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Expert Session Eurowings Management Presentation Expert Session Eurowings Management Presentation 10.06.2016 | London Disclaimer in respect of forward-looking statements Information published in this presentation concerning the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of definitive facts. These forward-looking statements are based on all discernible information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication. 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 occur, or may occur differently, it is possible that the Group’s actual results and development may differ materially from the forecasts. Lufthansa makes a point of checking and updating the information it publishes. However, the Company is under no obligation to update forward- looking statements or adapt them to subsequent events or developments. Accordingly, it neither explicitly nor implicitly accepts liability, nor gives any guarantee for the actuality, accuracy or completeness of this data and information. 3 Anwendungsbeispiele PowerPoint Agenda 1 Market environment and positioning of Eurowings 2 Commercial strategy 3 Organizational setup and financials 4 Growth opportunities through innovative Eurowings cooperation model 5 Summary and next steps 4 Expert Session Eurowings I 10.06.2016 Eurowings builds on the success of Germanwings Development of Eurowings in three phases New Eurowings Growth 1 Germanwings 2 Group 3 opportunities . Transfer of non-hub . CR9 conversion to . Organic growth: traffic from Lufthansa homogenous A320 fleet re-fleeting, additional to ‘New Germanwings’ aircraft and Lufthansa . Greenfield LCC operating from 2013 (30 aircraft) Group internal platform EW Europe consolidation . New fare concept . First base outside . External growth option: BASIC, SMART, BEST Germany in VIE various alternatives . Start of long-haul (strategic partnerships and M&A) . Financial turn-around / operations . Innovative cooperation break-even in 2015 . EW Group bundling model to foster profitable activities for all AOCs growth and benefit from . Eurowings as lead brand consolidation in Europe 5 Expert Session Eurowings I 10.06.2016 The business model has proven successful Financial turnaround achieved in 2015 EBIT development RASK / CASK development in m EUR in eurocents break-even RASK CASK 2012 2013 2014 2015 2015 vs. 2013 10.8 10.6 CASK -7% RASK -4% 10.0 excludes other operating income 9.9 9.9 (wetlease revenues, > +13pts. FX gains, etc.) EBIT-margin 9.5 ASK Share: Germanwings / Eurowings Lufthansa Lufthansa Direct Services Direct Services Germanwings / Eurowings > -200 m EUR 2013 2014 2015 . Successful turnaround despite increased LCC competition . CASK improvement overcompensates RASK decline . Constantly increasing load factor since 2013 6 Expert Session Eurowings I 10.06.2016 Eurowings holds #1 or #2 positions in all relevant German catchments Strong competitive position in Germany Cologne Hamburg = 14 = 21 HAM 23% 39% 44% = 55 = 90 62% 18% 17%7% = ~5.9m 15% = ~3.1m Stuttgart HAJ BER Berlin DTM = 14 DUS 11% = 8 33% 10% 50% = 59 57% = 30 6% CGN 32% 17% = ~4.4m = ~1.5m Düsseldorf Hanover 12% 25% = 30 = 1 20% 46% 7% = 77 STR 59% = 18 29% 29% = ~6.7m = ~0.7m Germany (non-hub airports) Eurowings operates from the heart of Europe Other EW • Decentral structure of German market; several large catchments = 89* 20% = 135 48% 11% LH • Premium position in high-yield markets with high purchasing power = ~22.5m* 21% • Shorter average sector length due to central geographic location in Europe AB Market shares based on offered outbound seats to Europe 2015; number of short- and long-haul fleet per base and number of destinations as of Jun 2016; *incl. Dortmund 7 Expert Session Eurowings I 10.06.2016 Eurowings leverages legacy advantages at lower cost Positioning of Eurowings within Lufthansa Group and LCC market Eurowings within LH Group Eurowings Positioning within the LCC Segment Eurowings leverages Ultra Traditional Modern LH Group advantages… Low Cost Low Cost Low Cost • LH status & corporate customer base . Single class, . Point-to-point . Point-to-point and • Frequent flyer program maximized seat network density . High frequency • Joint procurement . Leisure travelers and . Aggressive seat . Leisure travelers and price sensitive • Fleet management pricing, with strong price sensitive business travelers focus on ancillaries • Codesharing business travelers . Premium cabin, • Lounge access . Focus on leisure compromised seat travelers . Mainly primary und density … while maintaining secondary airports autonomy . Mainly secondary and . Frequently primary tertiary airports airports • P2P focus • Unbundled fares • Revenue management • Independent labour agreements • Non-legacy cost base • Separate IT system Cost Revenue (Navitaire) Position & Product 8 Expert Session Eurowings I 10.06.2016 Eurowings is able to retain LH Group customers and increase demand FFP data and travel profile of a frequent traveler Eurowings’ hybrid role Retain loyal Increase demand Raise purchase Lufthansa Group frequency and tap into new customer base target groups Example: flight travel pattern of a Miles&More Frequent flyer program Gold Status passenger from Hamburg Passengers with FFP-Membership Number of trips per year Lufthansa Eurowings Other Airlines 93% M&M 100 90 No FFP 76% 24% FFP 80 7% 70 Boomerang Club 60 Average revenue per segment 50 229 € 40 162 € 131 € 30 112 € 100 € 96 € 20 10 0 Non FFP Boomerang M&M FTL SEN HON Club Member 2011 2012 2013 2014 2015 FFP = Frequent Flyer Program; M&M = Miles&More; BC = Boomerang Club; FTL = Frequent Traveler (Silver Status); SEN = Senator (Gold Status); HON = Hon Circle Member (Platinum Status) 9 Expert Session Eurowings I 10.06.2016 Eurowings is one of the three pillars of the Lufthansa Group Stand-alone business within the leading Aviation Group First choice in aviation Premium network Eurowings Group Aviation Services carrier system #1 in Europe #1 in home markets* #1 worldwide • À-la-carte-concept • Point-to-point traffic • Pan-European and more * Germany, Austria, Switzerland and Belgium 10 Expert Session Eurowings I 10.06.2016 1 Market environment and positioning of Eurowings 2 Commercial strategy 3 Organizational setup and financials 4 Growth opportunities through innovative Eurowings cooperation model 5 Summary and next steps 11 Expert Session Eurowings I 10.06.2016 Eurowings serves more than 130 destinations High frequency domestic and European trunks plus attractive leisure routes Non-hub network 2011 Eurowings network 2016 LH+4U destinations ~110 EW destinations ~135 LH+4U seats offered ~24m EW seats offered ~26m • Primary European leisure destinations • High frequency on domestic and European served by Germanwings trunks (LON, PAR, MIL, BCN) • Primary domestic and European trunks • Touristic routes within central Europe served by Lufthansa (partly seasonal service) • 4U and LH networks not aligned • Leisure long-haul routes with a mix of „city“ and „beach“ destinations 12 Expert Session Eurowings I 10.06.2016 Eurowings strategy designed to fully exploit strong home market Domestic route network and KPI benchmark Domestic network 2016 Daily cycles, flight time and RASK 2015 Easyjet Comparable data for A320FAM aircraft Eurowings Vueling Wizz Air 9.5 7.2 6.5 5.9 5.6 5.7 5.0 4.2 1.6 1.9 1.3 1.5 Daily cycles Avg. flight duration RASK [flight hours] [eurocents / ASK] • High frequency domestic service • More daily cycles than competition and shorter (e.g. up to 10x daily CGN – TXL) average sector length • On average ~1,000 domestic • Structurally higher unit revenue than flights per week competitors plus additional premium • Domestic services account for ~30% • Potential to increase productivity with broader of total capacity European P2P network Source: Airbus; Annual Airline Reports 2015 13 Expert Session Eurowings I 10.06.2016 Network continuously enhanced to optimize schedule and mix Growth focus on leisure routes Our new Edinburgh European United Kingdom routes EDI NQT Faro Portugal Varna PSA PUY Bulgaria VAR BIA VLC FCO KVA SZF MAH BDS IBZ ALC CAG FAO Brindisi BJV Rhodos Antalya RHO AYT Gran Canaria Italy Greece Turkey Spain LPA 14 Expert Session Eurowings I 10.06.2016 Long-haul network serves leisure and selected city destinations Continuously growing long-haul network new new Miami Boston United States United States Bangkok Thailand BOS Phuket Thailand MIA HAV VRA Punta Cana CUN POP PUJ DXB Dominican BKK new Republic Havanna HKT Cuba new Port Louis Full charter destinations: Puerto Plata Mauritius Dominican Montego Bay, La Romana, Republic MRU Bridgetown, Salalah 15 Expert Session Eurowings I 10.06.2016 Eurowings serves price as well as value oriented customers Appealing to business and leisure passenger Eurowings customer segments Price-sensitive leisure travelers Value-conscious business travelers seeking lowest fares possible and corporate customers Upmarket leisure travelers, LH Groups most loyal customers willing to trade up for comfort traveling on non-hub routes Reason for ~75% Leisure/private ~25% Business travelling Clusters within 12% 28% 43% 12% 5% B2C segment Minimalistic One-time Recurring Long-term Frequent [Customer share] • Trip duration • Trip duration • Ø bookings per • Trip duration • Ø bookings per < 10 days < 7 days year > 2 >10 days year >10 • No frills / • Ancillaries
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