Deutsche Lufthansa Ag · XETR:LHA
Deutsche Lufthansa — Shareholder Meeting (April 2023)
36 slides from Deutsche Lufthansa's shareholder meeting presentation, Apr 20, 2023
Slide 1: Lufthansa Group Corporate Governance
Lufthansa Group Corporate Governance Karl-Ludwig Kley, Chairman of the Supervisory Board April 2023 lufthansagroup.com
Slide 2: Agenda
Agenda 1 Introduction Pages 3-4 2 Supervisory Board and Committee Work Pages 5-14 3 Corporate Responsibility Pages 15-19 4 Management Remuneration Pages 20-23 5 Annual General Meeting 2023 Pages 24-25 Corporate Governance Presentation April 2023 Page 2
Slide 3: Lufthansa Group leaves crisis behind in 2022
1 Introduction Lufthansa Group leaves crisis behind in 2022 Return to around EUR 1.5bn of operating profit Logistics and MRO generate record results Fast and steep operational ramp-up Cost inflation mitigated successfully Repayment of all stabilization measures Significant debt reduction Corporate G
Slide 4: The Group's transformation will drive the achievement of its 2024 targets
1 Introduction The Group’s transformation will drive the achievement of its 2024 targets Sustained leadership and premium brands in highly attractive markets Enhanced product and service offering Adj. EBIT margin target for 2024 CONNECTING Innovation focus to drive revenue quality Accelerated PEOPLE
Slide 5: Lufthansa Supervisory Board – Experienced, Diverse and Independent
2 Supervisory Board and Committee Work Lufthansa Supervisory Board – Experienced, Diverse and Independent 20 Board Members Lufthansa Supervisory Board tenure 10 Shareholder Representatives 10 Employee Representatives 8 10 2 Gender 0-3 years 4-8 years 9 years Age Nationality1 Professional experience1
Slide 6: Clearly defined Supervisory Board nomination process
2 Supervisory Board and Committee Work Clearly defined Supervisory Board nomination process1 Step 1 – Definition of required profile Step 2 Step 2 Step Step 3 3 StepStep 4 4 Skills Diversity Experience Other Nomination Committee Supervisory Board • Industry • International • Work • Independence asse
Slide 7: Shareholder representatives cover the targeted skill set and diversity criteria
2 Supervisory Board and Committee Work Shareholder representatives cover the targeted skill set and diversity criteria Karl-Ludwig Kley Chairman of the Supervisory Board Born 1951, German Member since 2013 Extensive leadership and supervisory board experience Financial expert Erich Clementi Carsten
Slide 8: Staggered Board and introduction of three year term for all new members
2 Supervisory Board and Committee Work Staggered Board and introduction of three year term for all new members facilitates regular change AGM 2024 AGM 2023 AGM 2025 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Karl-Ludwig Kley1 Erich Clementi Thomas Enders Michael Kerkloh Carsten Knobel Harald
Slide 9: Group of employee representatives headed by experienced chair
2 Supervisory Board and Committee Work Group of employee representatives headed by experienced chair Christine Behle Deputy Chairman of the Supervisory Board Born 1968, German Member since 2013 Deputy Chairwoman of the Federal Management Board of the Union Ver.di Alexander Behrens Holger Benjamin Ko
Slide 10: Skills profile of members ensures governance & Committee Work (I)
2 Supervisory Board and Committee Work Skills profile of members ensures governance & Committee Work (I) Criterion is met. The criteria regarding the professional aptitude are based on the self- assessment by the Supervisory Board members. A tick means at least „good knowledge“ and therefore the a
Slide 11: Skills profile of members ensures governance & Committee Work (II)
2 Supervisory Board and Committee Work Skills profile of members ensures governance & Committee Work (II) Criterion is met. The criteria regarding the professional aptitude are based on the self- assessment by the Supervisory Board members. A tick means at least „good knowledge“ and therefore the
Slide 12: Committees support the work of the Supervisory Board
2 Supervisory Board and Committee Work Committees support the work of the Supervisory Board Steering and Remuneration Committee Nomination Committee Prepares the Supervisory Board’s meetings and decisions, Recommends to the Supervisory Board candidates for election among other things with regard to
Slide 13: Supervisory and Executive Board met on a regular basis also in 2022
2 Supervisory Board and Committee Work Supervisory and Executive Board met on a regular basis also in 2022 Attendance of Supervisory Board and committee meetings 2022 Supervisory Board 5 Meetings in 2022 Steering and Remuneration Committee + 6 Meetings in 2022 Audit Committee + 5 Meetings in 2022 No
Slide 14: Regular self-evaluation is the basis for continuous improvements
2 Supervisory Board and Committee Work Regular self-evaluation is the basis for continuous improvements • The Supervisory Board conducts annual self-evaluations • All Supervisory Members provide feedback based on a detailed questionnaire • Includes a 360° feedback from the Executive Board every two
Slide 15: The Supervisory Board is actively involved in the strategy process
2 Supervisory Board and Committee Work The Supervisory Board is actively involved in the strategy process Two Board meetings per annum focused on strategy: In September, the Supervisory Board discusses the strategy with the Executive Board, in December it approves the strategy, the budget and mid-te
Slide 16: The selection of Executive Board members is guided by a comprehensive set of criteria
2 Supervisory Board and Committee Work The selection of Executive Board members is guided by a comprehensive set of criteria Personal skill-set Additional criteria Aviation Professional Industry Diversity qualifications Knowledge Leadership International skills & experience management experience Tea
Slide 17: Sustainability is an integral part of the Group's strategy and management
3 Corporate Responsibility Sustainability is an integral part of the Group’s strategy and management New ESG Committee of the Supervisory Board as of January 1, 2023 Christina Foerster holds direct responsibility for Corporate Responsibility on Executive Board level since 2020 Sustainability K
Slide 18: Emission reduction targets validated by SBTi
3 Corporate Responsibility Group’s emission reduction targets successfully validated by Science Based Targets initiative (SBTi) Index LHG CO2 Emissions (not to scale) 110 Major levers for CO2 Reduction: Growth Fleet (SBTi relevance) 50% less net carbon Reduction 100 Fleet rollover emissions by 203
Slide 19: SAFs will play a key role in reducing the Group's emissions
3 Corporate Responsibility SAFs will play a key role in reducing the Group’s emissions Sustainable Aviation Fuels (SAF) Predicted SAF production ramp-up1 in mt The availability of SAFs is projected ~x5 cost of Biogenic SAF fossil fuel to increase significantly, costs are Oils, Sugars, Starch expec
Slide 20: Lufthansa Group scores well in relevant sustainability rankings
3 Corporate Responsibility Lufthansa Group scores well in relevant sustainability rankings Improvement from BBB (2017-2020) to AA (2022) due to strong business ethics practices Leader among 16 companies in the airline industry Robust carbon reduction efforts Labor management: unions protest
Slide 21: Further increased focus on cyber security to protect the business and our customers
3 Corporate Responsibility Further increased focus on cyber security to protect the business and our customers Cyber Resilient Organization Major Achievements 2022 Technical security Cyber defense Usability, culture and Future focus Log-file analysis of aircraft IT-components contribute to baselin
Slide 22: AGM to resolve on changes to the Executive Board compensation system
4 Management Remuneration AGM to resolve on changes to the Executive Board compensation system ▶ Remuneration system reinstated after the end of the stabilization measures ▶ Adjustment of variable remuneration to set growth incentives and strengthen sustainable management ▶ Annual General Meeting 20
Slide 23: Short-Term Incentive: Rationale
4 Management Remuneration STI considers financial and non-financial targets as well as individual performance Subject to AGM resolution Annual Bonus x Annual Target Achievement = Payout: Cash or Financial Targets1 + Target Non-Financial Targets1 (20%) shares Bonus (80%) Cap at 200% Overall and indiv
Slide 24: Long-Term Incentive aligns interests of management and shareholders
4 Management Remuneration Long-Term Incentive (LTI) aligns interests of management and shareholders Subject to AGM resolution Performance Share Plan 4-year Performance Period LTI target Initial Payout: value number of Adjusted Relative TSR Non-financial targets1 Average cash or shares ROCE1 Performa
Slide 25: Supervisory Board remuneration is fixed and based on committee work
4 Management Remuneration Supervisory Board remuneration is fixed and based on committee work Base compensation: Chairman: € 240,000 Deputy Chairman: € 120,000 Ordinary members: € 80,000 Committee chair: Audit Committee: additional € 60,000 Other Committees: additional € 40,000 Commi
Slide 26: Proposal for adjustment of Supervisory Board remuneration
4 Management Remuneration Proposal for adjustment of Supervisory Board remuneration ▶ Supervisory Board remuneration essentially unchanged since 2013 ▶ AGM approval in May 2023 ▶ Adjustments effective January 1, 2023 Current remuneration system Proposed change Chairman of the Supervisory Board 240,0
Slide 27: Virtual format of AGM on May 9, 2023 will preserve all shareholder rights
5 AGM 2023 Virtual format of AGM on May 9, 2023 will preserve all shareholder rights ▶ German Stock Corporation Act (AktG) has established a new legal framework for virtual AGMs, ensuring that all shareholder rights are safeguarded ▶ Modern and future-oriented format creates additional opportunities
Slide 28: AGM format ensures a high-quality dialogue with our shareholders
5 AGM 2023 AGM format ensures a high-quality dialogue with our shareholders Submission of Shareholders have the Publication of Publication of shareholders’ motions right to submit shareholder answers to all and nominations at least comments no later than comments 4 days questions 1 day Convocation 1
Slide 29: Appendix
Appendix lufthansagroup.com
Slide 30: Executive Board Remuneration System – Short-Term Incentive (STI)
Appendix Executive Board Remuneration System – Short-Term Incentive (STI) Subject to AGM resolution Short-Term Incentive (STI) Base Salary • Adjusted EBIT vs. target value (40%) + Performance targets • Adjusted Free Cash Flow vs. target value (40%) • Overall and individual business and sustainabilit
Slide 31: Executive Board Remuneration System – Long-Term Incentive (LTI)
Appendix Executive Board Remuneration System – Long-Term Incentive (LTI) Subject to AGM resolution Long-Term Incentive (LTI) Base Salary Performance Share Plan + Plan type • Allocation of virtual Lufthansa shares with a four-year term Short-Term Incentive (STI) • Relative Total Shareholder Return (T
Slide 32: Executive Board Remuneration System – Pension
Appendix Executive Board Remuneration System – Pension Base Salary + Pension scheme Short-Term Incentive (STI) Plan type • Defined contribution plan = Contribution • Fixed annual amount Target Cash Compensation Investment concept • Investment of contributions via the Lufthansa Pension Trust + Retire
Slide 33: Executive Board Remuneration System – End-of-service benefits
Appendix Executive Board Remuneration System – End-of-service benefits In accordance with the recommendation of the German Corporate Governance Code (Code), no more than Termination by mutual the value of the entitlements for the remainder of the contract and maximum two years’ compensation consent
Slide 34: Executive Board Remuneration System – Other contractual terms
Appendix Executive Board Remuneration System – Other contractual terms • Company car incl. driver Fringe benefits • Industry standard flight allowances for private air travel • Insurance premiums • Obligation to invest in Lufthansa shares over a period of 4 years CEO: 200% of base salary Share Own
Slide 35: Capital Authorizations
Appendix Capital Authorizations Exclusion of Nominal Date of Expiry of Purpose Contribution Subscription amount authorization authorization rights Authorized In cash or EUR 1.000m General purposes May 10, 2022 May 9, 2025 Capital A in kind ~32.7% of share capital Contribution in cash: max. 10% of sh
Slide 36: Auditor and auditors' fees
Appendix Auditor and auditors’ fees Auditor for FY 2022 Ernst & Young (since 2020) Siegfried Keller (since 2020) Lead auditors Joerg Boesser (since 2022) The auditing services mainly consist of fees for auditing the consolidated financial statements, the review of the half-yearly Auditors’ fees fina
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