Lufthansa Proposes to Pay Higher Dividend

Germany’s Lufthansa (LHA.F, LHA.DE, DLAKF), the largest airline in Europe by the number of passengers, has amended its dividend policy, promising to pay out more to shareholders two weeks after lowering its outlook for the full-year 2019.

The Cologne-based group, which includes Network Airlines and Eurowings, plans to pay out a regular dividend of 20% to 40% of its net profit, adjusted for one-time gains and losses, according to an update. The prior policy stipulated a payout of 10% to 25% of group earnings before interest and tax. In the medium term, the carrier aims to raise its free cash flow to at least 1 billion euros ($1.14 billion) a year.

Additionally, Lufthansa set out a “comprehensive” set of measures to turn around its Dusseldorf-headquartered low-cost airline, Eurowings, which it said “should be returned to profit as swiftly as possible and sustainably generate value for shareholders.”

The company said Eurowings’ turnaround would have a clear focus on short-haul operations covering domestic and European routes, while the “commercial responsibility” for the long-haul business would be transferred to the Network organization. Lufthansa also announced a 15% cut in Eurowings unit costs by 2022.

Furthermore, Lufthansa said Brussels Airlines would not be integrated into Eurowings and, instead, a closer alignment to the Network Airlines would be sought. It said further details of this alternative course of action would be revealed in the third quarter when a turnaround plan for Brussels Airlines would also be unveiled.

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