3rd Interim Report January – September 2010 Ready for boarding 3

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Key fi gures Lufthansa Group Financial calendar 2011

Jan. – Sept. Jan. – Sept. Change July – Sept July – Sept. Change 2010 2009 3) in % 2010 2009 3) in % 17 March Press Conference and Analysts’ Conference Revenue and result on 2010 results Total revenue €m 20,193 16,162 24.9 7,568 5,936 27.5 of which traffi c revenue €m 16,445 12,589 30.6 6,242 4,743 31.6 3 May Annual General Meeting, Berlin Operating result €m 612 226 170.8 783 218 259.2 EBIT €m 957 208 360.1 893 359 148.7 5 May Release of Interim Report January – March 2011 EBITDA €m 2,206 1,417 55.7 1,330 753 76.6 Net profi t/loss for the period €m 524 31 628 209 200.5 28 July Release of Interim Report January – June 2011 Key balance sheet and cash fl ow statement fi gures 27 Oct Press Conference and Analysts’ Conference Total assets €m 29,501 27,281 8.1 – – – on interim result January – September 2011 Equity ratio % 25.1 22.5 2.6 pts – – – Net indebtedness €m 1,521 1,908 – 20.3 – – – Cash fl ow from operating activities €m 2,425 1,438 68.6 1,005 408 146.3 Capital expenditure (gross) €m 1,760 1,777 – 1.0 786 612 28.4

Key profi tability and value creation fi gures Adjusted operating margin 1) % 3.5 2.0 1.5 pts 11.1 4.5 6.6 EBITDA margin % 10.9 8.8 2.2 pts 17.6 12.7 4.9

The Lufthansa share Share price at the quarter-end € 13.49 12.11 11.4 – – – Earnings per share € 1.14 0.07 1.36 0.45 302

Traffi c fi gures2) Passengers thousands 67,869 55,635 22.0 26,089 22,432 16.3 Passenger load factor % 79.7 78.0 1.7 pts 83.6 82.6 1.0 pts thousand Freight and mail tonnes 1,468 1,231 19.3 530 443 19.8 Cargo load factor % 68.0 58.1 9.9 pts 66.4 61.6 4.8 pts Available tonne-kilometres millions 28,780 25,907 11.1 10,380 9,550 8.7 Revenue tonne-kilometres millions 21,479 17,994 19.4 7,943 7,026 13.0 Overall load factor % 74.6 69.5 5.1 pts 76.5 73.6 2.9 pts Flights number 763,170 638,492 19.5 271,316 244,538 11.0

Employees Employees as of 30.9. number 116,838 118,945 – 1.8 116,838 118,945 – 1.8

1) Performance indicator to enable comparison with other airlines: (operating result + write-backs of provisions) / revenue. 2) Lufthansa Group without . 3) Last year’s fi gures have been restated in line with measurement changes under IAS 39. Date of publication: 28 October 2010.

Contents Disclaimer in respect of forward-looking statements Information published in the 3rd Interim Report 2010, with regard to the future development of the Lufthansa Group and its subsidiaries consists purely 1 To our shareholders 43 Further information of forecasts and assessments and not of defi nitive historical facts. Its purpose is exclusively informational identifi ed by the use of such cautionary terms as “believe”, “expect”, “forecast”, “intend”, “project”, “plan”, “estimate” or “intend”. These forward-looking statements are based on all discernible 3 Interim management report 44 Credits/Contact information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication. 32 Interim fi nancial statements 45 Financial calendar 2011 Since forward-looking statements are by their nature subject to uncertainties and imponderable risk factors – such as changes in underlying economic conditions – and rest on assumptions that may not or divergently occur, it is possible that the Group’s actual results and development may differ materially from those implied by the forecasts. Lufthansa makes a point of checking and updating the information it publishes. It cannot, however, assume any obligation to adapt forward-looking statements to accommodate events or developments that may occur at some later date. Accordingly, it neither expressly nor conclusively accepts liability, nor gives any guarantee, for the actuality, accuracy and completeness of this data and information.

To the extent that the interim Group management report refers to sources other than the interim Group management report or the interim consolidated fi nancial statements (e.g. internet sites), the contents of these sources are not part of the interim Group management report and are solely for informational purposes. WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders | Interim management report | Interim financial statements | Further information Letter from the Executive Board

Ladies and gentlemen,

Our flight has crossed the financial and economic crisis success- As a German airline we are well aware that we can and may only fully! After a turbulent start to the year 2010, the Lufthansa Group rely on our own profitability. For this reason we are determined to regained uplift thanks to the gratifying performance of the cargo maintain and strengthen it. We are therefore continuing our pro- and passenger businesses. The strong positioning of our business grammes to safeguard earnings unchanged. Lufthansa ­Passenger segments, the synergy potential realised in the airline group and Airlines made further progress with its Climb 2011 ­programme. the ongoing cost-cutting measures have made a vital contribution It will lead to a significant reduction in costs. The restructuring and to this success. With an operating result of EUR 612m for the past integration of the new companies is also showing great success nine months, Lufthansa follows up on its performance of previous and running according to plan. years. This is a remarkable achievement, especially considering the lost production in the first months of the year, which is still fresh Based on the results achieved and the stable course of business in our memory. we can revise our expectations for earnings ­development in the 2010 financial year upwards. In view of the substantial increase in Lufthansa Passenger Airlines, SWISS and put in revenue and our unwavering efforts to reach our cost targets, we a particularly strong performance. In addition to higher passenger now expect the operating result to exceed the EUR 800m mark. numbers and cargo volumes, average yields continued to improve here as well. Lufthansa Cargo again posted a record result and Dear shareholders, we have kept our promise not only to practise the Passenger Airline Group too was able to report an operating short-term crisis management but always to look ahead and to profit. This includes earnings contributions from shape the future. In doing so we remain true to our principles – to and bmi that were negative overall, but also positive in the third solid financial structures, to our quality and customer focus, and quarter. and confirmed their to innovation and long-term value creation. Our fleet renewal and place as late-cycle segments with slight falls in revenue, but never- the continuous optimisation of our network with our partners in theless presented good results. LSG Sky Chefs also benefited the airline group are just two examples. We are also pleased that from the resurgent premium business. at its meeting in September the Supervisory Board prepared the way to continue on this course by appointing Christoph Franz The successes of the three last quarters confirm our course, but to succeed the current Chairman of the Executive Board and they should not obscure the fact that challenges still lie ahead. CEO and for to take his seat on the Executive Crude oil prices are going up again in conjunction with the eco- Board of Deutsche Lufthansa AG. These are all foundations nomic recovery, and the pressure this puts on earnings cannot for our success, which is built on sustainability. Lufthansa should be hedged away completely. A particular challenge for the years and will continue to grow – carefully and profitably! ahead is the air traffic tax adopted by the German federal ­government. It will also result in additional expenses for airlines and their passengers.

Wolfgang Mayrhuber Christoph Franz Stephan Gemkow Stefan Lauer Chairman of the Deputy Chairman of the Member of the Executive Board Member of the Executive Board Executive Board Executive Board and Chief Financial Officer Chief Officer Group Airlines and CEO CEO Lufthansa and Corporate German Airlines Human Resources

Lufthansa 3rd Interim Report January – September 2010 1 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 The Lufthansa share and synergies between the group airlines. The average target price was increased again in the third quarter, reaching EUR 15.20 As of 30 June 2010 the DAX had hardly changed compared with at the end of September. the beginning of the year, but in the third quarter of 2010 it rose by 4.4 per cent to 6,229 points. On 21 September the Lufthansa share reached a high for the year to date of EUR 13.65. The rea- Shareholder structure by nationality in % (as of 30.9.2010) son for the strong performance in the third quarter was the contin- uing momentum in sales and profit recovery. Lufthansa was one UK 3.4 Canada 2.0 of the three best performing shares in the DAX in the last quarter Luxembourg 7.4 with a price increase of 18.4 per cent. At the end of September Other 7.7 the price was EUR 13.49. This corresponds to a rise of 14.8 per USA 13.4 Germany 66.1 cent compared with the closing price for 2009 of EUR 11.75. The Lufthansa share has therefore outperformed the DAX (+ 4.6 per cent) by a factor of almost three this year so far, confirming that airline shares can benefit from an economic recovery with a ­considerable multiple.

In a sector comparison the performance of the Lufthansa share There have only been minor changes in the shareholder structure was also much better than many competitors such as compared with the mid-point of the year. As of 30 September (+ 3.0 per cent), easyJet (+ 4.8 per cent) and Air Berlin (– 20.5 per 2010, 66.1 per cent of Lufthansa shares were held by German cent). A stronger performance was put in by the shares of British investors. 67.9 per cent of the shares were owned by institutional Airways (+ 29.6 per cent) and Iberia (+ 51.5 per cent), whose investors. The largest single shareholder was still the American planned merger sparked the imagination of investors. investment company BlackRock Inc. with 4.22 per cent, followed by Janus Capital Management LCC with 3.29 per cent. The overwhelming majority of analysts continue to rate the Lufthansa share as a buy in view of the resurgence in passenger You can find regularly updated information on analyst recom­ and cargo business. This resurgence continues to be dynamic mendations and our shareholder structure on our website and is expected to benefit Lufthansa in the medium term given its i www.lufthansa.com/investor-relations. market positioning, comprehensive steps to improve earnings

Performance of the Lufthansa share, indexed as of 31.12.2009, compared with the DAX and competitors

1,4 140 1,3 130 1,2 120 1,1 110 1,0 100 0,9 90 0,8 80 0,7 70 31.12. 31.1. 28.2. 31.3. 30.4. 31.5. 30.6. 31.7. 31.8. 30.9. 2009 2010 2010 2010 2010 2010 2010 2010 2010 2010 DAX Lufthansa Air France

2 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information The Lufthansa share Economic environment and sector performance

Interim management report Economic growth in Asia remains very strong, particularly in emerging markets. Still on a high level, the leading indicators, however, are pointing to a reduction in the pace of economic Economic environment and growth. The moderate economic performance of some indus­ sector performance trialised countries also meant that growth rates for exports were lower. Some economic stimulus packages also expired and Macroeconomic situation The global economy continued to ­central banks began to tighten monetary policy in order to rein recover in the third quarter of 2010, albeit at a slower pace than in in potential overheating in some countries. prior quarters. This is largely due to the end of fiscal stimulus pro- grammes that had previously given the global economic revival a Thanks to increasing worldwide demand for oil and other raw considerable uplift. This trend is mirrored in global trade. For the materials and the general economic upswing, growth rates in the emerging economies that are driving the current global recovery countries of the Middle East and Africa remained strong. the slow-down in growth is expected to be modest. According to experts, global growth in the third quarter 2010 will be 3.9 per cent After a surge in growth in the area in the second quarter, up on last year. the indicators for the third quarter are again showing a positive dynamic. Global growth will also continue to bolster demand for exports from the euro area. The situation varies considerably GDP growth 2010 compared with previous year between the countries in the euro area, however. Observers Q1 1) Q2 1) Q3 2) Q4 2) Full ­estimate that development in the third quarter varied between in % year 2) – 5.2 per cent in Greece and + 3.7 per cent in Germany. The World 3.8 4.2 3.9 3.5 3.8 ­German economy is therefore still enjoying an upturn. Europe 1.0 2.3 2.1 2.1 1.9 Germany 2.0 3.7 3.7 3.8 3.3 Since the beginning of the year the Lufthansa Group has benefited North America 2.4 3.0 3.0 2.3 2.7 from the rapid pace of global growth. This applies particularly to South America 5.3 6.8 5.0 4.8 5.5 the companies in the Passenger Airline Group and to Lufthansa Asia / Pacific 8.1 6.6 6.1 5.2 6.5 Cargo, which were hit especially hard last year by the crisis, and China 11.9 10.3 10.0 9.5 10.3 can now also report improving revenue as well as a sharp increase Middle East 3.0 4.4 5.1 5.5 4.5 in demand. The other business segments also benefited from the Africa 3.8 4.5 4.9 5.1 4.6 economic upturn, albeit to widely different degrees. Current devel- Source: Global Insight World Overview as of 15.10.2010. opments show that Lufthansa’s group structure represents the best 1) Partially forecast. 2) Forecast. possible combination between the stabilising effect of the service companies and the earnings potential of the airborne subsidiaries. At a regional level economic developments have been varied. ­Following a powerful upturn thanks to government intervention Concerns about the euro due to increasing government debt and the inventory cycle, the prospects for the US economy are in some euro countries and the currency’s ensuing weakness now getting gloomier. This is due to poor performance on the against the dollar have largely been put to one side since the labour and property markets, in tandem with heavy household start of the third quarter. This stems from the uncertain economic debts, which will limit the expansion of private consumption in situation in the USA and the loose fiscal policy currently being the near future. ­pursued by the Fed. After falling by up to 17 per cent in the interim, the euro was just 4.2 per cent down on the US dollar at the end of the quarter compared to the start of the year. Its average for the first three quarters was 3.7 per cent below the average for the same period last year.

Lufthansa 3rd Interim Report January – September 2010 3 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 In recent months the price of oil has been subject to the conflicting very balanced currency exposure. The impact on the bottom line forces of positive underlying data and uncertainty concerning of the remaining net exposure is comparatively slight. We practise the strength of the continued economic recovery. In the first half systematic risk management to limit fuel price and currency risks. of 2010 worldwide demand for oil was strong. Since the middle of For detailed information on our rule-based hedging policy, please the year it has slackened somewhat, largely due to slower growth see p. 133 onwards and p. 196 in our Annual Report 2009. in demand for oil from China. After a recovery of prices at the end of September, a barrel of Brent Crude cost USD 82.31/barrel Sector developments The aviation sector continued its econo­mic at the end of the quarter and was therefore around 19 per cent recovery in the third quarter of 2010. According to IATA figures dearer than a year ago. The average price for the first nine months passenger demand in international air traffic rose by 6.4 per cent was EUR 77.86/barrel, or 33 per cent up on the same period last in August 2010 compared with the same month last year. Demand year. This figure came about as a result of prices ranging between in the freight business soared by 19.6 per cent. These rates are USD 69.55/barrel and USD 88.94/barrel. slightly below those for the second quarter, but this stems mainly from the stronger quarter in 2009, when the current economic upturn had already begun. Price development of Brent and kerosene in USD / t There are nevertheless strong regional disparities in the resurgence 15001,500 of demand for aviation. The fastest growth comes from emerging economies in Asia, Africa and the Middle East, where passenger 12001,200 numbers climbed by 10 per cent year on year in the first eight months. Airlines in Europe and North America reported solid but 900 900 comparatively moderate growth in numbers of 4 and 6 per cent respectively. 600 600 Growth took place both in the premium segment of First and 300 300 ­Business Class and in Economy Class. Passenger numbers in the 0 0 premium segment were up year on year by 9 per cent in August 2.1. 2.1. 2.1. 2.1. 30.9. according to IATA and in Economy Class the increase was 6 per 2007 2008 2009 2010 2010 cent. Overall, this rise is principally the result of increased demand Source: Lufthansa, based on market data. Kerosene IPE Brent for business travel.

The jet fuel crack (the price difference between crude oil and The trend towards consolidation and partnerships in the aviation ­kerosene) remained at the same level between the second and sector persisted in the third quarter 2010. In September, for third quarter of 2010, but was well up on last year. At the end of instance, the shareholders of US-based and Conti- September it came to USD 11.73/barrel (previous year: USD 6.63/ nental Airlines approved a merger following clearance from the barrel). The expansion of global refining capacities and stagnant US competition authority for a deal that will create the largest airline demand in OECD countries are forestalling further price increases. in the world by passenger numbers. In future the two members will fly together as United Airlines under the umbrella In the first nine months of 2010, the price for kerosene moved of United Continental Holdings. In the same month, the American between USD 625 and USD 779 per tonne. The average price low-cost carrier Southwest Airlines announced the takeover of was USD 698 per tonne, an increase of some 32 per cent on the its listed competitor Airtran Airways for around USD 1.4bn. same period last year.

Fuel price movements are of enormous significance for the Lufthansa Group’s cost base. Furthermore, changes in exchange rates affect other items of the income statement. Lufthansa already has a strong natural hedge, however, because the Group has a

4 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information Economic environment and sector ­performance Course of business

At the end of September the members of the Star Alliance agreed Systems confirmed their role as late-cycle segments with slight to accept as a future member. The resulting decreases in revenue. However, overall they were able to report expansion of the route network in eastern and central Africa means good results as well. The same applies to LSG Sky Chefs, which that all the main countries on the continent will be linked to the benefited particularly from the revival in premium business. global network of Star Alliance and Lufthansa. The structural steps to safeguard earnings are being continued September also saw an agreement between British Airways, unchanged. Lufthansa Passenger Airlines made progress with the American Airlines and Iberia on a transatlantic alliance. British measures taken as part of the Climb 2011 programme which will ­Airways and Iberia also intend to complete their planned merger lead to significant cost savings. The restructuring and integration by the end of the year. In August TAM and LAN, too, announced of the new companies is also showing great success and going their wish to carry out a merger under the name of LATAM Airlines. according to plan.

Significant events In September 2010 the Supervisory Board Course of business of Deutsche Lufthansa AG approved the order of 48 aircraft for the Group at a list price of EUR 3.5bn (see also the chapter on the Overview After a turbulent start to the year 2010, marked by ­Passenger Airline Group p. 13 ). The modern, fuel-efficient planes are ­various one-off events, Lufthansa was increasingly able to match to be delivered successively to the Group from 2012 onwards. the performance of prior years over the following months. The The fleet renewal will improve fuel efficiency and unit costs as well ­global economic recovery, the business segments’ strong posi- as reduce noise and greenhouse gas emissions. tioning in their markets, the increased use of synergy potential in the airline group and ongoing cost-cutting measures all had In addition to the good operating performance, Lufthansa was also a positive effect on the Group’s revenue and income. able to strengthen its balance sheet and cash flow by means of portfolio changes. In April 2010, the flotation of Amadeus IT Hold- Rapid growth rates were recorded in the reporting period in ing S.A., in which Lufthansa held a stake of around 11.6 per cent, sales, load factors and pricing, both in freight traffic and in inter­ took place. This had a positive effect on equity of EUR 464m. national passenger traffic, with the result that traffic revenue went Lufthansa also sold some of its shares as part of the flotation. The up sharply. In contrast, yields in domestic and inner-European sale generated additional income totalling EUR 97m and a book ­passenger traffic are still behind. gain of EUR 67m. Lufthansa is still a shareholder of the Spanish company, currently holding a stake of around 7.6 per cent (corre- In line with the economic upswing, however, global demand for sponding to a market value of EUR 460m as of 30 September). crude oil rose again. The oil price remains subject to severe ­fluc­tuations, which has an effect on performance at the airborne At the end of June, Lufthansa also contributed around 8.5 per cent companies in particular. This was aggravated in the third quarter of its Fraport shares to its pension fund. The shares represent the by the strong rise in the euro, which had differing results on first of the two scheduled annual contributions to fund pension ­earnings for the individual segments. At Group level the exchange obligations. Contributing the Fraport stake strengthens the equity rate movements had a slightly positive overall effect on the ratio and cash flow for the Lufthansa Group while retaining the ­oper­ating result. development potential of the Fraport share.

Buoyed by these positive demand trends the Passenger Airline Group reported an operating profit for the first nine months. It was nevertheless lower than last year’s due to the non-recurring effects from the first half of the year and negative earnings contributions from the newly consolidated companies bmi and Austrian Airlines. Lufthansa Cargo benefited particularly well from resurgent demand, reporting another record result. Lufthansa Technik and Lufthansa

Lufthansa 3rd Interim Report January – September 2010 5 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Staff and management In September 2010 the Supervisory This entails extending the existing wage agreement up to 31 Decem­ Board of Deutsche Lufthansa AG appointed the Deputy Chairman ber 2011, which amounts to a pay freeze of 22 months. The agree- of the Executive Board of Deutsche Lufthansa AG, Christoph Franz, ment also provides for a flexible profit-share payment. The subse- to succeed Wolfgang Mayrhuber as Chairman of the Executive quently started negotiations with another union, the Unabhängige Board and CEO. The change at the top of the Group is to take Flugbegleiter Organisation e. V. (UFO), are currently still underway. effect as of 1 January 2011. The members of the Supervisory Board also appointed Carsten Spohr to the Executive Board with Including the new companies the Lufthansa Group had a total effect from 1 January 2011. As the board member responsible for of 116,838 employees at the end of September 2010, which is Lufthansa German Airlines he will also chair the Executive Board 2,107 or 1.8 per cent fewer than on the same date a year ago. for Passenger Airlines. Karl Ulrich Garnadt, currently a member of the Lufthansa German Airlines Board, has been put forward to Changes in the group of consolidated companies There have the Supervisory Board of Lufthansa Cargo AG to succeed him been significant changes in the group of consolidated companies as Chairman of the Executive Board of Lufthansa Cargo AG. compared with the same period last year. British Midland Airways (bmi) and its holding company British Midland Ltd. were only Collective bargaining with the Vereinigung Cockpit pilots’ union included in the consolidated financial statements of Deutsche (VC) was brought to a conclusion back in June 2010 in arbitration Lufthansa AG for the first time as of 1 July 2009, as were Austrian proceedings. The parties agreed on a wage freeze and extended Airlines AG and its subsidiaries as of 3 September 2009. As a the existing wage agreement retroactively by 24 months until result, the income statement figures for last year are only partially 31 March 2011. Productivity improvements were also agreed comparable. The table on p. 38 – 39 shows the other companies that will bring cost savings, especially in European direct traffic. which have joined or left the group of consolidated companies Furthermore, Lufthansa and VC reached an agreement on the compared with year-end 2009 and 30 September 2009. The interpretation and application of the Group wage settlement. ­significant effects on the income statement of the Group and the This entailed redefining the regional segment by replacing the segments are discussed in the relevant sections. existing 70-seater rule with a 95-seater threshold and supple­ menting it with a clause that changes over time. The agreements Changes in reporting standards On 1 January 2010 it became shall pave the way for cost optimisation and sustainable hed- compulsory to use the amendments to IAS 39 Financial Instruments: ging for the regional segment. Both parties further agreed on a Recognition and Measurement. This led to changes in the report- floor for Lufthansa Passenger Airlines’ share of traffic between ing standards. To facilitate comparison, the figures presented in the domestic markets of the companies in the airline group. this report have been calculated as if the amended standards had already been applied last year. The other standards and interpre­ Wage agreements for ground and cabin staff had expired at the tations applicable as of 1 January 2010 did not have a significant end of the first quarter. In early July collective bargaining between effect on the Group’s net assets, financial and earnings position the Arbeitgeberverband Luftverkehr (AGVL) and the trade union in the reporting period. For further details, see the Notes to the ver.di resulted in a framework agreement for around 50,000 pay- consolidated financial statementsfrom p. 38 . scale ground and cabin staff at the Lufthansa Group in Germany.

Earnings position Employees by business segment in % (as of 30.9.2010) Revenue and income In the first three quarters of 2010 traffic Other 3.2 IT Services 2.5 rose year on year due to growing demand and the effects of Logistics 3.9 ­consolidation. The Group’s airlines transported some 68 million passengers (+ 22.0 per cent) and 1.5 million tonnes of freight and MRO 17.3 mail (+ 19.3 per cent). Adjusted for Austrian Airlines and bmi the Passenger Airline Group 48.8 increase in passenger numbers came to 4.7 per cent. Capacity Catering 24.3 at the Passenger Airline Group rose due to the consolidations by 14.6 per cent and was therefore 4.2 per cent above last year. Sales also progressed strongly (+ 17.0 per cent, adjusted: + 5.1 per cent). As a result, the passenger load factor was up by 1.7 percentage points (adjusted: + 2.3 percentage points).

6 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information Course of business Earnings position

The Group’s freight sales (including Swiss World Cargo and The improved traffic revenue meant that Group revenue rose by the freight business of the newly consolidated airlines) soared 24.9 per cent to EUR 20.2bn. Without the consolidation changes by 25.6 per cent (adjusted: 22.9 per cent). Capacity was only the increase came to 13.8 per cent. Adjusted revenue went up increased slightly in comparison by 7.4 per cent (adjusted. year on year by a significant 20.6 per cent in the third quarter. For 4.6 per cent). This caused the cargo load factor to climb steeply consolidation reasons and as a result of the positive course of by 9.9 percentage points to 68.0 per cent. The individual per­ business the Passenger Airline Group’s share of total revenue crept formance data for the separate segments is presented in the up to 74.1 per cent (+ 2.3 percentage points). The development respective chapters. of revenue over the last five years is shown in the following chart. Please refer to the segment report on p. 43 for a breakdown of The ongoing positive trend in the performance figures resulted ­revenue by region. in an increase in traffic revenue of 30.6 per cent for the third quar- ter to EUR 16.4bn (adjusted for consolidation effects: + 16.5 per cent). This increase in revenue was attributable to developments Revenue development in €m (Jan. – Sept.) in volumes (7.3 per cent), currency effects (4.6 per cent) and changes in the group of consolidated companies (14.1 per cent). 14,980 16,367 18,611 16,162 20,193 Higher prices led to a revenue increase of 4.6 per cent. The ­Passenger Airline Group accounted for EUR 14.2bn of the total (+ 28.4 per cent, adjusted: + 12.9 per cent) and the Logistics ­segment for EUR 1.9bn (+ 44.9 per cent). The positive trend in ­revenue already visible in the second quarter continued and became more pronounced over the past three months. Traffic ­revenue in the last quarter swelled by EUR 1.1bn or 23.0 per cent year on year, after adjustment for the larger group of con­ 2006 2007 2008 2009 2010 solidated ­companies. Other operating income was up by EUR 247m or 13.8 per cent to The increase in other revenue to EUR 3.7bn (+ 4.9 per cent) was EUR 2.0bn. Adjusted for consolidation effects, growth came to amongst others (0.5 per cent) due to changes in the group of 6.4 per cent. The higher income is largely due to the book gains ­consolidated companies. Of the figure for other revenue, the on the disposal of non-current assets for EUR 210m (previous MRO segment generated EUR 1.8bn (– 1.1 per cent), IT Services year: EUR 43m). This includes realised gains on the transfer of EUR 175m (– 6.4 per cent) and Catering EUR 1.3bn (+ 6.3 per 8.5 per cent of the Fraport shares to the Lufthansa Pension Trust cent). The airborne companies in the Passenger Airline Group (EUR 94m) and book gains of EUR 67m on the sale of 6.2 million and Logistics segments contributed EUR 865m (+ 42.5 per cent, shares in Amadeus IT Holding S.A. Included in the EUR 33m adjusted: + 16.6 per cent) to other revenue. income from write-backs (previous year: EUR 15m) were reversals of EUR 15m on a previously impaired loan receivable and EUR 9m of appreciation on loans in foreign currencies due to exchange External revenue share of the business segments in % (as of 30.9.2010) rate factors. Income from compensation for damages of EUR 47m (previous year: EUR 80m) includes income of EUR 25m in insur- Catering 6.3 IT Services 0.9 ance payments in connection with Lufthansa Cargo’s MD-11 incident in July 2010. In the previous year, this included compensation pay- MRO 8.8 ments for the internet system FlyNet and income from insurance Logistics 9.9 payments in connection with an LSG Sky Chefs claim in Scandina- Passenger Airline Group 74.1 via totalling EUR 69m. Exchange rate gains rose year on year by EUR 69m to EUR 898m. Corresponding exchange rate gains are accounted for in the other operating expenses. Other items did not vary significantly compared with the previous year.

Lufthansa 3rd Interim Report January – September 2010 7 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Total operating income came to EUR 22.3bn (+ 23.3 per cent). Alongside cost-cutting measures to safeguard earnings, staff costs Adjusted for consolidation, operating income went up by also reflected higher contributions to pension provisions due to the 12.6 per cent. lower discount rate and increases as a result of exchange rates, for example. The average number of employees, including Austrian Expenses Operating expenses rose to EUR 21.5bn (+ 20.6 per Airlines and bmi, climbed by 6.1 per cent to 117,102, while staff cent) in total. Adjustments for consolidation resulted in growth costs were up by 11.9 per cent. Adjusted for changes to the group of 9.2 per cent. of consolidated companies, they were 2.8 per cent up on the ­previous year, while the average number of employees shrank by The main reason for the change was the cost of materials and 2.3 per cent. services, which rose by 24.8 per cent to EUR 11.4bn. Even excluding the changes in the group of consolidated companies, Depreciation and amortisation increased to EUR 1.2bn (+ 16.9 per the figure went up by 12.1 per cent. As in the first half-year, this cent, adjusted: + 4.8 per cent). Depreciation of aircraft, mainly was largely due to the increase of EUR 1.2bn in fuel expenses new purchases from 2009 and 2010, and consolidation changes (+ 47.7 per cent) to EUR 3.9bn. In addition to the 26.0 per cent rise accounted for EUR 176m of the increase. Of the impairment in fuel prices (after hedging), the significant increase stemmed losses totalling EUR 44m, EUR 27m was attributable to 16 Canad- from the larger group of consolidated companies (15.2 per cent) air Regional Jet 200s which were decommissioned or earmarked and the stronger US dollar (5.8 per cent). Volumes (+ 0.7 per cent) for sale. The remainder came from the loss of an MD-11 by only had a minor effect on fuel expenses in contrast. Fuel costs Lufthansa Cargo in July 2010 (EUR 9m) and impairments of EUR 8m included a negative result of price hedging of EUR 27m. Other on unusable advance payments for intangible assets. raw materials, consumables and supplies were up 3.6 per cent to EUR 1.9bn, largely due to the changes in the group of con­ Other operating expenses edged up 21.4 per cent to EUR 4.0bn. solidated companies. Excluding the additional expenses due to the first-time conso­ lidation of companies in the previous year, the increase came to Fees and charges rose by 26.3 per cent, primarily for consolida- 10.7 per cent. One reason was the increase of EUR 387m in tion reasons. Without the airlines newly consolidated last year, the exchange rate losses to a total of EUR 918m, driven largely by the increase was 6.1 per cent, largely due to higher handling charges higher US dollar exchange rate. They are offset by exchange rate (+ 6.8 per cent) and higher air traffic control charges (+ 5.8 per gains in other operating income. Expenses were reduced by fewer cent). Other purchased services (+ 12.3 per cent) rose by 4.4 per losses on current financial investments (EUR – 16m), reduced cent without the changes in the group of consolidated companies. advertising and sales promotion spending (EUR – 23m) and lower expenses for computerised distribution systems (EUR – 25m). The other items did not vary significantly compared with last year.

Expenses from operating activities

Jan. – Sept. Jan. – Sept. Change Adjusted for 2010 2009 changes in the group of consolidated companies in €m in €m in % in %

Cost of materials and services 11,445 9,172 24.8 12.1 of which fuel 3,859 2,612 47.7 32.5 of which fees and charges 3,416 2,705 26.3 6.1 of which operating lease 194 235 – 17.4 – 34.5 Staff costs 4,820 4,307 11.9 2.8 Depreciation 1,240 1,061 16.9 4.8 Other operating expenses 3,971 3,270 21.4 10.7 Total expenses from operating activities 21,476 17,810 20.6 9.2

8 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information Earnings position

Earnings development The profit from operating activities came The operating result is regularly adjusted for the items shown in to EUR 869m, or EUR 553m above last year’s figure of EUR 316m. the below-mentioned table and came to EUR 612m for the report- Adjusted for the effects of consolidation the profit from operating ing period (previous year: EUR + 226m). This includes earnings activities actually rose by EUR 661m. The positive momentum contributions from Austrian Airlines and bmi totalling EUR – 137m. already visible in the second quarter was even stronger in the third Last year’s financial statements disclosed a positive earnings quarter. Indeed, in the third quarter of 2010 the profit from operat- effect of EUR 89m from these companies’ contributions as well as ing activities increased year on year by EUR 639m to EUR 935m. one-off effects from the first-time consolidation of Austrian Airlines. For the third quarter 2010 the operating result came to EUR 783m, compared with EUR 218m last year. The adjusted operating margin for the first nine months went up to 3.5 per cent (previous year: + 2.0 per cent). This is calculated as operating result plus write-backs of provisions divided by revenue.

Reconciliation of results

Jan. – Sept. 2010 Jan. – Sept. 2009 Income Reconciliation with Income Reconciliation with in €m statement operating result statement operating result

Total revenue 20,193 16,162 Changes in inventories 120 179 Other operating income 2,032 1,785 of which book gains and current financial investments – 238 – 53 of which income from reversal of provisions – 99 – 93 of which write-ups on capital assets – 33 – 15 of which period-end valuation of non-current financial liabilities – 54 – 26 Total income from operating activities 22,345 – 424 18,126 – 187

Cost of materials and services – 11,445 – 9,172 Staff costs – 4,820 – 4,307 of which past service cost – 3 – 18 Depreciation, amortisation and impairment – 1,240 – 1,061 of which impairment losses 44 70 Other operating expenses – 3,971 – 3,270 of which expenses incurred from book losses and current financial investments 28 33 of which period-end valuation of non-current financial liabilities 98 12 Total expenses from operating activities – 21,476 167 – 17,810 97

Profit / loss from operating activities 869 316 Total from reconciliation with operating result – 257 – 90 Operating result 612 226

Result from equity investments 71 47 Other financial items 17 – 155 EBIT 957 208

Write-downs (included in profit from operating activities) 1,240 1,063 Write-downs on financial investments (incl. at equity) 9 146 EBITDA 2,206 1,417

Lufthansa 3rd Interim Report January – September 2010 9 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Cash flow and capital expenditure Operating result and net profit / loss for the period in €m (Jan. – Sept.) In the first nine months of the 2010 financial year the Lufthansa 1,578 Group generated cash flow from operating activities of EUR 2.4bn (previous year: EUR 1.4bn). This increase is partly due to the 1,085 EUR 734m higher profit before income taxes. The sustained recov­ 954 ery in operations also led to an improvement in working capital, 691 612 which in turn had a positive effect of EUR 567m on cash flow com- 529 524 414 pared with last year. On the other hand, income tax payments 226 ­represented a drain of EUR – 101m on cash flow. 31

2006 2007 2008 2009 2010 Gross capital expenditure came to EUR 1.8bn, of which EUR 1.6bn Operating result Net profit / loss for the period was for final payments on a total of 44 aircraft (three Airbus A380s, four Airbus A330s, one , ten Airbus A320s, six Airbus A319s, six Bombardier CRJ 900s, one Embraer 195, eight Embraer The result from equity investments improved to EUR 71m E190s, one ATR 700, one ATR 42-500 and three Dash 8-400s) as (previous year: EUR 47m). Net interest fell by EUR 15m largely well as for aircraft overhauls and advance payments. An additional due to higher interest expenses on new borrowing in 2009 and EUR 112m was invested in other property, plant and equipment. to changes in the group of consolidated companies, totalling The other capital expenditure related to intangible assets and finan- EUR – 250m. Other financial items came to EUR 17m (previous cial investments. Repairable spare parts for aircraft were purchased year: EUR – 155m). Income of EUR 15m was derived from positive for EUR 47m. The funding requirement was partly covered by changes in the value of hedging instruments considered as interest and dividend income (EUR 312m in total) and proceeds of held for trading in the definition of IAS 39. The change in the fair EUR 298m from the disposal of assets – in particular aircraft and value of options used for hedging, which since 1 January 2010 non-current securities – as well as non-consolidated equity invest- is also to be included in the financial result, see the Notesfrom ments in companies (EUR 109m). Cash outflows of EUR 980m p. 38 , benefited earnings to the amount of EUR 5m. Last year, resulted from the purchase and sale of current securities and funds. other financial items also contained a write-down of EUR 140m A total of EUR 2.1bn in net cash was therefore used for capital on the Fraport shares. expenditure activities and cash management activities (previous year: EUR 3.1bn). Changes in the operating result, in the result from equity invest- ments and in other financial items are reflected in earnings before interest and taxes (EBIT). The figure came to EUR 957m Primary, secondary and financial investments and net investments (previous year: EUR 208m). in €m (Jan. – Sept.)

1,777 1,456 1,100 1,760 The profit before income taxes (EBT) improved by EUR 734m and 32 came to EUR 707m at the end of the third quarter. Income taxes 161 140 of EUR 175m are payable on this profit. Last year, income taxes 238 improved the result by EUR 70m. The net profit for the period after deduction of minority interests (EUR 8m) was EUR 524m and thereby EUR 493m above the figure of EUR 31m for the same period last year. In the first three quarters Lufthansa therefore 1,378 1,588 ­generated earnings per share of EUR 1.14 (basic and diluted, see the Notes on p. 40 ).

2009 2010 Financial investments Net investments Secondary investments Primary investments

10 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information Earnings position Cash flow and capital expenditure Net assets and financial position

Free cash flow, i.e. cash flow from operating activities less net Within current assets the item receivables increased by EUR 921m capital expenditure, was substantially positive in the third quarter for seasonal and billing reasons and due to continued improve- at EUR 1.3bn, in contrast to the slight deficit of EUR – 18m last year. ments in the course of business. Current financial derivatives from currency, interest rate and fuel hedging also rose by EUR 51m. Overall, financing activities produced a net cash outflow of Cash and cash equivalents – consisting of current securities, bank EUR 45m. This results primarily from new borrowing, especially balances and cash-in-hand – went up by a total of EUR 1.2bn for aircraft financing (EUR 896m), scheduled capital repayments to EUR 5.7bn. Non-current assets as a proportion of total assets (EUR 544m) and interest paid of EUR 379m. EUR 93m of the declined from 67.0 per cent at year-end 2009 to their current level ­capital repayments was used to redeem bonds. of 62.9 per cent.

Cash and cash equivalents climbed in the third quarter by a total of EUR 354m to EUR 1.5bn (previous year: EUR 1.4bn). This includes Calculation of net indebtedness and gearing appreciation of EUR 42m due to exchange rate movements. 30 Sept. 31 Dec. Change as 2010 2009 of 31 Dec. 2009 The internal financing ratio was 137.8 per cent (previous year: in €m in €m in % 80.9 per cent). Overall, cash including securities at the end of Liabilities to banks 2,035 1,909 6.6 the quarter rose to EUR 5.7bn (previous year: EUR 4.8bn). Turn Bonds 2,179 2,264 – 3.8 to p. 37 for the detailed cash flow statement. Other non-current borrowing 3,076 2,629 17.0 7,290 6,802 7.2

Other bank borrowing 141 58 143.1 Net assets and financial position Group indebtedness 7,431 6,860 8.3

Cash and cash equivalents 1,490 1,136 31.2 The consolidated balance sheet total at the end of the third quarter Securities 4,190 3,303 26.9 2010 amounted to EUR 29.5bn, or EUR 3.1bn more than at year- Non-current securities end 2009. Non-current assets rose by EUR 869m, while current (liquidity reserve) * 230 226 1.8 assets grew by EUR 2.2bn. Net indebtedness 1,521 2,195 – 30.7 Pension provisions 2,595 2,710 – 4.2 Within non-current assets the item aircraft and reserve engines Net indebtedness and pensions 4,116 4,905 – 16.1 rose due to new deliveries by EUR 725m (+ 6.9 per cent) to EUR 11.2bn. Following the stock market flotation of Amadeus IT Gearing in % 55.6 79.1 – 23.5 pts

Holding S.A. in April 2010, the stake in Amadeus IT Holding S.A. * Realisable at any time. held in the 2009 financial statements at cost (EUR 34m) is now shown in the consolidated balance sheet at its market value. As of On the liabilities side of the balance sheet, shareholders’ equity 30 September 2010 this market value was EUR 460m. Lufthansa (including minority interests) rose by EUR 1.2bn (+ 19.4 per sold 6.2 million shares in the course of the public offering, reaping cent) to reach EUR 7.4bn as of the reporting date. This growth proceeds of around EUR 97m. In the second quarter, 8.5 per is ­principally due to the positive post-tax result of EUR 532m, cent of the shares in Fraport (carrying amount: EUR 283m) had the first-time market valuation of the stake in Amadeus IT Holding already been transferred to the Lufthansa Pension Trust as part S.A. (EUR + 451m) in 2010 as well as positive currency translation of the ongoing funding of pension obligations. The item other differences (EUR + 203m). The equity ratio rose to 25.1 per cent equity investments increased by a total of EUR 168m as a result. (year-end 2009: 23.5 per cent). This again reduced the gap to the Derivative financial instruments went up by EUR 89m, largely target of 30 per cent. due to currency and interest rate hedges. On the other hand, ­non-current securities declined by EUR 98m due to disposals, and loans and receivables were down by EUR 99m primarily as a result of scheduled capital repayments.

Lufthansa 3rd Interim Report January – September 2010 11 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Non-current liabilities and provisions rose by EUR 261m to The increase in current liabilities is primarily attributable to higher EUR 11.7bn. In the same period current borrowing went up by trade payables and other financial liabilities (EUR + 736m) as well EUR 1.6bn. Under non-current liabilities, financial borrowing as to higher liabilities from unused flight documents (EUR + 834m). rose by EUR 371m, largely due to aircraft financing, while the In addition to increases for seasonal and billing reasons, this is ­negative market values of derivative financial instruments (prin­ mainly due to the ongoing improvement of the operating business. cipally from currency and interest rate hedging) declined by EUR 132m. Taking into account the contribution to the Lufthansa As of 30 September 2010, net indebtedness (including non-­ Pension Trust that took place back in the second quarter with current liquidity reserves of EUR 230m) was down to EUR 1.5bn. the transfer of 8.5 per cent of the shares in Fraport, pension provi- At year-end 2009 the figure was EUR 2.2bn. Gearing including sions were reduced by EUR 115m (– 4.2 per cent) to EUR 2.6bn. pension provisions decreased to 55.6 per cent (year-end 2009: 79.1 per cent) and is therefore back inside the target corridor of 40 to 60 per cent for the first time since 30 June 2009.

Group fleet – Number of commercial aircraft Lufthansa (LH), SWISS (LX), Austrian Airlines (OS), British Midland (bmi), Germanwings (4U), Lufthansa CityLine (CLH), (EN), (EW) and Lufthansa Cargo (LCAG) as of 30.9.2010

Manufacturer / type LH LX OS bmi 4U CLH EN EW LCAG Group of which of which Change Change fleet finance operating as of as of lease lease 31.12.09 30.9.09

Airbus A300 1 1 – 5 – 7 Airbus A310 33) 3 – 1 Airbus A319 28 7 7 11 30 83 2 23 + 6 + 7 Airbus A320 46 23 8 7 84 10 5 + 5 + 7 Airbus A321 43 6 6 7 62 4 6 – 1 + 2 Airbus A330 15 15 13) 2 33 7 + 3 + 1 Airbus A340 52 13 22) 67 2 2 3 3 + 3 + 3 Boeing 737 63 11 14 88 14 – 3 – 3 Boeing 747 30 30 Boeing 767 6 6 2 Boeing 777 4 4 Boeing MD-11F 18 18 – 1 – 1 Bombardier CRJ 241) 3 43 10 80 10 – 10 – 12 Bombardier Q-Series 20 20 1 + 1 ATR 51) 11 3 19 9 – 5 – 5 Avro RJ 20 17 37 18 – 1 – 1 BAe 146 1 1 1 – 7 – 13 Embraer 241) 43) 33) 18 49 3 8 + 10 + 13 Fokker F70 9 9 1 Fokker F100 15 15 Cessna Citation 42) 4 Total aircraft 341 88 95 59 30 60 11 14 18 716 23 105 – 6 – 9

1) Let to Lufthansa regional airlines. 2) Let to SWISS. 3) Leased to company outside the Group.

12 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information Net assets and financial position Passenger Airline Group

Passenger Airline Group business segment

Key figures Passenger Airline Group of which Lufthansa Passenger Airlines 3)

Jan. – Sept. Jan. – Sept. Change July – Sept. July – Sept. Change Jan. – Sept. Jan. – Sept. Change 2010 2009 in % 2010 2009 in % 2010 2009 in %

Revenue €m 15,460 12,050 28.3 5,893 4,578 28.7 10,248 9,100 12.6 of which with companies of the Lufthansa Group €m 490 442 10.9 189 153 23.5 Operating result €m 218 239 – 8.8 560 204 174.5 158 36 338.9 Segment result €m 305 306 – 0.3 613 240 155.4 EBITDA 1) €m 1,283 1,171 9.6 1,108 626 77.0 795 779 2.1 Segment capital expenditure €m 1,612 1,462 10.3 721 486 48.4 Employees as of 30.9. number 56,965 58,907 – 3.3 56,965 58,907 – 3.3 37,298 37,661 – 1.0 Passengers 2) thousands 67,869 55,635 22.0 26,089 22,432 16.3 44,095 41,933 5.2 Available seat-kilometres 2) millions 173,762 151,629 14.6 63,896 57,477 11.2 121,687 119,474 1.9 Revenue seat-kilometres 2) millions 138,420 118,321 17.0 53,401 47,466 12.5 97,247 92,853 4.7 Passenger load factor 2) % 79.7 78.0 1.7 pts 83.6 82.6 1.0 pts 79.9 77.7 2.2

1) Before profit / loss transfer from other companies. 2) Lufthansa Passenger Airlines, SWISS, British Midland (from July 2009) and Austrian Airlines (from September 2009), not including Germanwings. 3) Including regional partners.

Course of business In the third quarter of 2010 Lufthansa was In September 2010 Carsten Spohr was appointed to the Executive able to compensate for the negative one-off effects of the first half Board of Deutsche Lufthansa AG by the Supervisory Board with of the year, achieving a substantially positive earnings performance effect from 1 January 2011. As the board member responsible for overall. In terms of pricing there is still a disparity between long- Lufthansa German Airlines he will also chair the Executive Board haul and European traffic. Altogether, traffic revenue was increased for Lufthansa German Airlines. He succeeds Christoph Franz, who substantially in all regions, however. The improved – and in the is to take over from Wolfgang Mayrhuber as Chairman of the third quarter positive – results of the newly consolidated companies Executive Board and CEO of Deutsche Lufthansa AG. Austrian Airlines and bmi played their part in enabling the seg- ment to close the reporting period with an operating profit. All Product and route network Lufthansa Passenger Airlines reduced companies continue to pursue their cost-cutting measures. the number of their flights year on year by 3.2 per cent over the first three quarters of 2010. Seating capacity increased by 1.9 per Segment structure The business segment Passenger Airline cent, however. This development reflected the fleet restructuring to Group consists of Lufthansa Passenger Airlines (including regional optimise unit costs. It also enables sales opportunities to be seized airlines and ), SWISS (including Edelweiss since in specific growth regions. 1 January 2010), Austrian Airlines (since 3 September 2009), bmi (since 1 July 2009), Germanwings and the equity investments The route network of Lufthansa Passenger Airlines in the 2010 in , SunExpress and JetBlue. Vital synergies are summer flight timetable covers a total of 204 destinations in realised by means of collaboration within this airline group. This 81 countries. New destinations include Tashkent (Uzbekistan), is particularly evident in the successful collaboration between Tallinn (Estonia) and Bursa (Turkey), as well as Bogotá (Colombia) Lufthansa and SWISS, the fifth anniversary of which was cele- from 31 October and Pointe-Noire (Republic of the Congo) from brated in March 2010. The underlying integration and group 3 November. The launch of flight operations between and ­concept became a model for the integration of the new airlines Baghdad planned for late September 2010 was postponed due into the Group. to weak demand. The plan remains to include the route in the ­global network if demand is sufficient.

Lufthansa 3rd Interim Report January – September 2010 13 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Lufthansa and Germanwings have also agreed on a wide-ranging new Embraer 195s are to be deployed in Lufthansa’s regional traf- package of measures to enhance their cooperation in future. This fic. Five new Airbus A330-300s, two Airbus A321s and two ­Airbus will have a number of advantages for passengers of both airlines. A320s are intended for SWISS. Germanwings is to receive eight Since 1 September 2010 Miles & More members have been new Airbus A319s. The aircraft are to be delivered to the Group able to collect premium miles on Germanwings flights and to use successively from 2012. Lufthansa lounges. From early 2011 it will also be possible to combine ticket prices for Lufthansa and Germanwings. A cooper- Information on the products and route networks of the other air- ation agreement will also be in place for the ­corporate client lines in the Passenger Airline Group can be found on p. 17 onwards. business by early 2011. Operating performance The positive demand trend from the New additions to the Star Alliance are also a successful means of second quarter continued into the third quarter, with sales and expanding the network. A decision was taken at the end of Sep- load factors increasing again. Including Austrian Airlines and bmi, tember to admit Ethiopian Airlines. Together with Egyptair in the a total of 67.9 million passengers were carried in the first nine north and in southern Africa this will achieve months of the year (+ 22.0 per cent). Adjusted for consolidation a comprehensive set of links between Africa and the global net- effects the increase would have amounted to 4.7 per cent. work of the Star Alliance and Lufthansa. Lufthansa Passenger Airlines accounted for 44.1 million passen- gers, up by 5.2 per cent. The first Lufthansa Airbus A380 began regular flight operations on 11 June and the next two aircraft of this type were delivered in the In the reporting period the Passenger Airline Group increased its third quarter 2010. This was accompanied by the introduction of capacity compared with last year by 14.6 per cent (without Austrian the new Lufthansa First Class. Economy Class and the Lufthansa Airlines and bmi: + 2.0 per cent). Sales also grew by 17.0 per cent Passenger Airlines ground product were also refined. Continuous (adjusted: + 5.1 per cent). The passenger load factor was up by investment in product development was one reason why Lufthansa 1.7 percentage points at 79.7 per cent (adjusted: + 2.3 percentage was awarded the Innovation Prize 2010 by the German tourism points). This trend was largely driven by Lufthansa Passenger association. ­Airlines. With additional capacity of 1.9 per cent, sales went up by 4.7 per cent, with the result that the passenger load factor The comprehensive modernisation and expansion of the fleet increased by 2.2 percentage points to 79.9 per cent. ­continued in the third quarter. Following the order in July for eight Bombardier CRJ 900 NGs, the Supervisory Board approved The sustained recovery in demand had a very positive effect on an order for an additional 48 aircraft for the Group in September. the segment’s traffic revenue. Increased demand in the premium Eight Airbus A330-300s are destined for long-haul services, with segment played a major role here. Average yields rose by a the remaining 40 aircraft to be used for European traffic. Three total of 10.5 per cent in the reporting period as a result. The third of the Airbus A330-300s and twenty planes from the Airbus A320 ­quarter even saw year-on-year growth of 15.4 per cent. The grati- family are ordered for Lufthansa Passenger Airlines. Another eight fying performance of average yields in the reporting period was

Trends in traffic regions Passenger Airline Group *

Number of passengers Available seat-kilometres Revenue seat-kilometres Passenger load factor in thousands in millions in millions in % Jan. – Sept. Change Jan. – Sept. Change Jan. – Sept. Change Jan. – Sept. Change 2010 in % 2010 in % 2010 in % 2010 in pts

Europe 53,114 24.4 58,579 26.6 42,055 29.0 71.8 1.4 America 6,329 7.6 54,538 6.3 46,655 8.0 85.5 1.3 Asia / Pacific 4,324 13.3 39,594 8.2 33,781 14.0 85.3 4.3 Middle East / Africa 3,925 32.9 20,618 23.3 15,616 27.3 75.7 2.4 Total scheduled services 67,692 22.3 173,328 14.9 138,107 17.4 79.7 1.7 Charter 177 – 34.4 434 – 41.5 313 – 51.7 72.1 – 15.3 Total 67,869 22.0 173,762 14.6 138,420 17.0 79.7 1.7

* Incl. Lufthansa Passenger Airlines, SWISS, British Midland (from July 2009) and Austrian Airlines (from September 2009), not including Germanwings.

14 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information Passenger Airline Group

boosted by the positive effects of exchange rate movements Nevertheless, European traffic remains subject to fundamental (+ 3.8 per cent). Overall, traffic revenue went up by 29.2 per cent pricing pressure due to the shift in many passengers’ travel to EUR 13.7bn (adjusted: + 13.7 per cent). ­patterns. For this reason, all the cost-cutting and restructuring ­programmes in the airline group are continuing rigorously. It was possible to increase revenue in all traffic regions. In the Lufthansa Passenger Airlines are also pursuing their Climb 2011 Europe traffic region capacity was expanded by 26.6 per cent initiative in this context. Key elements include reducing the (adjusted: + 4.1 per cent), primarily as a result of consolidation number of administrative positions by 400, cutting unit staff costs effects. Sales grew significantly by 29.0 per cent (adjusted: by 10 per cent, significant contributions from suppliers and the + 6.6 per cent). This took the passenger load factor up by 1.4 per- measures described above to modernise the fleet. In addition, the centage points (+ 1.7 percentage points). Average yields were aircraft in the short-haul fleet will be fitted with new, lighter and 2.1 per cent down on last year’s already low figure. Despite this, space-saving seating. Climb 2011 has already ensured savings traffic revenue improved considerably by 26.3 per cent (adjusted: of more than EUR 230m for the current financial year. By the end + 4.9 per cent). of 2011 measures should be in place to reduce the cost base ­sustainably by a total of EUR 1bn. Positive developments were also reported in the Americas traffic region (North and South). Here, capacity grew by 6.3 per cent Revenue and earnings development The segment posted a (adjusted: + 2.0 per cent). Thanks to the 8.0 per cent leap in sales year-on-year increase in traffic revenue to EUR 14.2bn (+ 28.4 per (adjusted: + 3.9 per cent), the passenger load factor rose by cent). This was attributable to the larger group of consolidated 1.3 percentage points (1.5 percentage points) to 85.5 per cent companies and the continuing positive development in traffic fig- (85.7 per cent). Average yields performed very well at + 17.4 per ures. Without changes to the group of consolidated companies cent, again reaching pre-crisis levels from 2008. Traffic ­revenue (+ 15.5 per cent), the increase would have been 12.9 per cent. was up overall by 26.9 per cent (adjusted: + 22.6 per cent). Higher sales volumes accounted for 5.2 per cent of the increase, with higher prices contributing 3.4 per cent and positive exchange Capacity in Asia/Pacific was increased by 8.2 per cent for con­ rate effects a further 4.3 per cent. solidation reasons. Excluding the new companies capacity fell by 2.2 per cent. Due to a 14.0 per cent rise in sales (adjusted: In total, revenue grew to EUR 15.5bn (+ 28.3 per cent, adjusted: + 3.7 per cent), the passenger load factor went up 4.3 percentage + 13.0 per cent). points (+ 4.9 percentage points), taking the figure to 85.3 per cent (85.8 per cent). Strong demand lifted average yields by Other operating income fell by EUR 99m overall to EUR 909m 16.7 per cent, also back to pre-crisis levels. Traffic revenue (– 9.8 per cent). This was due partly to a drop in currency gains was up by 33.1 per cent (adjusted: + 23.4 per cent). compared with last year and lower income from compensation for damages. Last year, the figure included compensation payments In the Middle East/Africa traffic region capacity also climbed steeply of EUR 29m for the FlyNet internet system withdrawn by Boeing. by 23.3 per cent, while sales rose by 27.3 per cent. The passen- ger load factor edged up as a result by 2.4 percentage points to Total operating revenue went up 25.4 per cent to EUR 16.4bn 75.7 per cent. Adjusted for consolidation effects, capacity was (adjusted: + 10.7 per cent). up by 5.5 per cent, sales by 9.0 per cent and the passenger load factor by 2.5 percentage points to 75.3 per cent. As average Compared with the previous year, operating expenses rose by yields improved by 7.9 per cent, traffic revenue soared by 37.4 per 26.0 per cent to EUR 16.2bn. Excluding changes to the group cent (adjusted: + 16.5 per cent). of consolidated companies, operating expenses increased by 10.1 per cent. At the end of June Lufthansa Passenger Airlines increased ticket prices on the German market across the board for the first time since 2008. Tickets in Economy Class cost up to EUR 30 more and prices in Business Class were up by EUR 10 to EUR 20 in European traffic and by EUR 100 for long-haul flights. In First Class prices were raised by EUR 150.

Lufthansa 3rd Interim Report January – September 2010 15 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 The increase in expenses was primarily caused by a sharp rise in Miscellaneous segment expenses came to EUR 31m (previous the cost of materials and services to EUR 9.9bn (+ 28.6 per cent, year: EUR 85m). Impairment losses accounted for EUR 27m of the adjusted: + 12.3 per cent). Costs within this item were primarily total. These related to 16 Bombardier CRJ 200s held for sale or driven by a 48.7 per cent increase in fuel expenses to EUR 3.6bn retired as part of Climb 2011. The EUR – 17m result of equity valu- (adjusted: + 32.3 per cent). Fees and charges soared – largely due ation was attributable largely to SunExpress (EUR – 8m) and SN to consolidation changes as well as higher handling and air traffic Airholding (EUR – 9m). The overall segment result of EUR 305m control charges – by a total of 27.0 per cent to EUR 3.2bn. was roughly the same as last year’s figure of EUR 306m.

Staff costs were up 19.1 per cent at EUR 2.8bn and the average Segment capital expenditure increased to EUR 1.6bn, 10.3 per number of employees rose to 57,241 (+ 13.6 per cent). Excluding cent above last year’s figure. In the first nine months the aircraft consolidation changes, staff costs rose by 3.6 per cent, while investments at the Passenger Airline Group consisted of three the average number of employees was 1.8 per cent lower. The ­Airbus A380s, four Airbus A330s, one Airbus A321, ten Airbus reasons for the increase included currency movements and A320s, six Airbus A319s, six Bombardier CRJ 900s, one Embraer higher additions to pension provisions. 195, eight Embraer E190s, one ATR 700, one ATR 42-500 and three Dash 8-400s. Depreciation and amortisation went up to EUR 932m in total (­previous year: EUR 729m). This was largely due to new aircraft Outlook After a first half-year marked by non-recurring effects, the delivered last year (+ 10.8 per cent) and changes in the group third quarter was dominated by further recovery in demand. The of consolidated companies (+ 16.7 per cent). increase in revenue was the result of volume growth in European traffic, supplemented in long-haul traffic by a sharp improvement Other operating expenses soared by 23.5 per cent to EUR 2.5bn. in average yields. The new bookings give reason to believe that Without the newly consolidated companies, other operating this demand trend will continue. expenses would have climbed by 8.8 per cent, primarily due to higher exchange rate losses, offset by reduced expenses for The companies in the airline group are combating the persistent ­computerised distribution systems and for advertising and sales pressure in European traffic with programmes tailored to their promotions. ­specific needs in terms of intensity and focus. These projects, such as Climb 2011 at Lufthansa Passenger Airlines, are being Thanks to the improved course of business in the third quarter, pursued without respite. The measures adopted as part of the the operating result of EUR 218m was only EUR 21m down on last ­initiatives to cut unit costs play a key role in the resumption of year’s figure of EUR 239m, despite the one-off expenses incurred business growth. The restructuring of Austrian Airlines and bmi is in the first half of the year by the pilots’ strike and the airspace also progressing according to plan. Austrian Airlines is expected ­closures. At the mid-point of 2010 the result for the Passenger to reach operating profitability in 2011 and bmi in 2012. For the ­Airline Group was EUR 377m below last year’s. In the reporting full year 2010 both will still make negative earnings contributions period Lufthansa Passenger Airlines accounted for an operating in line with expectations. profit contribution of EUR 158m (last year: EUR 36m). The earn- ings contributions from Austrian Airlines and bmi depressed the The consequences of the resurgent increase in oil prices are operating result in the first nine months by a total of EUR 137m. reduced by the Lufthansa Group’s systematic hedging policy. In the third quarter both companies reported operating profits, Furthermore, the new wage agreements with cockpit and ground however. Last year the first-time consolidation of bmi and Austrian staff also have a positive impact. The risk of further strike action Airlines delivered a positive earnings contribution of EUR 89m has also gone down significantly as a result, but not disappeared in total. completely, as collective bargaining at SWISS and negotiations with cabin crew at Lufthansa are still underway. Other segment income totalling EUR 135m was attributable above all to book gains on the disposal of aircraft (EUR 38m) and income Altogether, the Passenger Airline Group is therefore expected to from higher write-backs of provisions (EUR 87m). report a significant increase in revenue for the financial year 2010, even after adjustment for the consolidation of Austrian Airlines and bmi. Based on the course of business to date and notwithstanding the seasonally weaker fourth quarter, it can now be assumed that the segment will generate an operating profit for the year 2010. A substantially positive operating result for Lufthansa Passenger Airlines will play a part in achieving this goal.

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Other Group airlines

SWISS Austrian Airlines 1)

Jan. – Sept. Jan. – Sept. Change Jan. – Sept. Jan. – Sept. Change 2010 2009 in % 2010 2009 2) in %

Revenue €m 2,556 2,066 23.7 Revenue €m 1,538 188 – Operating result €m 194 75 158.7 Operating result €m – 47 38 – EBITDA €m 364 217 67.6 EBITDA €m 108 53 – Employees as of 30.9. number 7,642 7,234 5.6 Employees as of 30.9. number 7,060 8,356 –

Further information on SWISS can be found at www.swiss.com. 1) Further information on Austrian Airlines can be found at www.aua.com. 2) Austrian Airlines has been fully consolidated since 3 September 2009.

SWISS has benefited from the recovery in demand underway The restructuring of Austrian Airlines and its integration into the since the beginning of the year and its strict cost management. Lufthansa Group are still being pursued. The measures taken on This is visible in strong sales in its home market as well as a con- the basis of the Austrian Next Generation initiative and the new stant upward trend in intercontinental traffic. The operating profit market and fleet strategy were again successful in the third quarter for the SWISS group (including Edelweiss) came to EUR 194m and had a positive impact on the result. The network optimisation (previous year: EUR 75m). Revenue was up by 23.7 per cent to carried out as part of these programmes has also been implemented EUR 2.6bn (previous year: EUR 2.1bn). The freight business for the winter flight timetable 2010/2011. Austrian Airlines was again made an important contribution, closing the third quarter able to further strengthen its position at its hub in , not least well up on last year, too. thanks to its new market strategy. Its market share there rose by 2.2 percentage points. Average yields have not yet recovered fully and are still under heavy pressure, particularly in European traffic. The result at In the third quarter Austrian Airlines’ traffic figures improved sharply SWISS was adversely affected by the airspace closures in April, in all traffic regions. The positive trend brought about by the alte­ the strength of the Swiss franc and higher fuel prices. rations to the market strategy continued, especially in terms of the load factor. In the first nine months of 2010 passenger numbers In the first nine months the load factor rose year on year to increased to around 8.2 million, 11.3 per cent above last year’s 82.3 per cent (+ 3.1 percentage points). It was lifted by the high figure. A 0.2 per cent capacity reduction was met by a 4.4 per passenger load factor in intercontinental traffic, which reached cent increase in sales. The load factor improved as a result by 86.8 per cent (+ 5.1 percentage points). The cargo load factor 3.3 percentage points to 77.2 per cent. also swelled significantly. The cooperation between Austrian Airlines and Lufthansa Cargo From 2012 SWISS is to add nine new Airbus aircraft to its fleet. began successfully on 1 July 2010 with the launch of Austrian They will reinforce the existing route network and enable additional Lufthansa Cargo GmbH. The new company is responsible for destinations to be served. In the winter flight timetable 2010/2011 marketing freight capacities for both companies in Austria. SWISS will expand capacity in line with demand. One of the ­additions will be the introduction of a midday flight from Zurich In the first nine months, revenue for Austrian Airlines picked up by to Stockholm. Valencia and Belgrade will also get one more 3.0 per cent to EUR 1.5bn. Thanks to a good third quarter the daily connection from Zurich. Flight capacity from Geneva will operating result came to EUR – 47m, a considerable improvement be increased, with another two daily flights to Madrid and one on last year. The effects of the restructuring programme are now additional service to Barcelona. is also expanding clearly visible. For example, staff costs adjusted for restructuring its fleet: it is to receive a wide-bodied Airbus A330-300 at provisions at Austrian Airlines were cut sharply. the end of February 2011. Its new destinations are Kilimanjaro, ­Mauritius and Goa. Austrian Airlines is aiming for a healthy increase in revenue and savings of around EUR 250m in 2010. Based on a current perspec- In view of the positive performance to date, SWISS is confident tive, the airline will be able to generate positive cash flow (free of substantially outperforming last year’s revenue and operating cash flow before non-recurring factors) and considerably reduce result for the full year as well. its operating loss year-on-year.

Lufthansa 3rd Interim Report January – September 2010 17 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 bmi 1) Germanwings

Jan. – Sept. Jan. – Sept. Change Jan. – Sept. Jan. – Sept. Change 2010 2009 2) in % 2010 2009 in %

Revenue €m 696 301 – Revenue €m 486 451 7.8 Operating result €m – 90 – 10 – Operating result €m – 11 39 EBITDA €m – 68 – 14 – EBITDA €m 13 64 – 80.2 Employees as of 30.9. number 3,686 4,559 – Employees as of 30.9. number 1,279 1,097 16.6

1) Further information on bmi can be found at www.flybmi.com. Further information on Germanwings can be found at www.germanwings.com. 2) bmi has been fully consolidated since 1 July 2009.

The restructuring measures introduced in 2009 were pursued After a difficult start to the reporting year and resurgent demand ­successfully in 2010 and already have a positive effect on the from the second quarter, Germanwings added considerably to result. The third quarter was also satisfactory, with an operating its capacity at the airports in Cologne/Bonn and Stuttgart in the profit of EUR 3m. In the first nine months of 2010 total revenue summer season. In Cologne/Bonn it consolidated its market came to EUR 718m and the operating result to EUR – 90m. ­leadership as the largest airline. A new base was also opened in Hanover-Langenhagen. The Germanwings route network now Alongside the steps already identified, a second restructuring links 75 destinations in 26 countries. ­programme has been launched with the aim of improving results further and securing them sustainably. After considerable staff In the first half of the year the pilots’ strike and the temporary cuts, which are now complete, the productivity improvements will ­airspace closures had caused substantial losses of revenue. As be maintained during a consolidation phase by means of new expected, the addition of the Hanover-Langenhagen site initially processes and more efficient routines. resulted in start-up losses. Since mid 2010 developments in ­passenger numbers have nevertheless pointed to a recovery in Average yields in the local market are not yet satisfactory, which aviation. Although Germanwings’ passenger load factor sank means that further efforts will be required in order to meet all in compar­ison to last year by 3.0 percentage points to 77.8 per the targets as planned. The markets in the Middle East and the cent, it still carried around 6 million passengers, 8.9 per cent CIS states are still on a positive track, however. more than in the same period a year ago. Given the difficult con­ ditions, the operating result was poor and at EUR – 11m was In order to boost average yields further, bmi will also invest in well below last year’s (EUR 39m). Revenue increased by 7.8 per product quality in future, especially in cabin equipment. The cent to EUR 486m in contrast. ­integration of the sales organisation at bmi and Lufthansa is also progressing to plan and will be completed by the end of the Germanwings expects the closer collaboration with Lufthansa that year. The synergies realised and the joint market presence will began on 1 September 2010 to deliver a positive impetus. Miles & have an additional positive impact on the result. More members can now both redeem and collect premium miles on all Germanwings flights. From 2011 Germanwings fares can be Altogether, it is expected that the financial planning can be adhered combined with those of Lufthansa and the two airlines are also to to as calculated. This means that revenue and results for 2010 work together more closely in corporate business. should be a considerable improvement on last year. The target of reaching operating profitability is expected to be met from 2012. The course of business was severely hampered by the one-off ­factors mentioned earlier. The stabilisation of traffic volumes that is now underway and the steps taken to safeguard earnings were not able to make up for these effects completely. For the current financial year Germanwings is therefore expecting an operating loss in spite of higher revenue.

18 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information Passenger Airline Group Logistics

Logistics business segment

Key figures Logistics

Jan. – Sept. Jan. – Sept. Change July – Sept. July – Sept. Change 2010 2009 in % 2010 2009 in %

Revenue €m 2,014 1,389 45.0 731 473 54.5 of which with companies of the Lufthansa Group €m 18 18 0 6 6 0 Operating result €m 230 – 200 – 86 – 66 – Segment result €m 240 – 193 – 84 – 61 – EBITDA €m 335 – 100 – 119 – 29 – Segment capital expenditure €m 11 17 – 35.3 7 6 16.7 Employees as of 30.9. number 4,499 4,542 – 0.9 4,499 4,542 – 0.9 Freight and mail thousand tonnes 1,304 1,092 19.4 474 398 19.2 Available cargo tonne-kilometres millions 9,142 8,632 5.9 3,377 2,997 12.7 Revenue cargo tonne-kilometres millions 6,504 5,298 22.8 2,334 1,960 19.1 Cargo load factor % 71.1 61.4 9.7 69.1 65.4 3.7

Course of business The positive demand trend that began in With effect from 1 January 2011 the Supervisory Board of Deutsche early 2010 for Lufthansa Cargo continued into the third quarter. Lufthansa AG appointed Carsten Spohr, Chairman of the Execu- Increased capacity was sold in full, which resulted in the cargo load tive Board of Lufthansa Cargo AG, as a member of the Executive factor improving again compared with last year. In combination Board of Deutsche Lufthansa AG and Chairman of the Lufthansa with rising freight rates this drove up Lufthansa Cargo’s revenue German Airlines Board. Karl Ulrich Garnadt has been put forward significantly compared with last year. Strict cost discipline was to the Supervisory Board of Lufthansa Cargo AG as his suc­- maintained, which enabled another substantially positive operating cessor. Garnadt is currently a member of the Lufthansa German result to be achieved. ­Airlines Board.

In late July 2010 an MD-11 freighter operated by Lufthansa Product and route network In the first nine months of 2010 Cargo had an incident on landing in Riyadh. Both pilots survived Lufthansa Cargo made specific additions to its route network. the ­accident, but the aircraft was a write-off. This reduced the Alongside the growth markets India and Brazil, the company company’s freighter fleet to 18 aircraft. The financial damages invested primarily in new routes to China. Since the middle of the resulting from the crash are covered by insurance. The causes year the economic metropolis Tianjin has been part of Lufthansa of the accident are currently under review. Cargo’s route network. From November the company is also to scale up its capacities between Europe and Japan to exploit Segment structure In addition to Lufthansa Cargo AG, the Logis- opportunities created by the withdrawal of Japan Airlines from tics segment includes Lufthansa Cargo Charter Agency GmbH, the freight business. As part of the strategy for creating this extra the airfreight container management specialist Jettainer GmbH capacity Lufthansa Cargo is currently bringing the last MD-11 and the equity investments in the cargo airlines Jade Cargo ­aircraft parked during the financial and economic crisis back into ­International Ltd. and AeroLogic GmbH. Lufthansa Cargo also service. They will be made available again in the course of the holds equity interests in sales support and handling companies. fourth quarter.

Since July 2010 Lufthansa Cargo AG has also been marketing As well as the integration of Austrian Airlines’ freight business, the freight capacities of Austrian Airlines. As a result, customers the expansion of the fleet at AeroLogic also added to capacities now also have freight capacities available to them on the entire at Lufthansa Cargo. AeroLogic received additional Boeing 777F route network of the Austrian carrier, which has meant an expan- aircraft in the third quarter and now operates a total of seven sion of network capacity primarily in Eastern Europe. In Austria ­aircraft. In the fourth quarter they are to be joined by the eighth the joint venture between Austrian Airlines and Lufthansa Cargo plane in the fleet, which will be the last one for the time being. – Austrian Lufthansa Cargo GmbH – is responsible for developing the market and for further developing Vienna airport as an addi- tional hub for Lufthansa Cargo.

Lufthansa 3rd Interim Report January – September 2010 19 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Putting innovations into practice remained an area of focus for The Asia/Pacific traffic region remains a key growth driver for Lufthansa Cargo. Alongside successful tests of RFID technology Lufthansa Cargo’s performance. Freight volumes sold here were the company concentrated primarily on expanding its paperless up by 23.5 per cent on last year. As traffic from Asia is more profit- airfreight transport (e-freight). able, most of the additional flights were carried out in this traffic region. Compared with last year this meant capacity went up by Lufthansa Cargo continues to enjoy great standing with its custom- 10.1 per cent in the reporting period. The third quarter alone saw ers, as was reflected in awards for the best European cargo airline a significant increase of 24.0 per cent. Compared with the other in Europe and Asia. traffic regions the load factor for Asia/Pacific, on a cumulative basis for the year, was the highest at 75.1 per cent. The number of night flights allowed at Airport is still the subject of a legal review. Lufthansa Cargo has set up an initiative Inner-European sales advanced at a similarly high level to the entitled “Freight needs the Night” to underline the need for com- Americas and Asia/Pacific traffic regions. The year-on-year petitive night flight regulations at all commercial airports in increase here came to 15.1 per cent. The volume growth stems ­Germany. Since it was established in June this year the initiative mainly from shuttle services for the Americas and Asia/Pacific has gathered ­support from a large number of new members. ­traffic regions.

Operating performance The positive performance by Lufthansa Compared with the first three quarters of 2009 it was not possible Cargo continued in the third quarter. Freight volumes rose in the to increase sales in the Middle East/Africa traffic region in 2010 – period January to September by 19.4 per cent on last year, while sales volumes fell by one per cent. The main markets, Kenya and tonne-kilometres transported were up 22.8 per cent. As capacity South Africa especially, are still showing no signs of a post-crisis was only increased by 5.9 per cent, the load factor climbed by recovery. 9.7 percentage points to 71.1 per cent. At the same time the aver- age yield per tonne-kilometre transported was lifted 26.7 per cent The collective bargaining agreements reached for cockpit and above last year’s crisis-induced figure. ground staff provide for a pay freeze that is to run into 2011. These agreements will help to stabilise the cost base. Lufthansa Cargo achieved the greatest volume growth in the Americas traffic region (+ 27.9 per cent year on year). The trend Revenue and earnings development The pleasing development nevertheless flattened out slightly from the first half-year to the in performance figures is also reflected in the shape of revenue. third quarter. Lufthansa Cargo reacted to increased demand with Traffic revenue increased by 44.9 per cent to EUR 1.9bn as a result a modest 3.4 per cent expansion of capacity. of both higher volumes and much improved freight rates.

Trends in traffic regions Lufthansa Cargo

Freight /mail Available cargo tonne- Revenue cargo tonne- Cargo load factor in tonnes kilometres in millions kilometres in millions in % Jan. – Sept. Change Jan. – Sept. Change Jan. – Sept. Change Jan. – Sept. Change in 2010 in % 2010 in % 2010 in % 2010 pts

Europe 442,984 15.1 576 4.7 262 8.9 45.5 1.7 America 382,035 27.9 3,645 3.4 2,679 26.1 73.5 13.2 Asia / Pacific 376,971 23.5 4,068 10.1 3,055 25.9 75.1 9.4 Middle East / Africa 102,072 – 1.0 852 – 1.1 507 0.4 59.5 0.9 Total 1,304,062 19.4 9,142 5.9 6,504 22.8 71.1 9.7

20 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information Logistics

Other operating income was 10.0 per cent down on the year at Other segment income dropped to EUR 3m (previous year: EUR 72m. The decline stemmed mainly from exchange rate EUR 6m). Other segment expenses rose to EUR 10m, largely effects and was offset by insurance compensation of EUR 25m driven by an impairment loss of EUR 9m following the aircraft for the aircraft incident. incident in Riyadh. The insurance compensation received for this is recognised in other operating income. Total operating income rose to EUR 2.0bn (+ 45.0 per cent). At EUR 17m, the result of investments accounted for under the Operating expenses increased by just 11.2 per cent to EUR 1.9m. equity method was much higher than in the same period a year ago. Among others, the equity investments in Shanghai Pudong The cost of materials and services climbed to EUR 1.3bn Cargo Terminal Co. Ltd. and AeroLogic GmbH (+ 16.6 per cent). The main drivers were expenses for fuel, fees both contributed to earnings. and charges, and chartering. Fuel expenses were up 34.8 per cent for pricing and currency reasons to EUR 258m. Charter The segment result picked up overall to EUR 240m (previous expenses rose – largely as a result of increased costs for capacity year: EUR – 193m). Adjusted for the earnings impact of the plane at Lufthansa Passenger Airlines – to EUR 717m (+ 14.7 per cent). incident, the segment result improved year on year by EUR 417m. MRO expenses of EUR 90m were higher than last year, partly as a result of more maintenance inspections. Segment capital expenditure fell EUR 6m year on year to EUR 11m due to the restrictions placed on investing activity as part of the Staff costs went up by 4.7 per cent to EUR 243m. The principle programme to stabilise earnings. reasons were the end of reduced working hours and higher addi- tions to provisions for profit-sharing and for holiday and flexitime Outlook In view of the very positive economic momentum accounts. The average number of staff employed in the reporting Lufthansa Cargo is optimistic to improve revenue even further period was 4,453, which represents a reduction of 142 compared in the traditionally strong fourth quarter. Considerable seasonal with last year. demand is forecast, above all from Asian markets. The rapid growth rates seen this year will increasingly taper off, however, due to the Depreciation and amortisation fell by EUR 7m (– 7.6 per cent) base effect caused by last year’s slump in demand. The growing to EUR 85m as depreciation on part of the freighter fleet came AeroLogic fleet and the MD-11 aircraft brought back into service to an end. ahead of schedule by Lufthansa Cargo will provide much greater capacities for the pre-Christmas increase in demand. Other operating expenses were cut substantially by 2.4 per cent year on year to EUR 207m. The abolition of agency commission Lufthansa Cargo therefore continues to expect a significant agreements last year was the main reason for the improvement. increase in revenue for the full year and will maintain its strict cost Foreign currency translation losses had the opposite effect and management. After the crisis-induced loss sustained last year, were higher than last year. the company is confident of generating an operating profit in the fourth quarter of 2010 as well and adding to the result already The pleasing development in total income in conjunction with achieved. ­consistent cost management led to a very good operating result of EUR 230m (previous year: EUR – 200m).

Lufthansa 3rd Interim Report January – September 2010 21 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 MRO business segment

Key figures MRO

Jan. – Sept. Jan. – Sept. Change July – Sept. July – Sept. Change 2010 2009 in % 2010 2009 in %

Revenue €m 2,983 3,008 – 0.8 1,009 934 8.0 of which with companies of the Lufthansa Group €m 1,209 1,214 – 0.4 407 376 8.2 Operating result €m 211 229 – 7.9 66 85 – 22.4 Segment result €m 238 236 0.8 74 89 – 16.9 EBITDA €m 301 319 – 5.6 123 130 – 5.4 Segment capital expenditure €m 40 81 – 50.6 12 33 – 63.6 Employees as of 30.9. number 20,244 19,823 2.1 20,244 19,823 2.1

Course of business The unbroken recovery in global air traffic Products Lufthansa Technik offers a wide product portfolio, also increased demand worldwide for technical maintenance ranging from the latest repair procedures to full technical servicing ­services in the aviation industry. Airline profitability is still strained, of modern aircraft fleets worldwide and individual completion however, and this results in increased price pressure on suppliers. ­programmes for VIP aircraft. This makes the company the global This was already very high given the new and idle capacities in market leader in MRO for civilian aircraft. the maintenance, repair and overhaul (MRO) market. In terms of its financial performance Lufthansa Technik therefore remains This year Lufthansa Technik introduced a multitude of new prod- a late-cycle segment in the aviation sector. Revenue fell slightly ucts such as a new in-flight camera surveillance system and compared with last year, but the shortfall was reduced consid­ a flexible quick-change kit for VIP cabins in Airbus and Boeing erably in the third quarter. ­aircraft. The latter enables clients to convert a commercial aircraft cabin into a VIP interior as needed in a very short space of time. Segment structure The Lufthansa Technik group is made up Furthermore, Lufthansa Technik’s Mobile Aircraft and Cabin of 30 maintenance operators worldwide and a total of 54 compa- ­Services team provides on-site services worldwide to various VIP nies. Lufthansa Technik uses its international network to provide and executive jet customers. its ­customers with services on location, such as in Riga, Latvia, with the new service station for business aircraft run by Lufthansa The product range was also expanded in the engine department. ­Bombardier Aviation Services. These low-cost sites enable Now maintenance and overhaul work can also be completed on Lufthansa Technik to increase its competitiveness. The entry into the Trent 900 fitted to the Airbus A380 as well as on the auxiliary the Asian market several years ago plays an important role as turbine on the Embraer E-Jets. Lufthansa Technik signed a coop- well. Market presence will be further expanded next year with eration agreement with Volvo Aero Corporation to jointly develop the construction of a new hangar for aircraft maintenance at the and market new repair methods for individual engine components. future Berlin-Brandenburg International Airport, with three bays for short and medium-haul aircraft. Operating performance For the full year 2010, Lufthansa ­Technik has won 418 new contracts with a volume of EUR 445m. The aircraft overhaul companies Lufthansa Technik Malta This was nevertheless not quite enough to make up for expired and Lufthansa Technik Budapest were added to the business contracts and revenue from one-off orders in the previous year. ­segment’s group of consolidated companies in the reporting period. The Italian engine servicing subsidiary Main- During the reporting period Lufthansa Technik handed over the enance Systems was sold. second Airbus A319 to the Special Air Mission Wing at the German Federal Ministry of Defence. The plane was equipped with a VIP cabin during an idle period of seven months. Two more Airbus A340s are currently being completed for the Defence Ministry in Hamburg. In addition, Lufthansa Technik and China Airlines

22 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information MRO

signed a long-term contract covering component services for the The average number of employees went up by 949 as a result airline’s 24 Airbus A330/A340s. A component support agreement of the two newly consolidated companies. Staff numbers were for 34 Boeing B737NGs was also concluded with Aeromexico. reduced in several plants, however, leaving a net increase of 621 to 20,363 on average for the year. Staff costs did not go up Lufthansa Technik AERO Alzey was also able to acquire plenty proportionately, rising by just 2.4 per cent to EUR 805m. Despite of new orders this year. They include maintenance work for the the difficult economic conditions, Lufthansa Technik upholds its engines on a large number of aircraft operated by Lufthansa strong commitment to vocational training in aircraft maintenance. ­City­Line, Eurowings, the Austrian InterSky and At the beginning of the vocational training year 2010 a total of the Spanish regional airline Air Nostrum. In addition, Lufthansa 1,025 young people were being trained at the Lufthansa Technik Technik signed a ten-year cooperation agreement with the group in Germany. National Air Services (NAS) in Saudi Arabia and is to take on engine and component maintenance services for the entire Depreciation and amortisation rose by EUR 5m to EUR 69m. NAS fleet. Engineers and technical advisors from Lufthansa ­Technik are also to assist the customer’s new MRO subsidiary, The greatest change related to other operating expenses, where NAS Tech, to build up its own maintenance expertise locally. higher rental and maintenance costs and additions to provisions for onerous contracts were responsible for an increase of 8.6 per Revenue and earnings development Buoyed up by the US dollar cent to EUR 541m. exchange rate, revenue for Lufthansa Technik increased year on year by EUR 75m in the third quarter, bringing the cumulative As expected, the operating result could not match last year’s high shortfall compared with last year down to EUR 25m (– 0.8 per cent). figure, falling by 7.9 per cent to EUR 211m. Overall, revenue for the segment came to around EUR 3.0bn. Revenue from companies in the Lufthansa Group accounted for On the other hand the segment result improved by EUR 2m EUR 1.2bn of the total, roughly the same as last year (– 0.4 per (+ 0.8 per cent) to EUR 238m. This is because the figures for 2010 cent). Business with non-Group companies picked up again over also include the equity-accounted results of the Technik compa- the last three months. In component support the fleet serviced nies N 3 (aero-engine joint venture with Rolls Royce) and Spair­ by Lufthansa Technik grew by 4.4 per cent to a current global total liners, the A380 component joint venture with Air France and of 2,070 aircraft. Non-Group revenue came to EUR 1.8bn, or Lufthansa Bombardier Aviation Services, and the disposal of the 1.1 per cent down on the year. However, Austrian Airlines and bmi, loss-making Alitalia Maintenance Services. which are now fully consolidated, accounted for EUR 41m of external revenue in 2009. Segment capital expenditure amounted to EUR 40m. The EUR 41m reduction was attributable to the relatively high figure for the Non-Group revenue as a proportion of total revenue remained ­previous year, which included the purchase of reserve engines ­stable at a high 59.5 per cent. and the completion of the A380 maintenance hangar.

Other operating income rose, due in part to exchange rate gains, Outlook Thanks to its modern product portfolio, low-cost sites staff secondment and reversals of write-downs, by EUR 45m to and permanent projects to cut costs and increase efficiency and EUR 146m. flexibility, Lufthansa Technik is well prepared for the challenges posed by the competition. However, as in previous cycles, the All in all, the MRO segment generated total operating income of recovery on the MRO market trails the increase in demand for air EUR 3.1bn (+ 0.6 per cent). transport.

Operating expenses rose, partly due to the larger group of consol- For the full year the MRO segment is anticipating revenue at the idated companies, by a total of 1.3 per cent to EUR 2.9bn. same level as last year and a substantially positive operating result. As expected, however, it will not be possible to repeat last The cost of materials and services fell by 1.9 per cent to EUR 1.5bn year’s high earnings again in 2010. as a result of fewer engine repairs and outsourcing of aircraft idle times.

Lufthansa 3rd Interim Report January – September 2010 23 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 IT Services business segment

Key figures IT Services

Jan. – Sept. Jan. – Sept. Change July – Sept. July – Sept. Change 2010 2009 in % 2010 2009 in %

Revenue €m 438 451 – 2.9 147 149 – 1.3 of which with companies of the Lufthansa Group €m 263 264 – 0.4 89 87 2.3 Operating result €m 12 12 0 4 5 – 20.0 Segment result €m 3 11 – 72.7 – 4 3 – EBITDA €m 37 41 – 9.8 13 14 – 7.1 Segment capital expenditure €m 25 43 – 41.9 9 13 – 30.8 Employees as of 30.9. number 2,955 3,028 – 2.4 2,955 3,028 – 2.4

Course of business Airlines’ willingness to invest only recovered Products The products and consultancy services from Lufthansa slowly over recent months, despite rising passenger numbers. Systems enable its clients to generate added value directly in Revenue at Lufthansa Systems therefore continued to decline. the form of efficiency gains, cost reductions or additional revenue. Lufthansa Systems stuck to the cost-cutting measures started in In the field of integrated platform solutions for airlines Lufthansa 2009 and was thus able to compensate for the decreased revenues. Systems plays a pioneering role. A prime example is the Integrated Operations Control Center (IOCC), a platform introduced in 2010 The third quarter saw the launch of the Jetzt! programme to to manage all aspects of flight operations. This year Lufthansa increase competitiveness and improve earnings. It aims to reduce Systems also launched the Integrated Commercial Platform (ICP), overlapping functions in the company, simplify structures and which integrates network management, yield management and thereby cut costs sustainably as well as generating additional resource planning. In addition the company offers consultancy revenue from existing customers. In the medium term significant and operating services in various other sectors – such as energy, ­revenue streams are also to be developed with customers healthcare, transport and logistics, media and publishing, and outside the airline industry. industrials. The products from the Industry Solutions department also include solutions for publishers and public transport operators. Segment structure Lufthansa Systems offers consultancy and IT services for selected industries and is a global leader in the Operating performance Lufthansa Systems was able to expand ­aviation sector. Its portfolio covers the entire range of IT services its business with new and existing clients in the first nine months from consultancy via applications development and implemen­ of the year 2010. In addition to the IOCC platform Tunisair has tation through to complete IT outsourcing. Lufthansa Systems has now also decided to adopt key components of the ICP. The com- offices in Germany and 14 other countries, including production pany succeeded in winning the Russian airline Transaero as sites in Europe and the USA. A global sales team with account another customer for the IOCC. Royal Air Maroc recently selected managers in all major international markets enables optimal cus- NetLine/Load in order to enjoy the benefits of the IOCC platform. tomer service. Furthermore, important contracts were signed with Lufthansa and Lufthansa Cargo to renew server and applications operating Stefan Hansen became CEO of Lufthansa Systems AG as of services. 1 July 2010. He already led the Infrastructure Services division until 2006 and made a significant contribution to developing its In the media sector Lufthansa Systems was able to apply and external revenue. expand its publishing solution VI&VA at the printer and publisher Leipziger Verlags- und Druckereigesellschaft and at the news­ paper Donaukurier. The Hamburg Port Authority also appointed Lufthansa Systems to develop an integration platform for rail ­transport in the Port of Hamburg.

24 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information IT Services

Lufthansa Systems has launched the Jetzt! programme to achieve This brought total operating expenses down to EUR 447m sustainable earnings improvements. The aim of the programme ­(previous year: EUR 466m). is to make the company competitive again by cutting costs and generating additional short-term revenue. The programme is The operating result for Lufthansa Systems improved slightly to divided into four focus areas and aims to achieve a sustainable EUR 12m as a result of the steps taken to safeguard earnings. earnings improvement of EUR 50m a year by 30 June 2011. By squeezing costs it was possible to make up for the decline in revenue. Revenue and earnings development Lufthansa Systems ­generated revenue of EUR 438m (– 2.9 per cent) in the reporting The segment result for the period under review was EUR 3m period. Revenue from Lufthansa Group companies declined by ­(previous year: EUR 11m). The difference in the operating result 0.4 per cent to EUR 263m. This stems from price cuts for operat- and in last year’s segment result is largely due to write-downs ing airline applications and operator models. There was also a made in the re-priorisation of development projects. ­further volume adjustment in the passenger system environment for Lufthansa Group companies. Revenue on the external market Capital expenditure was capped at a total of EUR 25m for the declined by 6.4 per cent to EUR 175m due to the integration of reporting period (previous year: EUR 43m) and served mainly to Austrian Airlines and bmi into the Lufthansa Group. secure existing business.

Other operating income dwindled to EUR 21m (previous year: Outlook The improvement in the airlines’ economic situation has EUR 27m), largely due to exchange rate effects and lower invest- not yet led to a significant increase in capital expenditure for airline ments in customer projects. IT. Lufthansa Systems nevertheless enjoys market benefits from the advantages its innovative products provide to airlines and industrial Total operating income went down as a result by 4.0 per cent to companies. EUR 459m. Persistent cost pressure and dwindling revenue make further steps The reduction of 6.7 per cent in the cost of materials and services necessary to improve profitability. The portfolio restructuring cur- to EUR 56m is in connection with the fall in revenue. rently taking place in the Infrastructure Services division will also mean lower revenue for the current financial year. For the full year Despite a slight decline in staff numbers – Lufthansa Systems the operating result is likely to be lower than last year’s due to had an average of 2,983 employees during the reporting period the ongoing re-priorisation of development projects and one-off ­(previous year: 3,043) – staff costs went up by 2.3 per cent to expenses incurred under the Jetzt! programme. EUR 178m. This was due to overtime and higher additions to ­pension obligations.

The year-on-year fall in capital expenditure led to a decrease in depreciation and amortisation to EUR 25m (previous year: EUR 27m).

Other operating expenses came to EUR 188m or 8.3 per cent below the figure for last year. The saving stems primarily from the considerable reduction in outside staff.

Lufthansa 3rd Interim Report January – September 2010 25 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Catering business segment

Key figures Catering

Jan. – Sept. Jan. – Sept. Change July – Sept. July – Sept. Change 2010 2009 in % 2010 2009 in %

Revenue €m 1,674 1,586 5.5 618 562 10.0 of which with companies of the Lufthansa Group €m 396 384 3.1 139 138 0.7 Operating result €m 50 53 – 5.7 37 28 32.1 Segment result €m 63 73 – 13.7 43 30 43.3 EBITDA €m 149 81 84.0 – 3 7 – Segment capital expenditure €m 23 40 – 42.5 6 8 – 25.0 Employees as of 30.9. number 28,435 28,871 – 1.5 28,435 28,871 – 1.5

Course of business The rise in passenger numbers continued Products LSG Sky Chefs is increasingly involved in the develop- into the third quarter of 2010 and led to a corresponding revival ment, procurement and logistics of in-flight products. The function in demand for catering services. Over the summer months “product marketing” was recently established in the central Sales LSG Sky Chefs reported rapid growth rates in its European and and Marketing department to underline these innovation capa­ North American markets, which had initially only picked up bilities. It pools the skills that exist in the company for the purpose slowly. Asia and South America saw strong growth, especially of researching trends and innovations. This is also where new in the key ­markets China, Korea, Hong Kong and Brazil. The service concepts are developed that take customer specifications ­premium segment also performed well. In spite of the temporary and operating conditions into account. closure of large sections of European airspace in the spring and the loss of an important customer in Mexico, revenue in the The new lightweight trolley Quantum, which in the spring received Catering segment was above expectations for the first nine an award for the most innovative cabin product from a jury of months of 2010 and above revenue for the same period last year. ­international aviation experts, successfully completed its test phase As a result, the segment once again recorded an operating profit. on board Lufthansa and is soon to be rolled out across the entire long-haul fleet. Segment structure The LSG Sky Chefs group consists of 133 companies, with more than 200 plants in 52 countries. At Operating performance In the first nine months of 2010, LSG the beginning of 2010 a firm in Malaysia was added as an asso­ Sky Chefs was able to profit from increasing passenger numbers ciated company. The group of consolidated companies also grew and greater demand for flights in the premium segment. In addi- compared with last year to include one fully consolidated com- tion to the contract extensions with SunExpress, Virgin Atlantic, pany in Turkey (since 1 August 2010), the first-time consolidation Emirates, airBaltic and Virgin America, the contract for supplying of a company in the USA (since 1 October 2009) and a subsidiary SWISS short-haul flights from the hub in Zurich was also renewed in China that was consolidated using the equity method until in the third quarter. Furthermore, the global agreement with Air 30 June 2009. Canada was expanded and Jet Airways was acquired as a new customer in Brussels. The joint venture with in Moscow LSG Sky Chefs has aligned its core business with the highly diverse was able to secure no fewer than four new contracts in the report- market conditions in its six regions North America, Latin America, ing period; with Air Astana, China Eastern, Avianova and Hong Europe, Germany, Emerging Markets and Asia/Pacific. In order Kong Airlines. to meet increasing demand from airlines for complementary prod- ucts and services, these regions are supported by centralised After the expansion that took place in the first half-year in China, centres of excellence. They focus on frozen food, in-flight sales Egypt and Russia, LSG Sky Chefs added again to its geographical programmes, logistics and accessories for in-flight service. reach in the third quarter. A new joint venture to open a catering The company has also set up excellence teams to strengthen facility at airport was signed with Air. In Turkey a its ­activities in neighbouring areas such as catering for trains, company was established with a local partner to set up a produc- schools and healthcare facilities or sales of products to retailers. tion line for ready meals, bakery goods and pre-cooked food. Three small plants in Norway and the USA were closed in the first nine months of 2010 due to a change in service concepts and ­further switches to return loads.

26 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information Catering

The company-wide Upgradeplus initiative launched in 2009 with the Depreciation and amortisation was more or less the same as last aim of creating a sustainable, competitive company structure is year at EUR 44m. running to plan. This is to be supported by the introduction of a uniform project reporting and monitoring system. LSG Sky Chefs Other operating expenses of EUR 292m were 2.5 per cent higher is pursuing both wide-ranging measures to achieve improvements than last year, also due to negative exchange rate movements. and growth in the airline business and activities to move into neighbouring markets. The latter are intended to generate signifi- LSG Sky Chefs posted an operating profit of EUR 50m for the first cant growth in the years ahead. nine months of 2010. This is only just below last year’s figure of EUR 53m, which was inflated by the non-recurring effect of the In September 2010 the pilot phase was launched for the intro­ D&O policy. Adjusted for this effect, the operating result improved duction of a new production system in order to take processes year on year by EUR 37m. beyond the successful and multiple-prize-winning Lean initiative to world class level. The balance of other segment income and expense was, at EUR 1m, EUR 12m below last year’s figure. This decline is prima- Revenue and earnings development Revenue continues to rily due to a one-off effect last year of changes to the American develop positively in the reporting period, rising year on year pension plans (EUR 15m). The result of the equity valuation, on by 5.5 per cent to EUR 1.7bn. The main reasons were positive the other hand, was 71.4 per cent up on last year at EUR 12m. currency and consolidation effects and higher passenger ­numbers, especially in the premium classes. This brought the segment result for LSG Sky Chefs to EUR 63m (previous year: EUR 73m). Compared with last year’s figure when External revenue climbed to EUR 1.3bn (+ 6.3 per cent), while adjusted for the non-recurring effects mentioned above, this internal revenue increased by 3.1 per cent to EUR 396m. The ­represents an improvement of EUR 45m. ­first-time consolidations mentioned previously contributed revenue of EUR 40m in the first nine months of 2010. As part of the measures taken to safeguard earnings capital expenditure was reduced worldwide to the level required for Other operating income fell year on year by EUR 50m to EUR 48m. ­maintenance and to secure operations. The segment’s capital This substantial decline is primarily due to the arbitration settle- expenditure therefore came to just EUR 23m, 42.5 per cent ment reached in the first quarter 2009 on the D&O policy for the below last year’s. SAS contract in Scandinavia (EUR 40m). Outlook The positive trend observed in the third quarter across Overall, total operating revenue improved by 2.3 per cent to all regions is likely to continue. EUR 1.7bn. In its core business with airlines the company will continue to Total operating expenses were up slightly year on year at EUR 1.7bn develop its product and service portfolio by intensifying its custo­ (+ 2.5 per cent). mer relations. At the same time the activities initiated in neigh­ bouring areas are to be intensified. In the months ahead priority Greater sales volumes and negative exchange rate effects meant will also be given to standardising and optimising processes, that 4.4 per cent increase in the cost of materials and services to ­particularly in production, purchasing and sales. Collective bar- EUR 743m was disproportionately lower than the rise in revenue. gaining is to be continued in the two main markets, Germany and The cost ratio for materials and services dropped by 0.5 percent- the USA, where around 50 per cent of the workforce is employed. age points to 44.4 per cent. Savings achieved in purchasing were the reason behind the reduction. For the full year 2010 LSG Sky Chefs is still expecting higher ­revenue than last year and an operating profit that is well above The average number of employees at the LSG Sky Chefs group last year’s result, after adjusting for the non-recurring factors sank over the first nine months by 2.2 per cent compared with the ­mentioned. same period last year to 28,343. Job cuts, largely in Scandinavia and Germany, were offset by increases in China due to the first- time consolidation mentioned above. Despite the reduced head- count, staff costs rose by 0.5 per cent to EUR 593m, but the staff cost ratio still fell by 1.8 percentage points to 35.4 per cent.

Lufthansa 3rd Interim Report January – September 2010 27 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Other

Other

Jan. – Sept. Jan. – Sept. Change July – Sept. July – Sept. Change 2010 2009 in % 2010 2009 in %

Total operating income €m 962 891 8.0 257 281 – 8.5 Operating result €m – 114 – 98 – 16.3 15 – 37 – Segment result €m – 88 – 86 – 2.3 19 11 72.7 EBITDA €m 308 – 18 – 33 2 Segment capital expenditure €m 12 54 – 77.8 5 9 – 44.4 Employees as of 30.9. number 3,740 3,774 – 0.9 3,740 3,774 – 0.9

Structure The segment Other includes the central Group ­earnings contributions. For example, the switch at Lufthansa ­functions of Deutsche Lufthansa AG as well as the Service and ­Passenger Airlines to a new area concept for the cabin continued Financial Companies in the Lufthansa Group, in which the to provide increased demand for retraining by Aviation Safety Lufthansa Group’s financial and service activities are pooled. & Service Training. Continuing cost management as part of the The latter include Lufthansa Flight Training, AirPlus and Lufthansa ESP 8+2 programme launched in 2007 also makes a sustainable Commercial Holding among others. contribution to earnings development.

Operating performance The positive trend on the worldwide On 9 September 2010 Lufthansa Flight Training and the German business travel market continued in the third quarter of 2010. army celebrated 50 years of working together successfully. More Many companies began travelling more again as the economy than 1,400 trainee military pilots have earned their pilot’s license in picked up. AirPlus benefits from this trend: overall its billing Bremen since 1960. The 100th training course is currently underway. ­revenue was up 25 per cent on last year, confirming the upward trajectory of the second quarter in 2010. Revenue and earnings development The companies repre- sented in the segment Other reported total operating revenue of Since September AirPlus has offered its customers a mobile portal EUR 962m (+ 8.0 per cent). AirPlus accounted for EUR 294m giving them direct access to the main functions of their online card (+ 70.9 per cent), equivalent to 30.6 per cent of the total. Lufthansa account and an overview of current payments with the company Flight Training contributed EUR 122m (+ 10.9 per cent), a share credit card while travelling. The site can be accessed using an of 12.7 per cent. internet-enabled mobile phone or a smartphone. Billing statements can also be viewed quickly and simply using the portal. This Operating expenses went up, principally due to exchange rates, makes verification easier and improves security when using the by 8.8 per cent to a total of EUR 1.1bn. The operating result stood card. AirPlus also proved its pioneering role in the industry again at EUR – 114m (previous year: EUR – 98m), which again stems during the reporting period with the innovative AirPlus Green partly from realised exchange rate losses. This includes the Group

Reports. They give companies a CO2 report for the business flights functions with a negative earnings contribution of EUR – 165m paid for via AirPlus. This enables customers to choose whether (previous year: EUR – 143m). AirPlus on the other hand made to make a voluntary donation to a climate protection provider or to a positive contribution with an operating profit of EUR 17m invest in their own climate protection projects. Emission footprints (+ 21.4 per cent), as did Lufthansa Flight Training with a profit of can also be used in companies’ sustainability reports. EUR 27m (+ 28.6 per cent).

The positive trend in demand for simulator training and additional The segment result fell slightly to EUR – 88m (previous year: flight attendant courses at Lufthansa Flight Training was reiterated EUR – 86m). in the third quarter of 2010 as well. The long-term collaboration with key accounts in the aviation sector also delivers secure

28 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information Other Risk report

Risk report However, a consistently robust economic climate brings with it the risk that kerosene prices will rise again, well above the level Lufthansa is an international aviation company exposed to macro­ reached today. In the current market environment, with competition economic, finance, sector-specific and company risks. These intensifying again, it is also difficult to see how additional costs ­primarily include market and competitive risks which potentially could be recovered in full by revenue. Despite this, cost increases affect capacity and load factors. They are flanked by political risks, due to currency movements were offset thanks to hedging and operational and collective bargaining risks, legal risks and contin- the Group’s almost balanced foreign exchange exposure. gencies, procurement risks, IT risks and financial and treasury risks. The risk of further strike action, which had a huge impact on the With the help of management systems that are constantly updated course of business in the first quarter, was reduced considerably the Group can identify both risks and opportunities at an early by the successful arbitration in June 2010 of the collective bar- stage and act accordingly. This proven risk strategy allows us to gaining dispute with the Vereinigung Cockpit pilots’ union and take advantage of business opportunities provided that a risk- the agreement on wage settlements with the trade union ver.di. adjusted return can be realised on market terms. The risks must Negotiations on new pay settlements with cabin staff have not yet also be appropriate and acceptable in relation to the value created. been concluded. For detailed information on the opportunity and risk management system and the Group’s risk situation, please see p. 126 of the 2009 The decision by the German federal government to levy an air Annual Report. ­traffic tax from 2011 will result in an additional financial burden and a distortion of competition to the detriment of German airlines. By the end of the third quarter the Group’s risk position had The intention is to pass on the costs to passengers, but there is ­brightened again compared with the risks and opportunities nevertheless a risk of negative reactions in demand, especially described in detail in the Annual Report 2009. Economic growth from passengers choosing airports abroad situated close to the has continued apace around the world and this is reflected in border with Germany. In spite of the positive economic lift, the ­market and traffic performance for the sector and for the Group. cumulative effect of the additional fees could have a significant It should be said that the markets in Asia are still expanding adverse impact on future growth. ­comparatively faster than those in North America and Europe. The global airfreight market grew at a particularly robust clip, Altogether, however, and even considering the macroeconomic although here, too, growth rates are expected to slow. The pre- situation and all other known issues and circumstances, there are mium segment, consisting of First and Business Class, which currently no identifiable developments which could endanger the is important for the Group’s passenger airlines, is also recovering, Company’s continued existence. especially on long-haul routes. Uncertainties remain, however, concerning the sustainability of the upturn. More information can be found in the “Forecast” chapter on p. 30 .

Lufthansa 3rd Interim Report January – September 2010 29 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Supplementary report An appreciably higher growth rate than at the beginning of the year is now also expected for the euro area, although economic Since 1 October 2010 no events of particular importance have expansion is predicted to cool towards the end of 2010. Lower occurred that the Lufthansa Group would expect to have a signifi- consumer spending as a result of high unemployment will have an cant influence on its net assets, financial and earnings position. adverse effect. This is exacerbated by diminished export pros- pects as economic stimulus programmes expire worldwide, weak growth in the USA and measures to curb an overheating economy Forecast in some emerging countries. GDP growth of 1.9 per cent is expected in Europe for 2010 compared with last year. In Germany General economy and sector The global economy will continue the recovery is now on a broader footing and should retain its to recover, above all due to the high pace of growth in Asian momentum. Altogether the growth forecast for the year 2010 was emerging economies. The rate of expansion is nevertheless likely raised to 3.3 per cent. to flatten out over the next few quarters. As fiscal policy measures come to an end in many countries in the face of increasing Economic growth also has an effect on the consumption of re­- national debt and some economies tighten their monetary policy, sources,­ which means that higher oil prices are predicted for the growth rates will slow in response. High domestic demand in medium term. This is reflected in futures contracts for delivery in De- developing countries will also decline towards the end of the year. cember 2011, which are currently trading at around USD 87/barrel. The cyclical upswing in industrialised countries is also expected to slacken over the remainder of the year. After contracting by Based on the unexpectedly rapid recovery in traffic volumes and 1.8 per cent last year, global growth of 3.8 per cent is nevertheless average yields in the aviation sector, IATA has revised its previous still forecast for 2010, see also the table on p . 3 . That is nearly profit forecast of USD 2.5bn and is now predicting worldwide one percentage point more than was assumed at the beginning ­profits of USD 8.9bn and passenger numbers of 2.4bn. Generally of the year. speaking, profits are expected for airlines in all regions, with the exception of European carriers, which are forecast to rack up Early indicators suggest that the pace of the economic recovery losses of USD 1.3bn. At the same time IATA expects profits to in the USA is slowing, primarily due to a fall in household con- fall to USD 5.3bn in 2011. The main reason given by the trade sumption. This trend stems from gloomier prospects for wages association is a forecast fall in demand, ­confronted by increasing and construction investments. Overall, the American economy is capacities due to upcoming aircraft deliveries. predicted to grow by 2.7 per cent compared with last year. For the economies in Asia much stronger year-on-year growth of 6.5 per cent is forecast. Experts expect the Chinese economy to expand by 10.3 per cent in 2010, and the Indian economy by 8.2 per cent.

30 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders Interim management report | Interim financial statements | Further information Supplementary report Forecast

Lufthansa Group After a first half-year marked by atypical events, In the course of the operating recovery we are now also the recovery in demand and profitability dominated the third expecting 2010 to deliver a net profit for the period and positive ­ quarter for the Lufthansa Group. On the one hand this ­recovery earnings per share. These are subject to diverse influences, is driven by the economic development. On the other, the strong however, including changes in IFRS, and therefore cannot be market positions of the Lufthansa Group companies, paired quantified more closely at present. We nevertheless assume with sustainable cost management or restructuring programmes, today that the conditions for paying a dividend for the financial and the realisation of synergies in the airline group are creating year 2010 will be met. More information on our dividend policy structural competitive advantages that contribute a great deal to can be found at i http://investor-relations.lufthansa.com/en/aktie/dividend. the current performance of the business. It is based on a broad array of initiatives and projects in all units of the Lufthansa Group The gratifying earnings progression will also have a positive effect and these will be pursued with undiminished vigour. on Lufthansa’s financial profile. Cash flow from operating activities for the 2010 financial year will be considerably higher than last Despite the varying dynamics in the business development in the year’s. In spite of an estimated capital expenditure of EUR 2.3bn different segments, the success of these measures to date and we are also again expecting to generate free cash flow. The current stable developments in demand have altogether led us to defined minimum liquidity requirement of EUR 2.3bn is conside­ the conclusion that our expectations for earnings development rably more than matched by available liquid funds. The majority in 2010 can be revised upwards. We are therefore now assuming of the Lufthansa fleet is owned and unencumbered. Across the an increase in revenue, which should be well above last year’s, Group, unencumbered aircraft make up 66 per cent of the fleet, in even after adjusting for the effects of consolidation. By continuous the core fleet of Lufthansa and Lufthansa Cargo they account for focus on attaining our cost targets we now expect the operating as much as 81 per cent. Net indebtedness at year-end will be well result for the current financial year to exceed the EUR 800m mark. down on last year. The equity ratio is approaching the target of If the economy develops as forecast and the course of business 30 per cent. Gearing has already been brought back into its target is not undermined by a ­disproportionate increase in fuel prices corridor of 40 to 60 per cent. or other unforeseeable ­factors, it can generally be assumed from a current perspective that the result will continue to develop The development of the Group will continue to be managed ­positively in 2011, too. The extent to which the air traffic tax will according to the principles of value-based management. Cash lead to a downturn in demand is difficult to predict, however. value added (CVA) is the relevant indicator. Detailed information on this management philosophy can be found in the 2009 Annual The opportunities described in the 2009 Annual Report on p. 142 could Report from S. 45 onwards. Lufthansa’s objective is to generate posi- be realised and in some cases even be exceeded. The volatility tive value over the cycle. For the period 2000 to 2009 this goal of the variables in the aviation sector will nevertheless remain high. has been achieved, with a CVA of EUR 2.1bn. Given the factors The current forecast is therefore also subject to the usual risks adversely affecting the first half of the year and the broader capital for the sector. A weakening of the economic environment, in par- base, we assume, however, that CVA is still negative for 2010. ticular the introduction of the air traffic tax or an increase in fuel prices, could lead to a severe slump in business performance Information on the economic, product and other developments in if these additional burdens cannot be passed on adequately to the individual segments can be found in the respective chapters. passengers. We are nevertheless upholding our ambition of taking a sustainable leading position in the air transport industry in terms of profitability and value creation.

Lufthansa 3rd Interim Report January – September 2010 31 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Consolidated income statement January – September 2010

Jan. – Sept. Jan. – Sept. July– Sept. July – Sept. in €m 2010 2009 2010 2009

Traffic revenue 16,445 12,589 6,242 4,743 Other revenue 3,748 3,573 1,326 1,193 Total revenue 20,193 16,162 7,568 5,936

Changes in inventories and work performed by entity and capitalised 120 179 50 58 Other operating income 2,032 1,785 566 539 Cost of materials and services – 11,445 – 9,172 – 4,140 – 3,402 Staff costs – 4,820 – 4,307 – 1,627 – 1,459 Depreciation, amortisation and impairment – 1,240 – 1,061 – 442 – 387 Other operating expenses – 3,971 – 3,270 – 1,040 – 989 Profit / loss from operating activities 869 316 935 296

Result of equity investments accounted for using the equity method 28 8 32 17 Result of other equity investments 43 39 17 10 Interest income 139 126 32 45 Interest expenses – 389 – 361 – 135 – 142 Other financial items 17 – 155 – 91 36 Financial result – 162 – 343 – 145 – 34 Profit / loss before income taxes 707 – 27 790 262

Income taxes – 175 70 – 160 – 47 Profit / loss after income taxes 532 43 630 215

Profit / loss attributable to minority interests – 8 – 12 – 2 – 6 Net profit / loss attributable to shareholders of Deutsche Lufthansa AG 524 31 628 209

Basic earnings per share in € 1.14 0.07 1.37 0.46 Diluted earnings per share in € 1.14 0.07 1.36 0.45

32 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders | Interim management report Interim financial statements | Further information Consolidated income statement Statement of comprehensive income

Statement of comprehensive income January – September 2010

Jan. – Sept. Jan. – Sept. July – Sept. July – Sept. in €m 2010 2009 2010 2009

Profit / loss after income taxes 532 43 630 215

Other comprehensive income Differences from currency translation 203 – 47 – 7 12 Subsequent measurement of available-for-sale financial assets 423 210 61 142 Subsequent measurement of cash flow hedges 83 – 403 – 572 – 313 Revaluation due to business combinations 0 – 44 0 – 44 Other comprehensive income from investments accounted for using the equity method – 6 – 6 0 0 Other expenses and income recognised directly in equity 13 3 – 11 5 Income taxes on items in other comprehensive income – 29 110 145 73 Other comprehensive income after income taxes 687 – 177 – 384 – 125

Total comprehensive income 1,219 – 134 246 90 Comprehensive income attributable to minority interests 5 46 – 8 41 Comprehensive income attributable to shareholders of Deutsche Lufthansa AG 1,214 – 180 254 49

Lufthansa 3rd Interim Report January – September 2010 33 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Consolidated balance sheet as of 30 September 2010

Assets in €m 30.9.2010 31.12.2009 30.9.2009

Intangible assets with an indefinite useful life * 1,573 1,511 1,491 Other intangible assets 323 328 315 Aircraft and reserve engines 11,169 10,444 10,332 Repairable spare parts for aircraft 863 810 777 Property, plant and other equipment 2,123 2,157 2,157 Investment property 3 3 3 Investments accounted for using the equity method 369 320 327 Other equity investments 1,046 878 895 Non-current securities 251 349 428 Loans and receivables 407 506 390 Derivative financial instruments 344 255 217 Deferred charges and prepaid expenses 29 31 20 Effective income tax receivables 60 69 69 Deferred tax assets 5 35 21 Non-current assets 18,565 17,696 17,442

Inventories 658 646 640 Trade receivables and other receivables 3,954 3,033 3,910 Derivative financial instruments 303 252 154 Deferred charges and prepaid expenses 147 128 144 Effective income tax receivables 118 105 24 Securities 4,190 3,303 3,399 Cash and cash equivalents 1,490 1,136 1,359 Assets held for sale 76 93 209 Current assets 10,936 8,696 9,839

Total assets 29,501 26,392 27,281

* Including goodwill.

34 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders | Interim management report Interim financial statements | Further information Consolidated balance sheet

Shareholders’ equity and liabilities in €m 30.9.2010 31.12.2009 30.9.2009

Issued capital 1,172 1,172 1,172 Capital reserve 1,366 1,366 1,366 Retained earnings 2,955 2,972 2,972 Other neutral reserves 1,291 618 490 Net profit / loss 524 – 34 31 Equity attributable to shareholders of Deutsche Lufthansa AG 7,308 6,094 6,031 Minority interests 95 108 106 Shareholders’ equity 7,403 6,202 6,137

Pension provisions 2,595 2,710 2,975 Other provisions 581 620 579 Borrowings 6,480 6,109 6,163 Other financial liabilities 91 87 48 Advance payments received, deferred income and other non-financial liabilities 1,066 1,000 992 Derivative financial instruments 93 225 284 Deferred tax liabilities 769 663 589 Non-current provisions and liabilities 11,675 11,414 11,630

Other provisions 1,003 1,122 975 Borrowings 810 693 801 Trade payables and other financial liabilities 4,532 3,796 4,037 Liabilities from unused flight documents 2,740 1,906 2,272 Advance payments received, deferred income and other non-financial liabilities 1,054 1,008 1,146 Derivative financial instruments 118 106 190 Effective income tax obligations 166 145 93 Current provisions and liabilities 10,423 8,776 9,514

Total shareholders’ equity and liabilities 29,501 26,392 27,281

Lufthansa 3rd Interim Report January – September 2010 35 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Consolidated statement of changes in shareholders’ equity as of 30 September 2010

Issued Capital Fair value Currency Reva- Other Total Retained Net pro- Equity Minority Total capital reserve measure- differ- luation neutral other earnings fit / loss attrib­- interests share­ ment of ences reserve reserves neutral ut­able to holders’ financial (due to reserves share­ equity instru- business holders of ments combi­ Deutsche nations) Lufthansa in €m AG

As of 31.12.2008 1,172 1,366 1 – 52 237 393 579 2,872 542 6,531 63 6,594 Changes in accounting policies – – 122 – – – 122 – 122 – – – – Adjusted as of 31.12.2008 1,172 1,366 123 – 52 237 393 701 2,750 542 6,531 63 6,594

Capital increases / reductions – – – – – – – – – – 6 6 Reclassifications – – – – – 2 2 222 – 222 2 – 2 – Dividends to Lufthansa shareholders / minority interests – – – – – – – – – 320 – 320 – 9 – 329 Consolidated net profit / loss attributable to minority interests – – – – – – – – 31 31 12 43 Other expenses and income recognised directly in equity * – – – 83 – 47 – 44 – 39 – 213 – – – 213 36 – 177 Adjusted as of 30.9.2009 1,172 1,366 40 – 99 193 356 490 2,972 31 6,031 106 6,137

As of 31.12.2009 1,172 1,366 118 – 70 193 333 574 3,094 – 112 6,094 108 6,202 Changes in accounting policies – – 44 – – – 44 – 122 78 – – – Adjusted as of 31.12.2009 1,172 1,366 162 – 70 193 333 618 2,972 – 34 6,094 108 6,202

Capital increases / reductions – – – – – – – – – – – – Reclassifications – – – – – – 1 – 1 – 34 34 – 1 1 – Dividends to Lufthansa shareholders / minority interests – – – – – – – – – – – 18 – 18 Consolidated net profit / loss attributable to minority interests – – – – – – – – 524 524 8 532 Other expenses and income recognised directly in equity * – – 477 203 – – 6 674 17 – 691 – 4 687 As of 30.9.2010 1,172 1,366 639 133 193 326 1,291 2,955 524 7,308 95 7,403

* Please refer to page 33 for more information on other comprehensive income.

36 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders | Interim management report Interim financial statements | Further information Consolidated statement of changes in shareholders’ equity Consolidated cash flow statement

Consolidated cash flow statement January – September 2010

Jan. – Sept. Jan. – Sept. July – Sept. July – Sept. in €m 2010 2009 2010 2009

Cash and cash equivalents 1.1. 1) 1,136 1,444 1,424 1,029

Net profit / loss before income taxes 707 – 27 790 262 Depreciation, amortisation and impairment losses on non-current assets (net of reversals) 1,224 1,200 452 391 Depreciation and impairment losses on repairable spare parts for aircraft 5 77 20 15 Net proceeds from disposal of non-current assets – 192 – 36 – 8 0 Result of equity investments – 71 – 47 – 49 – 27 Net interest 250 235 103 97 Income tax payments / reimbursements – 43 58 – 6 56 Change in working capital 2) 545 – 22 – 297 – 386 Cash flow from operating activities 2,425 1,438 1,005 408

Capital expenditure for property, plant and equipment and intangible assets – 1,728 – 1,614 – 785 – 547 Capital expenditure for financial investments – 21 – 14 0 – 7 Additions to repairable spare parts for aircraft – 47 – 139 – 29 – 26 Proceeds from disposal of non-consolidated equity investments 109 91 0 1 Proceeds from disposal of consolidated equity investments 0 0 0 0 Cash outflows for acquisitions of non-consolidated equity investments – 9 – 93 – 1 – 5 Cash outflows for acquisitions of consolidated equity investments 3) – 2 – 56 0 – 53 Proceeds from disposal of intangible assets, property, plant and equipment and other financial investments 298 207 37 23 Interest income 257 107 90 37 Dividends received 55 55 18 11 Net cash from / used in investing activities – 1,088 – 1,456 – 670 – 566 Purchase of securities / fund investments – 1,647 – 2,465 – 758 – 219 Disposal of securities / fund investments 667 869 473 77 Net cash from / used in investing and cash management activities – 2,068 – 3,052 – 955 – 708

Capital increase 4) 0 6 0 6 Non-current borrowing 815 2,501 419 906 Repayment of non-current borrowing – 544 – 419 – 226 – 206 Other financial debt 81 13 61 6 Dividends paid – 18 – 329 – 5 – 1 Interest paid – 379 – 227 – 231 – 78 Net cash from / used in financing activities – 45 1,545 18 633

Net increase / decrease in cash and cash equivalents 312 – 69 68 333 Changes due to currency translation differences 42 – 16 – 2 – 3 Cash and cash equivalents 30.9. 1) 1,490 1,359 1,490 1,359 Securities 4,190 3,399 4,190 3,399 Total liquidity 5,680 4,758 5,680 4,758 Net increase / decrease in total liquidity 1,241 1,480 314 469

1) Presented for the individual quarter, cash and cash equivalents as of 1 July. 2) Working capital consists of inventories, receivables, liabilities and provisions. 3) Previous year less cash balances acquired of EUR 431m. 4) Previous year capital increase of minority interests.

Lufthansa 3rd Interim Report January – September 2010 37 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Notes the “inner value” of the option. The change in the “time value” is recognised in the financial result, which leads to corresponding fluctuations in net profit/loss for the period. This has no effect on 1) Standards applied and changes in the group realised hedging gains or losses on hedged items. Changes in the of consolidated companies time value of the options are always equalised in full at the time of The consolidated financial statements of Deutsche Lufthansa AG realisation, because the time value of the hedging combinations and its subsidiaries have been prepared in accordance with the most commonly used is always zero when the hedging transaction International Financial Reporting Standards (IFRS) issued by the is closed and when the financial derivative is realised. This there- International Accounting Standards Board (IASB), taking account fore has no effect on the Group’s assets and financial position. of interpretations by the IFRS Interpretations Committee (IFRIC) The Lufthansa Group is presenting the changes retrospectively as applicable in the (EU). This interim report as as of the 2010 financial year, i. e. the previous year’s figures have of 30 September 2010 has been prepared in condensed form in been adjusted as if the amended IAS 39 had already been applied accordance with IAS 34. In preparing the interim financial state- at that point in time. If the amended IAS 39 had been applied to ments the standards and interpretations applicable as of 1 Janu- the interim report as of 30 September 2009, the profit/loss before ary 2010 have been applied. Following the amendment to IAS 39 income taxes would have been EUR 78m higher and the net profit Financial Instruments: Recognition and Measurement, from the after income taxes would have been EUR 63m higher. The other financial year 2010 onwards it is no longer possible to recognise standards and ­interpretations applicable as of 1 January 2010 did the change in total market value of an option used as a hedge (full not have a ­significant effect on the Group’s net assets, financial fair value method) in equity as part of hedge accounting, but only and earnings position in the reporting period.

Changes in the group of consolidated companies in the period 1.10.2009 to 30.9.2010

Name, registered office Consolidated as of Deconsolidated as of Reason

Passenger Airline Group segment Edelweiss Air AG, Kloten, Switzerland 1.1.10 Consolidated for the first time Ingrid Finance 2010 S.N.C., Paris, France 15.5.10 Established Soir Leasing Co., Ltd., Tokyo, Japan 25.6.10 Established Ellen Finance 2010 S.N.C., Paris, France 25.6.10 Established FI Beauty Leasing Ltd., Tokyo, Japan 28.6.10 Established First Valley Highway Kumiai, Tokyo, Japan 29.6.10 Established Second Valley Highway Kumiai, Tokyo, Japan 29.6.10 Established Third Valley Highway Kumiai, Tokyo, Japan 29.6.10 Established AirNavigator Ltd., Tokyo, Japan 29.6.10 Established Lufthansa Leasing Austria GmbH & Co. OG Nr. 2, Salzburg, Austria 6.7.10 Established Lufthansa Leasing Austria GmbH & Co. OG Nr. 3, Salzburg, Austria 6.7.10 Established Lufthansa Leasing Austria GmbH & Co. OG Nr. 4, Salzburg, Austria 6.7.10 Established Lufthansa Leasing Austria GmbH & Co. OG Nr. 5, Salzburg, Austria 6.7.10 Established Lufthansa Leasing Austria GmbH & Co. OG Nr. 6, Salzburg, Austria 6.7.10 Established Lufthansa Leasing Austria GmbH & Co. OG Nr. 7, Salzburg, Austria 6.7.10 Established Lufthansa Leasing Austria GmbH & Co. OG Nr. 8, Salzburg, Austria 6.7.10 Established Lufthansa Leasing Austria GmbH & Co. OG Nr. 9, Salzburg, Austria 6.7.10 Established Lufthansa Leasing Austria GmbH & Co. OG Nr. 10, Salzburg, Austria 6.7.10 Established Jour Leasing Co., Ltd., Tokyo, Japan 16.7.10 Established Lufthansa Leasing GmbH & Co. Fox-Bravo oHG, Grünwald, Germany 15.7.10 Liquidation Lufthansa Leasing GmbH & Co. Fox-Charlie oHG, Grünwald, Germany 15.7.10 Liquidation UIA Beteiligungsgesellschaft mbH, Wien, Austria 1.4.10 Disposal Suriba Beteiligungsverwaltungs GmbH, Wien, Austria 10.6.10 Merger

38 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders | Interim management report Interim financial statements | Further information Notes

Changes in the group of consolidated companies in the period 1.10.2009 to 30.9.2010

Name, registered office Consolidated as of Deconsolidated as of Reason

Segment MRO Lufthansa Technik Budapest Repülögép Nagyjavító Kft., Budapest, Hungary 1.1.10 Consolidated for the first time Lufthansa Technik Malta Limited, Malta 1.1.10 Consolidated for the first time Lufthansa Technik Aircraft Services Ireland Limited, Shannon, Ireland 26.2.10 Liquidation

Segment Catering Oakfield Farms Solutions, L.L.C., Wilmington, USA 1.10.09 Established Starfood Antalya Gida Sanayi ve Ticaret A.S., Istanbul, Turkey 10.8.10 Established

­British Midland Airways Ltd. and its holding company British ­Midland plc were only included in the consolidated financial ­statements for Deutsche Lufthansa AG for the first time as of 1 July 2009, and Austrian Airlines AG and its subsidiaries were consolidated as of 3 September 2009. As a result, the figures for last year are only partially comparable. The table on p. 38 – 39 shows the companies which have joined or left the group of ­consolidated companies compared with year-end 2009 and 30 September 2009.

Assets held for sale

30.9.2010 Financial 30.9.2009 Statements in €m 31.12.2009

Assets Aircraft and spare engines 76 91 66 Financial assets – 2 143 Other assets – – –

Equity / liabilities associated with assets held for sale Shareholders’ equity – – – Liabilities – – –

Lufthansa 3rd Interim Report January – September 2010 39 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 2) Notes to the income statement, balance sheet, 5) Earnings per share cash flow statement and segment reporting Detailed comments on the income statement, the balance sheet, the cash flow statement and the segment reporting can be found in the management report on p. 3 – 31 . Jan. – Sept. Jan. – Sept. 2010 2009

3) Seasonality Basic earnings per share € 1.14 0.07 The Group’s business is mainly exposed to seasonal effects via Consolidated net profit / loss €m 524 31 the Passenger Airline Group segment. As such, revenue in the first Weighted average number of shares 457,937,572 457,870,209 and fourth quarters is generally lower as people travel less, while Diluted earnings per share € 1.14 0.07 higher revenue and operating profits are normally earned in the Consolidated net profit / loss €m 524 31 second and third quarters. + interest expenses on the convertible bonds €m 0 1 4) Contingencies and events after the balance sheet date – current and deferred taxes €m 0 0 Adjusted net profit / loss for the period €m 524 32 Weighted average number of shares 460,462,194 460,405,153 Contingent liabilities in €m 30.9.2010 31.12.2009 6) Issued capital

From guarantees, bills of exchange A resolution passed at the Annual General Meeting on 24 April and cheque guarantees 912 855 2009 authorised the Executive Board until 23 April 2014, subject From warranty contracts 964 897 to approval by the Supervisory Board, to increase the Company’s From providing collateral issued capital by up to EUR 25m by issuing new registered shares for third-party liabilities 14 13 to employees for payment in cash. The new shares are to be offered for sale solely to employees of Deutsche Lufthansa AG Several provisions could not be made because an outflow of and its affiliated companies. Existing shareholders’ subscription re­sources was not sufficiently probable. The potential financial rights are excluded. As the parent company of the Group, Deutsche effect of these provisions on the result would have been EUR 170m Lufthansa AG posted a net loss of EUR 148m for the 2009 finan- for subsequent years. As of the year-end reporting date for 2009 cial year. Retained earnings of a corresponding sum were trans- the figure was EUR 163m. Signed contracts for the sale of one AT ferred to achieve a net result of zero, so that no distributable profit 42-500 and one AT 72-500 are expected to generate profits of from which to pay a dividend was reported. EUR 2m by the end of 2010. These disposals as well as signed contracts for the sale of one Airbus A300-600 and six Canadair Regional Jet 200s will result in total cash inflow of EUR 23m in 2010 and EUR 9m in 2011. At the end of September 2010, there were order commitments of EUR 6.7bn for capital expenditure on property, plant and equipment and intangible assets. As of 31 December 2009, the order commitments came to EUR 6.4bn.

Since 1 October 2010 no events of particular importance have occurred that the Lufthansa Group would expect to have a signifi- cant influence on its net assets, financial and earnings position.

40 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders | Interim management report Interim financial statements | Further information Notes

7) Segment reporting

Segment information by operating segment January – September 2010

Passenger Logistics MRO 1) IT Services Catering 1) Total Other Reconciliation Group ­Airline reportable ­Group 1) operating in €m segments

External revenue 14,970 1,996 1,774 175 1,278 20,193 – – 20,193 of which traffic revenue 14,193 1,908 16,101 – 344 16,445 Inter-segment revenue 490 18 1,209 263 396 2,376 – – 2,376 – Total revenue 15,460 2,014 2,983 438 1,674 22,569 – – 2,376 20,193

Other operating income 909 72 146 21 48 1,196 962 – 431 1,727 Total operating income 16,369 2,086 3,129 459 1,722 23,765 962 – 2,807 21,920 Operating expenses 16,151 1,856 2,918 447 1,672 23,044 1,076 – 2,812 21,308 of which cost of materials and services 9,914 1,321 1,503 56 743 13,537 68 – 2,160 11,445 of which staff costs 2,812 243 805 178 593 4,631 196 – 4 4,823 of which depreciation and amortisation 932 85 69 25 44 1,155 33 7 1,195 of which other operating expenses 2,493 207 541 188 292 3,721 779 – 655 3,845 Operating result 2) 218 230 211 12 50 721 – 114 5 612

Other segment income 135 3 12 0 * 2 152 35 238 425 Other segment expenses 31 10 0 * 9 1 51 10 107 168 of which impairment losses 27 9 – 8 1 45 – – 1 44 Result of investments accounted for using the equity method – 17 17 15 – 12 27 1 – 28 Segment result 3) 305 240 238 3 63 849 – 88 136 897

Other financial result – 190 Profit before income taxes 707 Segment assets 4) 15,142 806 2,986 259 1,257 20,450 1,531 7,520 29,501 of which from investments accounted for using the equity method 105 42 150 – 67 364 4 1 369 Segment liabilities 5) 10,052 436 1,333 207 516 12,544 1,407 8,147 22,098 Segment capital expenditure 6) 1,612 11 40 25 23 1,711 12 37 1,760 of which on investments accounted for using the equity method – – – – – – – – – Staff on balance sheet date 56,965 4,499 20,244 2,955 28,435 113,098 3,740 – 116,838

* Rounded below EUR 1m. 1) Previous year’s figures only partially comparable due to changes in the group of consolidated companies. 2) See page 9 of the interim management report for reconciliation between operating result and profit from operating activities. 3) Profit from operating activities including result of investments shown at equity. 4) Intangible assets, property, plant and equipment, investments accounted for using the equity method, inventories, trade receivables and other assets constitute assets. Under the heading “Group” all assets are shown. 5) All liabilities with the exception of financial debt, liabilities to Group companies, derivative financial instruments, other deferred income and tax obligations. Under the heading “Group” all liabilities are shown. 6) Capital expenditure for intangible assets, property, plant and equipment, and investments accounted for using the equity method. Under the heading “group” all capital expenditures are shown.

Lufthansa 3rd Interim Report January – September 2010 41 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Segment information by operating segment January – September 2009

Passenger Logistics MRO IT Services Catering Total Other Reconciliation Group ­Airline reportable ­Group operating in €m segments

External revenue 11,608 1,371 1,794 187 1,202 16,162 – – 16,162 of which traffic revenue 11,055 1,317 12,372 – 217 12,589 Inter-segment revenue 442 18 1,214 264 384 2,322 – – 2,322 – Total revenue 12,050 1,389 3,008 451 1,586 18,484 – – 2,322 16,162

Other operating income 1,008 80 101 27 98 1,314 891 – 427 1,778 Total operating income 13,058 1,469 3,109 478 1,684 19,798 891 – 2,749 17,940 Operating expenses 12,819 1,669 2,880 466 1,631 19,465 989 – 2,740 17,714 of which cost of materials and services 7,710 1,133 1,532 60 712 11,147 63 – 2,038 9,172 of which staff costs 2,361 232 786 174 590 4,143 186 – 4 4,325 of which depreciation and amortisation 729 92 64 27 44 956 32 5 993 of which other operating expenses 2,019 212 498 205 285 3,219 708 – 703 3,224 Operating result 1) 239 – 200 229 12 53 333 – 98 – 9 226

Other segment income 153 6 6 – 1 166 39 – 19 186 Other segment expenses 6) 85 – – 1 – 12 74 27 – 5 96 of which impairment losses 6) 68 – – – – 68 – – 68 Result of investments accounted for using the equity method – 1 1 1 – 7 8 – – 8 Segment result 2), 6) 306 – 193 236 11 73 433 – 86 – 23 324

Other financial result – 429 Profit before income taxes – 27 Segment assets 3) 14,036 823 2,845 269 1,213 19,186 1,578 6,517 27,281 of which from investments shown at equity 132 23 112 – 49 316 10 1 327 Segment liabilities 4) 9,571 461 1,355 195 478 12,060 1,348 7,736 21,144 Segment capital expenditure 5) 1,462 17 81 43 40 1,643 54 80 1,777 of which from investment accounted for using the equity method 65 4 – – – 69 – – 69 Staff on balance sheet date 58,907 4,542 19,823 3,028 28,871 115,171 3,774 – 118,945

1) See page 9 of the interim management report for reconciliation between operating result and profit from operating activities. 2) Profit from operating activities including result of investments shown at equity. 3) Intangible assets, property, plant and equipment, investments accounted for using the equity method, inventories, trade receivables and other assets constitute assets and are presented. Under the heading “Group” all assets are shown. 4) All liabilities with the exception of financial debt, liabilities to Group companies, derivative financial instruments, other deferred income and tax obligations are presented. Under the heading “Group” all liabilities are shown. 5) Capital expenditure for intangible assets, property, plant and equipment, and investments accounted for using the equity method. Under the heading “group” all capital expenditures are shown. 6) Last year’s figures have been adjusted to simplify presentation.

42 Lufthansa 3rd Interim Report January – September 2010 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 To our shareholders | Interim management report Interim financial statements Further information Notes Declaration by the legal representatives

Information about geographical areas January – September 2010

Europe thereof North thereof Central Asia / Pacific Middle East Africa Total Germany America U.S.A. and South in €m America

Traffic revenue * 10,404 3,904 2,353 2,057 382 2,443 529 334 16,445 Other operating revenue 1,704 521 757 678 118 735 244 190 3,748 Total revenue 12,108 4,425 3,110 2,735 500 3,178 773 524 20,193

* Traffic revenue is allocated by original place of sale.

Information about geographical areas ** January – September 2009

Europe thereof North thereof Central Asia / Pacific Middle East Africa Total Germany America U.S.A. and South in €m America

Traffic revenue * 8,377 3,882 1,729 1,539 281 1,540 422 240 12,589 Other operating revenue 1,733 658 703 617 113 638 211 175 3,573 Total revenue 10,110 4,540 2,432 2,156 394 2,178 633 415 16,162

* Traffic revenue is allocated by original place of sale. ** Regional classification adjusted in line with IATA standard.

8) Related party disclosures Declaration by the legal representatives As stated in Note 48 to the consolidated financial statements for 2009 on p. 204 , the operating segments in the Lufthansa Group We declare that to the best of our knowledge and according to render numerous services to related parties within the scope of the applicable accounting standards for interim reporting the their ordinary business activities and also receive services from ­consolidated interim financial statements give a true and fair view them. These extensive supply and service relationships take place of the net assets, financial and earnings position of the Group and unchanged on the basis of market prices. There have been no that the Group interim management report gives a true and fair significant changes in comparison with the balance sheet date. view of the course of business, including the business result, and The contractual relationships with the group of related parties the situation of the Group, and suitably presents the opportuni- described in Note 49 p. 206 – 209 to the 2009 consolidated financial ties and risks to its future development in the remainder of the statements also still exist unchanged, but are not of material sig­ finan­cial year. nificance for the Group.

Executive Board, 28 October, 2010

Wolfgang Mayrhuber Christoph Franz Stephan Gemkow Stefan Lauer Chairman of the Deputy Chairman of the Member of the Executive Board Member of the Executive Board Executive Board Executive Board and Chief Financial Officer Chief Officer Group Airlines and CEO CEO Lufthansa and Corporate German Airlines Human Resources

Lufthansa 3rd Interim Report January – September 2010 43 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Credits Contact

Published by Frank Hülsmann Deutsche Lufthansa AG Head of Investor Relations Von-Gablenz-Str. 2– 6 + 49 69 696 – 28001 50679 Cologne Germany Johannes Hildenbrock + 49 69 696 – 28003 Entered in the Commercial Register of Cologne, District Court under HRB 2168 Jobst Honig + 49 69 696 – 28011 Editorial staff Frank Hülsmann (Editor) Gregor Schleussner Claudio Rizzo + 49 69 696 – 28012 Anna-Maria Wehenkel Deutsche Lufthansa AG Deutsche Lufthansa AG, Investor Relations Investor Relations LAC, Airportring Foto 60546 Frankfurt / M. Jens Görlich, Oberursel, Germany Telephon: + 49 69 696 – 28008 Telefax: + 49 69 696 – 90990 Concept, design and realisation E-Mail: [email protected] HGB Hamburger Geschäftsberichte GmbH & Co. KG, Hamburg, Germany The Lufthansa 3rd Interim Report is a translation of the original German Lufthansa Zwischen- Translation by bericht 3/2010. Please note that only the German EnglishBusiness GbR, version is legally binding. Hamburg, Germany You can order the Annual and Interim Printed by Reports in German or English via our website – Broermann Offset-Druck, Troisdorf, ­Germany www.lufthansa.com/investor-relations – or from Printed on Circlesilk Premium White the address above. (100 per cent recycled paper ­bearing the EU Ecolabel, licence number 03/05/5) The latest financial information on the internet: www.lufthansa.com/investor-relations Printed in Germany ISSN 1616-0258 WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 Lufthansa Group overview

Key fi gures Lufthansa Group Financial calendar 2011

Jan. – Sept. Jan. – Sept. Change July – Sept July – Sept. Change 2010 2009 3) in % 2010 2009 3) in % 17 March Press Conference and Analysts’ Conference Revenue and result on 2010 results Total revenue €m 20,193 16,162 24.9 7,568 5,936 27.5 of which traffi c revenue €m 16,445 12,589 30.6 6,242 4,743 31.6 3 May Annual General Meeting, Berlin Operating result €m 612 226 170.8 783 218 259.2 EBIT €m 957 208 360.1 893 359 148.7 5 May Release of Interim Report January – March 2011 EBITDA €m 2,206 1,417 55.7 1,330 753 76.6 Net profi t/loss for the period €m 524 31 628 209 200.5 28 July Release of Interim Report January – June 2011 Key balance sheet and cash fl ow statement fi gures 27 Oct Press Conference and Analysts’ Conference Total assets €m 29,501 27,281 8.1 – – – on interim result January – September 2011 Equity ratio % 25.1 22.5 2.6 pts – – – Net indebtedness €m 1,521 1,908 – 20.3 – – – Cash fl ow from operating activities €m 2,425 1,438 68.6 1,005 408 146.3 Capital expenditure (gross) €m 1,760 1,777 – 1.0 786 612 28.4

Key profi tability and value creation fi gures Adjusted operating margin 1) % 3.5 2.0 1.5 pts 11.1 4.5 6.6 EBITDA margin % 10.9 8.8 2.2 pts 17.6 12.7 4.9

The Lufthansa share Share price at the quarter-end € 13.49 12.11 11.4 – – – Earnings per share € 1.14 0.07 1.36 0.45 302

Traffi c fi gures2) Passengers thousands 67,869 55,635 22.0 26,089 22,432 16.3 Passenger load factor % 79.7 78.0 1.7 pts 83.6 82.6 1.0 pts thousand Freight and mail tonnes 1,468 1,231 19.3 530 443 19.8 Cargo load factor % 68.0 58.1 9.9 pts 66.4 61.6 4.8 pts Available tonne-kilometres millions 28,780 25,907 11.1 10,380 9,550 8.7 Revenue tonne-kilometres millions 21,479 17,994 19.4 7,943 7,026 13.0 Overall load factor % 74.6 69.5 5.1 pts 76.5 73.6 2.9 pts Flights number 763,170 638,492 19.5 271,316 244,538 11.0

Employees Employees as of 30.9. number 116,838 118,945 – 1.8 116,838 118,945 – 1.8

1) Performance indicator to enable comparison with other airlines: (operating result + write-backs of provisions) / revenue. 2) Lufthansa Group without Germanwings. 3) Last year’s fi gures have been restated in line with measurement changes under IAS 39. Date of publication: 28 October 2010.

Contents Disclaimer in respect of forward-looking statements Information published in the 3rd Interim Report 2010, with regard to the future development of the Lufthansa Group and its subsidiaries consists purely 1 To our shareholders 43 Further information of forecasts and assessments and not of defi nitive historical facts. Its purpose is exclusively informational identifi ed by the use of such cautionary terms as “believe”, “expect”, “forecast”, “intend”, “project”, “plan”, “estimate” or “intend”. These forward-looking statements are based on all discernible 3 Interim management report 44 Credits/Contact information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication. 32 Interim fi nancial statements 45 Financial calendar 2011 Since forward-looking statements are by their nature subject to uncertainties and imponderable risk factors – such as changes in underlying economic conditions – and rest on assumptions that may not or divergently occur, it is possible that the Group’s actual results and development may differ materially from those implied by the forecasts. Lufthansa makes a point of checking and updating the information it publishes. It cannot, however, assume any obligation to adapt forward-looking statements to accommodate events or developments that may occur at some later date. Accordingly, it neither expressly nor conclusively accepts liability, nor gives any guarantee, for the actuality, accuracy and completeness of this data and information.

To the extent that the interim Group management report refers to sources other than the interim Group management report or the interim consolidated fi nancial statements (e.g. internet sites), the contents of these sources are not part of the interim Group management report and are solely for informational purposes. WorldReginfo - f85274c6-5a41-42dd-b8f1-b9558fa92b70 3rd Interim Report January – September 2010 Ready for boarding 3

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