© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by. My name is Emma, your Chorus Call operator. Welcome, and thank you for joining the conference call of Deutsche Lufthansa. [Operator Instructions] I would now like to turn the conference over to Andreas Hagenbring, Head of Investor Relations. Please go ahead, sir.
Yes, thanks Emma, and good morning, ladies and gentlemen. Warm welcome to the presentation of our group results for the first quarter 2018. I've got Ulrik Svensson with me today, our CFO, and he will give you an overview on current developments, and of course present the financial figures for the first quarter. As always, you will have the opportunity to ask your questions after the presentation. Ulrik, please.
Thank you, Andreas. Ladies and gentlemen, a very warm welcome from me, too. Overall, we have seen a good development of the operating businesses in the first quarter of this year. The Network Airlines had performed strongly. They increased adjusted EBIT by EUR 154 million to EUR 114 million. Lufthansa German Airlines has achieved a positive result with its highest first quarter margin in the last 10 years. SWISS stands out with a margin of 9.3% in this typically weak first quarter.As we already indicated at year-end, the performance of the Eurowings Group has been negatively impacted by significant one-off costs associated with the integration of additional capacity after the exit of Air Berlin. The trading at Eurowings is very strong. Traffic revenues increased by 34% on a capacity growth of 28.8%. With a 4.2 points higher load factor and at stable constant currency yields. Overall, the Passenger Airlines have continued to perform well with unit revenues going up while unit costs continue to come down and this despite the significant one-off cost at Eurowings Group.Cargo has also continued to trade well. Its profit development has broadly offset lower results at Lufthansa Technik, where profits are now normalizing after an outstanding performance in the first quarter last year.There's also the case for others and consolidation, which had a strong positive impact on the profits in the first quarter of 2017 and are now coming down to the average levels of the years before 2017. Altogether, we are satisfied with the underlying profit development of the operating businesses, in particular with the strong performance of the Network Airlines and Cargo, and above all, continued unit cost reductions despite significant one-off costs at Eurowings Group.Allow me a technical remark before we look at the recent developments in more detail. In the first quarter, we have seen the first time implementation of the new accounting IFRS 15 rules. As guided, this has reduced traffic revenue and fee expenses equally. As a result, reported revenues have remained stable despite strong growth at the operating level. I will take you through these changes today only briefly as absolute profit remains unaffected and the relative performance of the KPIs has been restated in order to reflect the true and fair view of the development of the Lufthansa Group. A more detailed breakdown of the effects is available in the annex of this presentation.The trading environment was balanced in European short-haul. The significant extra capacity in particular at Eurowings and Lufthansa German Airlines after the exit of Air Berlin, could be sold at stable unit revenues. Trading on long-haul improved as well, transatlantic is strong with load factors and constant currency yield increasing on a moderate capacity increase. In Asia, we have seen stable yields and seat load factors on a 6.3% capacity growth. And in Middle East and Africa, our smallest and most volatile region, load factor increases are basically compensating for the yield decline.Overall, yields saw a stable development on a constant-currency basis. Due to increasing load factors, constant currency unit revenues increased by 1.2%. The unit cost development was negatively impacted by the anticipated one-off cost at Eurowings. Nevertheless, we were able to reduce total unit cost. Constant currency ex fuel unit costs came down by 0.5%. The network alliance alone reduced constant currency ex fuel unit cost by 1.9%. We therefore continue to expect an overall reduction of 1% to 2% for the full year.Total revenues declined by 0.7% as a result of the first time application of the accounting rule IFRS 15 against a nonrestated 2017 figure. Excluding IFRS 15, revenues would have increased by 4.5%. Fuel cost increased by EUR 11 million on the back of slightly lower-than-expected volumes and the strength of the euro versus the U.S. dollar. Overall profit improvement of the Passenger Airlines was EUR 83 million. This was, however, largely offset by an altogether stable development of the operating service companies and the significant negative impact from others and consolidation.In total, adjusted EBIT of the group remained on previous year's level despite one-off integration cost and the significant negative effect from nonoperational elements.Against year end 2017, net financial debt decreased by 27.5% on seasonally strong cash inflows in the first quarter. Adjusted net debt over adjusted EBITDA for the trailing 12 months improved from 1.7x to 1.6x. This has contributed to further improve our financial stability as is also reflected in the recent S&P upgrade of our investment-grade rating outlook from stable to positive. Operating cash flow remained on previous years levels in line with the operating result. The decrease in free cash flow is mainly a function of the acquisition of Brussels Airlines last year. We had bought the company for a very low purchase price but with a positive cash balance of EUR 200 million, which have impacted the free cash flow at the time.Pension provisions increased by EUR 425 million versus year end 2017 mainly on the back of the reduced discount rate from 2.0% to 1.9%.The Network Airlines showed the best performance in this quarter. They improved their adjusted EBIT by EUR 154 million to EUR 114 million, resulting in a strong margin improvement of 3.2 points to 2.4%. This was particularly driven by Lufthansa German Airlines and SWISS. Lufthansa was the largest contributor to the adjusted EBIT improvement with an increase of EUR 95 million to EUR 83 million. SWISS increased adjusted EBIT by EUR 64 million to EUR 99 million. This is a very strong margin of 9.3% in the traditional weak first quarter.Austrian Airlines was affected by 3 day employee meetings. If it had not been for that, profits would have remained broadly flat.Eurowings Group saw a EUR 71 million lower adjusted EBIT of minus EUR 203 million. This was largely driven by one-off integration costs for the former Air Berlin assets. These one-off costs are significant in the first quarter and will continue to be so in the coming months. But they are certainly a good investment in making Eurowings a better business going forward.Lufthansa Cargo continues its strong performance with an increase of adjusted EBIT by EUR 32 million to EUR 65 million. This is a margin increase of 4.3 points to 10.1%. The strong trading environment is expected to continue in the next months, albeit against an increasingly difficult comparable base.Lufthansa Technik saw adjusted EBIT decline by EUR 34 million to EUR 103 million. The company is reporting against an extraordinary strong first quarter last year, which heavily benefit from seasonal capacity utilization in aircraft overhaul and timing effects. The weaker U.S. dollar also contributed to the low result.LSG Group is still affected by its ongoing transformation in Europe, but the benefits should be coming increasingly visible from now on. Others and consolidation saw adjusted EBIT decline by EUR 83 million to minus EUR 54 million. The first quarter last year saw a strong improvement in their contribution, and we are now returning to levels of the years before 2017.In my last presentations, I had put a particular focus on return on capital and the finance strategy. Today, I would like to show you a particular successful example of investments here at Lufthansa Group. By replacing A340s at SWISS with 777 aircraft, we have reduced unit cost, including fuel, by approximately 25% for each of those aircraft. At the same time, we increased the revenue per flight on average by some 30% at 50% additional capacity. As a result, the margin on those flights increased on average by 10%. This is an extremely attractive business case, and you have witnessed the recent margin development at SWISS.Coming back to our results for the first quarter, we are very satisfied with the performance of the Network Airlines. We had anticipated the significant one-off cost at Eurowings and addressed this in our full year call 6 weeks ago. We have reduced our planned organic capacity growth slightly in light of the late deliveries of A320neos, by the cancellations, employee meetings at Austrian Airlines and strikes from the ground staff here at Frankfurt airport, as well as some slower growth at Eurowings Group. We now expect additional fuel cost of EUR 600 million. This is lower than our previous guidance due to the lower capacity growth and weaker U.S. dollar.The operational development will be good even despite the significant one-off cost at Eurowings. From what we can see today, it will not fully compensate for the still significant increase in fuel cost.Our guidance remains, therefore, unchanged. We continue to expect an adjusted EBIT slightly below previous year. With that, I thank you for your attention, and I'm happy to answer your questions.
[Operator Instructions] First question comes from the line of Neil Glynn with Crédit Suisse.
Two questions from me, please. The first one, with respect to SWISS [ profitability ], you obviously achieved profitability in the first quarter of '18 following a loss last year. That's certainly something that's been a feature in the U.S. as well as among some of your European peers as they structurally improved EBIT margins. Just interested do you expect to be able to retain profitability in the first quarter going forward and is profitability in each quarter a validation of a structural margin improvement for you? Then the second question, with respect to yields management in a rising fuel price environment, just interested have you changed anything or have you seen a greater ability to actually manage yields upwards in a more consolidated environment as the fuel price rises and has that differed from experience in the past in a less consolidated market.
Starting then with the profitability in the first quarter, as we all know, most airlines, indeed, are making a loss in the first quarter. So we are extremely happy about the development now of SWISS having a 9% EBIT margin in the first quarter and also Lufthansa getting very much into stable profit territory. And indeed, with the structural changes we have done over the last couple of years, we expect for SWISS and Lufthansa, this will continue with Austrian being slightly more a leisure market it will be tougher however. On the second question on yields, indeed, a consolidation of the market is, of course, helping yields long term, but there's also a lot of other things we are doing when it comes to changing our GDS relationship, changing how we do our bookings, which will come into place into 2018 where SWISS is the first platform we are using that which will help. But it's too early to say that we can, so to say, compensate the fuel through the yield fully. Thank you, Neil.
The next question comes from the line of Jarrod Castle with UBS.
Three, if I may. Obviously, you spoke about the drag in Eurowings relating to Air Berlin. Can you give any color in terms of what your estimate is now for the one-off costs relating to the integration? And maybe just the profile as we move through the year through the quarters? Secondly, just in terms of cost cutting, I understand kind of the slow start to Q1. Obviously, you're going to have a bit of catch up as you go through the quarters to achieve the minus 1 to minus 2. But also just in terms of the profile, how we should be thinking about how that should evolve during the quarters. And then just the balance sheet, obviously seeing further strengthening in the rating agencies. So just any change in your thinking in terms of balance sheet, capital returns, share buybacks, et cetera?
Yes, sorry, we were on mute. Thanks for your questions. And starting with the Eurowings, I mean, this is a fantastic once-in-a-lifetime opportunity to consolidate the German market. And there are, indeed, a number of one-off costs. But the majority of those costs are coming here in the first and in the second quarter. They are the classical project cost we have spoken about, repainting of aircraft, there are costs in connection with training and so on. But there are also MRO costs, the technical level of the aircraft we are taking over from Air Berlin, it's not fully up to Lufthansa and Eurowings standards. So there's been some less capacity due to maintenance, which we had to lease in wet lease capacity to cover. But this is indeed trailing off during the course of the year. And going into 2019, those costs will have been fully disappearing. And we are very confident that the total group cost reduction of guiding 1% to 2% for the year will absolutely be there. And I think that's very visible with the Network Airlines who reduced their CASK by 1.9% in the first quarter. In terms of the rating agency, yes, you saw the increase of our S&P going from stable to positive. We have now a net debt-to-EBITDA of 1.6. We will continue as we indicated early, short-term to strengthen our balance sheet. We think there are opportunities to consolidate the market, and we want to have some dry powder for that. Long-term, of course, if there are new opportunities, we will have to look again at what our abilities to return some of that liquidity to our shareholders.
Okay, and so just coming back to Eurowings, are you going to give us a number for the cost of integration and ramp up at any stage during the year? So we can see kind of how the underlying business would be performing otherwise.
Yes, it is clear that the CASK reduction within Eurowings without these one-off cost would have been negative. Today, it's up around 8 -- 9%. So that is basically differences with one-off cost.
The next question comes from the line of Anand Date with Deutsche Bank.
I just had 2 questions, please. I was wondering if we look at the load factor performance over Q1 and kind of what all the airlines are saying about bookings into Q2, is it reasonable to draw a conclusion that you guys are sort of volume loading as opposed to taking better price? And is that something that's a function of potential scrutiny around the Air Berlin deal, or is that a new strategy that you guys have in the revenue management system? And then secondly, just to come back to -- on Alitalia, we've been getting lots of press recently that your proposal is now top of the queue or front of the queue, so to speak. Could you just give us an outline perhaps of what your redlines might be around how that deal would look? So what sort of guarantees you might need for that to really work.
Starting with the sunny country of Italy, as we have said many times, Italy is a very important market for us. It's the second most important after U.S. And, however, it's important to remember that the way Alitalia looks today is of absolutely no interest to us at all. We have handed in a concept to the Italians how a totally restructured airline could possibly look like in terms of size, costs, destinations and so on. But that restructuring would have to be done by the Italians. That is something which we could not do as a new shareholder. So there are many redlines which basically means it has to be restructured first. So therefore, for the moment, this is just on a concept stage, and I think that is important to remember. When we look at seat load factors and lead, I mean, clearly, the target of our revenue management system is to maximize the RASK, the total revenue. There is no specific volume strategy, there's nothing which changed from what we have been doing earlier. So there's nothing to be read into that.
Could I ask, sorry, a follow-up on both? If you don't see that something is happening on Alitalia that sort of fits with the model that you proposed, is it -- would it be reasonable that you would just look to scale up Air Dolomiti or one of the other brands and you can basically just cover Northern Italy with your existing operations?
Clearly, scaling up Air Dolomiti and scaling up all the different airlines opportunities to make more commercial platform in Italy is an important ingredient. It is a very important market for us. So absolutely, we would scale up.
And just one more, this should be very quick, I'm sure. Do you have any comment on whether your low cost long-haul ambitions now have to change and whether you need to do anything a bit differently given what IAG has sort of done with Norwegian?
No, not at all. Quick question, quick answer.
The next question comes from the line of Daniel Roeska with Bernstein.
Three, if I may. Number one, on the sector, you pulled back growth a little bit in the forecast due to operational reasons. But maybe looking out on the performance and what the sector is doing second half of '18 into '19, how are you thinking about capacity growth? Is there any indication that you are thinking a little bit more cautiously on what you want to do with capacity? Second question on Eurowings. I know the original plan always was to kind of consolidate within Eurowings and be more efficient running the different operators. Now you've decided also to keep Essen Brussels as a full-fledged operator in the Eurowings business unit. Is that in any way impacting what the Eurowings aviation getting [indiscernible] can do in terms of synergies? Is it complicating and delaying the process? And last question that may be something you kind of touched on before. In the tougher environment earnings growth gets harder. You talked about how you think about the cash balance and you need a little bit of dry powder or maybe give it back. But any other ideas how you can translate that cash balance that's building up into earnings growth aside from consolidation in the market?
Yes, clearly, the -- taking down the growth prospect from 7% to 6%, as you rightly said, is all due to operational questions. Actually, there are 5, 6 different reasons I mentioned in my speech. So there is nothing there changing when it comes to how we think about the capacity growth. When it comes to Eurowings being our platform for consolidation, absolutely, that is the strategy going forward. But of course, acquisition opportunities never really come when you -- they are most ideal, some from a practical point of view. The Air Berlin once-in-a-lifetime opportunity came a little bit too early for us. And therefore, we are now spending a lot of energy on digesting and integrating that. And from that perspective, Brussels Airlines is indeed coming a little bit later than we probably first had envisioned when we did that acquisition. In terms of looking at our cash balances, we still have a net debt of EUR 2 billion. If at some stage there are no further good acquisition or CapEx opportunities, we would indeed look at how could a return of those balances look to the shareholders. But that is all too early at this stage.
Yes, maybe if I can follow-up on that one, we talked a lot about the M&A opportunity on the airlines in the European space. And I was just wondering, right, if you look at cargo, Technik or LSG, right, if there's any significant opportunity to increase in the-- into those areas where you may be kind of holding back right now because you're still waiting to see how the consolidation game in Europe plays out.
I think there might be some exciting opportunities within Technik, which is a good platform and a well-run company. But that is too early to speak about what would those opportunities be, and it could also be the case that there are a number of smaller ones, which could add up to some amounts.
[Operator Instructions] The next question comes from the line of Andrew Lobbenberg with HSBC.
Can I ask a couple of questions on SWISS? First up, what do we think about the weakening Swiss franc? What does that do for the business? Frankly, I was surprised how awesomely it traded with the strong Swiss franc, but what do we think about the weakening Swiss franc? And then staying with SWISS, it was clearly an awesome Q1 performance. When we get to Q1 next year and SWISS' profitability goes down, are there any exceptional one-off positives that you'll be tempted to draw out at that time? Is there anything exceptional that drove this performance? And then a third question, have you guys got any further with your homework on the IFRS 16 burden which is to come?
Yes, thanks for those questions on SWISS. As you know, I have an emotional relationship with SWISS. I'm very happy to answer about the fantastic result they have. And clearly, the Swiss franc is helping us because we have a lot of costs in Swiss franc. So when the Swiss franc is weakening, that is indeed a benefit for them. But I think one should see it also in the opposite direction. It's amazing how well they have been performing over the last couple of years despite of the very strong Swiss franc, and maybe now it's coming down to a Swiss franc which is a little bit more reasonable to the Euro. There are no significant Q1 one-offs. So indeed, this is really trading as good as it is. You had a homework question as well when it comes to the IFRS 16, and we will come back to the IFRS 16 in connection with our Q2 numbers. So it's a bit too early to say what it is. It's thousands of different contracts around in the world. As we all know, it's not aircraft we are leasing, it is a lot of actual premises and buildings in many different places of the world. So that's too early to speak about.
Next question comes from the line of James Hollins with Exane.
A few for me. Just on the point-to-point long haul, looks like it's been pretty massive shift from Asia Pacific capacity onto Americas, which I assume might be in North America versus where we were 6 weeks ago in your presentation. Could you just check if that's correct? And is it due to Asia Pacific weakness or just transatlantic strength? Second one, still looking at CapEx of EUR 3.4 billion this year, that is a question, not a statement. And also, does that change because of the Airbus delays or is it obviously planned in; and do you get compensation from Airbus for that? And finally, are you one of the interested parties that has looked closely, we believe, at Norwegian?
Yes, starting on the CapEx side, the EUR 3.4 billion CapEx guidance did indeed include the A320neos, which might be delayed. We do get compensation when those aircraft are not arriving in time. So that is helpful even, of course, we would have preferred to get the aircraft in time. On Norwegian, we never comment on any M&A transactions. Starting with your first question, long-haul, there is a certain shift to America, but of course, it is from a small base. So it's not really anything really, really relevant.
Your next question comes from the line of Johannes Braun with MainFirst.
I have 3. Firstly, on the cost impacts from the recent agreement with Austrian union on Eurowings. Is that significant at all? Can you give any indication on that? And secondly, again, back to extra unit costs, looking at the developments excluding the Air Berlin integration costs, I guess the main building blocks this year are the pilot agreement and also the management restructuring. Was just wondering if you could give us a sense of how much that has already affected Q1 and what the phasing will be over the year. So will there be more impact from these 2 building blocks in the quarters to come? And then very lastly when you talk to your corporate clients these days, is there anything that would indicate that they will get more restrictive on travel budget going forward like downgrading from business-class to premium economy or less travel in general, anything you can say on that.
Yes, starting with the unit cost, no, the -- and there's a steady cost improvement. And as you saw in the Network Airlines, we had 1.9% reduction in the first quarter. This is basically coming from all the P&L items we have spoken about earlier. So there's no specific phasing of those unit cost. When we speak to our corporate customers, no, there is indeed no change. We see very strong demand both when speaking to them, so to say, off-line and looking into the booking numbers. I think that is indeed continuing and a very strong, so to say, premium part of our cabin. There is indeed no change in Austria when it comes to the agreement of the wages, which will have any impact at all on our guidance.
So the agreement in Austria was in line with your expectation, is what you're saying?
Indeed, yes.
Next question comes from the line of Ruxandra Haradau-Doser with Kepler Cheuvreux.
Three questions, please. First I'm a little surprised that yields in Europe were down 2.8% ex currency in Q1. With strong year-over-year capacity growth of low-cost carriers during the summer flight schedule in Frankfurt, Zurich and Vienna, how should we think about yields in Europe in Q2 and Q3? Second, a follow-up to an earlier question. RASK in Q1 was strongly supported by the load factor development, particularly in March. How should we think about the load factors during the remaining of the year? And then I reiterate the question I had in the last conference call. Adjusting for the fuel cost because the fuel guidance already accounts for currency changes, what currency impact do you expect this year?
Okay, yes. Starting with the currency, the currency impact is actually pretty much a wash. Clearly, it does have an impact on our yields. But we also have large savings predominantly of course, when it comes to the U.S. dollar saving on the fuel. So overall, for your modeling, I think this is -- has not a significant impact. Looking at seat load factors going forward, now of course, in the month of April, you will see that we have Easter effect, which means that we have the less loads in the month of April but a higher yield when you come into the month of May due to the -- all the weekend holidays being moved. Then, of course, you see the effect that there are higher seat load factors but lower yields. So overall, this is really much depending on which quarter you look like -- you look at. But overall, for the full year, as we have said earlier, we think that our RASK is going to be stable, and that's something we are indeed looking at going forward. You did have -- I think I actually covered both your answers by that one.
Yields in Europe?
Yes, you are asking about yields in Europe. I think that has been covered by Ulrik with his answer as well.
Okay. From your answer, is it fair to assume that the positives you have from currencies on fuel cost are fully offset by the negatives you have excluding fuel cost?
No. As I mentioned, the currency is indeed a wash for Lufthansa as a total because the currency impact on the yield is being compensated by the cost savings we have specifically maintenance and fuel.
The next question comes from the line of Damian Brewer with RBC.
Three questions, but 2 clarifications from previous questions. James at Exane asked about the CapEx guidance but you didn't give us a new outlook. Could you provide that, please? Secondly, Eurowings seems that there's about a 10% CASK differential, so it looks like there was about an EUR 80 million sort of one-off cost in Q1. Again, I think Jared asked, but could you clarify what you expect that to be in Q2? And then a third question. We -- the full year yield outlook -- or rather RASK outlook is stable which rather implies that H2 would see a decline. The logistics business outlook is for decline in EBIT despite a 50% incremental margin in Q1 and a still relatively buoyant, if normalized, market. So clearly, something's going to grow wrong in the second half of the year. What's stopping Lufthansa being capable of compounding earnings growth? Is there still inherent problems within the group or is the company just not capable of compound EBIT growth?
Starting on the CapEx, well, indeed, our guidance is EUR 3.4 billion in CapEx for 2018. So there's not a change in that. When it comes to your question on Eurowings and the delta of the CASK, your EUR 80 million number you mentioned there is not a bad assumption. When it comes to our guidance and our total EBIT being slightly below last year for the full year, it is just a function that indeed we are getting much tougher comparables in the second half of the year, nothing else.
And -- but just to be clear, economies do compound in their growth. Are you saying that Lufthansa's earnings can't compound?
I'm not sure I even understand your question. Clearly, our revenues are increasing. But as we said earlier, we had a very, very good second half of the year. And our fuel cost against us and some of that we can compensate by better operation performance. But at this stage, we think it's prudent to say that it's going to be slightly below last year when you look at the full year guidance.
Next question comes from the line of Malte Schulz with Commerzbank.
Two questions are left from my side. The first one is if you look at your lower organic growth guidance now, will it affect also on the Network Airlines evenly or do you plan to shift some of the more capacity growth rather to SWISS or Lufthansa core if you have better margins there? And the second one is are you currently also already looking at alternatives to the A320neo if the problems are more severe than previously expected?
When it comes to the Network Airlines, our capacity will short-term not change. We are, of course, short-term shifting capacity between the different hubs, for example, between Munich and Frankfurt where we have looking at the airport where are the best quality and the best pricing or the best cost. But otherwise, there are no larger changes going on there. Your second question, regarding alternatives to the A320neo, that's a problem for the whole industry. That is something which I think our suppliers are working very hard to be resolved. And in the meantime, we have to scramble with getting in capacities from other sites short-term and get these compensation costs, which I spoke about earlier. But this is an industry problem which will not change overnight.
One follow-up, if you allow. Will the compensation more than or at least offset the higher cost you have from wet leases also? And if there are other methods to get capacity?
Well, I think that's more a question between us and Airbus.
Next question comes from the line of Nuala McMahon with Goodbody.
Just 2 questions from me. The first one back is to a question that was asked earlier on yields in Europe. So yields coming down 2.8% in the quarter, can we get a bit more color on the reasons for this result given you have the benefit of half an Easter in the quarter? I'm specifically interested to hear how domestic German yields are performing. And then secondly, on North America, you had quite a turnaround in your yield performance of 4% this quarter. I'm just wondering what were the main drivers of this.
Yes, starting with the yields in Euroland and Germany. What we see, of course, is a very large growth of Eurowings. And Eurowings indeed have lower yields than Lufthansa, [indiscernible] and the rest of the airlines. So just due to their very strong growth, disproportionately there is a mix shift when it comes to the yield. In terms of the North America, we have strong trading in North America. There is underlying good demand and a good load factor. But of course, as you rightly say, there is a ForEx headwind out of U.S., but there is indeed also a very demand out of U.S. So overall, we are very happy with North American development.
And just 1 follow-up question, if I may. In terms of the mix effect associated with Eurowings, what percentage of that was the -- is included in the minus 2.8%? On what underlying weakness?
That number I have to come back to you on. I don't have that in my head.
We have a follow-up question from Anand Date with Deutsche Bank.
It's a pretty quick one. I was just wondering if you could let us know, firstly, have you seen any benefit from the strikes at Air France or in France generally or was that really quite marginal? And secondly, did Q1 see any particularly material impact from bad weather in Northern Europe or is that also relatively small?
No, there are no real large benefits from the strikes at Air France. And being a Swede, used to bad weather, I think it's been as bad as it's always been. So there's no way to change that.
That was the last question we had. And maybe Ulrik, some closing words?
Yes, thanks, Andreas, and thanks to all of you for joining our call today. And as I said before, we are indeed satisfied on how the quarter went. The unit cost reductions at the Network Airlines were very visible and will continue in the coming quarters. Eurowings will, of course, see further significant one-off cost in the coming months, but this will not negatively impact our overall cost-reduction targets of the 1% to 2%. Trading was good, and we're expecting this to continue for some more time. But the comparables are, of course, becoming tougher later in the year. Nevertheless, we feel we are on track for what we have planned for this year, and I'm happy to discuss this with many of you in the coming months. Thanks for today. Bye-bye.
Ladies and gentlemen, the conference is now concluded. And you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.