Slide 1: Analyst and Investor Conference Call – Q3 2018
Analyst and Investor Conference Call – Q3 2018 Frankfurt, 30 October 2018
Slide 2: Disclaimer
Disclaimer The information herein is based on publicly available information. It has been prepared by the Company solely for use in this presentation and has not been verified by independent third parties. No representation, warranty or undertaking, express or implied, is made as to, and no reliance
Slide 3: Analyst and Investor Conference Call – Q3 2018 (Ulrik Svensson, CFO)
Analyst and Investor Conference Call – Q3 2018 Ulrik Svensson CFO and Member of the Executive Board Frankfurt, 30 October 2018
Slide 4: Lufthansa holds up well in increasingly challenging market environment
Lufthansa holds up well in increasingly challenging market environment Growing political Air traffic control strikes uncertainties and capacity shortages Trade conflicts Capacity constraints at airports Oil price increase Moderation of global economic growth outlook Flight delays and cancellations A
Slide 5: EBIT declines slightly because of one-off related losses at Eurowings
EBIT declines slightly because of one-off related losses at Eurowings Group Adjusted EBIT 9M 2018 Comments Fuel cost: • Group Adjusted EBIT above the +536m EUR previous year level excluding Eurowings which suffers from -198 / -8% c. 170m EUR of one-off 2,560 Air Berlin integration costs +13 • Networ
Slide 6: Strength in long-haul continues
Strength in long-haul continues Revenue KPIs Q3 9M Comments +11.3% +12.1% • Significant market share gains in +1.8pts. Europe, yield pressure due to tough Europe +1.0pts. 48% -2.0% comparison base, high market-wide -3.9% capacity-growth and negative mix ASK SLF Yield1 ASK SLF Yield1 effect from disp
Slide 7: Unit revenues at Passenger Airlines up in the first nine months
Unit revenues at Passenger Airlines up in the first nine months Revenue KPIs Q3 9M Comments +7.5% +7.9% • Prior year comparison base has become more difficult due to effects Passenger +0.4pts. +0.6pts. +0.2% +0.3% of Air Berlin insolvency Airlines -0.6% -1.3% • Strong long-haul performance offset AS
Slide 8: Irregularity costs and one-offs mask better underlying performance
Irregularity costs and one-offs mask better underlying performance Cost KPIs Q3 9M Comments CASK1 CASK1 • Higher irregularity costs and increase of MRO expenses impact Passenger Airlines CASK in Q3, irregularity and Passenger +1.2% MRO cost growth expected to -0.0% Airlines moderate in the fourth qu
Slide 9: Fuel cost increase accelerates markedly compared to first half year
Fuel cost increase accelerates markedly compared to first half year Fuel Cost Q3 9M Comments • Development in the quarter in line with unchanged full year outlook of c. 850 million euro increase +536 / +14% • Less protection compared to earlier in the year due to roll-off of lower price hedges • Gro
Slide 10: Network Airlines offset rising fuel costs in the first nine months
Network Airlines offset rising fuel costs in the first nine months Adjusted EBIT Q3 9M Comments -15% +1% Network • Nine months Adjusted EBIT up Airlines despite fuel, irregularity and MRO 1,190 1,009 1,947 1,960 cost increases Q3 17 Q3 18 9M 17 9M 18 • Expected moderation of irregularity and MRO cos
Slide 11: Eurowings results distorted by one-off effects of Air Berlin insolvency
Eurowings results distorted by one-off effects of Air Berlin insolvency Adjusted EBIT Q3 9M Comments Eurowings -40% -145% • Air Berlin aircraft integration and 145 ramp-up of long-haul operations 222 134 weigh on profits -65 Q3 17 Q3 18 9M 17 9M 18 • Integration of former Air Berlin aircraft complet
Slide 12: Lufthansa Cargo and LSG Group lead profit growth in Aviation Services
Lufthansa Cargo and LSG Group lead profit growth in Aviation Services Adjusted EBIT Q3 9M Comments +40% +56% • Ongoing good demand supports continuously high yields at Lufthansa 20 28 98 153 Cargo Q3 17 Q3 18 9M 17 9M 18 • Cost inflation in spare parts and short-term additions of external -6% -3% ca
Slide 13: Balance sheet strengthened further
Balance sheet strengthened further Gross Investments1 Free Cash Flow Net Debt / Pension Provisions +27% -59% 2,496 2,790 8,000 7,278 1,962 -6% 5,116 4,801 1,152 2,884 -14% 2,477 9M 17 9M 18 9M 17 9M 18 FY 17 9M 18 Net debt Pension provisions • Majority of investments (2.2bn EUR) • Decline mainly due
Slide 14: Lufthansa Group confirms financial outlook
Lufthansa Group confirms financial outlook 9M Forecast ∆ Previous forecast Capacity Growth (ASK, organic and inorganic) +7.9% c. +8% c. +8% Passenger Airlines Unit Revenue (RASK, ex. currency) +0.3% slightly positive slightly positive Unit Cost (CASK, ex. currency, ex. fuel) 0.0% c. -1% c. -1%
Slide 15: Confident outlook above all for long-haul
Confident outlook above all for long-haul Europe • Yield pressure as a result of tough prior year comparison base, high industry-wide capacity growth and protection of expanded market position Americas Asia / Pacific • Good demand expected to continue • Good demand both • Limited market-wide ways, w
Slide 16: Analyst and Investor Conference Call – Q3 2018 (Carsten Spohr, CEO)
Analyst and Investor Conference Call – Q3 2018 Carsten Spohr CEO and Chairman of the Executive Board Frankfurt, 30 October 2018
Slide 17: Second best 9M result of Group history despite challenging environment
Second best 9M result of Group history despite challenging environment LH Group Adjusted EBIT: 2.4bn EUR • Second best nine months result in Group history despite fuel cost increase and flight schedule disruptions Network Airlines: Result above previous year • Fuel cost increase fully compensated Eu
Slide 18: Lufthansa starts operational excellence initiative and reduces growth
Lufthansa starts operational excellence initiative and reduces growth 18,000 cancelled flights 1.7m Passengers affected by cancellations 70% punctuality (-7pts. vs. previous year) Capacity growth for Summer Additional spare aircraft 2019 reduced to 3.8% Qualitatives Wachstum Additional A320ceo order
Slide 19: Eurowings: Market position significantly improved
Eurowings: Market position significantly improved Strong growth and integration phase LH Group position in home markets D-A-CH-B 2015 2016 2017 2018 #3 #1 Hamburg P2P in Hanover #1 #1 90 185 Europe #2 #Aircraft Dortmund #2 #2 Berlin ~2x Dusseldorf #1 #1 #2 #3 • Market consolidation around Air Berlin
Slide 20: Analyst and Investor Conference Call – Q3 2018
Analyst and Investor Conference Call – Q3 2018 Frankfurt, 30 October 2018
Slide 21: Appendix - supplementary information
Appendix - supplementary information-
Slide 22: Operating profit and loss statement
Operating profit and loss statement Lufthansa Group (in m EUR) Q3 ‘18 vs. Q3 ‘17 9M ’18 vs. 9M ‘17 • Excluding IFRS 15, “Total operating income“ would Total revenue 9,959 +1.5% 26,897 +0.5% have increased by 6.0% Other operating income 395 -31.1% 1,269 -27.4% versus Q3 ’17 (+4.9% vs. 9M ’17) Total o
Slide 23: Adoption of IFRS reduces reported revenues and costs
Adoption of IFRS 15 reduces reported revenues and costs 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 9M ’18 Effect on Lufthan
Slide 24: Group revenue bridge
Group revenue bridge in m EUR Price: +1.5% Volume: +8.0% 318 -489 Currency: -2.3% -1,726 1,682 IFRS 15 adj.: -8.1% 21,360 21,145 Traffic revenue (-1.0%) 5,752 Other revenue (+6.5%)1 5,401 9M 2017 9M 2018 ∑ 26,761 ∑ Group revenue (+0.5%) ∑ 26,897 1 Including positive 270m EUR IFRS 15 effect from recl
Slide 25: Capacity growth at Passenger Airlines
Capacity growth at Passenger Airlines 12% 12% Total growth incl. inorganic growth1 5% 9M ‘18 FY ‘18 9M ’18 FY ’18 4% 7% 7% 9% 8% 9% 8% 9M ’18 FY ’18 9M ’18 FY ’18 5% 6% Landings ASK Landings ASK 9M ’18 FY ’18 1 Growth through Air Berlin insolvency Status: October 2018 All capacity plans indicative a
Slide 26: Operating KPIs of Passenger Airlines by region
Operating KPIs of Passenger Airlines by region Total Q3 '18 9M '18 Europe Q3 '18 9M '18 Asia/ Pacific Q3 '18 9M '18 Number of flights +9.1% +8.7% ASK +11.3% +12.1% ASK +2.1% +4.1% ASK +7.5% +7.9% RPK +12.7% +14.7% RPK +2.9% +3.5% RPK +8.0% +8.7% SLF +1.0pts. +1.8pts. SLF -0.7pts. -0.5pts. SLF +0.4pt
Slide 27: 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% -0.9% -2.0% Americas -1.6% +3.0% -0.2% +1.0% +0.5% Thereof North America -0.8% +3.9% +0.7% +1.9% +1.5% Thereof South America -0.7% -0.2% -3.9% -0.6% -1.8% Asia Pacific -0.3% +0.1% +2.7% -0.1% +1.0% Middle East
Slide 28: Exemplary calculation of operational airline KPIs RASK CASK
Exemplary calculation of operational airline KPIs Network Airlines, Q3 2018 (1) Traffic revenues 5,954 Traffic Figures 1 Yield (2) RPK 2 67,154 Quarterly Data.xls 1 Q2 2018 Yield: (1) / (2) * 100 8.9 Netw ork Airlines LOGISTICS MRO CATERING OTHER CONSOLDIATON LH GROUP Profit and Loss LHP SWISS AUA N
Slide 29: Fuel cost bridge
Fuel cost bridge Hedging result by quarter (in m EUR) in m EUR Q1 Q2 Q3 Q4 FY (YTD) 2017 -30 -63 -30 -123 2018 107 229 245 581 Change versus previous year +536 Price -704 +1,288 4,475 Volume Hedging -260 3,939 Currency +212 9M 2017 9M 2018 Page 29
Slide 30: Fuel cost outlook and sensitivity
Fuel cost outlook and sensitivity Fuel cost Sensitivity to Brent and currency +850 ~7.0 FY 18 100 Full Year 17 / 18 / 19 1.100 1.050 1.000 1.000 950 950 900 2019: 95 1.050 1.000 1.000 950 950 900 850 90 Average Brent in Q4 5.2 6.1 + ~900m EUR 1.000 950 950 900 900 850 850 (excluding volume growth) 8
Slide 31: Fuel and foreign exchange hedging strategy
Fuel and foreign exchange hedging strategy Hedging Strategy Fuel Hedging Approach Aim of hedging strategy 85 80 75 • Lufthansa's hedging strategy is designed to 66 71 61 reduce volatility 47 52 56 42 38 • No intention to outperform the market 24 28 33 19 14 • Rolling approach up to 24 months going f
Slide 32: Cash flow statement
Cash flow statement Lufthansa Group (in m EUR) 9M ‘18 vs. 9M ‘17 5.0 3.4 3.8 EBT (earnings before income taxes) 2,266 -84 3.2 2.0 Depreciation & amortization (incl. non-current assets) 1,393 -56 Net proceeds from disposal of non-current assets -1 +33 FY 2014 FY 2015 FY 2016 FY 2017 9M 2018 Result of
Slide 33: Group Adjusted EBIT expected to be slightly below previous year
Group Adjusted EBIT expected to be “slightly below previous year” Segment Adj. EBIT 2017 (m EUR) Adj. EBIT Forecast for 2018 Lufthansa German Airlines 1,627 slightly below previous year SWISS 542 above previous year Austrian Airlines 94 below previous year Network Airlines 2,263 slightly below previ
Slide 34: Multi-Year financial overview
Multi-Year financial overview Lufthansa Group (in m EUR) 2014 2015 2016 2017 Operating KPIs RASK ex currency -2.5% -3.0% -5.9% +1.9% CASK ex currency, ex fuel -2.6% +2.4% -6.1% -0.4% Profit & Loss Revenues 30,011 32,056 31,660 35,579 Fuel Cost 6,751 5,784 4,885 5,232 Adjusted EBIT 1,171 1,817 1,752