Slide 1: Q4 and FY 2018 Analyst and Investor Conference Call
Q4 and FY 2018 Analyst and Investor Conference Call Frankfurt, 14 March 2019
Slide 2: Disclaimer
Disclaimer The information herein is based on publicly available information. It This presentation contains statements that express the Company‘s has been prepared by the Company solely for use in this opinions, expectations, beliefs, plans, objectives, assumptions or presentation and has not been v
Slide 3: Q4 and FY 2018 - Carsten Spohr, CEO
Q4 and FY 2018 Analyst and Investor Conference Call Carsten Spohr, CEO and Chairman of the Executive Board Frankfurt, 14 March 2019
Slide 4: Lufthansa Group in 2018
Lufthansa Group in 2018 Highest revenue in history Europe’s first and only +10% passengers 5-Star rated airline 35.8 bn € 2nd best result in history 100 years Unit cost reduction Attractive return anniversary 2.8 bn € ( Adj. EBIT margin: 7.9%) of the crane -1.7% (CASK excl. fuel, excl. currency, +10
Slide 5: Q4 and FY 2018 - Ulrik Svensson, CFO
Q4 and FY 2018 Analyst and Investor Conference Call Ulrik Svensson, CFO and Member of the Executive Board Frankfurt, 14 March 2019
Slide 6: Significant headwinds almost compensated by underlying improvements
Significant headwinds almost compensated by underlying improvements Group Adjusted EBIT Comments 2,969 Adjusted EBIT performance in line 2,836 with initial guidance -122 2,714 Headwinds from fuel cost increase, -855 integration costs at Eurowings and +1,106 rising irregularity costs larger than
Slide 7: Capitalization of engine overhauls improves view on airlines' performance
Capitalization of engine overhauls improves view on airlines’ performance • Capitalization of engine overhauls provides better view on underlying profit performance of the Airlines by reducing volatility in MRO costs Context • Change in accounting makes Group airlines more comparable to competition
Slide 8: Strength in long-haul continues, short-haul remains challenged by oversupply
Strength in long-haul continues, short-haul remains challenged by oversupply Revenue KPIs Q4 FY +10.9% +11.8% Comments Europe +1.1pts. 47% -0.8pts. -2.7% European yield affected by a tough -4.9% ASK SLF Yield1 ASK SLF Yield1 comparison base, the Group’s +9.4% +7.3% Yield NA: response to competitio
Slide 9: Network Airlines grow full year unit revenues
Network Airlines grow full year unit revenues Revenue KPIs Q4 FY +9.3% Passenger Airlines +8.2% Comments Passenger +0.2pts. +0.5pts. RASK of all Network Airlines up in the Airlines -1.4% -0.2% -0.5% full year due to strength in long-haul -3.0% ASK SLF Yield1 RASK1 ASK SLF Yield1 RASK1 RASK decli
Slide 10: Irregularity costs and one-offs mask even better underlying cost performance
Irregularity costs and one-offs mask even better underlying cost performance Cost KPIs Q4 FY CASK1 CASK1 Comments -2.0% Passenger ex. integration CASK reduction at Network Airlines Airlines costs driven by crew productivity -1.2% improvements, the renegotiation of -4.5% infrastructure contracts an
Slide 11: Fuel cost increase significantly in 2018
Fuel cost increase significantly in 2018 Fuel Cost Q4 FY Comments +855 / +16% Average jet fuel price 15% above prior year level Around EUR 250 million of full year increase attributable to capacity growth Hedging limits fuel cost increase Lufthansa Group 6,087 +318 / +25% 5,232 1,611 1,293 Q41
Slide 12: Network Airlines fully offset rising fuel costs
Network Airlines fully offset rising fuel costs Adjusted EBIT Q4 FY -1% 0% Comments 316 313 2,263 2,273 Lufthansa offsets higher fuel costs Q4 17 Q4 18 FY 17 FY 18 by growing unit revenues and reducing unit costs +21% -1% Profit growth at SWISS driven by 222 269 1,627 1,615 higher loads and yiel
Slide 13: Eurowings results distorted by one-off effects
Eurowings results distorted by one-off effects Adjusted EBIT Q4 FY nmf. nmf. Comments -51 94 -113 -178 Full year loss largely due to expenses Q4 17 Q4 18 FY 17 FY 18 of around EUR 170 million related to the integration of former Air Berlin aircraft Irregularity costs more than double compared to
Slide 14: Profits grow across all Aviation Services
Profits grow across all Aviation Services Adjusted EBIT Q4 FY -22% +10% Comments 144 112 242 265 Cargo profits up in the full year, Q4 Q4 17 Q4 18 FY 17 FY 18 result reflects normalization after prior year record level +26% +2% Technik benefits from improvements 82 103 415 425 in engine overhaul
Slide 15: Group investments focus on fleet modernization
Group investments focus on fleet modernization Gross Investments1 Comments +5% 3,757 Investments broadly on prior year 3,287 level excluding the effect of the 470 3,141 capitalization of engine overhaul events 3.3bn EUR invested in aircraft and engines 46 aircraft added in 2018 FY 17 FY 18 FY
Slide 16: Allocation of investments is driven by capital return performance
Allocation of investments is driven by capital return performance Adjusted ROCE after tax Gross Investments and Adjusted ROCE after tax per business 1,582 -1.3pts. 26% 774 15% 11.9% 13% 10.6% 515 7% 7% 7% 374 241 220 79 FY 171 FY 18 Lufthansa Swiss Eurowings Logistics MRO Austrian Catering -8% Pre
Slide 17: Balance sheet remains strong
Balance sheet remains strong Operating Cash Flow Free Cash Flow Net Debt / Pension Provisions -23% -88% 5,368 2,117 9,354 8,000 Net debt 4,109 +15% 5,865 Pension provisions 5,116 250 3,489 2,884 +21% FY 171 FY 18 FY 171 FY 18 31 Dec. 17 31 Dec. 18 Decline due to non-recurrence of Decrease due to
Slide 18: Dividend proposal amounts to 80 Cents per share
Dividend proposal amounts to 80 Cents per share Dividend per share in EUR 0.80 0.80 0.70 0.60 0.50 0.50 0.45 0.25 0 0 0 FY 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Dividend Policy FY 2018 Base EBIT 2,974m EUR Pay-out 10% - 25% 13% (0.80 EUR per share = 380m EUR) Page 18
Slide 19: Group Airlines further reduce capacity growth
Group Airlines further reduce capacity growth Europe Market-wide seat growth SU 19: +3% Market-wide capacity growth moderates significantly Group unit revenues expected to benefit from moderating yield pressure Americas Market-wide seat growth SU 19: +6% Good demand expected to continue Asia /
Slide 20: Lufthansa Group Airlines will further reduce unit costs in 2019
Lufthansa Group Airlines will further reduce unit costs in 2019 Successful CASK reduction … …set to continue in 2019 Process improvements New aircraft (c. 20% less operating cost each) Ambition: 1% to 2% CASK reduction -1.8% -1.7% every year Continuous optimization -2.5% of MRO costs Staff productiv
Slide 21: Lufthansa Group expects EBIT margin between 6.5% and 8.0% in 2019
Lufthansa Group expects EBIT margin between 6.5% and 8.0% in 2019 Passenger Airlines Network Airlines Eurowings Capacity growth (ASK) c. +4% c. +2% Unit revenue (RASK, at constant currency) stable to down low-single digit stable to up low-single digit Unit cost (CASK, at constant currency, excl. fue
Slide 22: Q4 and FY 2018 - Carsten Spohr, CEO
Q4 and FY 2018 Analyst and Investor Conference Call Carsten Spohr, CEO and Chairman of the Executive Board Frankfurt, 14 March 2019
Slide 23: In a challenging environment we will build on our strengths
In a challenging environment we will build on our strengths Customer Shareholder #1 Employee Network Airlines Eurowings #1 in Europe #1 in home markets Logistics Aviation Services #1 worldwide MRO Catering Aviation Training Cost Focus & Operational Quality Page 23
Slide 24: A strong brand and a superior product differentiate us from our competition
A strong brand and a superior product differentiate us from our competition A strong and well recognized brand… …with a full pipeline of new products and services A strong brand… Pre-flight #1 most trusted brand (Germany) Innovative booking services Common App # 5 strongest brand value growth (Airli
Slide 25: Fleet modernization benefits customers, shareholders and the environment
Fleet modernization benefits customers, shareholders and the environment Group Fleet 2018 Order book Delivery Schedule 763 Aircraft type 2019 20 21 22 23 24 25 728 46 11 20 Boeing 787-9 New 20 Airbus 350-900 New Long-Haul 13 Airbus 350-900 38 Boeing 777 2 Airbus 330 93 31 Dec. Additions Retirements
Slide 26: Innovation in revenue management will start to have an impact in 2019
Innovation in revenue management will start to have an impact in 2019 Distribution strategy Revenue management Share of direct distribution steadily increasing Continuous pricing will be expanded in 2019 Greater choice and more personalized offer Expansion expected to grow booking volumes
Slide 27: Eurowings will focus on its turnaround in 2019
Eurowings will focus on its turnaround in 2019 Eurowings in 2018 Adjusted EBIT Margin #1 position in home market 1.5% Around 0% #3 position in Europe 4.2bn EUR Revenues -5.0% -5.5% 2016 2017 2018 2019 38.5m Passengers Fleet Profitability drivers in 2019 136 180 205 Improvement of crew and aircraft p
Slide 28: Austrian Airlines addresses market challenges
Austrian Airlines addresses market challenges Performance has improved… …but competitive pressures mean… … that AUA must adapt its strategy Adjusted EBIT Margin Strong LCC growth in Vienna Expansion and streamlining of +436% short-haul fleet: 3.8% Replacement of 18 Dash 4 aircraft +92% by 10 A320
Slide 29: Lufthansa Group will capitalize on its leading position in a constrained industry
Lufthansa Group will capitalize on its leading position in a constrained industry Continued demand Lufthansa Group holds Infrastructure Pace of consolidation growth leading positions increasingly constrained increases Slot constrained Airline failures / M&A airports +4.9% RPK growth per year 35% ATC
Slide 30: Appendix - supplementary information
Appendix - supplementary information- Page 30
Slide 31: Financial guidance 2019 / 2018 Base
Financial guidance 2019 / 2018 Base Passenger Airlines Network Airlines Eurowings ASK 284,741m 64,748m RASK 8.1 Ct. 6.8 Ct. CASK 5.6 Ct. 5.7 Ct. Fuel cost 4,713m EUR 973m EUR Adjusted EBIT margin 10.7% -5.5% Non-PAX Logistics MRO Catering Others Revenue 2,713m EUR 5,918m EUR 3,217m EUR Adj. EBIT mar
Slide 32: Planned capacity growth for 2019
Planned capacity growth for 2019 5% 3% Total growth Network Eurowings 4% Network Airlines Eurowings Airlines 10% 4% 4% 3% -40% 2% 2% Network Eurowings Network Eurowings Airlines Airlines 7% Landings ASK Landings ASK Further 2019 focus on -4% moderation of operational Network Eurowings growth in
Slide 33: Group P&L
Group P&L Lufthansa Group (in m EUR) Q4 ’18 vs. Q4 ’17 FY ’18 vs. FY ’17 Total revenue 8,947 +2% 35,844 +1% Other operating income 730 -0% 2,349 -13% Total operating income 9,677 +1% 38,193 -0% Operating expenses 9,201 +6% 35,393 +1% Non-fuel operating expenses 7,590 +3% 29,306 -2% Cost of materials
Slide 34: Group P&L / Impact of accounting changes
Group P&L / Impact of accounting changes Lufthansa Group (in m EUR) FY ’18 vs. FY ’17 Comments Total revenue 35,844 +1% +6% excl. IFRS 15 Other operating income 2,349 -13% Mandatory implementation of IFRS Total operating income 38,193 -0% +6% excl. IFRS 15 15 requires netting of revenues Operating
Slide 35: Adoption of IFRS 15
Adoption of IFRS 15 Context IFRS 15 relates to the accounting of revenues arising from contracts with customers Netting of revenues and related expenses required in some cases (e.g. ticket related taxes, airport fees) IFRS 15 effect in FY ’18 P&L Revenues and costs: on traffic revenue and fee ex
Slide 36: Adoption of IFRS 16
Adoption of IFRS 16 • New accounting standard IFRS 16 is applicable from 2019 onwards Context • Lease liabilities must be recognized in the financial accounts at the present value of the contractually agreed lease payments for leases with a term of more than twelve months Effect on Profit & Loss: Ef
Slide 37: Group revenue bridge
Group revenue bridge in m EUR Price: -+0.5% Volume: +8.0% 151 -457 Currency: -1.6% -2,257 2,267 IFRS 15 adj.: -7.9% 28,399 28,103 Traffic revenue (-1.0%) 7,741 Other revenue (+7.8%)1 7,180 FY 2017 FY 2018 ∑ 35,579 ∑ Group revenue (+0.7%) ∑ 35,884 1 Including positive 359m EUR IFRS 15 effect from rec
Slide 38: Operating KPIs of Passenger Airlines by region
Operating KPIs of Passenger Airlines by region Total Q4 ’18 FY ’18 Europe Q4 ’18 FY ’18 Asia / Pacific Q4 ’18 FY ’18 Number of flights +7.4% +10.0% ASK +10.9% +11.8% ASK +5.9% +4.5% ASK +9.3% +8.2% RPK +9.7% +13.5% RPK +7.1% +4.4% RPK +9.5% +9.0% SLF -0.8pts. +1.1pts. SLF +1.0pts. -0.1pts. SLF +0.2p
Slide 39: 2018 regional yield development by quarter
2018 regional yield1 development by quarter Q1 Q2 Q3 Q4 H1 9M FY Europe +0.1% -1.6% -3.9% -4.9% -0.9% -2.0% -2.7% Americas -1.6% +3.0% -0.2% -0.1% +1.0% +0.5% +0.2% Thereof North America -0.8% +3.9% +0.7% +3.5% +1.9% +1.5% +1.9% Thereof South America -0.7% -0.2% -3.9% -14.8% -0.6% -1.8% -5.4% Asia P
Slide 40: Exemplary calculation of operational airline KPIs
Exemplary calculation of operational airline KPIs Quarterly Data.xls 1 Network Airlines, FY 2018 Traffic Figures 1 (1) Traffic revenues 20,877 Yield (2) RPK 2 231,952 FY 2018 (restated) NETWORK AIRLINES EUROWINGS LOGISTICS MRO CATERING OTHER CONSOLDIATON LH GROUP Yield: (1) / (2) * 100 9.0 Profit an
Slide 41: Fuel cost bridge
Fuel cost bridge Hedging result by quarter (in m EUR) Q1 Q2 Q3 Q4 FY (YTD) 2017 -30 -63 -30 56 -67 2018 107 229 245 108 689 Change versus previous year in m EUR +855 Price -756 +1,558 6,087 -208 Volume Hedging 5,232 Currency +261 FY 2017 FY 2018 Page 41
Slide 42: Fuel cost outlook 2019
Fuel cost outlook 2019 Fuel cost Sensitivity to Brent and currency +650 FY 19 85 1,800 1,650 1,550 1,400 1,300 1,150 1,050 Average Brent in FY 19 80 Full Year 18 / 19 1,600 1,450 1,300 1,200 1,100 950 850 6.1 6.8 6.1 75 1,350 1,200 1,100 950 850 750 600 70 (USD/bbl) 1,050 900 800 650 550 450 350 65
Slide 43: Fuel and foreign exchange hedging strategy
Fuel and foreign exchange hedging strategy Hedging Strategy Fuel Hedging Approach Aim of hedging strategy 80 85 Lufthansa's hedging strategy is designed to 56 61 66 71 75 47 52 reduce volatility 28 33 38 42 19 24 No intention to outperform the market 5 9 14 Rolling approach up to 24 months goi
Slide 44: Cash flow statement
Cash flow statement Lufthansa Group (in m EUR) FY ’18 vs. FY ’17 5.4 4.1 EBT (earnings before income taxes) 2,784 -374 3.4 3.2 2.0 Depreciation & amortization (incl. non-current assets) 2,201 -138 Net proceeds from disposal of non-current assets -34 +3 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Result
Slide 45: Multi-Year financial overview
Multi-Year financial overview Lufthansa Group (in m EUR, as reported) 2014 2015 2016 2017 2018 Operating KPIs RASK ex currency -2.5% -3.0% -5.9% +1.9% -0.5% CASK ex currency, ex fuel -2.6% +2.4% -6.1% -0.4% -1.7% Profit & Loss Revenues 30,011 32,056 31,660 35,579 35,844 Fuel Cost 6,751 5,784 4,885 5