Slide 1: Press and Analyst Conference
Press and Analyst Conference Carsten Spohr, Group CEO Simone Menne, Group CFO Frankfurt/M., 12 March 2015
Slide 2: Agenda
Agenda Operative highlights 2014 Financial development 2014 and forecast 2015 Strategic outlook Q&A Session Page 2
Slide 3: Key financial figures 2014
Key financial figures 2014 in m Euro FY 2014 vs. py Revenue 30,011 -0.1% Operating Profit 954 +36.5% Operating Margin 3.2% +0.9pts. Net income (IFRS) 55 -82.4% Local GAAP (HGB) -732 -- Dividend 0.00 -100.0% Gross Invest 2,777 +11.1% Page 3
Slide 4: Strong portfolio of profitable businesses
Strong portfolio of profitable businesses Operating profit per segment 954 m EUR (+255 m EUR) Passenger Airline Group MRO Catering Logistics IT 553 m EUR 392 m EUR 100 m EUR 100 m EUR 37 m EUR (+40 m EUR) (-12 m EUR) (-5 m EUR) (+21 m EUR) (+1 m EUR) Page 4
Slide 5: Lufthansa Group continues to consistently approach challenges
Lufthansa Group continues to consistently approach challenges 7to1 - Our Way Forward: Seven fields of action, one goal Customer New concepts centricity & for growth quality focus Constantly Innovation & improving digitalization efficiency Value based Effective & lean steering organization Culture &
Slide 6: Simone Menne, Member of the Executive Board and CFO
Simone Menne – Member of the Executive Board and CFO –
Slide 7: Forecast of c. 1 bn EUR operating profit was reached
Forecast of c. 1 bn EUR operating profit was reached FY and Q4 2014 at a glance Lufthansa Group (in m EUR) FY 2014 FY 2013 vs. PY Q4 2014 Q4 2013 vs. PY Total revenue 30,011 30,027 -0.1% 7,387 7,260 +1.7% of which traffic revenue 24,388 24,568 -0.7% 5,928 5,904 +0.4% Operating result 954 699 +36.5%
Slide 8: Fuel and depreciation benefit offset by higher fees and currency effects
Fuel and depreciation benefit offset by higher fees and currency effects Operating costs and revenues Lufthansa Group (in m EUR) FY 2014 vs. PY Q4 2014 vs. PY Total revenue 30,011 -0.1% 7,387 +1.7% Other operating income 1,886 -1.7% 538 +4.5% Total operating income 31,897 -0.2% 7,925 +1.9% Operating
Slide 9: Cash flow reduced due to working capital and higher investments
Cash flow reduced due to working capital and higher investments Cash flow statement Lufthansa Group (in m EUR) FY 2014 vs. PY 3.3 3.0 2.8 2.4 EBT (earnings before income taxes) 180 -366 2.0 Depreciation & amortisation (incl. D&A for non-current assets) 1,508 -231 Net proceeds from disposal of non-cu
Slide 10: Aviation Services show good performance
Aviation Services show good performance Segment Overview FY14 Share of LH Group’s 75.4% 8.0% 8.9% 6.8% 0.9% external revenue FY 2014 vs. FY 2013 Passenger Others & in EUR m Airline Group Logistics MRO Catering IT Services Consolidation Revenue 23,320 2,435 4,337 2,633 646 -3,360 vs. PY in% -0.8% -0.
Slide 11: Weak pricing on long-haul routes, but record volumes achieved
Weak pricing on long-haul routes, but record volumes achieved Operating KPIs of Passenger Airline Group Total FY '14 Q4 '14 Europe FY '14 Q4 '14 Asia/Pacific FY '14 Q4 '14 Number of flights -2.6% -3.8% ASK +0.1% -3.2% ASK +1.9% +2.6% ASK +2.1% +1.7% RPK +1.5% -1.2% RPK +2.2% +1.6% RPK +2.4% +1.6% SL
Slide 12: Trading assumptions for 2015 unchanged
Trading assumptions for 2015 unchanged Trading assumptions FY 2015 Full Year 2015 assumptions Explanation Fleet rollover: No. of flights further reduction Continue to phase out small, non-efficient aircraft Capacity c. +3% Capacity growth mainly achieved through more seats per (ASK) aircraft. Growth
Slide 13: Fuel cost higher than expected in Jan, but significantly below 2014
Fuel cost higher than expected in Jan, but significantly below 2014 Fuel forecast and sensitivities FY15 150 Lufthansa Group fuel expenses after hedging 140 LH price (in bn EUR) 2015 Sensitivities 7.4 costs with 130 7.1 deviating oil price 6.8 120 6.3 6.6bn (+20%) Market price Price paid in USD/barr
Slide 14: Almost all segments expected to increase profits above previous year
Almost all segments expected to increase profits above previous year Forecast 2015 per segment Op. profit 2014 Adj. EBIT 2014 Adj. EBIT Forecast for 2015 Segment (m EUR) (m EUR) Lufthansa Passenger Airlines 252 399 significantly above previous year SWISS 289 278 on previous year’s level Austrian Air
Slide 15: Adjusted EBIT FY15 expected to be more than 1.5 bn EUR
Adjusted EBIT FY15 expected to be more than 1.5 bn EUR Forecast Lufthansa Group 2015 Lufthansa Group Adjusted EBIT “more than 1.5 bn EUR" Financial Year 2015 Actual and Forecast Profit increase in 2015 mainly driven by passenger airlines 1,297 1,171 Four parameters will largely determine ultimat
Slide 16: Carsten Spohr, Chairman of the Executive Board and CEO
Carsten Spohr – Chairman of the Executive Board and CEO –
Slide 17: Focus on Quality, Efficiency and Innovation
Focus on Quality, Efficiency and Innovation 7to1 - Our Way Forward: Seven fields of action, one goal Customer New concepts centricity & for growth quality focus Constantly Innovation & improving digitalization efficiency Value based Effective & lean steering organization Culture & leadership Page 17
Slide 18: Industry-leading products and services drive customer satisfaction
Industry-leading products and services drive customer satisfaction Quality focus of hub airlines Lufthansa Passenger Airlines Lufthansa Group Airlines Full flat Business Class seats New First Class New Business Class now standard in the Lufthansa Group New Premium Economy Class 5 Star Service Upgrad
Slide 19: Constantly improving efficiency
SCORE becomes routine process Constantly improving efficiency 2.5 New bn Euro Germanwings 7,600 contribution to the operating result (2012 – 2014) projects Fuel Efficiency identified 2.4 bn Euro of headwinds (2012 – 2014) 2-Class- Lufthansa Revenue 1,130 Fleet Services days of SCORE 1.7 Headquarter
Slide 20: Consistent focus on profitability measures
Consistent focus on profitability measures Efficiency measures at Lufthansa Passenger Airlines 2012 2013 2014 2015 2016 2017 Freeze fleet size Capacity & fleet Phase-in A380 and B747-8 dimensioning Reduced ASK growth rate until competitive structures have been established Introduction of 2 class lon
Slide 21: Agreements with labor unions support competitiveness
Agreements with labor unions support competitiveness Current status of negotiations Arbitration with cabin union UFO Agreements with pilots and cabin unions ! Negotiations with pilots union VC ongoing Perspective for further development with ! Further VC strikes cannot be excluded new fleet of
Slide 22: Optimized travel chain through innovations and digitization
Optimized travel chain through innovations and digitization Innovations in the Lufthansa Group Group Group wide wide innovation innovation activities acitvities Lufthansa Innovation Hub Berlin • Innovation targets for each BU • Co-Creation: Connect LH to Start-Up scene • Set up an innovation process
Slide 23: Eurowings to be the #3 point-to-point airline in Europe
Eurowings to be the #3 point-to-point airline in Europe Evolution of the new Eurowings Evolution of the new Eurowings Long-haul flights to start from Nov 2015 Until 2013 2013-2015 2015 onwards Punta Cana Bangkok LH Direct and New New Germanwings Germanwings Eurowings Varadero Phuket Dubai Loss- Brea
Slide 24: Contribution of aviation services to increase further
Contribution of aviation services to increase further Regional diversification, partnerships and innovative solutions boost growth Lufthansa Technik LSG Sky Chefs • Expansion of customer specific services • Further development onboard retail • Empowerment of sales to increase market • Expansion conv
Slide 25: Three strong pillars form the Lufthansa Group
Three strong pillars form the Lufthansa Group Ambitious targets for all segments First Choice in Aviation through Quality, Efficiency and Innovation # 1 Global Aviation Group Hub Airlines Point-to-Point Airlines Aviation Services #1 multi-brand premium #3 pan-European #1 global market leader in hub
Slide 26: Financial Figures FY & Q4 2014
Appendix – Financial Figures FY & Q4 2014 – Page 26
Slide 27: Group Revenue FY 2014 vs. FY 2013
Group Revenue FY 2014 vs. FY 2013 in m EUR Volume: +2.1% Price: -2.3% 511 -570 Currency: -0.5% -121 24,568 Traffic revenue (-0.7%) 24,388 5,623 5,459 Other revenue (+3.0 %) FY 2013 FY 2014 ∑ 30,027 ∑ Group revenue (-0.1%) ∑ 30,011 Page 27
Slide 28: Fuel Cost FY 2014 vs. FY 2013
Fuel Cost FY 2014 vs. FY 2013 Hedging results by Quarter (in m EUR) in m EUR Q1 Q2 Q3 Q4 FY -20 -3 -30 -96 -149 -364 +7,115 Volume Price -4 -385 Hedging Currency +6,751 +24 +1 FY 2013 FY 2014 Page 28
Slide 29: Operating Result FY 2014 vs. FY 2013
Operating Result FY 2014 vs. FY 2013 in m EUR FY 2014 FY 2013 vs. PY Profit from operating activities 767 851 -84 Net book gains / losses on assets and financial investments 78 -30 +108 - thereof aircraft disposals -17 -23 +6 Reversal of provisions -168 -191 +23 Past service costs -3 -12 +9 Valuatio
Slide 30: Earnings figures FY 2014 vs. FY 2013
Earnings figures FY 2014 vs. FY 2013 in m EUR FY 2014 FY 2013 vs. PY Profit from operating activities 767 851 -9.9% Income from subsidiaries, joint ventures and associates 121 124 -3.4% Other financial items -429 -83 -416.9% - thereof changes in time value of hedge options -212 -20 -960% EBIT 459 89
Slide 31: Operating Results and one-off factors
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 resu
Slide 32: Operating margins (normalized) FY 2014 vs. FY 2013
Operating margins (normalized*) FY 2014 vs. FY 2013 10.0 9.7 all numbers in % 9.0 9.0 8.0 7.0 6.8 6.0 5.7 5.6 5.4 5.0 4.1 4.2 3.8 3.9 4.0 3.5 3.1 3.2 3.0 2.6 2.4 2.2 2.0 1.2 1.0 0.5 0.0 Lufthansa SWISS Austrian Passenger Logistics MRO Catering IT Services LH Group Passenger Airlines Airline Group Ai
Slide 33: Adjusted EBIT and EBIT per Quarter
Adjusted EBIT and EBIT per Quarter in m EUR Q1 Q2 Q3 Q4 6M 9M Full Year Operating result -245 359 735 105 114 849 954 Adj. EBIT -240 418 810 183 178 988 1,171 pension changes 0 0 +15 +33 0 +15 +48 book gains / losses on asset disposals +13 0 +8 -100 +13 +21 -79 impairments +10 +15 -1 -164 25 24 -140
Slide 34: Reconciliation Operating Result to Adjusted EBIT per segment
Reconciliation Operating Result to Adjusted EBIT per segment FY 2014 Valuation of Op. profit 2014 financial Reversal of Pension Income from Adj. EBIT 2014 Segment liabilities at due provisions changes subsidiaries (m EUR) (m EUR) date Lufthansa Passenger Airlines 252 -10 +125 +32 399 SWISS 289 -18 +
Slide 35: New system directly links profit figures and value creation metric
New system directly links profit figures and value creation metric EBIT, EACC and ROCE are transparent and can be calculated easily Total Op. Income Balance Sheet Total (Rev.+ Oth. Op. Income) ./. non-interest bearing ./. operating costs liabilities Capital Employed + Income from Current Year 50 Sub
Slide 36: Calculation for financial year 2014
New system directly links profit figures and value creation metric Calculation for financial year 2014 in m EUR 30,474 32,114 ./. 12,980 ./. 31,235 17,584 + 121 50 : 50 17,545 EBIT: 1,000 + 84 -48 ./. 271 +77 5.9% X ./. 1,036 +142 EACC: -223 Adj. EBIT: 1,171 (1,000 + 84 - 271) ROCE = = 4.6% 17,565 P
Slide 37: EBIT is a structurally higher number than operating result
EBIT is a structurally higher number than operating result Main difference is that income from subsidiaries is included 1,645 Operating profit EBIT 1,171 Adj. EBIT 972 936 986 954 1,000 820 864 839 725 699 2011 2012 2013* 2014 Total Operating Income 31,070 32,947 32,149 32,114 ./. Operating Expenses
Slide 38: WACC is based on a target capital structure of 50:50
WACC is based on a target capital structure of 50:50 Current WACC is 5.9% Cost of Debt1 Cost of Equity2 3.4% (FY 2014) 8.4% (FY 2014) Target Capital Structure 50 : 50 WACC: 5.9% 1 Currently no consideration of tax shield 2 Cost of Equity FY2014 = Risk-free market interest rate of 2.6% + (Market risk
Slide 39: Current capital employed is ca. 17.6 bn EUR
Current capital employed is ca. 17.6 bn EUR Weighted average cost of capital is 5.9% 18,101 17,526 17,545 17,565 Average Capital Employed WACC 7.0% 7.0% 6.2 % 5.9% 2011 2012 2013* 2014 Balance Sheet Total 28,081 28,559 29,108 30,474 ./. Non-Interest Bearing Liabilities 10,649 10,940 11,563 12,890 -