Lufthansa's net earnings down 55% in first half 2016

Lufthansa Group reported that net result for the first half of 2016 amounted to €429m (prior year: €954m), slightly below the prior-year result excluding one-off effects. In the first quarter 2015, the result included a positive effect amounting to €503m from the early conversion of the JetBlue convertible bond. First-half cash flow from operating activities declined 13% €2.2nn, reflecting consumers’ hesitancy to make forward bookings. Free cash flow increased to €1.1bn (prior year: €1.0 bn). The equity ratio declined to 10.4% (18.0% at year-end 2015), owing largely to an increase in pension fund provisions in response to the decline of the IFRS discount rate to 1.6 per cent (2.8% at year-end 2015). At a comparable discount rate in the first quarter of 2015 (1.7%), the equity ratio of 7.5% was substantially lower than its present level, which confirms the Lufthansa Group’s enhanced financial stability. The 2016 first half-year results do not yet include the impact of the agreement (following mediation) with the UFO flight attendants’ union under which employees’ retirement system will be switched from a defined benefit to a defined contribution model; the agreement is still to be ratified. The new tariff agreement will further noticeably improve the equity ratio. The EBIT, the metric which is relevant for dividend payment purposes, is still expected to be above the previous year and will be several hundred million euros above the Adjusted EBIT for the financial year 2016.