Dividend resumption planned as Lufthansa flies high again

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LUFTHANSA soared away from five years of losses to announce yesterday that it had been firmly in profit for the first six months of 1994, with improving prospects for the full year.

Describing the German national carrier's achievements as 'the turnaround story in European aviation history that many would love to emulate', Jurgen Weber, chief executive, said he was confident of resuming a dividend payment in 1994.

'Every day in 1992 we made a loss of about DM2m (pounds 820,000), but every day in the first half of 1994 we made a profit of about DM500,000,' Mr Weber told the annual meeting, at which shareholders approved plans for a capital increase that will substantially cut the state holding.

Reaping the benefits of a radical restructuring, which saw substantial lay-offs and other cost reductions, Lufthansa reported a parent pre-tax profit of about DM100m for the first half of 1994 compared with a DM221m loss a year earlier.

Mr Weber said the second half of the year traditionally brought better profits in the air transport business. Sales and capacity were up, productivity had increased by 15 per cent and unit costs were cut.

Lufthansa hopes to raise DM1.7bn from its new shares, beginning with a first tranche as soon as the market recovers sufficiently. The state holding will fall from nearly 51 to about 38 per cent in this first stage.

Mr Weber said the capital increase and privatisation were necessary, on top of the restructuring, to strengthen Lufthansa's position as a global player.

He saw bright prospects now the worst of the recession in Germany was over and the international overcapacity problem was easing.

Lufthansa said it was aiming for an issue price for its new shares of DM160. Given its intention to offer these at a 20 per cent discount to the market, this suggests it will wait until its ordinary shares have recovered to DM200. They closed at DM189 in Frankfurt yesterday.