Annual Report 2019 CREATING SUSTAINABLE VALUE lufthansagroup.com lufthansagroup.com/investor-relations The Lufthansa Group The Lufthansa Group is the leading European airline group. It is composed of the segments Network Airlines, Eurowings and Aviation Services. T001 KEY FIGURES LUFTHANSA GROUP 1) 2019 2018 Change 2019 figures in % Revenue and result Total revenue €m 36,424 35,542 2 of which traffic revenue €m 28,136 27,801 1 Operating expenses €m 37,124 35,164 6 Adjusted EBITDA €m 4,718 5,016 – 6 Adjusted EBIT €m 2,026 2,836 – 29 36,424 EBIT €m 1,857 2,974 – 38 Revenue in EUR m Net profit/loss €m 1,213 2,163 – 44 Key balance sheet and cash flow statement figures Total assets €m 42,659 38,213 12 Equity ratio % 24.0 25.1 – 1.1 pts Net indebtedness €m 6,662 3,489 91 2,026 Pension provisions €m 6,659 5,865 14 Adjusted EBIT in EUR m Cash flow from operating activities €m 4,030 4,109 – 2 Capital expenditure (gross) 2) €m 3,559 3,757 – 5 Adjusted free cash flow €m 203 288 – 30 Key profitability and value creation figures 5.6 Adjusted EBITDA margin % 13.0 14.1 – 1.1 pts in % Adjusted EBIT margin % 5.6 8.0 – 2.4 pts Adjusted EBIT margin EBIT margin % 5.1 8.4 – 3.3 pts ROCE % 6.1 11.1 – 5.0 pts Adjusted ROCE % 6.6 10.6 – 4.0 pts Lufthansa share 3,559 Share price at year-end € 16.41 19.70 – 17 Capital expenditure in EUR m Earnings per share € 2.55 4.58 – 44 Proposed dividend per share € – 0.80 – 100 Traffic figures 3) Flights number 1,177,315 1,163,565 1 Passengers thousands 145,190 141,935 2 203 Available seat-kilometres millions 359,567 349,391 3 Adjusted free cash flow Revenue seat-kilometres millions 296,511 284,639 4 in EUR m Passenger load factor % 82.5 81.5 1.0 pts Available cargo tonne-kilometres millions 17,378 16,349 6 Revenue cargo tonne-kilometres millions 10,664 10,896 – 2 Cargo load factor % 61.4 66.6 – 5.2 pts Employees 6.6 Employees as of 31 Dec number 138,353 135,534 2 Adjusted ROCE in % Average number of employees number 137,784 134,330 3 1) The figures shown here and elsewhere in the report include effects from the first-time application of new accounting standards and other accounting changes. Detailed explanations and a detailed overview are provided in the chapter ↗ Earnings, assets and financial position, p. 33ff., of this Annual Report. Previous year’s figures have been adjusted accordingly. For ease of comparison with the forecast figures, the previous definitions have been kept in the reporting year for the year-on-year calculation of performance indicators (yields, RASK, CASK). 2) Without acquisition of equity investments. 3) Previous year’s figures have been adjusted. Date of publication: 19 March 2020. Business segments NETWORK AIRLINES T002 NETWORK AIRLINES 2019 Change The Network Airlines segment comprises Lufthansa in % German Airlines, SWISS and Austrian Airlines. With Revenue €m 23,106 2 their multi-hub strategy, the Network Airlines offer their of which traffic revenue €m 21,375 3 passengers a premium, high-quality product and service, Adjusted EBIT €m 1,805 – 26 and a comprehensive route network combined with the Adjusted EBIT margin % 7.8 – 3.0 pts highest level of travel flexibility. Adjusted ROCE % 12.2 – 7.2 pts Segment capital expenditure €m 2,605 1 Employees as of 31 Dec number 52,741 2 EUROWINGS T003 EUROWINGS 2019 Change The Eurowings segment comprises the flight operations in % of Eurowings and Brussels Airlines. The equity investment Revenue €m 4,123 1 in SunExpress is also part of this segment. Eurowings of which traffic revenue €m 3,987 0 provides an innovative and competitive offering for Adjusted EBIT €m – 166 28 price-sensitive and service-oriented customers in the Adjusted EBIT margin % – 4.0 1.6 pts growing European direct traffic segment. Adjusted ROCE % – 4.8 3.4 pts Segment capital expenditure €m 260 – 50 Employees as of 31 Dec number 8,809 – 5 C01 Business segments’ share of Group external revenue in % Additional Businesses and Group Functions 1 Catering 7 Logistics 7 MRO 12 Eurowings 11 62 Network Airlines 2 LUFTHANSA GROUP ANNUAL REPORT 2019 LOGISTICS T004 LOGISTICS 2019 Change In addition to Lufthansa Cargo AG, the Lufthansa Group’s in % logistics specialists, the Logistics segment includes the Revenue €m 2,478 – 9 airfreight container management specialist Jettainer group, of which traffic revenue €m 2,318 – 9 the time:matters subsidiary, which specialises in parti- Adjusted EBIT €m 1 – 100 cularly urgent consignments, and the equity investment Adjusted EBIT margin % 0 – 9.9 pts in the cargo airline AeroLogic. Adjusted ROCE % 0 – 14.6 pts Segment capital expenditure €m 286 – 24 Employees as of 31 Dec number 4,539 1 MRO T005 MRO 2019 Change Lufthansa Technik is the world’s leading independent in % provider of maintenance, repair and overhaul services Revenue €m 6,921 13 (MRO) for civilian commercial aircraft. Lufthansa Technik of which external revenue €m 4,378 11 AG serves more than 850 customers worldwide, including Adjusted EBIT €m 493 11 OEMs, aircraft leasing companies and operators of VIP Adjusted EBIT margin % 7.1 – 0.2 pts jets, as well as airlines. Adjusted ROCE % 6.8 – 0.6 pts Segment capital expenditure €m 313 28 Employees as of 31 Dec number 26,650 8 CATERING T006 CATERING 2019 Change The LSG group offers a comprehensive range of products, in % concepts and services related to in-flight service. As the Revenue €m 3,360 4 strongest revenue driver in the LSG group, LSG Sky Chefs of which external revenue €m 2,623 5 offers classical catering for airlines and rail operators, as Adjusted EBIT €m 128 11 well as lounge management. It is present at 205 airports in Adjusted EBIT margin % 3.8 0.2 pts 59 countries for more than 300 airlines and a growing Adjusted ROCE % 6.4 – 0.5 pts number of European rail operators. Segment capital expenditure €m 127 61 Employees as of 31 Dec number 35,679 0 LUFTHANSA GROUP ANNUAL REPORT 2019 3 CONTENTS 4 To our shareholders 65 Opportunities and risk report 4 Letter from the Executive Board 79 Combined non-financial declaration 7 Report of the Supervisory Board 79 About this combined non-financial declaration 11 Lufthansa share 81 Environmental concerns 88 Customer concerns 14 Combined management report 93 Employee concerns 15 Principles of the Group 98 Fighting corruption and bribery 15 Business activities and Group structure 99 Respect for human rights 16 Goals and strategies 101 Social concerns 24 Fleet and route network 102 Responsible production and 26 Employees sustainability in the supply chain 27 Research and development 103 Summary 27 Legal and regulatory factors 106 Forecast 28 Economic report 110 Corporate Governance 28 Macroeconomic situation 133 Notes to the individual financial statements 29 Sector developments of Deutsche Lufthansa AG (HGB) 31 Course of business 33 Earnings, assets and financial position 137 Consolidated financial statements 43 Target achievement and overall statement by the Executive Board on the economic position 243 Further information 45 Business segments 244 Independent Practitioner’s Report 45 Network Airlines business segment on a Limited Assurance Engagement on 52 Eurowings business segment Non-Financial Reporting 55 Logistics business segment 246 Ten-year overview 58 MRO business segment 250 Glossary 61 Catering business segment 252 Chart and table overview 63 Additional Businesses and Group Functions Credits/Contact/ Financial calendar 2020 and Disclaimer 4 TO OUR SHAREHOLDERS LUFTHANSA GROUP ANNUAL REPORT 2019 Letter from the Executive Board The Executive Board Deutsche Lufthansa AG From left: Detlef Kayser, Member of the Executive Board, Airline Resources & Ulrik Svensson, Member of the Executive Board, Chief Financial Operations Standards. Born in 1965, Aerospace engineer, Executive Officer. Born in 1961, B.Sc. in Economics, Executive Board member Board member since 2019, with the Lufthansa Group since 2016. since 2017, with the Lufthansa Group since 2017. Thorsten Dirks, Member of the Executive Board, IT, Digital & Michael Niggemann, Member of the Executive Board, Corporate Innovation. Born in 1963, chartered engineer, member of the Human Resources and Legal Affairs. Born in 1974, lawyer, Executive Executive Board since 2017, at the Lufthansa Group since 2017. Board member since 2020, with the Lufthansa Group since 2007. Christina Foerster, Member of the Executive Board, Customer & Harry Hohmeister, Member of the Executive Board, Commercial Corporate Responsibility. Born in 1971, B. Sc. Hotel Administration, Passenger Airlines. Born in 1964, diploma in commercial air transport, MBA, member of the Executive Board since 2020, at the Lufthansa Executive Board member since 2013, with the Lufthansa Group Group since 2002. since 1985. Carsten Spohr, Chairman of the Executive Board and CEO. Born in 1966, industrial engineer, Chairman of the Executive Board and CEO since 1 May 2014, Executive Board member since 2011, with the Lufthansa Group since 1994. TO OUR SHAREHOLDERS LUFTHANSA GROUP ANNUAL REPORT 2019 5 Letter from the Executive Board Ladies and gentlemen, 2019 was another demanding year for the global airline industry. Slower economic growth worldwide, trade disputes, uncertainty surrounding Brexit and overcapacities – especially in the German market – and the resulting price erosion also affected the performance of the Lufthansa Group. Despite these difficult conditions, we can point to some successes: we have reduced our unit costs for the fourth year in succession. Lufthansa German Airlines and SWISS performed well on long-haul routes. This is also reflected in our passenger numbers, which reached new records.