Slide 1: Q3 2019 Analyst and Investor Conference Call
Q3 2019 Analyst and Investor Conference Call Frankfurt, 7 November 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: Q3 2019 Analyst and Investor Conference Call: Carsten Spohr
Q3 2019 Analyst and Investor Conference Call Carsten Spohr, CEO and Chairman of the Executive Board Frankfurt, 7 November 2019
Slide 4: Lufthansa Group achieves an Adjusted EBIT of EUR 1.3 billion in Q3
Lufthansa Group achieves an Adjusted EBIT of EUR 1.3 billion in Q3 Q3 result slightly Passenger growth below previous year +3% EUR 1.3bn 2019 guidance Unit costs Adj. EBIT (-8%) confirmed reduced Q3 revenues increased 5.5%-6.5% -2.1% to more than EUR 10bn Adj. EBIT margin Q3 CASK Network Airlines EU
Slide 5: Q3 2019 Analyst and Investor Conference Call: Ulrik Svensson
Q3 2019 Analyst and Investor Conference Call Ulrik Svensson, CFO and Member of the Executive Board Frankfurt, 7 November 2019
Slide 6: Network Airlines: Transatlantic performance continues to be strong
Network Airlines: Transatlantic performance continues to be strong Q3 9M +4.5% +5.0% Comments Europe 41% -0.2pts. -0.5pts. -4.3% -4.7% Yields in Europe remain under ASK SLF Yield 1 ASK SLF Yield 1 pressure from price-sensitive demand Yield NA: Yield NA: +2.1% +3.0% North America performs strongl
Slide 7: Network Airlines: Step up of unit cost reductions in the third quarter
Network Airlines: Step up of unit cost reductions in the third quarter Q3 9M Revenue KPIs Comments +3.6% +4.4% Strength in long haul partly offsets +0.5pts. +0.8pts. unit revenue weakness in short haul -2.2% Easing MRO cost pressures, lower -2.9% -3.4% -2.8% 1 1 irregularity costs and productivi
Slide 8: Network Airlines: Q3 profits down only moderately despite higher fuel costs
Network Airlines: Q3 profits down only moderately despite higher fuel costs Q3 9M Fuel cost Comments +174 / +13% +552 / +16% Fuel cost increase higher than anticipated because of the recent 1,315 1,489 3,477 4,029 appreciation of the US Dollar Strong cost performance largely Q3 18 Q3 19 9M 18 9M
Slide 9: Eurowings: Slight yield declines in short-haul - long-haul up strongly
Eurowings: Slight yield declines in short-haul - long-haul up strongly Q3 9M Comments Sequential yield improvement in Short-haul +0.8% +0.4pts. +1.5% +0.4pts. short-haul (Q1: -8.5%, Q2: -4.3%) 75% despite ongoing challenges in -2.6% domestic business -4.6% Long-haul performance benefits from ASK
Slide 10: Eurowings: RASK and CASK performance distorted by structural changes
Eurowings: RASK and CASK performance distorted by structural changes Q3 9M Revenue KPIs Comments 3.5% Segment RASK increases in the third 2.0% +0.5pts. +0.9% +0.6pts. quarter because of operational improvements in long-haul, positive -1.7% -1.8% -3.6% mix effect from long-haul capacity 1 1 1 1 dec
Slide 11: Eurowings: Profit growth reflects first signs of turnaround
Eurowings: Profit growth reflects first signs of Eurowings turnaround Q3 9M Fuel cost Comments +15 / +5% +93 / +13% Fuel cost increase dampened by capacity declines 288 303 721 814 Strong profit increase in Q3 limits year-to-date decline Q3 18 Q3 19 9M 18 9M 19 Adjusted EBIT / Margin +39% -6% 13
Slide 12: MRO and Catering businesses increase profits in the third quarter
MRO and Catering businesses increase profits in the third quarter Adjusted EBIT / Margin Q3 9M nmf. nmf. Comments 35 -8.0% 162 -1.8% -48 -13.3pts. -33 -10.1pts. Logistics business continues to Q3 18 Q3 19 9M 18 9M 19 suffer from decline of air cargo market +16% +10% Profit increases in MRO busin
Slide 13: Net profit performance distorted by several one-off items
Net profit performance distorted by several one-off items Lufthansa Group (in EUR m) 9M ’19 vs. 9M ’18 Total operating income 29,448 +3% Impairments related to Thomas 1 Operating expenses 27,986 +7% Cook insolvency Of which fees & charges 3,431 +2% Of which fuel 5,095 +14% Reclassification of hedges
Slide 14: Net debt increase largely driven by accounting effects
Net debt increase largely driven by accounting effects Gross Investments1 Adjusted Free Cash Flow Net Debt -2% -42% 3,735 +74% 2,849 2,785 1,181 6,083 685 3,489 963 -278 685 -2,772 9M 18 9M 19 9M 18 9M 19 Op. CF Net Free CF IFRS 16 Adj. Dec 31, 2018 Sep 30, 2019 Investments effect2 Free CF Decreas
Slide 15: Increase of pension provisions has no impact on profits and cash flow
Increase of pension provisions has no impact on profits and cash flow Balance Sheet: Pension Provisions Profit & Loss: Service Costs Cash Flow: Pension payments Contribution to plan assets (operating cash flow) (change in funds /securities) Discount +35% Discount rate: rate: -9% -8% -21% 2.0% 7,914
Slide 16: Market capacity growth in Europe set to turn negative in winter
Market capacity growth in Europe set to turn negative in winter Europe -1% Seat growth WI 19/20 Americas Asia / Pacific +0% +2% Seat growth WI 19/20 Seat growth WI 19/20 Middle East / Africa +5% Based on published flight plans as of 24 Oct 2019 Seat growth WI 19/20 Definition of relevant Market: Sho
Slide 17: LCCs start to reduce their capacities in all Group hubs except Vienna
LCCs start to reduce their capacities in all Group hubs except Vienna Offered LCC capacity (ASK) in Lufthansa Group hubs vs. prior year FRA MUC 7% -10% -31% -20% S 19 W 19/20 S 19 W 19/20 ZRH VIE 105% 27% -13% -30% S 19 W 19/20 S 19 W 19/20 Page 17
Slide 18: Group financial outlook confirmed
Group financial outlook confirmed Passenger Airlines Network Airlines Eurowings Capacity (ASK) c. +4% c. -1% Unit Revenue (RASK, at constant currency) Down low single-digit Down low single-digit Unit Cost (CASK, at c. currency, excl. fuel) 0% to -1% -4% to -5% Fuel (year-on-year change) +EUR 600m +E
Slide 19: Q3 2019 Analyst and Investor Conference Call: Carsten Spohr
Q3 2019 Analyst and Investor Conference Call Carsten Spohr, CEO and Chairman of the Executive Board Frankfurt, 7 November 2019
Slide 20: Modernization of Lufthansa Group continues for all stakeholder groups
Modernization of Lufthansa Group continues for all stakeholder groups Profit Improvement Austrian Airlines Eurowings Brussels Airlines Shareholders #1 Customer Focus Customers Employees Further Development New digital solutions in 2020 Expansion of touristic expertise Comprehensive sustainability in
Slide 21: Eurowings Turnaround shows first signs of success
Eurowings Turnaround shows first signs of success Status Targets Next Steps Realigning long-haul • Commercial responsibility for 7 aircraft • Further capacity adjustments in transferred to Network Airlines 1) Break-Even in 2021 2020 • Four aircraft in Düsseldorf to follow • Reduction of operational
Slide 22: Austrian und Brussels with key measures to improve profits
Austrian und Brussels with key measures to improve profits Target: further 90m EUR cost reduction p. a. as of 2021 Target: Operating margin of 8% by 2022 1 Process efficiency and organization (EUR 60m) 1 Network and commercial embedding • Strengthening digitalization and centralization • Refocused n
Slide 23: Further development of touristic long-haul business
Further development of touristic long-haul business Operationally and commercially managed out of one hand Pooling of touristic long-haul offer • First flights out of FRA and MUC successfully started • Merging of current fragmented operative units into one AOC until 2022 • Target: high flexibility a
Slide 24: Product improvements and innovations in the coming years
Product improvements and innovations in the coming years 2020 Individual customer service and 2021 efficient digital solutions along all Launch of new future long-haul experience with B777-9 2021 touch points Boundless digital onboard experience with new Inflight Entertainment 2020 Contact- and pape
Slide 25: Modernization and further development of Lufthansa Cargo und LSG
Modernization and further development of Lufthansa Cargo und LSG Fleet First phase of sale process: LSG Europe • Accelerated Roll-over: Phase-out of all MD11 until end of 2020; homogenous, smaller and • LSG Europe sale process runs according to more modern fleet of 9 Boeing 777F plan Infrastructure
Slide 26: Lufthansa Group: #1 for all stakeholders
Lufthansa Group: #1 for all stakeholders Page 26
Slide 27: Lufthansa Group with comprehensive sustainability initiatives
Lufthansa Group with comprehensive sustainability initiatives Fleet CO2 Reduction • Continuous investments in modern • Eco-power on ground in 2020 fleet • CO2-neutral ground traffic until 2030 • 25% CO2 reduction per new in DACH aircraft generation Alternative Fuel CO2 Compensation • Cooperation wit
Slide 28: Appendix - supplementary information
Appendix - supplementary information- Page 28
Slide 29: Financial guidance FY 2019 / 2018 Base
Financial guidance FY 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
Slide 30: Group P&L
Group P&L Lufthansa Group (in m EUR) Q3 ’19 vs. Q3 ’18 9M ’19 vs. 9M ’18 Total revenue 10,177 +2% 27,700 +3% Other operating income 634 +19% 1,748 +8% Total operating income 10,811 +3% 29,448 +3% Operating expenses 9,678 +5% 27,986 +7% Non-fuel operating expenses 7,808 +4% 22,891 +5% Cost of materia
Slide 31: Planned capacity growth for full year 2019
Planned capacity growth for full year 2019 Network Airlines Eurowings 7% 4% 4% 4% 1% 3% -1% Europe Americas Asia Mideast/ Total -4% Pacific Africa Short-haul Long-haul Total Status: October 2019; All capacity plans indicative and subject to change Page 31
Slide 32: Effect on Lufthansa Group (IFRS 16 adoption)
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 33: Group revenue bridge
Group revenue bridge in m EUR Volume: +4% Currency: +2% 868 -835 403 Price: -4% 21,581 21,145 Traffic revenue (+2%) 6,119 Other revenue (+6%) 5,752 9M 2018 9M 2019 ∑ 26,897 ∑ Group revenue (+3%) ∑ 27,700 Page 33
Slide 34: Operating KPIs of Network Airlines by region
Operating KPIs of Network Airlines by region Total Q3 ’19 9M ’19 Europe Q3 ’19 9M ‘19 Asia / Pacific Q3 ’19 9M ‘19 Number of flights +2.3% +3.1% ASK +4.5% +5.0% ASK +4.4% +4.1% ASK +3.6% +4.4% RPK +4.4% +4.3% RPK +4.3% +4.9% RPK +4.2% +5.4% SLF -0.2pts. -0.5pts. SLF -0.1pts. +0.7pts. SLF +0.5pts. +0
Slide 35: Operating KPIs of Eurowings by region
Operating KPIs of Eurowings by region Total Q3 ’19 9M ‘19 Short-haul Q3 ’19 9M ‘19 Number of flights +0.1% +0.4% ASK +0.8% +1.5% ASK -3.6% +0.9% RPK +1.3% +2.0% RPK -3.1% +1.7% SLF +0.4pts. +0.4pts. SLF +0.5pts. +0.6pts. Yield -2.2% -4.1% Yield ex currency -2.6% -4.6% Yield +2.4% -1.3% Long-haul Q3
Slide 36: 2019 regional yield development by quarter
2019 regional yield1 development by quarter Network Airlines Q1 Q2 Q3 Q4 H1 9M FY Europe -6.5% -3,8% 2 -4.3% -5,0% 2 -4.7% Americas -6.1% -2,2% 2 -2.3% -3,9% 2 -3.3% Thereof North America -1.9% +1,8% 2 +1.2% +0,2% 2 +0.6% Thereof South America -18.7% -20,4% 2 -18.3% -19,6% 2 -19.2% Asia Pacific +1.9
Slide 37: 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 38: Fuel cost bridge
Fuel cost bridge Hedging result by quarter (in m EUR) Q1 Q2 Q3 Q4 FY (YTD) 2018 107 229 245 581 2019 17 35 -46 6 Change versus previous year in m EUR +620 Currency 5,095 Hedging +289 Volume 4,475 +118 +575 -362 Price 9M 2018 9M 2019 Page 38
Slide 39: Fuel cost outlook 2019
Fuel cost outlook 2019 Fuel cost Sensitivity to Brent and currency +650 FY 19 77 Average Brent rest of year 1,050 1,000 950 900 900 850 800 72 Full Year 18 / 19 950 900 900 850 800 800 750 6.1 6.8 6.1 67 850 850 800 750 750 700 650 62 (USD/bbl) 750 750 700 650 650 600 600 57 FY 18 FY 19e 700 650 600
Slide 40: 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 41: Cash flow statement
Cash flow statement Lufthansa Group (in m EUR) 9M ’19 vs. 9M ’18 1 Largely due to IFRS 16 EBT (earnings before income taxes) 1,633 -729 Depreciation & amortization (incl. non-current assets) 2,113 +469 1 Net proceeds from disposal of non-current assets 16 +17 “Correction” of EBT for non-cash effect
Slide 42: 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
Slide 43: Lufthansa pension accounting
Lufthansa pension accounting Schematic overview of cash flows (Example for FY 2018) Lufthansa Group Cash Flow Statement Proceeds from asset divestitures Cash Flow from operating activities 3 1 to finance payments to non- German Retirees EUR 126m Lufthansa Pension Group Fund Net Cash from / used in i