Q3 2014 Roadshow
Q3 / 9M 2014 Lufthansa Group Roadshow Presentation
Page 1 ¾ The Lufthansa Group: World's largest aviation group with leading airlines and aviation services Hub airlines to improve profitability at current size; P2P airlines and services to grow
¾ Implementing Our Way Forward through seven areas of action Measures to overcome existing challenges and increase profitability underway
¾ Financials & outlook Solid Q3 results, FY14 target on track, significant improvement expected for FY15
¾ Lufthansa Passenger Airlines is the core of the Group Fleet optimization, unit cost reduction and improvement of revenue quality
Page 2 The Lufthansa Group is the largest aviation group in the world Strong global market position but facing multiple challenges
Our strengths Our challenges
Compete with low-cost and Gulf World’s largest aviation group carriers while securing strong with >30 bn EUR in revenue market position
Lower unit costs and offset cost Europe’s largest passenger inflation and possible network with strong brands yield pressure
Global leader in MRO and Lufthansa 5 STAR Become quality leader and innovation driver again airline catering Group
Leading positions in air cargo Execute faster, use of group and airline IT as well as other synergies better and explore aviation services potential of service companies
Strong financials: constant FCF Reach higher profitability and generation, investment grade strengthen return on capital focus rating, dividend payments
Page 3 A unique portfolio of airlines and aviation service companies Service companies sustainably contribute c. 500 m EUR operating profit p.a.
Revenue Operating result Op. margin range
Airlines
23.5 bn 495 m +4.8% Passenger Airline Group 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 -0.1%
77 m 2.4 bn +11.4% Logistics (Cargo) 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 -8.0% Service Companies
4.2 bn 404 m +10.9%
MRO 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 +6.9%
2.5 bn 105 m +4.3% non-airline profits Catering 2009 2010 2011 2012 2013 of c. 500 m EUR 2009 2010 2011 2012 2013 +3.1%
0.6 bn 36 m +6.2% IT Services 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 +1.8% -420 m Others incl. Group Functions (burdened by restructuring costs) 2009 2010 2011 2012 2013
Page 4 Our success is based on optimizing all three pillars of our Group Focus on profitability improvement for hubs, growth in P2P and Services
Lufthansa Aviation Group - Key Advantages
Integrated Value Chain Financial Stability Strong Brand Family
Favoured Employer Deep Customer Insights Natural Hedging
Hubs Point-to-Point Aviation Services
2013 2020 2013 2020 2013 2020 Revenue Share 70% 60% Revenue Share 6% Revenue Share 24% Profit Margin 3%1) Profit Margin - Profit Margin 7%1)
Improve Profit Redesign & Grow Sustain Margin & Grow
1) excl. germanwings and consolidation effects
Page 5 Growth in airlines is focussed on P2P platforms One out of six aircraft will be on a lower unit cost platform
Network Carriers Short-haul New P2P-Platforms
23 A320 ex GER
starting 2015
c. 60 A320 ex GER
c. 350* in full swing in 2015 LH Passenger 7 A330 14 A340 ex GER LH Passenger starting 2015 c. 90 SWISS aircraft
c. 75 Austrian Airlines aircraft Long-haul
* Lufthansa Passenger Airlines incl. regional partners, excl. germanwings, eurowings
Page 6 Service companies have attractive global growth opportunities Extending business models geographically and into adjacent markets
Grow APAC, MidEast, North America revenue International expansions and Extension of Joint Venture with Air China new partnerships (MoU signed in 2014) Joint Venture with McKinsey
Grow global catering network via JVs, acquisitions and new sites International expansion and Assess opportunities in adjacent markets, e.g. train catering exploring adjacent markets Margin improvement from restructuring underperforming parts of the network
Attract new partner companies also from Extend business models to non-travel industries Enhance attractiveness for "less frequent" fliers adjacent customer segments Implement dedicated mileage program for point-to-point platforms
Page 7 ¾ The Lufthansa Group: World's largest aviation group with leading airlines and aviation services Hub airlines to improve profitability at current size; P2P airlines and services to grow
¾ Implementing Our Way Forward through seven areas of action Measures to overcome existing challenges and increase profitability underway
¾ Financials & outlook Solid Q3 results, FY14 target on track, significant improvement expected for FY15
¾ Lufthansa Passenger Airlines is the core of the Group Fleet optimization, unit cost reduction and improvement of revenue quality
Page 8 Our Way Forward: Seven areas of action to implement our strategy Lufthansa Group is tackling the challenges ahead
Customer New concepts centricity & for growth quality focus
Constantly Innovation & improving digitalization efficiency
Value based Effective & lean steering organization
Culture & leadership
Page 9 Constantly improving efficiency Pipeline approach to continuous profit improvement SCORE concept to be maintained beyond 2015
program generated gross measures targeting minimum gross measures of >3 bn EUR of ca. 700 m EUR p.a (during program timeframe 2012-2015) (to compensate 2% cost inflation and 1% yield decline)
1,170 1,200
926
>700 >700 >700 >700 >700 618
926 971 618
2012 2013 2014 2015 2016 2017 2018 2019 …
measures P&L effective measures in implementation further measures targeted
Status: October 2014
Page 10 Effective & lean organization Structural change goes beyond mere optimization Recent example: Cost savings via outsourcing of IT Infrastructure
Airline Solutions: Industry Solutions: IT Infrastructure ¾ One-time charge in 2014 Airline IT Professional of c. 240 m EUR in IFRS and HGB Services net results (non-operating)
¾ Average savings of 70 m EUR p.a. in IT costs for LH Group from 2015 Equal revenue split of three Lufthansa Systems divisions ¾ Integration into international IT 9 Growth potential in 9 Successful ȋ Lack of scale of in Group secures jobs and increases international system integrator business prospects for employees airline market in automotive, dominated by large ¾ transport & logistics providers Transformation to be completed 9 Chances triggered in Q2 2015 by digital 9 Growth of process ȋ Cloud services and transformation consulting and offshoring increase and services Big Data pressure on prices
Page 11 Constantly improving efficiency Labour deals to support change in core business Consensual agreements except of open issues with VC & Swiss pilot unions
Preliminary agreement with cabin personnel Agreement with flight crews
9 -20% costs for 14 Lufthansa A340s 9 New terms effective as of Dec 2014
9 Move from DB to DC pension scheme 9 Reduced salary levels vs. today
9 Productivity increased o Open agreement with pilot union (VC) 9 Employees move to "new" Austrian: Reintegration of operations from Tyrolean Airways into legal unit Austrian Airlines AG as of March 2015
New CLA to be negotiated with pilot unions 9 Legal stability: withdrawal of lawsuits from union and workers' councils
9 Pilot union IPG agreed on new CLA 9 One-time payments for staff leaving the effective since July 2014 company
o Aeropers rejected new CLA; 9 No further negative p&l impact after Q3 2014 Existing agreement cancelled per Nov 16
Page 12 Constantly improving efficiency Restructuring of non-hub stations in progress Move to more efficient structures
Stations to be restructured Starting point
䖃 HAM Transfer of LH direct services to 䖃 BRE germanwings
䖃 HAJ 䖃 BER
䖃 DUS ǻ 50-60% Handling providers in Germany 䖃 CGN produce services at approx. 50-60% lower costs than LH
Non-hub Handling 䖃 NUE stations services 䖃 STR
Objective C. 1,500 employees Operational tasks at stations Stations transferred in up to eight separate legal entities (check-in, handling, lounges etc.) Better cost structure and more flexibility in new setup
Page 13 Innovation and digitalization Standing out through innovation and digitization Driving business through systematic approach to innovation
Strengthen internal innovation culture by creating “Innovation Hub” company in Berlin a new Group Innovation Unit to get close to the world of start-ups and the digital technology scene Establish “innovation budget” to expedite the development of innovative products and ideas Close collaborations and partnerships with Silicon Valley companies Consistently promote existing innovative projects within the Lufthansa Group (Lufthansa Use potential of some 300,000 passengers a day to Technik Innovation Fund, eCargo, Board Connect, develop new products and services with partners SMILE and similar)
Page 14 Value based steering Commitment to value creation New return on capital measures and dividend policy to be presented shortly
Strong track record in value creation New KPIs to be introduced
2000 2014 2015
CVA (cash value added) concept New return on capital KPI introduced in 1999 to be introduced in late 2014 Positive CVA generation: Objective: Enhanced transparency, standard KPI cumulated CVA of > 6 bn EUR (e.g. ROCE), easier for capital allocation and Capital in last 14 years operational steering Return on
Regular dividend payments New dividend policy 30-40% of operating result to be introduced in late 2014 Dividends paid in 11 of 15 years Objective: Continue regular dividend payments, Cumulated dividends of 5.95 EUR adjust for non-cash profit effects from change Dividends in new depreciation policy
Historical dividend payments in EUR 1.25 0.70 0.70 0.60 0.60 0.50 0.60 0.45 0.30 0.25 0.00 0.00 0.00 0.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Page 15 ¾ The Lufthansa Group: World's largest aviation group with leading airlines and aviation services Hub airlines to improve profitability at current size; P2P airlines and services to grow
¾ Implementing Our Way Forward through seven areas of action Measures to overcome existing challenges and increase profitability underway
¾ Financials & outlook Solid Q3 results, FY14 target on track, significant improvement expected for FY15
¾ Lufthansa Passenger Airlines is the core of the Group Fleet optimization, unit cost reduction and improvement of revenue quality
Page 16 The Lufthansa Group was able to increase its profits Key figures 9M & Q3 2014 for the Lufthansa Group
Lufthansa Group (in m EUR) 9M 2014 9M 2013 vs. PY Q3 2014 Q3 2013 vs. PY Total revenue 22,624 22,767 -0.6% 8,458 8,303 +1.9% of which traffic revenue 18,460 18,664 -1.1% 6,994 6,884 +1.6% Operating result 849 663 +28,1% 735 590 +24.6% One-off items* 155 198 -- 50 127 -- Normalized operating result 1,004 861 +16.6% 785 717 +9.5% Net income 482 247 +95.1% 561 450 +24.7%
9M 2014 9M 2013 vs. PY Passenger Airline KPIs 9M 2014 Q3 2014 Operating cash flow 2,052 3,006 -16.8% No. of flights -2.2% -2.2%
Net invest 1,823 1,448 +25.9% ASK (capacity) +2.2% +4.0%
Free cash flow 229 1,558 -85.3% RPK (volume) +2.6% +5.0%
SLF (load factor) +0.3P. +0.8pts.
9M 2014 FY 2013 vs. Year-end Yield ex. currency -3.6% -3.6%
Equity ratio 15.2% 21.0% -5.8pts. RASK (unit revenue) -3.2% -2.6%
Net financial debt (excl. pensions) 2,262 1,695 +33.5% CASK** (unit costs) -4.4% -2.9% Pension provisions 7,397 4,718 +56.8%
* adjusted for one-off items in m EUR: ** adjusted for one-off items in m EUR in (passenger airlines): 9M 2013: 168 / 30; Q3 2013: 97 / 30 restructuring / project costs 9M 2013: 102 / 30; Q3 2013: 91 / 30 restructuring / project costs 9M 2014: 30 / 125; Q3 2014: 0 / 50 restructuring / project costs 9M 2014: 22 / 125; Q3 2014: 0 / 50 restructuring / project costs
Page 17 Profit increase driven by lower one-off costs and depreciation effect Segment Overview 9M
Share of LH Group’s 76.0% 7.7% 8.8% 0.9% external revenue 6.6%
9M 2014 vs. 9M 2013 Passenger Others & in EUR m Airline Group Logistics MRO Catering IT Services Consolidation
Revenue 17,694 1,767 3,200 1,960 483 -2,480 vs. PY in% -1.1% -1.9% +2.9% +3.8% +2.3% -3.5%
Operating result 473 51 335 66 21 -97 vs. PY in m EUR -41 +6 +3 +3 +4 +211
+54 m EUR +73 m EUR excl. one-offs excl. one-offs incl. +267 m EUR from lower D&A
Lufthansa Passenger SWISS Austrian in EUR m Airlines Airlines
Total revenue 12,989 3,190 1,574 vs. PY -1.2% -0.4% -0.2%
Operating result 260 217 -7 vs. PY -56 +35 -26 +39 m EUR excl. one-offs
Page 18 Nearly all business segments were able to improve their margin Normalized* operating margins 9M 2014 vs. 9M 2013
11.0 10.5 10.7 all numbers in % 10.0
9.0
8.0
7.0 6.8
6.0 5.7
5.0 4.3 4.4 4.0 3.6 3.8 3.4 3.4 3.3 3.0 3.0 2.9 3.0 2.6 2.5 2.0 1.2 1.0
0.0
-1.0 -0.4 Lufthansa SWISS Austrian Passenger Logistics MRO Catering IT Services LH Group Passenger Airlines Airline Group Airlines
9M 2014 9M 2013
* excluding one-off effects
Page 19 Passenger airlines: Record volumes but pricing remained weak Operating KPIs of Passenger Airline Group
Total 9M '14 Q3 '14 Europe 9M '14 Q3 '14 Asia/Pacific 9M '14 Q3 '14 Number of flights -2.2% -2.2% ASK +1.1% +0.3% ASK +1.7% +4.0% ASK +2.2% +4.0% RPK +2.3% +2.6% RPK +2.4% +4.8% RPK +2.6% +5.0% SLF +0.8pts. +1.8pts. SLF +0.6pts. +0.7pts. SLF +0.3pts. +0.8pts. Yield -2.7% -0.7% Yield -4.5% -3.8%
Yield ex currency -2.3% -1.1% Yield ex currency -2.8% -4.2% RASK -1.6% +1.6% RASK -3.8% -3.1%
RASK ex currency -1.2% +1.2% RASK ex currency -2.1% -3.5%
Yield -3.6% -3.6% America 9M '14 Q3 '14 Mid East / Africa 9M '14 Q3 '14
Yield ex currency -2.7% -3.9% ASK +6.5% +10.9% ASK -7.5% -6.5% RASK -3.2% -2.6% RPK +4.7% +9.1% RPK -3.6% -1.7%
CASK* incl. fuel -4.4% -2.9% SLF -1.5pts. -1.4pts. SLF +3.1pts. +3.9pts.
RASK ex currency -2.3% -2.9% Yield -4.0% -6.0% Yield -3.7% -4.6%
CASK* ex currency ex fuel -3.4% -4.1% Yield ex currency -2.7% -5.9% Yield ex currency -2.4% -5.1% RASK -5.7% -7.6% RASK +0.3% +0.2%
RASK ex currency -3.5% -7.5% RASK ex currency +1.6% -0.4%
*adjusted for one-off items
Page 20 Fuel cost forecast FY14 unchanged at 6.7 bn EUR Fuel forecast and sensitivities
150 Lufthansa Group fuel expenses after hedging LH price (in bn EUR) 140 2014 Sensitivities costs with deviating 7.4 oil price 130 7.1 7.0bn (+20%) 6.7 6.8bn (+10%) 6.3 120 6.6bn (-10%) Market price 6.5bn (-20%)
110 break-even of hedges at 109 USD/bbl 5.0 USD/barrel
100 3.7
90
2009 2010 2011 2012 2013 2014e 80
USD/barrel 70 70 80 90 100 110 120 130 140 150
FY 2014 FY 2015 as of 24 October 2014 Brent forward 87 USD/barrel Current fuel hedging levels 79% 65% EUR/USD 1.27 (forward)
Page 21 Proven measures and fleet strategy successfully lowered unit costs Airline KPIs 2013 vs. start of restructuring program in 2011
FY 2013 vs. FY 2011 Explanation
Fleet Size fleet rollover, (no. of aircraft) -2.6% phase-out of small, non-efficient aircraft
Capacity capacity growth realized through (ASK) +1.7% larger aircraft with more seats per aircraft
Volume +4.6% (RPK)
Load Factor (SLF) +2.2%
Pricing +1.2% (Yield)
increase driven by Unit Revenue +4.1% (RASK) higher load factor and yield increases
Unit Costs SCORE cost reductions: transfer of non-hub traffic to -1.9% (CASK ex fuel) Germanwings, Austrian restructuring, etc.
Reduction mainly due to terminated joint ventures and -8.5% Cargo Capacity decrease in belly capacity
Page 22 Strategy is being continued in FY14 Fleet, costs and revenue assumptions
Full Year 2014 assumptions Explanation
Fleet Size Fleet rollover: Phase-out of small, non-efficient aircraft (no. of aircraft) overall stable
Capacity growth mainly achieved through more seats per Capacity c. +3% aircraft / flight. Capacity reductions in winter schedule of (ASK) 5 short-haul and 3 long-haul aircraft. Volume above capacity growth (RPK)
Load Factor slightly up (SLF)
Pricing negative (Yield)
Unit Revenue negative Unchanged volatility from short-term bookings (RASK ex currency)
Drivers: More capacity (ASK) at stable fleet and SCORE Unit Costs c. -4% (CASK ex currency, ex fuel) measures; -2pts. from new depreciation policy
Cargo Capacity c. -2% Reduction of freighter fleet by two MD 11 aircraft
Page 23 Profit guidance for 2014 unchanged Operating profit expected at around 1 billion Euros
Result 2013 Forecast for 2014 Segment (m EUR) Lufthansa Passenger Airlines 265 on par with previous year SWISS 226 significantly above previous year Austrian Airlines 25 below previous year, but positive Consolidation -21
Passenger Airline Group 495 slightly above previous year Logistics 77 above previous year MRO 404 significantly above 2012 level (328 m EUR) Catering 105 on par with previous year IT Services 36 slightly below previous year Others -378 significant improvement due to lower restructuring costs Internal Result / Consolidation -42
LH Group (reported) 697 approx. 1,000 Restructuring costs 245 80 Project costs Lufthansa Passenger Airlines 100 200 LH Group (normalised) 1,042 approx. 1,300
*incl. 340 m EUR lower depreciation for aircraft and engines
Page 24 Operating profit outlook 2015: "significantly above previous year" Profit increase to be achieved from airlines and aviation services
Lufthansa Group Reported Operating result Actual and Forecast Financial Year 2014 1,378 "significantly above previous year" 1,280 Operating profit expected at ca. 1.0 bn EUR Operating profit excl. one-offs at ca. 1.3 bn EUR Forecast includes strike impacts until October, 1,020 ca. 1,000 excludes strike costs for rest of year
845 820 839 Financial Year 2015 697 Operating profit outlook reduced to "significantly above previous year" Driven by weak revenue environment due to darkening economic outlook; expected weaker pricing 130 inflation of pension cost Profit increase in 2015 vs. 2014 to be achieved 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 from airlines and aviation services. forecast outlook in m EUR
effect from change in depreciation policy
Page 25 Lufthansa Group benefits from superior financing conditions Conservative financial profile, but currently burdened by pension provisions
1. Lufthansa Group is profitable and 2. Conservative fleet structure and 3. Solid financial profile provides produces strong cash flows ambitious balance sheet targets provide competitive edge in financing conditions; security buffer low net financial debt, but pension provision burden
in bn EUR S&P Investment Grade Rating (BBB-, stable) 1.7 1.7 1.8 1.8 confirmed in April 2014 1.1 Recent Issuance of 1.125% Bond 1.0 0.8 0.8 0.7 0.8 ca. 90% of fleet >70% of fleet Debt Volume of 500 m EUR is owned vs. 10% leased is financially unburdened financing and a maturity of 5 years 2010 2011 2012 2013 9M 2014 (not used as security (Sept 2014 - Sept 2019) for financing deals) Depreciation Operating Profit
Target FY 13 9M 14
3.3 7.4 3.0 5.8 2.8 4.7 Equity 25% 2.2 2.4 21% 15% 2.6 2.1 Ratio midterm 1.6 2.3 2.0 1.7 2.3 1.5 1.4 1.3 Debt Re- 2010 2011 2012 2013 9M 2014 0.7 payment 45% 37% 23% 0.2 pension provisions net financial debt Ratio (min. 35%)
2010 2011 2012 2013 9M 2014 Min. 2.3 4.7bn 3.5bn pension provisions: flexible funding model, Operating CF Free Cash Flow Liquidity bn EUR EUR EUR no "margin call" for additional fundings
Page 26 ¾ The Lufthansa Group: World's largest aviation group with leading airlines and aviation services Hub airlines to improve profitability at current size; P2P airlines and services to grow
¾ Implementing Our Way Forward through seven areas of action Measures to overcome existing challenges and increase profitability underway
¾ Financials & outlook Solid Q3 results, FY14 target on track, significant improvement expected for FY15
¾ Lufthansa Passenger Airlines is the core of the Group Fleet optimization, unit cost reduction and improvement of revenue quality
Page 27 Strong network quality through comprehensive route network Segmentation of long-haul network
Share of premium passengers 30% Small Niche Mid-Size Premium Premium Trunk
A380 and 20% New Technology Aircraft 747-8I Fleet
10%
Two Class Fleet & New Technology Aircraft 5% Lower cost sub-fleet of 14 A340
Small & Growing Medium Volume Large Volume
350,000 1.2 million 14 million
long-haul O&Ds Europe-World served by Lufthansa total passengers p.a. long-haul O&Ds Europe-World total market
Page 28 Fleet structure fits route network requirements Fleet overview Lufthansa Passenger Airlines
2011 2025 5 aircraft types 5 aircraft types
A380 400-500 A380 Development seats 747-8I -20%CASK vs. replaced 740-400 Phase-out by age Phase-in of 777-9X 777-9X 300-400 aircraft seats A340-600 Phase-out by age
long-haul Use in 2-class configuration Phase-in of A350-900 200-300 A340-300 A350-900 seats Lower cost sub-fleet of 14 A340 A330-300 A330-300 Deployment on thinner markets 9 aircraft types 3 aircraft types
A310/19/20/21 Development & rollover A320Family Classic 733/5 Phase-out by 2015
E90/95 E90/95 Regional Used as hub-Feeder „sustainable“ CR9 CR9
Phase-out CR7 by 2015 short-haul DH4 Phased-out Regional 2013 „in transition“ AT7 F100 Phased-out AR8 2012 2011 2013 2015 2017 2019 2021
Page 29 Successful track record of unit cost reductions set to continue Spread of RASK and CASK to be increased
Lufthansa Passenger Airline development of KPIs (numbers normalized)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 yoy% 2015 2016 2017 12 12 12 12 13 13 13 13 14 14 14 14
+0.3 +0.7 +0.5 +0.4 # of -0.1 -1.5 stable at constant fleet flights -1.7 -3.1 -1.6 -4.0 -4.6
+5.3 +4.3 +1.2 +3.1 +2.7 +0.8 +1.1 Capacity +0.0 3% p.a. on average from upgauging (ASK) -1.1 -3.9 -2.9 (half of global passenger growth)
+8.3 +6.7 +5.1 Unit +2.3 +4.0 to be stabilized by product initiatives revenues (RASK) -2.6 -1.4 -2.2 -3.1 -3.7 -2.7 and new pricing concepts
+3.1 +0.8 +1.4 +2.1 Non-fuel continuous focus on cost reduction, unit costs -1.6 -0.1 (CASK) -3.7 -3.4 -3.6 -3.4 -4.2 introduction of new technology
+17.9 +24.3 +18.0 Fuel-only +12.4 +5.1 net technology aircraft, unit costs group-wide fuel efficiency management (CASK) -9.8 -6.0 -11.2 -10.4 -5.8 -3.3
today
Page 30 Five focus areas to increase profitability Revenue quality to stabilize RASK, efficiency measures to reduce CASK
new platforms
2012 2013 2014 2015 2016 2017
freeze fleet size at 400 aircraft Capacity & fleet Phase-in A380 and B747-8i (c. -15% CASK) 1 dimensioning ASK growth at half of market rate (3% p.a.)
introduction of 2 class long-haul fleet Lower cost sub-fleet of 14 a/c (>-20% CASK) (c. -10% to -20% CASK) Restructuring of WINGS Intercont (>-30% CASK) 2 long-haul launch new technology aircraft (-20% CASK / -25% fuel-only CASK)
reduction of regional platforms Roll-over Eurowings CR9 to A320 (c. -40% CASK) (c. -10 to -15% CASK) Eurowings p2p platform (c.-15% CASK to GW) Restructuring of Phase-Out Avro 85 exit from 70-seater fleet 3 short-haul Phase-Out B737 A320neo delivery return non-hub operations to break-even (new germanwings) (c. -15% fuel-only CASK) (c. -20% CASK vs. mainline; 200 m EUR profit improvement)
turn LH from functional to process oriented company (project Shape!) Reduce reduce overhead costs through shared services reduce IT infrastructure costs 4 (c. 70 m EUR savings p.a.) unit cost restructure outstation operations reduce costs at all suppliers (ATC, internal suppliers, etc.)
Roll-out new First and Business Class Invest in revenue 5 quality and best Premium Economy phase-in (c. 80 m EUR profit improvement) product become Europe’s first 5 Star Airline today
Page 31 Network and partnerships are important drivers for revenue quality Passenger network and partner overview
Largest Airline Group in Europe
Largest Transatlantic Joint Venture First JV for Japan-Europe and Europe-China
Intra- European 46.6% North (+0.3pts.) Asia America Pacific 21.4% 17.6% (+0.8pts.) (-1.3pts) Mid-East 4.1% (-0.4pts.)
Africa South 4.0% America (+0.0pts.) 6.3% (+0.6pts.)
Traffic revenue shares Passenger Airline Group as of 31 December 2013 (comparison to previous year)
Page 32 Product quality has positive impact on yield and customer satisfaction Implementation of five star product
New First Class: New Business Class: New Premium Economy Class: Passenger satisfaction at 98% New full flat seat More exclusivity & delight 75 % of retrofit completed 50% of 7.000 seats replaced More personal space Completion June 2015 Completion August 2015 3.600 seats until October 2015
5 Star Service in addition to hardware upgrades: Full flat Business Class seats now standard in the Lufthansa Group Upgrade in food & beverage on board and on ground New transfer & arrival services 5 STAR in Frankfurt and Munich New lounges in London and Newark
Page 33 Focus on fuel efficiency helps reduces fuel only-CASK Activities to sustainably reduce fuel consumption & enhance CO2 footprint
ATC/ATM Operations Network
Domestic Routes China Packless Take-off Block time vs. Cost Index
By application of normal Usage of Domestic Routes For every flight an procedure Packs Off T/O in China for flights between individual Cost-Index is the A/C-Packs are SHE and TAO. Shortage of calculated considering switched off during T/O, flight time by 17min saves the daily updated which leads to fuel and 1600kg per flight. technic-, personnel- maintenance savings on and fuel-costs. A330, A340.
510 tons p.a. 2,450 tons p.a. 8,640 tons p.a.
Technical Weight Ground Ops Performance
Trash compactor removal A380 Fanblade Recontouring APU vs. GPU usage
Substitution of 2 Increased maintenance APU usage shall be Trashcompactors of improves fuel consumption minimized in order to 83 kg each and by 4 and avoids a fall of air flow safe fuel (number of waste Trolleys quality due to erosion and cycles and usage (12kg) saves in roughening of fan blade time) compared to addition to fuel also leading edges. cost of ground power. investment costs.
160 tons p.a. 4,320 toms p.a. 1,840 tons p.a.
Page 34 Lufthansa Investor Relations Contact
Deutsche Lufthansa AG Investor Relations / FRA IR Lufthansa Aviation Center Airportring D-60546 Frankfurt
Andreas Hagenbring, Head of IR Phone: +49 (0) 69 696 28000 Fax: +49 (0) 69 696 90990 E-mail: [email protected]
Visit our webpage: lufthansa-group.com/investor-relations
Page 35 Appendix – Financial Figures 9M & Q3 2014 –
Page 36 Group Revenue 9M 2014 vs. 9M 2013
in m EUR
Volume: +2.3% Price: -1.2%
226 421 Currency: -2.2%
399
Traffic revenue (-1.1%) 18,664 18,460
4,103 4,164 Other revenue (+1.5 %)
9M 2013 9M 2014
22,767 Group revenue (-0.6%) 22,624
Page 37 Operating expenses grew less than revenue in Q3, stable in 9M Operating costs and revenues
Lufthansa Group (in m EUR) 9M 2014 vs. PY Q3 2014 vs. PY
Total revenue 22,624 -0.6% 8,458 +1.9%
Other operating income 1,348 -4.0% 496 +15.1%
Total operating income 23,972 -0.8% 8,954 +2.5%
Operating expenses 23,123 -1.6% 8,219 +0.9%
-0.4% excl. one-offs +2.7% excl. one-offs Non-fuel operating expenses 17,943 -0.6% +1.0% excl. one-offs & D&A 6,282 +1.4% +4.2% excl. one-offs & D&A Cost of materials and services 13,002 -2.3% 4,738 -0.3%
Fuel expenses 5,180 -4.9% 1,937 -0.5%
Fees and charges 3,978 +1.4% 1,460 +3.7%
Staff costs 5,455 -0.3% +2.0% excl. one-offs 1,809 -2.8% +2.5% excl. one-offs
Scheduled depreciation 1,047 -17.5% +3.0% excl. D&A change 360 -16.3% +4.9% excl. D&A change
Other operating expenses 3,619 +4.5% 1,312 +19.3%
Operating result 849 +28.1% +16.6% excl. one-offs 735 +24.6% +9.5% excl. one-offs
Page 38 Fuel Cost 9M 2014 vs. 9M 2013
in m EUR
-269 m EUR +5,449 Volume Price +2 -73 Hedging
-46 Currency
-152
+5,180
9M 2013 H1 2014
Page 39 Excluding one-off items operating profit shows improvement Normalized operating results for 9M and Q3 1,004 861 849 125 30 30 663 168
9M 2013 restructuring costs project costs 9M 2013 9M 2014 restructuring costs project costs 9M 2014 operating profit normalized operating profit normalized operating profit operating profit 9M 2013 9M 2014
785 717 735 50 30 0 590 97
Q2 2013 restructuring costs project costs Q3 2013 Q3 2014 restructuring costs project costs Q3 2014 operating profit normalized operating profit normalized operating profit operating profit Q3 2013 Q3 2014
Page 40 Operating Results and one-off factors Quarterly operating results 2013-2014
in m EUR Q1 Q2 Q3 Q4 6M 9M Full Year
Reported operating result 2013 -359 432* 590* 36 73* 663* 699*
incl. SCORE restructuring costs -64 -7 -97 -77 -71 -168 -245
incl. Project costs 0 0 -30 -70 0 -30 -100 Normalized operating result 2013 -295 439* 717* 183 144* 861* 1,044*
Reported operating result 2014 -245 359 735 114 849
incl. SCORE restructuring costs -20 -10 0 -30 -30
incl. Project costs -35 -40 -50 -75 -125 Normalized operating result 2014 -190 409 785 219 1,004
incl. depreciation policy change effect 83 86 91 169 260
incl. strike impacts -10 -60 -35 -65** -70 -105 -170**
incl. Venezuelan cash write-offs -38 -23 +7 -61 -54
* Restatement due to IFRS11: Aerologic GmbH has been proportionately consolidated as a joint operation since 1 January 2014 ** as of October 30, 2014
Page 41 Cash flow reduced due to working capital and higher investments Cash flow statement
Group Cash Flow Statement in m EUR 9M 2014 vs. PY 3.3 3.0 2.8 2.4 EBT (earnings before income taxes) 634 +275 2.1
Depreciation & amortisation (incl. D&A for non-current assets) 1,064 -368 Net proceeds from disposal of non-current assets -24 -24 FY 2010 FY 2011 FY 2012 FY 2013 9M 2014 Result from equity investments -94 +7 Operating Cash Flow Net interest 210 -47 Income tax payments/reimbursements -215 -138 2.6 2.5 2.3 2.4 2.2 Non-cash changes in measurement of financial derivatives 139 +70 2.0 1.8 1.5 1.6 1.4 Change in working capital 338 -729 Operating cash flow 2,052 -954 FY 2010 FY 2011 FY 2012 FY 2013 9M 2014 Capital expenditure (net) -1,823 -375 Gross Capex Net Capex Free cash flow 229 -1,329
1.5 1.4 1.3
Cash and cash equivalents as of 30.09.2014* 819 -756 0.7 Current securities 2,711 -1,109 0.2
Total Group liquidity* 3,530 -1,865 FY 2010 FY 2011 FY 2012 FY 2013 9M 2014
Free Cash Flow
* Excluding fixed-term deposits with terms of three to twelve months (115 m EUR)
Page 42 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 historical 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.
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