Deutsche Lufthansa Ag · XETR:LHA
Deutsche Lufthansa — Commerzbank German Investment Seminar (January 2014)
44 slides from Deutsche Lufthansa's conference presentation, Jan 13, 2014
Slide 1: Commerzbank German Investment Seminar
JANUARY 2 0 1 4 Commerzbank German Investment Seminar Simone Menne, Member of the Executive Board and CFO New York, 13 January 2014 Page 1
Slide 2: Page 2
Page 2 Lufthansa Group
Slide 3: Disclaimer in respect of forward-looking statements
Disclaimer in respect of forward-looking statements Information published in this presentation concerning the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of definitive historical facts. These forward-looking statements are based
Slide 4: Executive Summary
Executive Summary Under its SCORE program Lufthansa Group targets an operating result of 2.3 bn EUR in 2015 Pipeline of earnings improvement measures is well filled but SCORE also causes one-off costs until 2015 Structural change in passenger business is key to reach the profit target Lufthansa Grou
Slide 5: Lufthansa Group targets an operating result of 2.3 bn EUR in 2015
Lufthansa Group targets an operating result of 2.3 bn EUR in 2015 Overview of SCORE program Operating result target 2015 SCORE projects (examples) • New Germanwings • Push of special products • Efficient ground/admin (e.g. cool.td) processes • New warehouse • Raising profitability on handling contra
Slide 6: SCORE pipeline is well filled with measures until 2015
SCORE pipeline is well filled with measures until 2015 SCORE pipeline 2013-2015 potential further headwinds must be compensated by additional measures Projects in Idea Status Projects in Implementation Projects concluded / P&L-Effect 969 2,300 in m EUR 1,059 Target 2013: 740 m EUR 950 gross contribu
Slide 7: Normalized operating result shows good improvement year-on-year
Normalized operating result shows good improvement year-on-year Significant profit improvement in 2015 from ceasing one-off costs potential further headwinds must be compensated by additional measures Projects in Idea Status Projects in Implementation Projects concluded / P&L-Effect 969 in m EUR 700
Slide 8: SCORE burdens operating result with one-offs costs
SCORE burdens operating result with one-offs costs Mainly 2013 and 2014 are strongly burdened SCORE one-off costs FY2013 FY2014 FY2015 Restructuring Costs 200 m EUR 80 m EUR 20 m EUR (provisions for headcount reductions, severance payments,..) Project Costs 100 m EUR major relief (additional costs d
Slide 9: Executive Summary: SCORE targets 2.3 bn EUR operating result in 2015
Under its SCORE program Lufthansa Group targets an operating result of 2.3 bn EUR in 2015 Pipeline of earnings improvement measures is well filled but SCORE also causes one-off costs until 2015 Structural change in passenger business is key to reach the profit target Lufthansa Group focuses on impro
Slide 10: Good development since initiation of SCORE in passenger business
Good development since initiation of SCORE in passenger business 835 m fuel cost increase compensated, +143 m increase in operating profit 9M 2013 vs. 9M 2011 * Explanation fleet rollover, Fleet Size (no. of aircraft) phase-out of small, non-efficient aircraft -2,5% capacity growth realized through
Slide 11: Fleet is being modernized and complexity is reduced
Fleet is being modernized and complexity is reduced Example: Lufthansa Passenger Airlines 2011 2025 6 aircraft types 5 aircraft types A380 400-500 A380 Development seats 747-8I long-haul -20%CASK Phase-out by age 777-9X vs. replaced 300-400 740-400 aircraft seats A340-600 Phase-out by age 200-300 A3
Slide 12: Capacity growth with stable fleet size leads to unit cost reductions
Capacity growth with stable fleet size leads to unit cost reductions Example: Lufthansa Passenger Airlines Number of aircraft fleet size Fleet size frozen at 400 aircraft throughout 2016 3% roll-over effects 1% 2-class fleet capacity growth ASK growth year-on-year 1% productivity, stage length FY14
Slide 13: Revenues are supported by significant fleet and product investments
Revenues are supported by significant fleet and product investments Aircraft order book and product upgrades Aircraft order book Planned product upgrades Total Orders: 295 aircraft Vision for Lufthansa passenger airline: Short haul: 203 aircraft Europe's first five star airline in 2015 Long haul: 92
Slide 14: Loss-making non-hub traffic is transferred into new low cost unit
Loss-making non-hub traffic is transferred into new low cost unit SCORE project "new Germanwings" 2009 2012 2015 # of 5 3 1 brands (Lufthansa, Germanwings, Eurowings, Cityline, Contact Air) (Lufthansa, Germanwings, Eurowings) (Germanwings) # of aircraft 8 5 2 (B737-300,-500,CRJ-200,-700,-900,ATR72-5
Slide 15: Germanwings is to return the non-hub network to break-even in FY15
Germanwings is to return the non-hub network to break-even in FY15 Germanwings business plan Actual Forecast break-even target ‘Best of both New positioning worlds’ 2012 2013 2015 Focus on 6 biggest markets ca. 200 m EUR Repositioning and clear SCORE target differentiation in market Yield protection
Slide 16: Executive Summary: SCORE targets 2.3 bn EUR operating result in 2015
Under its SCORE program Lufthansa Group targets an operating result of 2.3 bn EUR in 2015 Pipeline of earnings improvement measures is well filled but SCORE also causes one-off costs until 2015 Structural change in passenger business is key to reach the profit target Lufthansa Group focuses on impro
Slide 17: Visibly lower unit costs were achieved in first nine months of 2013
Visibly lower unit costs were achieved in first nine months of 2013 Operating KPIs of passenger airline group Total 9M '13 Q3 '13 Europe 9M '13 Q3 '13 Asia/Pacific 9M '13 Q3 '13 ASK +0.8% +2.6% ASK -3.1% +1.5% ASK -1.1% +3.4% RPK +2.1% +3.4% RPK +0.2% +3.1% RPK -1.7% +3.9% SLF +1.0P. +0.7P. SLF +2.4
Slide 18: Group operating costs actually reduced in first nine months of 2013
Group operating costs actually reduced in first nine months of 2013 Cost development in 9M and Q3 Lufthansa Group (in EUR m) 9M 2013 vs. PY Notes Q3 2013 vs. PY Notes Total revenue 22,768 -0.2% 8,304 -0.1% Other operating income 1,403 -0.1% 431 -5.1% Total operating income 24,171 -0.2% 8,735 -0.4% O
Slide 19: Operating profit (excl. one-offs) improved in first nine months of 2013
Operating profit (excl. one-offs) improved in first nine months of 2013 Normalized operating results for 9M and Q3 +277 9M 2012 Austrian one-off +48% operating profit (Tyrolean Transfer) normalized IAS 19 bmi pensions project operating profit restatement of -111 one-offs Austrian and bmi costs 9M 20
Slide 20: Most segments are expected to improve in 2013
Most segments are expected to improve in 2013 Segment outlook Passenger Airline Group Logistics MRO Catering IT Services Outlook vs. PY new: new: new: revenue on par with operating profit below moderate revenue revenue on par with moderate revenue previous year previous year (105) growth and operati
Slide 21: Operating profit for full year 2013 is expected higher than last year
Operating profit for full year 2013 is expected higher than last year Group Outlook FY13 Outlook 2013 Revenue on previous year's level Operating profit 2013 between 600 and 700 m EUR Operating profit includes one-off costs of 300 m EUR (200 m restructuring costs and 100 m project costs) Normalized o
Slide 22: Executive Summary: SCORE targets 2.3 bn EUR operating result in 2015
Under its SCORE program Lufthansa Group targets an operating result of 2.3 bn EUR in 2015 Pipeline of earnings improvement measures is well filled but SCORE also causes one-off costs until 2015 Structural change in passenger business is key to reach the profit target Lufthansa Group focuses on impro
Slide 23: RASK over CASK optimisation to be continued in 2014
RASK over CASK optimisation to be continued in 2014 Unit costs expected to decrease by ~ 2%, increasing revenue per flight Outlook 2014 / Current Trading Explanation fleet rollover, Fleet Size (no. of aircraft) overall stable phase-out of small, non-efficient aircraft capacity growth realized throug
Slide 24: Lower fuel costs are expected for FY 2014
Lower fuel costs are expected for FY 2014 Fuel forecast and sensitivities 150 LH Group fuel expenses after hedging LH price (in bn EUR) Sensitivities 140 2014 costs with deviating oil price 7.4 7.5bn (+20%) 130 7.1 7.2bn (+10%) 6.9 USD/barrel 120 Market price 6.3 6.3bn (-10%) 110 5.8bn (-20%) curren
Slide 25: Executive Summary: SCORE targets 2.3 bn EUR operating result in 2015
Under its SCORE program Lufthansa Group targets an operating result of 2.3 bn EUR in 2015 Pipeline of earnings improvement measures is well filled but SCORE also causes one-off costs until 2015 Structural change in passenger business is key to reach the profit target Lufthansa Group focuses on impro
Slide 26: Lufthansa operates a broad portfolio incl. non-cyclical businesses
Lufthansa operates a broad portfolio incl. non-cyclical businesses 300-450 m EUR non-cylical profit base Revenue Operating result Op. margin range Airlines 23.6 bn +4.8% Passenger Airline 258 m Group -0.1% +11.4% 2.7 bn Logistics 104 m (Cargo) -8.0% Service Companies 4.0 bn 318 m +8.8% MRO +6.9% +3.
Slide 27: Strong cash flow generation and conservative financial setup
Strong cash flow generation and conservative financial setup Strong balance sheet, fleet in ownership 1. Lufthansa Group is profitable 2. Solid financial profile provides 3. Conservative fleet structure and produces strong cash flows competitive edge in financing allows flexible fleet and capacity c
Slide 28: Commerzbank German Investment Seminar
JANUARY 2 0 1 4 Commerzbank German Investment Seminar Simone Menne, Member of the Executive Board and CFO New York, 13 Jan 2014 Page 28
Slide 29: Supplementary information Lufthansa Passenger Airline
– Supplementary information Lufthansa Passenger Airline – Page 29
Slide 30: LH focuses on markets with highest margins: large and premium
LH focuses on markets with highest margins: large and premium Fleet and network clusters Share of premium passengers 30% Small Niche Mid-Size Premium Premium Trunk Expansion of 20% New Technology Aircraft A380 and 747-8I Fleet 10% Introduction of 2 Class Fleet 5% & New Technology Aircraft Small & Gr
Slide 31: Reduce complexity, lower unit costs, but also invest in new aircraft
Reduce complexity, lower unit costs, but also invest in new aircraft SCORE at LH Passenger Airlines 2013 2014 2015 2016 onwards freeze fleet size at 400 aircraft, ASK growth at half of market rate (ca. 3% p.a.) 1 Capacity & fleet dimensioning ASK growth mainly through more seats per plane (i.e. CASK
Slide 32: Balanced network supported by leading intercontinental JVs
Balanced network supported by leading intercontinental JVs Passenger network overview Largest Airline Group in Europe Largest Transatlantic Joint Venture First Asian-European Joint Venture Intra- European 46.3% North Asia America Pacific 20.6% 18.9% Mid- East 4.5% Africa South 4.0% America 5.7% Traf
Slide 33: Supplementary financial information
– Supplementary financial information – Page 33
Slide 34: Rolling approach reduces fuel cost volatility
Rolling approach reduces fuel cost volatility Lufthansa's fuel hedging strategy Current hedging level status FY2013 100% FY2014 70% Lufthansa Group's hedging strategy is designed to reduce volatility Rolling approach with 24 months lead time before actual consumption Hedging level increases month-by
Slide 35: Dividend policy is integral part of financial strategy
Dividend policy is integral part of financial strategy Lufthansa Group dividend past dividend pay-out Our dividend policy 30-40% pay-out ratio of operating result Net profit of Deutsche Lufthansa AG (German GAAP/HGB) must allow for dividend payment Further payments possibly from extraordinary income
Slide 36: Balance sheet targets adjusted with regards to new IFRS rules
Balance sheet targets adjusted with regards to new IFRS rules Lufthansa Group financial targets Old New Current Target Target Status IFRS changes (especially pensions) have Equity 25% impaired equity sustainably but do not change 30% 19% Ratio mid-term underlying economic situation. Equity ratio tar
Slide 37: Detailed Nine Months 2013 and Q3 2013 Financials
– Detailed Nine Months 2013 and Q3 2013 Financials – Page 37
Slide 38: 9M and Q3 2013 at a glance
9M and Q3 2013 at a glance Key figures for the Lufthansa Group Lufthansa Group (in m EUR) 9M '13 9M '12 vs. PY Q3 '13 Q3 '12 vs. PY Total revenue 22,768 22,821 -0.2% 8,304 8,312 -0.1% of which traffic revenue 18,663 18,786 -0.7% 6,885 6,935 -0.6% Operating result 661 907 -27.1% 589 672 -12.4% Normal
Slide 39: Operating profit & loss statement
Operating profit & loss statement Cost development in 9m and Q3 Lufthansa Group (in EUR m) 9M 2013 vs. PY Notes Q3 2013 vs. PY Notes Total revenue 22,768 -0.2% 8,304 -0.1% Other operating income 1,403 -0.1% 431 -5.1% Total operating income 24,171 -0.2% 8,735 -0.4% Operating expenses -23,510 +0.8% -8
Slide 40: Cash flow statement 9M 2013 vs. 9M 2012
Cash flow statement 9M 2013 vs. 9M 2012 in EUR m 9M 2013 vs. PY EBT (earnings before income taxes) 358 -333 Depreciation and amortisation (incl. d&a for non-current assets) 1432 -9 Net proceeds from disposal of non-current assets 1 +23 Result from equity investments -102 -25 Net interest 257 -24 Inc
Slide 41: Group Revenue 9M 2013 vs. 9M 2012
Group Revenue 9M 2013 vs. 9M 2012 in EUR m Volume (+1.8%) Price (-0.4%) Currency (-2.1%) -72 +329 -380 18,786 18,663 Traffic revenue (-0.7%) 4,035 4,105 Other revenue (+1.7%) 22,821 Group revenue (-0.2%) 22,768 9M 2012 9M 2013 Page 41
Slide 42: Fuel Costs 9M 2013 vs. 9M 2012
Fuel Costs 9M 2013 vs. 9M 2012 in EUR m Volume (-2.2%) Hedging (+4.5%) Currency (-2.3%%) 5,567 -118 Price (-2.9%) +253 0 -130 -166 5,406 EUR -161m (-2.9%) 9M 2012 9M 2013 Page 42
Slide 43: Operating Result 9M 2013 vs. 9M 2012
Operating Result 9M 2013 vs. 9M 2012 in EUR m 9M 2013 9M 2012 vs. PY Result from operating activities 582 915 -333 Book gains/losses, non-current assets, financial assets -11 -25 +14 - of which disposals of aircraft -9 -20 +11 Measurement of non-current borrowing 7 6 +1 Past service costs -2 0 -2 Im
Slide 44: Adj. operating margins (excl. one-offs and restructuring costs)
Adj. operating margins (excl. one-offs and restructuring costs) 9M 2013 vs. 9M 2012 9M 2013 (excl. one-offs and restructuring charges) 9M 2012 (excl. one-offs and restructuring charges) Lufthansa SWISS Austrian Passenger Logistics MRO IT Services Catering LH Group Passenger Airlines Airline Group Ai
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