Deutsche Lufthansa Ag · XETR:LHA
Deutsche Lufthansa — Baader Investment Conference 2024
41 slides from Deutsche Lufthansa's conference presentation, Sep 23, 2024
Slide 1: Baader Investment Conference 2024
Baader Investment Conference 2024 Deutsche Lufthansa AG Investor Presentation September 2024
Slide 2: Disclaimer
Disclaimer IMPORTANT: The following applies to this document and the oral presentation of the information in this document by Deutsche Lufthansa Aktiengesellschaft (the “Company”, and together with its consolidated subsidiaries, the “Group”) or any person on behalf of the Company, any question-and-a
Slide 3: Disclaimer
Disclaimer This Presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue, or the solicitation of an offer to purchase, subscribe to or acquire, securities of the Company, its affiliates or an inducement to enter into investment activity in the Unite
Slide 4: Recent Financial Results
Recent Financial Results Strategy Update Investment in ITA Airways Operational and Financial Outlook Appendix Page 4
Slide 5: Lufthansa Group achieves third highest operating profit ever in 2023
Lufthansa Group achieves third highest operating profit ever in 2023 (in EUR million) FY23 FY22 Change in % Revenues 35,442 30,895 +15 Operating income 38,429 33,268 +16 Operating expenses 35,960 31,771 +13 Of which fuel 7,931 7,601 +4 Of which staff 8,310 7,223 +15 Of which depreciation 2,228 2,199
Slide 6: Q1 EBIT loss significantly impacted by strikes and lower Cargo results
Q1 EBIT loss significantly impacted by strikes and lower Cargo results compared to prior year Q1 ‘23 to Q1 ‘24 Adjusted EBIT bridge in EUR million Gross profit Strike impact Q1 2023 from growth less Cargo (excl. (Airlines, Q1 2024 Actuals cost inflation strike impact) Cargo, MRO) Other Actuals -15 -
Slide 7: Q2 revenues increased by 7% vs. prior year, Adjusted EBIT decreased by 37%
Q2 revenues increased by 7% vs. prior year, Adjusted EBIT decreased by 37% (in EUR million) Q2’24 Q2’23 Change in % Revenues 10,007 9,389 +7% Operating expenses 9,969 9,064 +10% Of which fuel 2,148 1,934 +11% Of which staff 2,228 2,062 +8% Of which depreciation 571 554 +3% Adjusted EBIT 686 1,085 -3
Slide 8: Passenger Airlines: Inefficiencies at Lufthansa Airlines prevent fixed cost leverage
Passenger Airlines: Inefficiencies at Lufthansa Airlines prevent the Group from fully exploiting its fix cost leverage Passenger Airlines Passenger Airlines Lufthansa Comments excl. LH Airlines Airlines ▪ Strong capacity increase by around 11% relative to prior year ▪ Yields decrease by 3.7% year-on
Slide 9: Passenger Airlines segment could not benefit from increased demand and revenues
Passenger Airlines segment could not benefit from increased demand and revenues since they were offset by lower yields and strike impacts ASK Revenue Adj. EBIT Adj. EBIT Q2 2024 Performance vs. 2019 [m EUR] [m EUR] margin Lufthansa Airlines 86.5% 4,514 213 4.7% SWISS 98.0% 1,665 246 14.8% Austrian A
Slide 10: Lufthansa Technik result is record high – Lufthansa Cargo is back on track
Lufthansa Technik result is record high – Lufthansa Cargo is back on track Adjusted EBIT/(margin) in EUR million Comments ▪ Record results for Lufthansa Technik – 203 strong demand for MRO services (10.8%) 156 offsetting supply chain disruptions and (9.8%) cost inflation ▪ Cargo profits on same leve
Slide 11: Free cash flow in first half of 2024 driven by strong incoming bookings
Free cash flow in the first half of 2024 was driven by strong incoming bookings for the summer and CAPEX shift H1 ‘24 Adjusted EBIT / Adjusted free cash flow in EUR million Q2 ’24 (856) 2,788 Adj. FCF: 204 EUR 573m 2,406 (1,741) 878 (169) 1,197 (163) Adjusted EBIT D&A Liability from Trade Other Oper
Slide 12: Lufthansa Group continues to have strong liquidity and a robust balance sheet
Lufthansa Group continues to have strong liquidity and a robust balance sheet Liquidity Net debt and net pension liabilities1) Comments in EUR billion in EUR billion Increase in 10.4 10.6 pension ▪ Leverage ratio of 2.03) – 8.4 discount rate2) reductions in net debt and 2.1 2.5 Target liquidity: by
Slide 13: Strategy Update
Recent Financial Results Strategy Update Investment in ITA Airways Operational and Financial Outlook Appendix Page 13
Slide 14: Lufthansa Group is delivering on its key strategic priorities
Lufthansa Group is delivering on its key strategic priorities Customer New Product Multi-Airline Transformation into Experience Generation Multi-Hub an Airline Group Page 14
Slide 15: Increasing customer satisfaction is our number one priority in 2024
Customer Product Multi-Airline Airline Group Increasing customer satisfaction is our number one priority in 2024 Offer Reliable Operations • Schedule regularity • Punctuality • Baggage handling Empower our Customers Digitally Customer • Seamless digital processes • Expansion of self-service options
Slide 16: Product and service innovations to define premium in European airline industry
Customer Product Multi-Airline Airline Group Comprehensive product and service innovations underline our aspiration to define premium in the European airline industry Lufthansa Allegris ▪ First flight on May 1st from Munich to Vancouver ▪ Five Business Class seating options with EUR 2.5bn All-Aisle-
Slide 17: Technological and commercial innovation are key to decarbonization
Customer Product Multi-Airline Airline Group Technological and commercial innovation are key to decarbonization Technology drives Rising contribution Among top-ranked emission reduction made by customers airlines in CDP Specific CO2 emissions: More than one million Received top score (A-) in -2% FY
Slide 18: Emission reduction targets validated by SBTi
Customer Product Multi-Airline Airline Group 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: First European airline Growth Fleet (SBTi relevance) group and second Reduction
Slide 19: Multi-Hub and Multi-Brand strategy is key for success
Customer Product Multi-Airline Airline Group Multi-Hub and Multi-Brand strategy is key for the success of Lufthansa Group Customer centricity: • Strong national brands with unique identity • Customer offering tailored to market- specific needs • Connected networks offer maximum connectivity JOINT OP
Slide 20: Focus on the synergetic core of the Group further sharpened
Customer Product Multi-Airline Airline Group Focus on the synergetic core of the Group further sharpened Active consolidation Airline Synergetic core business aviation services 1) Passenger Airlines … MRO, Cargo Business, Portfolio cleanup IT Services, Aviation 2) Lufthansa Training … City Airlines
Slide 21: Investment in ITA Airways
Recent Financial Results Strategy Update Investment in ITA Airways Operational and Financial Outlook Appendix Page 21
Slide 22: Attractive transaction rationale for LHG: ITA, Italy, Rome FCO
Attractive transaction rationale for LHG: ITA as a company, Italy as a market, and Rome FCO as a 5 Star hub LHG Italy Attractive investment case, Most important broader access to LHG market Italian market and outside our home Rome FCO resources markets and US ITA One of Newly established Europe’s be
Slide 23: Transaction terms minimize the Group's financial risk and create optionality
Transaction terms minimize the Group’s financial risk and create optionality ▪ Acquisition of 41% of shares in ITA Airways through a capital increase ▪ Investment into the company’s equity, no payment to Italian Ministry of Economy and Finance (MEF) Key terms ▪ Capital increase of EUR 325 million fu
Slide 24: Remedy package addresses concerns of the European Commission
Remedy package addresses concerns of the European Commission while maintaining economic feasibility of the deal Concerns of EU Commission Remedies Overlaps on ‘neighborhood’ traffic New competitor (short-haul remedy taker) ➢ Transaction security: Closing and Short-Haul between Italy and existing LHG
Slide 25: ITA acquisition is an extension of our multi-hub strategy
The ITA acquisition is an extension of our multi-hub, -brand and –AOC strategy that made Lufthansa Group Europe’s leading airline group Customer centricity ▪ ITA is a strong local brand with maximum identification ▪ New travel options for customers by offering connections via Rome 13 Internationaliz
Slide 26: Plug and Play system enables fast integration into Lufthansa Group
Plug and Play system enables fast integration into Lufthansa Group ITA Integration LUFTHANSA GROUP Steering Synergies and standards „One kitchen“ functions Sales & Network IT (Digital Fleet ▪ Large LHG team with revenue planning Delivery etc.) management dedicated experts ramped management up … Furt
Slide 27: Largest part of synergies can be implemented prior to full consolidation
Largest part of synergies can be implemented prior to full consolidation After full consolidation 100% Central aircraft Technical fleet Step 2: Financing of synergies ownership management & MRO Majority shareholding after option exercise Step 1: 2026 - 2027 Minority shareholding Star Alliance & Opti
Slide 28: Operational and Financial Outlook
Recent Financial Results Strategy Update Investment in ITA Airways Operational and Financial Outlook Appendix Page 28
Slide 29: Lufthansa Group making significant improvements to enhance customer journey
Lufthansa Group making significant improvements to enhance our customer journey Allegris ✓ 4th Allegris aircraft in service Operational customer communication revised 300+ new employees for customer ✓ 100 aircraft with Allegris in ✓ more timely live chats to complement the next four years ✓ more pre
Slide 30: Lufthansa Technik 'Ambition 2030'
Lufthansa Technik will continue its unprecedented track record as key source of value creation by “Ambition 2030” Global expansion Digital push Defense business Main target: remain global MRO leader – TechOps ecosystem expanded into Partnerships to strengthen defense underlined by global production
Slide 31: Fuel cost expectation decreased by EUR 0.2 bn compared to April guidance
Fuel cost expectation decreased by EUR 0.2 bn compared to April guidance of EUR 8.3 billion LH fuel price exposure is well hedged1) in 2024 LH fuel price exposure is well hedged1) in 2024 Expected fuel price sensitivity after hedging (FY 2024) Expected fuel price sensitivity after hedging (FY 2024)
Slide 32: Full year outlook assumes unchanged capacity and cost guidance
Full year outlook assumes an unchanged capacity and cost guidance, while Adjusted EBIT range mainly depends on RASK variability Q3 2024 FY 2024 ~92% of 2019 Capacity1) ~96% of 2019 (including reductions in winter schedule) RASK Low single-digit decline vs. PY Low to mid single-digit decline vs. PY L
Slide 33: Appendix
Recent Financial Results Strategy Update Investment in ITA Airways Operational and Financial Outlook Appendix Page 33
Slide 34: Traffic Data
Traffic Data Apr vs. 2023 May vs. 2023 Jun vs. 2023 Q2 vs. 2023 vs. 2019 Passengers in 1,000 11,081 8.3% 12,219 8.7% 12,640 6.9% 35,939 7.9% -9.1% Available seat-kilometers (m) 27,491 10.6% 29,652 12.5% 29,802 9.2% 86,945 10.7% -8.6% Revenue seat-kilometers (m) 22,298 9.4% 24,012 10.9% 25,150 8.1% 7
Slide 35: Operating KPIs of Passenger Airlines by region
Operating KPIs of Passenger Airlines by region vs. 2023 (unless stated otherwise) Total Q2’24 Europe Q2’24 Asia Pacific Q2’24 Number of flights +6.5% ASK +10.2% ASK +20.6% ASK +10.7% RPK +10.0% RPK +19.5% RPK +9.4% SLF -0.2%p SLF -0.8%p SLF -1.0%p RASK incl. currency1) -3.9% RASK incl. currency 1) -
Slide 36: Calculation of operational airline KPIs RASK CASK
Calculation of operational airline KPIs Passenger Airlines, Q2 2024 1) Traffic revenues (€m) 7,556 1) Total Revenues (€m) 8,017 2) Not assignable (€m) 695 2) Other operating income (€m) 248 Yield = 3) Basis for Yield (1)–(2) (€m) 6,861 3) Reversal of provisions (€m) 48 RASK 4) RPK (m) 1) 71,460 4) F
Slide 37: Group P&L
Group P&L Lufthansa Group (in EUR m) Q2’24 vs. Q2’23 Revenues 10,007 +7% Total operating income 10,632 +5% Operating expenses 9,969 +10% Of which fees & charges 1,326 +10% Of which fuel 2,148 +11% Of which staff 2,228 +8% Of which depreciation 571 +3% Result from equity investments 23 nmf. Adjusted
Slide 38: EBIT / Adjusted EBIT bridge Q2 2024
EBIT / Adjusted EBIT bridge Q2 2024 in EUR million 686 (13) 659 (8) (6) Adjusted EBIT Impairment of non-current Net book gains Others EBIT assets / assets held for sale Page 38
Slide 39: Cash flow statement
Cash flow statement Lufthansa Group (in m EUR) Q2’ 24 vs. Q2’ 23 EBT (earnings before income taxes) 572 -489 1 Depreciation & amortization (incl. repairable MRO materials) 608 +46 Significant decrease in the operating result Net proceeds from disposal of non-current assets 8 +24 1 compared to the pr
Slide 40: Multi-year financial overview
Multi-year financial overview Lufthansa Group (in EUR million, as reported) 2016 2017 2018 20191) 2020 2021 20224) 2023 Operating KPIs (change vs. prior year) RASK ex currency -5.9% +1.9% -0.5% -2.5% -26.7% -6.1% -6.1% +11.0% CASK ex currency, ex fuel2) -2.5% -1.8% -1.7% -1.5% +84.6% -25.8% -25.8% +
Slide 41: Maturity profile of borrowings as of June 30, 2024
Maturity profile of borrowings as of June 30, 2024 3,000 2,500 2,000 1,500 1,000 500 0 2024 2025 2026 2027 2028 2029 2030 2031 Straight Bond Hybrid Convertible Bond Schuldscheindarlehen Aircraft Finance (secured) Other1) 1) Mainly bilateral loans – does not include operating lease payments; as drawn
Deutsche Lufthansa — Baader Investment Conference 2024 on 6ix