amount to DM 61,935 thousand (previous
year: DM 57,649 thousand). Current remuneration in the 1998 financial
year came to DM 3,434 thousand for 1998 and DM 6 thousand for 1997,
in the 1997 financial year to DM 2,931 thousand for 1997 and DM 9
thousand for previous years.
35)
Earnings per share
The basic earnings per share are determined as the quotient from the
net profit for the period and the weighted average of the number of ordinary shares outstanding during the financial year.
Basic earnings per share in DM
Net profit for the period in DM000
weighted average number of ordinary shares
outstanding during the period
1998
1997
3.75
1,430,695
2.82
1,076,634
381,172,597
381,160,152
In both financial years, diluted earnings per share correspond to basic
earnings per share.
We have audited the accompanying consolidated financial statements
of Deutsche Lufthansa AG and its subsidiaries (Lufthansa Group)
as of December 31, 1998 comprising the income statement, balance
sheet, statement of changes in equity, cash flow statement and the notes
for the year then ended. These consolidated financial statements are
the responsibility of Lufthansa’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits as to whether they comply with International Accounting
Standards (IAS).
We conducted our audit in accordance with German auditing standards
and the International Standards on Auditing (ISA). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. It also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements of Lufthansa Group
as of December 31, 1998 give a true and fair view of the net worth and
financial position of the Group, the consolidated results of its operations
and its cash flows for the year then ended in accordance with IAS.
Our audit, which also covered the management report of the Lufthansa
Group for 1998, gave rise to no objections. In our opinion, the management report provides a fair understanding of the Group’s position and is
consistent with the consolidated financial statements. We also confirm
that the consolidated financial statements of the Lufthansa Group as of
December 31, 1998 and the management report of the Lufthansa Group
for 1998 meet the requirements for the company to be exempted from
the obligation to prepare consolidated financial statements and a
management report for the Group in accordance with Paragraph 292a
German Commercial Law.
Düsseldorf, April 13, 1999
Cologne, March 26, 1999
Deutsche Lufthansa Aktiengesellschaft
C & L Deutsche Revision
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Executive Board
Siepe
Wirtschaftsprüfer
1)
Dr. Vogelpoth
Wirtschaftsprüfer
Translation of the Bestätigungsvermerk
Major Subsidiaries of the Lufthansa Group
Company, seat
Capital Gain International (1986) Ltd., Hong Kong
Consolidated Catering Services (China) Ltd., Hong Kong
LSG Catering China Ltd., Hong Kong
LSG Catering Guam, Inc., Guam
LSG Catering Hong Kong Ltd., Hong Kong
LSG Catering Saipan, Inc., Saipan, Micronesia
LSG Catering Thailand Ltd., Bangkok, Thailand
LSG Holding Asia Ltd., Hong Kong
LSG Lufthansa Service Asia Ltd., Hong Kong
LSG Lufthansa Service Deutschland GmbH, Frankfurt/Main
LSG Lufthansa Service Enterprises Ltd., Hong Kong
LSG Lufthansa Service Europa/Afrika GmbH, Kriftel
LSG Lufthansa Service Guam, Inc., Guam. USA
LSG Lufthansa Service Holding AG, Kriftel
LSG Lufthansa Service Nordost GmbH, Berlin
LSG Lufthansa Service Saipan, Inc., Saipan, Micronesia
LSG Lufthansa Service USA Corp.,
Wilmington (Delaware), USA
LSG-Airport Gastronomiegesellschaft mbH, Frankfurt/Main
LSG-Food & Nonfood Handel GmbH, Frankfurt/Main
LSG-Hygiene Institute GmbH, Neu-Isenburg
LSG-Sky Food GmbH, Alzey
Lufthansa Cargo AG, Kelsterbach
Lufthansa CityLine GmbH, Kriftel
Lufthansa Commercial Holding GmbH, Cologne
Lufthansa Systems GmbH, Kelsterbach
Lufthansa Technik AG, Hamburg
Orderich Company Ltd., Hong Kong
START AMADEUS GmbH, Frankfurt/Main
123
Major Joint Ventures*
Shareholding
Voting
rights
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
100.00 %
Company, seat
Shareholding
Voting
rights
Aircraft Maintenance and Engineering Corp., Beijing, China
Amadeus Global Travel Distribution S.A., Madrid, Spain
C & N Touristic AG, Frankfurt/Main
Global Logistics System Europe Company for
Cargo Information Services GmbH, Frankfurt/Main
Shannon Aerospace Ltd., Shannon, Ireland
40.00 %
29.20 %
50.00 %
46.85 %
50.00 %
29.20 %
50.00 %
46.85 %
50.00 %
50.00 %
Company, seat
Shareholding
Voting
rights
Airest Restaurant- und Hotelbetriebsgesellschaft mbH,
Vienna, Austria
China Air Catering Ltd., Hong Kong
CLS Catering Services Ltd., Vancouver, Canada
DHL International Ltd., Bermuda, USA
Feenagh Investments (Proprietary) Ltd.,
Johannesburg, South Africa
Hong Kong Beijing Air Catering Ltd., Hong Kong
Hong Kong Shanghai Air Catering Ltd., Hong Kong
Jamestown Investments Ltd., Hong Kong
LSG Lufthansa Service Hong Kong Ltd., Hong Kong
Lufthansa Leasing GmbH & Co. Alfa-Golf KG, Grünwald
Lufthansa Leasing GmbH & Co. Alfa-Mike KG, Grünwald
Lufthansa Leasing GmbH & Co. Alfa-November KG,
Grünwald
Lufthansa Leasing GmbH & Co. Alfa-Tango KG, Grünwald
Lufthansa Leasing GmbH & Co. Bravo-Juliett KG, Grünwald
Nanjing Lukou International Airport
LSG Catering Co Ltd., Nanjing, China
Onex Food Services, Inc., Dover (Delaware), USA
Siam Flight Services Ltd., Bangkok, Thailand
Venture Capital Enterprise – VCE S.p.A., Rome, Italy
Xi’an Aircraft Catering Co. Ltd., Xi’an, Shaanxi, China
30.00 %
30.00 %
50.00 %
40.00 %
25.03 %
31.00 %
50.00 %
40.00 %
25.03 %
31.00 %
45.00 %
45.00 %
37.50 %
38.12 %
95.00 %
95.00 %
95.00 %
45.00 %
45.00 %
37.50 %
38.12 %
25.00 %
25.00 %
25.00 %
95.00 %
95.00 %
25.00 %
25.00 %
40.00 %
24.74 %
49.00 %
50.00 %
30.00 %
40.00 %
24.74 %
49.00 %
50.00 %
30.00 %
Major Associated Companies*
* Accounted for using the equity method
124 Report of the Supervisory Board Annual Report 1998
Annual Report 1998 Report of the Supervisory Board
125
Report of the Supervisory Board
In the 1998 financial year meetings of the
Supervisory Board took place on March 11,
April 28, June 17, September 16 and
December 3. During these meetings the
Executive Board informed the Supervisory Board in detail of the economic
situation of Lufthansa AG and its Group
companies, the course of business,
major entrepreneurial measures and the
intended line of corporate policy, including
the planned investment and acquisitions
policy.
Dr. Klaus G. Schlede
Chairman of the
Supervisory Board
Lufthansa’s medium-term strategy envisages its ongoing transformation from an
airline into a comprehensive aviation
group. The seven business segments
Passenger Business, Logistics, Leisure
Travel, Maintenance, Overhaul and Repair,
Catering, Ground Services and Information
Technology are each to become leading
global suppliers in their respective market
segment and, through their corporate
interaction, strengthen the Group’s competitive position for the common benefit
of our customers, shareholders and
employees.
In the light of this strategic objective, the
Supervisory Board discharged its duties
under legal regulations and the Company’s articles of association throughout
the financial year and continuously moni-
tored the work of the Executive Board.
The members of the Supervisory Board
actively oversaw and assisted the Executive Board in its work and were able to
satisfy themselves that the Executive Board
is making strenuous efforts to further
improve Lufthansa’s competitive position
amid a persistently difficult operating
environment.
The Supervisory Board elected a presidium from its midst consisting of the
Chairman and Deputy Chairman plus
Mr. Macht and Mr. Walter. Meetings of this
presidium took place in the 1998 financial
year on March 11, April 28, June 17,
September 16, October 6 and December 3.
The presidium is responsible for personnel matters concerning the Executive
Board and represents the company in
dealings with the members of the Executive Board. It is also responsible for
other personnel matters that have to be
submitted to the Supervisory Board for its
approval.
Outside of those meetings, too, the
Executive Board kept the Supervisory
Board regularly informed of significant
developments in the Group through written
reports. Furthermore, during numerous
individual discussions the Chairman of
the Supervisory Board conferred with the
members of the Executive Board on
important corporate policy and strategic
questions and on the Company’s general
development.
On several occasions during the year
under review the Supervisory Board considered the ongoing transformation of
Lufthansa to become a comprehensive
aviation group. Besides preparatory steps
aimed at globally complementing the
membership of the Star Alliance, the
Supervisory Board focused its attention
on the strategic equity interests of
Lufthansa Commercial Holding GmbH
in the joint ventures to be formed with the
operator of Munich Airport, Flughafen
München GmbH, to finance and operate
Terminal 2, of GlobeGround GmbH
in the US airport ground-handling
company Hudson General LLC, and of
LSG Lufthansa Service Holding AG in the
motorway service station chain Autobahn
Tank & Rast AG. In addition, decisions
were taken to relinquish the shareholdings in Euro Lloyd GmbH and START
Amadeus GmbH.
Particular attention was further devoted
to the capital expenditure measures for
the passenger fleets of Lufthansa
German Airlines and Lufthansa CityLine
GmbH and for the cargo fleet of Lufthansa
Cargo AG.
Moreover, the Supervisory Board inquired
about the implementation of the Act on
Corporate Governance and Transparency
(KonTraG) within the Lufthansa Group
and kept itself regularly informed about
the scope, handling and monitoring of
transactions involving derivative financial
instruments.
Furthermore, the Executive Board assured
the Supervisory Board that all necessary
measures have been undertaken in
connection with the Year 2000 problem
and the conversion to the euro currency.
126 Report of the Supervisory Board Annual Report 1998
The Annual General Meeting held on
June 17, 1998 authorised the Supervisory
Board to convert the D-Mark amounts in
the articles of association into euros in
accordance with the officially announced
conversion rates. The corresponding
changes to the articles of association have
since been entered in the Commercial
Register. The Company’s nominal capital
now amounts to EUR 975,544,909.32.
Under the option granted by Section
292a of the German Commercial Code,
the consolidated financial statements
were drawn up according to International
Accounting Standards (IAS).
C & L Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft,
Düsseldorf, the auditing firm appointed as
auditors by the Annual General Meeting
on June 17, 1998, examined the annual
financial statements and management
reports of Deutsche Lufthansa AG and the
Lufthansa Group as at December 31, 1998,
together with the accounting records, to
ensure that they comply with the legal
requirements, and issued its unqualified
audit endorsement.
At the meeting on April 28, 1999 the
members of the Supervisory Board carefully examined the audit reports, which
were sent to them prior to the meeting.
The auditors who signed the audit report
on the annual financial statements also
attended that meeting at which they
reported on their audit and answered
questions.
The Supervisory Board examined the
annual financial statements and the management reports of Deutsche Lufthansa
AG and the Lufthansa Group as well as
the proposal for the appropriation of the
profit, and had no objections to make.
It approved the 1998 annual financial
statements of Deutsche Lufthansa AG as
compiled by the Executive Board, which
are therewith formally adopted. The
Supervisory Board supports the proposal
for the appropriation of the distributable
profit.
At the end of the Annual General Meeting
on June 17, 1998 the five-year period of
office of all the members of the Supervisory Board expired. The Supervisory
Board wishes to thank the retiring Board
members Dr. Wolfgang Röller, Hans
Jochen Henke, Helmut Höltl, Wolfgang
Jorissen, Reinhold Kreutz, Dr. Manfed
Overhaus, Dr. Johannes Rau, Professor
Eberhard Scheffler and Dr. Friedrich
Zimmermann for their constructive and
committed collaboration.
Special thanks are due to Dr. Wolfgang
Röller, who was a member of the
Supervisory Board for ten years and its
Chairman for five years. In acknowledgement of the services which Dr. Röller
performed during what was a difficult
period, and also his ability to harmoniously harness the energies of the representatives of both shareholders and
employees on the Supervisory Board, the
members of the Supervisory Board
expressed their deep respect for and
profound gratitude to him at the Supervisory Board meeting on June 17, 1998,
and decided to make him Honorary
Chairman of the Supervisory Board of
Deutsche Lufthansa AG. Dr. Wolfgang
Röller’s name will forever remain inextricably linked to the great successes of
Annual Report 1998 Report of the Supervisory Board
rehabilitation, privatisation and restructuring of the Company – as well as the
associated safeguarding of jobs –
achieved under his aegis.
At the Annual General Meeting on June
17, 1998 the shareholders’ representatives
were newly elected for a term of five
years. Mr. Ulrich Hartmann, Dr. Klaus G.
Schlede, Mr. Jan G. Stenberg, Mr. Bernhard Walter, Dr. Hans-Dietrich Winkhaus
and Dr. Klaus Zumwinkel were newly
appointed to the Supervisory Board.
At the same time the employees’ elected
Mr. Richard Bornheimer, Mr. Peter Geisinger and Dr. Michael Wollstadt as new
members of the Supervisory Board.
The newly appointed Supervisory Board
chose Dr. Schlede to serve as Chairman
and Mr. Mai as Deputy Chairman of the
Supervisory Board.
Dr. Karl-Ludwig Kley was appointed to
succeed Dr. Schlede as the member of
the Executive Board responsible for finance with effect from September 1, 1998.
Mr. Hemjö Klein, who up to September
1998 was the Executive Board member
responsible for Group marketing, stepped
down from that body on October 31, 1998.
The Supervisory Board wishes to thank
Mr. Klein for his fruitful contribution.
127
The great accomplishments of the 1998
financial year were a collective achievement. The Supervisory Board wishes to
formally record its thanks to the members
of the Executive Boards and Boards of
Management, executives, members of the
staff representation councils and employees of the Lufthansa Group for their
great dedication and fine efforts.
Cologne, April 28, 1999
The Supervisory Board
Chairman
128 Supervisory Board and Executive Board Annual Report 1998
Annual Report 1998 Supervisory Board and Executive Board
129
Supervisory Board
Members
with voting rights
Dr. Wolfgang Röller
Honorary Chairman
of the Supervisory Board,
Dresdner Bank AG,
Honorary Chairman
(from June 17, 1998,
Chairman until June 17, 1998)
Former Deputy Chairman
of the Executive Board
Deutsche Lufthansa AG,
Chairman (from June 17, 1998)
Herbert Mai
Chairman of the Union of Public
Services and Transport Employees
(ÖTV), employee representative
Deputy Chairman
Richard Bornheimer
Motor mechanic,
employee representative
(from June 17, 1998)
Dr. Rolf-E. Breuer
Chairman of the Executive Board
Deutsche Bank AG
Peter Geisinger
Captain,
Holger Hagge
Lathe operator,
Ulrich Hartmann
VEBA AG
Hans Jochen Henke
Former Secretary of State,
Federal Ministry of Transport
(until June 17, 1998)
Franz Ludwig Neubauer
Former Chairman of the
Executive Board
Bayerische Landesbank
Girozentrale
Dr. Manfred Overhaus
Secretary of State,
Federal Ministry of Finance
Andreas Heß
Union of Public Services and
Transport Employees (ÖTV),
Dr. Wolfgang Peiner
Chairman of the Executive Boards
Parion OHG and
Parion Finanzholding AG
Helmut Höltl
Member of the office staff,
Dr. h.c. Johannes Rau
Former Prime Minister
of the Federal State of
North Rhine-Westphalia
Roland Issen
Head of German Union of Salaried
Employees (DAG),
Prof. Dr. Eberhard Scheffler
Wirtschaftsprüfer
Wolfgang Jorissen
Cook, employee representative
Jan G. Stenberg
President and Chairman of the
Executive Board SAS
Reinhold Kreutz
Dr. Otto Graf Lambsdorff
Lawyer, Honorary President of
Deutsche Schutzvereinigung
für Wertpapierbesitz e.V.
Franz-Eduard Macht
Ingo Marowsky
Flight Attendant,
Executive Board
Dipl.-Ing. Dr.-Ing. E. h. Jürgen Weber
Chairman
Deputy Chairman
Hemjö Klein
(until October 31, 1998)
(from September 1, 1998)
Dr. Heiko Lange
Bernhard Walter
Dresdner Bank AG
Patricia Windaus
Flight Attendant,
Dr. Hans-Dietrich Winkhaus
Chairman of the
Boards of Directors
Henkel KGaA
Dr. Michael Wollstadt
Dr. Friedrich Zimmermann
Lawyer
Dr. Klaus Zumwinkel
Deutsche Post AG
130 Supervisory Board and Executive Board Annual Report 1998
Other mandates of the Dr. Wolfgang Röller
a) BMW AG
Supervisory Board
Heidelberger Zement AG
members
(Chairman)
Münchener RückversicherungsDeutsche Lufthansa AG
Gesellschaft AG
(Deputy Chairman)
b) Henkel KGaA (Proprietors’ Committee)
a) C & N Touristic AG
Deutsche Hyp Deutsche Hypothekenbank Frankfurt-Hamburg AG
Gerling-Konzern Globale Rückversicherungs-AG
b) DHL Worldwide Express B.V.,
Amsterdam (Board of Directors)
Herbert Mai
a) VEBA AG
Dr. Rolf-E. Breuer
a) Deutsche Börse AG
(Chairman)
Münchener RückversicherungsGesellschaft AG
Siemens AG
(Deputy Chairman)
VEBA AG
b) Compagnie de Saint-Gobain S. A.
(Board of Directors)
Landwirtschaftliche Rentenbank
Ulrich Hartmann
a) Degussa-Hüls AG 1)
(Chairman)
Hochtief AG
IKB Deutsche Industriebank AG
Münchener RückversicherungsGesellschaft AG
(Chairman)
PreussenElektra AG 1)
(Chairman)
Raab Karcher AG-VEBA Immobilien
Management 1)
(Chairman)
RAG Aktiengesellschaft
(Chairman)
Stinnes AG 1)
(Chairman)
VEBA OEL AG 1)
(Chairman)
b) Henkel KGaA
(Proprietors’ Committee)
VEBA Telecom GmbH 1)
Annual Report 1998 Supervisory Board and Executive Board
Andreas Heß
a) TÜV Rheinland Holding AG
Roland Issen
a) DAWAG – Deutsche AngestelltenWohnungsbau AG
(Chairman)
Polizeiversicherung AG
b) Vermögensverwaltung der DAG GmbH
(Chairman)
Dr. Otto Graf Lambsdorff
a) D.A.S. Deutscher Automobil Schutz
Allgemeine Rechtsschutz-Versicherungs-AG
IVECO Magirus AG
(Chairman)
NSM AG
(Chairman)
Trinkaus & Burkhardt KGaA
Victoria Lebensversicherung AG
Victoria Versicherung AG
b) IVECO N.V., Amsterdam
Franz Ludwig Neubauer
a) Deutsche Kreditbank AG
Gabriel Sedlmayr Spaten-FranziskanerBräu KGaA
(Deputy Chairman)
Süddeutsche Bodencreditbank AG
(Deputy Chairman)
Thüga AG
Dr. Wolfgang Peiner
a) Aachener Bausparkasse AG
(Chairman)
Bankgesellschaft Berlin AG
Gothaer Credit-Versicherung-AG 2)
(Chairman)
Gothaer Rückversicherung-AG 2)
(Chairman)
Roland-Rechtsschutz-Versicherungs-AG
b) EUREKO B.V.
Gothaer Versicherungs-AG, Vienna2)
(Chairman)
Jan G. Stenberg
b) British Midland PLC
SAS Commuter Consortium, Denmark
(Chairman)
SAS International Hotels AS, Norway
(Chairman)
Telia AB, Sweden
(Chairman)
Other mandates of the Bernhard Walter
a) Bilfinger + Berger Bauaktiengesellschaft
Supervisory Board
DaimlerChrysler AG
members
DEGI Deutsche Gesellschaft für
Immobilienfonds mbH 3)
Degussa-Hüls AG
(continued)
Deutsche Hyp Deutsche Hypothekenbank Frankfurt-Hamburg AG 3)
(Chairman)
Dresdner Capital International Kapitalanlagegesellschaft mbH 3)
dresdnerbank investment management
Kapitalanlagegesellschaft mbH 3)
Heidelberger Zement AG
Henkel KGaA
Metallgesellschaft AG
Staatliche Porzellan-Manufaktur
Meissen GmbH
Thyssen AG
b) Bankhaus Reuschel & Co.3)
(Deputy Chairman Board of Directors)
Kommanditgesellschaft Allgemeine
Leasing GmbH & Co.
(Chairman Board of Directors)
Dipl.-Ing. Dr.-Ing. E. h. Jürgen Weber
Mandates of the
a) Allianz Lebensversicherung AG
Executive Board
Bilfinger + Berger AG
members
C & N Touristic AG
(Chairman)
Karstadt AG
LSG Lufthansa Service Holding AG5)
(Chairman)
Lufthansa Cargo AG 5)
(Chairman)
Lufthansa Systems GmbH 5)
(Chairman)
Lufthansa Technik AG 5)
(Chairman)
Stinnes AG
b) Lufthansa Commerical Holding GmbH 5)
(Chairman)
131
Dr. Hans-Dietrich Winkhaus
a) Degussa-Hüls AG
ERGO-Versicherungen
Schwarz-Pharma AG
Dr. Klaus Zumwinkel
a) Deutsche Postbank AG 4)
(Chairman)
Tchibo Holding AG
Thyssen Handelsunion AG
b) Danzas Holding AG 4)
(Chairman Board of Directors)
DHL Worldwide Express B.V.,
Amsterdam
a) Delvag Luftfahrtversicherungs-AG 5)
(Chairman)
Delvag Rückversicherungs-AG 5)
(Chairman)
Gerling Firmen- und Privat-Service AG
LSG Lufthansa Service Holding AG 5)
b) Albatros Versicherungsdienste GmbH 5)
(Chairman)
AMADEUS Global Travel Distribution S.A.,
Madrid (Board of Directors)
KG Allgemeine Leasing GmbH & Co.
Lufthansa Commercial Holding GmbH 5)
(Deputy Chairman)
Sky Chefs International Services, Inc.
Dr. Heiko Lange
a) LSG Lufthansa Service Holding AG 5)
Pensions-Sicherungs-Verein VVaG
b) Lufthansa Flight Training GmbH 5)
(Chairman)
Explanation:
a) Membership of supervisory boards required by law
b) Membership of comparable supervisory bodies at companies in Germany and abroad
1 ) Companies in which VEBA has a controlling interest
2 ) Companies in which Parion OHG and Parion Finanzholding have a controlling interest
3 ) Companies in which Dresdner Bank Group has a controlling interest
4 ) Companies in which Deutsche Post AG has a controlling interest
5 ) Companies in which Deutsche Lufthansa AG has a controlling interest
132 Ten-year statistics Annual Report 1998
Annual Report 1998 Ten-year statistics
133
Ten-year statistics
Consolidated income statement1)
Revenue
Result
Operating result2)
Profit from ordinary activities3)
Extraordinary result
Net changes in special items with an equity portion
Profit before taxes
Taxes
Net profit/loss for the period4)
DM million
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
22,653.8
21,609.8
20,862.7
19,900.4
18,835.7
17,730.7
17,239.0
16,100.6
14,447.0
13,055.3
DM
DM
8)
DM
8)
DM
8)
DM
DM
8)
DM
million
million
million
million
million
million
million
2,072.3
2,482.1
–
–
2,482.1
1,050.4
1,430.7
1,644.2
1,748.7
–
–
1,748.7
668.3
1,076.6
674.4
685.9
–
–
685.9
127.8
558.1
837.3
756.3
879.0
–
1,635.3
159.1
1,476.2
596.5
734.0
– 55.8
– 334.5
343.7
41.7
302.0
326.0
74.5
–
– 82.8
– 8.3
83.3
– 91.6
66.9
– 734.5
–
424.4
– 310.1
81.0
– 391.1
11.6
– 559.5
–
258.6
– 300.9
124.9
– 425.8
306.0
36.1
–
106.3
142.4
127.2
15.2
314.3
563.8
–
– 304.0
259.8
150.1
109.7
Main cost items
Staff costs
Fees and charges
Fuel for aircraft
Net interest
DM
DM
DM
DM
DM
million
million
million
million
million
5,607.7
3,775.0
1,689.8
1,693.6
– 382.7
5,521.6
3,606.4
1,854.2
1,684.9
– 547.7
5,756.3
3,902.0
1,783.5
1,389.3
– 87.3
5,400.0
3,653.9
1,461.1
1,362.1
– 123.2
5,255.3
3,295.1
1,476.7
1,318.1
– 305.9
5,418.6
3,067.4
1,642.4
1,265.7
– 404.8
5,832.2
2,957.2
1,538.9
1,195.7
– 475.6
5,214.3
2,507.3
1,572.5
1,513.5
– 339.2
4,768.7
2,032.1
1,644.7
1,327.0
– 166.8
4,318.7
1,727.0
1,387.3
1,034.7
– 40.6
Consolidated balance sheet1)
Asset structure
Non-current assets
Current and other assets
of which liquid assets
DM million
DM million
DM million
17,040.3
7,000.0
3,259.8
15,544.4
7,260.1
3,635.0
12,509.5
6,182.5
1,873.9
12,454.8
5,964.5
2,147.3
12,857.4
5,280.2
1,410.0
12,032.7
5,377.4
948.8
12,458.5
4,411.4
251.5
11,780.7
4,173.5
307.8
10,831.0
3,708.6
416.6
8,823.5
3,457.9
387.9
million
million
million
million
million
million
million
million
6,461.6
1,908.0
3,122.9
1,430.7
19.4
17,559.3
5,398.8
7,122.2
5,262.1
1,908.0
2,277.5
1,076.6
5.7
17,536.7
5,041.6
8,582.2
5,353.2
1,908.0
3,240.5
190.8
13.9
13,338.8
3,667.4
4,943.0
1,908.0
2,825.2
190.8
19.0
13,476.3
3,303.0
4,089.3
1,908.0
1,560.1
172.6
9.1
14,048.3
3,101.5
2,914.4
1,526.0
705.7
– 110.8
15.6
14,495.7
1,408.0
3,017.4
1,526.0
1,121.8
– 372.8
5.9
13,852.5
1,318.7
3,635.5
1,526.0
1,560.5
– 444.0
44.3
12,318.7
1,234.7
4,222.1
1,526.0
1,564.2
6.7
47.2
10,317.5
1,087.2
4,393.2
1,520.0
1,565.3
121.6
55.2
7,888.2
956.2
Total assets
DM million
24,040.3
22,804.5
18,692.0
18,419.3
18,137.6
17,410.1
16,869.9
15,954.2
14,539.6
12,281.4
Other financial data Lufthansa Group1)
Capital expenditure
of which on tangible and intangible assets
of which on financial assets
DM million
DM million
DM million
3,990.7
3,265.1
725.6
2,363.8
2,026.7
337.1
1,987.1
1,624.4
362.7
1,365.4
1,162.6
202.8
2,086.0
1,766.4
319.6
1,741.1
1,475.5
265.6
2,668.9
2,311.7
357.2
3,041.8
2,845.5
196.3
3,656.7
3,334.2
322.5
2,299.4
3,030.1
269.3
Cash flow7)
DM million
3,637.9
3,905.6
2,440.3
2,481.7
2,530.4
1,930.5
1,595.2
1,768.0
1,576.6
1,844.8
Indebtedness
gross
net
DM million
DM million
4,701.3
1,441.6
5,951.6
2,316.7
3,305.3
1,431.4
4,123.2
1,975.9
4,920.6
3,590.3
6,801.1
5,852.3
6,359.5
6,113.6
5,647.4
5,340.6
4,408.7
3,996.8
2,436.0
2,142.9
DM
DM
DM
DM
784.4
–
– 364.6
419.8
1.10
862.9
–
– 519.5
343.4
0.90
190.8
–
0.0
190.8
0.50
190.8
–
0.0
190.8
0.50
283.4
– 110.8
0.0
172.6
0.40 10)
– 110.8
– 372.8
372.8
–
–
– 372.8
– 444.0
444.0
–
–
– 444.0
–
0.0
–
–
Capital structure
Capital and reserves5)
of which issued capital
of which reserves
of which net profit/loss for the period
Minority interest
Debt6)
of which retirement benefit obligations
of which liabilities
Net profit/loss for the year
Accumulated losses
Transfers to/withdrawals from reserves
Dividends proposed/paid
Dividend per share proposed/paid9)
8)
DM
DM
8)
DM
DM
DM
DM
DM
DM
million
million
million
million
DM
8.7
–
2.0
6.7
0.2511)
123.6
–
2.0
121.6
0.40
134 Ten-year statistics Annual Report 1998
Operational ratios1)
Profit-revenue ratio
(profit from ordinary activities3)/revenue)
Total return on investment
(profit from ordinary activities3)
plus interest on debt/total assets)
Return on equity
(net profit/loss for the period4)/capital and reserves5) )
Return on equity
(Profit from ordinary activities3)/capital and reserves5))
Equity ratio
(capital and reserves5)/total assets)
Net indebtedness – total assets ratio
Internal financing ratio
(cash flow7)/capital expenditure)
Net indebtedness – cash flow7) ratio
Revenue efficiency
(cash flow7)/revenue)
Net working capital
(current assets less short-term debt)
Personnel ratios
Annualised average employee total
Revenue/employee
Staff costs/revenue
Output data Lufthansa Group13)
Total available tonne-kilometres
Total revenue tonne-kilometres
Overall load factor
Passengers carried
Paid passenger tonne-kilometres
Freight/mail
Freight/mail tonne-kilometres
Number of flights
Flight kilometres
Aircraft utilisation
Aircraft in service
Annual Report 1998 Ten-year statistics
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
per cent
11.0
8.1
3.3
3.8
3.9
0.4
– 4.3
– 3.5
0.2
4.3
per cent
13.0
10.9
4.9
5.7
6.3
3.4
– 1.1
– 0.7
2.2
5.9
8)
per cent
22.1
20.5
10.4
12.112)
7.4
– 3.1
– 13.0
– 11.7
0.4
2.5
8)
per cent
38.4
33.2
12.8
15.3
17.9
2.6
– 24.3
– 15.4
0.9
12.8
8)
per cent
per cent
26.9
6.0
23.1
10.2
28.6
7.7
26.8
10.8
22.5
19.8
16.7
33.6
17.9
36.2
22.8
33.5
29.0
27.5
35.8
17.4
per cent
per cent
91.2
39.6
165.2
59.3
122.8
58.7
181.8
79.6
121.3
141.9
110.9
303.1
59.8
383.2
58.1
302.1
43.1
253.5
80.2
116.2
per cent
16.1
18.1
11.7
12.5
13.4
10.9
9.3
11.0
10.9
14.1
DM billion
– 0.3
0.3
3.3
2.4
2.5
2.6
1.5
1.7
1.6
1.6
DM
per cent
54,867
412,886
24.8
55,520
389,226
25.6
57,999
359,708
27.6
57,586
345,577
27.1
58,044
324,507
27.9
60,514
293,002
30.6
63,645
270,862
33.8
61,791
260,565
32.4
57,567
250,960
33.0
51,942
251,344
33.1
20,133.6
14,170.4
70.4
102,354.4
74,668.4
73.0
40.5
7,474.1
1,702,733
6,696.3
618,615
636.4
1,010,897
339
19,324.6
13,620.9
70.5
98,750.0
70,581.4
71.5
37.2
7,071.1
1,703,657
6,548.0
596,456
614.6
963,675
326
20,697.5
14,532.8
70.2
116,183.1
81,716.3
70.3
41.4
8,084.8
1,684,729
6,448.0
595,120
720.5
1,000,723
314
19,983.2
14,063.1
70.4
112,147.2
79,085.3
70.5
40.7
7,828.4
1,576,210
6,234.7
580,108
659.0
1,070,238
314
17,123.4
11,768.4
68.7
98,295.3
67,017.5
68.2
35.6
6,636.6
1,263,698
5,131.8
501,139
561.1
973,504
301
16,369.8
10,724.8
65.5
94,138.1
61,273.8
65.1
33.7
5,882.3
1,197,870
4,842.5
492,606
598.7
964,776
302
14,292.2
9,376.2
65.6
81,661.8
52,344.2
64.1
29.5
5,026.6
1,125,168
4,349.6
431,102
516.0
835,000
275
13,679.6
9,118.5
66.7
75,504.6
50,685.1
67.1
26.6
4,874.8
1,056,526
4,243.7
358,522
470.0
817,604
220
12,462.3
8,580.8
68.9
65,058.5
44,669.4
68.7
23.4
4,296.3
1,004,600
4,284.3
310,882
412.7
660,431
197
millions
millions
per cent
millions
millions
per cent
millions
millions
t
millions
millions
As from the 1997 financial year, the financial statements are prepared according to the International Accounting Standards.
Thus, previous years’ figures are not comparable
2) Up to 1996 profit from operating activities
3) Up to 1995 before net changes in special items with an equity portion
4) Up to 1996 before withdrawal from/transfer to retained earnings and before minority interest
5) Up to 1995 including the equity portion of special items and up to 1996 including minority interest
6) Up to 1995 including the debt portion of special items
7) Calculated as net cash from operating activities as per cash flow statement, up to 1996 financial cash flow
1)
135
18,209.8
12,890.0
70.8
103,876.9
72,750.9
70.0
37.7
7,202.4
1,435,636
5,687.6
536,687
620.9
992,45214)
308
As from the 1995 financial year, the special items with an equity portion set up in individual company financial statements
for tax purposes are not included in the consolidated financial statements according to the HGB. The special items brought
forward from the 1994 financial year were released in 1995 as extraordinary income amounting to DM 879 million. This
additional income was allocated to retained earnings. As a result of this reclassification, earnings before taxes, the net profit
for the year, retained earnings and equity (including the equity portion of special items) were all shown with correspondingly
higher totals
19) In 1996 the face value of the shares was diluted to DM 5; previous years figures were adjusted
10) DM 1.15 on preference shares
11) Only guaranteed dividend on preference shares
12) Net profit less extraordinary result
13) As from the 1997 financial year, Condor is no longer included
14) Method of calculation changed
18)
136 Annual Report 1998
Editorial information
Deutsche Lufthansa AG, Von-Gablenz-Str. 2-6, D-50679 Cologne
Editorial staff: Stephan Gemkow (Editor), Elisabeth Heidan, Deutsche Lufthansa AG, Investor Relations
Illustrations: Peter Krämer, Düsseldorf
Photos: Frieder Blickle, Hamburg
Layout and production:
Koch Mediendesign GmbH, Cologne;
Deutsche Lufthansa AG, Corporate Design Lufthansa German Airlines
Printing: Broermann Offset Druck GmbH, Troisdorf
This Annual Report has been printed on environmentally friendly, chlorine-free paper.
Printed in the Federal Republic of Germany
ISS 0722-3838
This Annual Report is also available on CD-ROM, both in German and English.
Essential information is presented in German Marks as well as in euros.
Extensive updated financial information – including annual report and interim reports –
is available on the Internet:
For further information please contact:
Investor Relations (CGN/FRA IR)
Von-Gablenz-Str. 2-6
D-50679 Köln
Telephone +49 221 826 2444
or
+49 69 696 6470 and -90997
Telefax
+49 221 826 2286 and -3646
E-mail: [email protected]

Lufthansa PDF ENGLISCH - Investor Relations

Transcription

Similar documents

Total Material Operations TMO

Munich Airport, Terminal 2

50 cent - Oak Grove College

An open letter to Jim Ratcliffe, Ineos` owner

PDF - Lufthansa Group

Housework? That`s a job for women say men

Annual Report 2015 - Lufthansa Technik AG

Jelena Dokic reveals: He abused me

Lufthansa Cargo Lufthansa Investor Day 2010

Book your appointment with Leah for your 2013 Revamp!