Deutsche Lufthansa Ag · XETR:LHA
Deutsche Lufthansa — Baader Investment Conference 2023
48 slides from Deutsche Lufthansa's conference presentation, Sep 20, 2023
Slide 1: Baader Investment Conference
Baader Investment Conference September 20, 2023
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: Second Quarter 2023 Results
Second Quarter 2023 Results Strategy Investment in ITA Airways Operational and financial outlook Appendix Page 4
Slide 5: Q2 Adjusted EBIT and net income reach new record level
Q2 Adjusted EBIT and net income reach new record level (in EUR million) Q2 ’23 Q2 ’22 Change in % Revenues 9,389 8,000 +17 Operating expenses 9,095 8,207 +11 Of which fuel 1,934 2,151 -10 Of which staff 2,064 1,752 +18 Of which depreciation 555 551 +1 Adjusted EBITDA 1,639 973 +75 Adjusted EBIT 1,08
Slide 6: Passenger Airlines: Strong Q2 performance as yields remain high
Passenger Airlines: Strong Q2 performance as yields remain high Operational KPIs Adjusted EBIT Comments in EUR million ▪ All airlines record an operated profit in Q2 ’23 vs. 2022 vs. 2019 Q2 - SWISS, Austrian Airlines, Brussels Airlines and Eurowings reach new ASK 78,520 +12,2% -17,5% record levels
Slide 7: Unit cost increases expected to moderate in H2
Unit cost increases expected to moderate in H2 – productivity improvements to support unit cost reduction in 2024 CASK expected to improve in H2 Productivity forecasted to recover in 2024 Quarterly CASK performance Crew productivity vs. PY -8% Drivers in H1: Drivers of expected H2 improvement: • Inv
Slide 8: Record results at Lufthansa Technik – Lufthansa Cargo’s profits normalize
Record results at Lufthansa Technik – Lufthansa Cargo’s profits normalize Adjusted EBIT in EUR million Comments 482 ▪ Cargo business impacted by market- 37 wide rate declines and low volumes – Lufthansa Cargo gains market share Q2 ’23 Q2 ’22 and sustains its yield premium (Q2 yields up >40% vs. 2019
Slide 9: Free cash flow performance driven by strong operating result and bookings
Free cash flow performance driven by strong operating result and bookings H1 Adjusted EBIT / Adjusted free cash flow in EUR million (371) (69) (490) 3,100 2,119 (1,874) 1,099 1,071 (155) 812 Adjusted EBIT D&A Liability from Receivables Remaining Other1 Operating Net CAPEX Repayments Adjusted Free un
Slide 10: Credit rating upgrades reflect significant progress in deleveraging
Credit rating upgrades reflect significant progress in deleveraging Liquidity Net debt and net pension liabilities1 EUR billion EUR billion Ratings upgraded Reduction in 10.8 ▪ S&P Global: Upgrade to BB+ from 10.4 pension 2.1 discount rate BB with positive outlook in April 2.1 Target liquidity: 8.9
Slide 11: Option-based fuel hedging offers protection
Option-based fuel hedging offers protection while leaving the opportunity to benefit from lower prices Expected fuel cost sensitivity after hedging (FY 2023)1 Hedging portfolio excl. LH Cargo 104 Q3 H2 2023 Ø Market price crude oil2 500 450 400 300 250 94 350 300 250 200 100 Hedge ratio Crude (%) 86
Slide 12: Strategy
Second Quarter 2023 Results Strategy Investment in ITA Airways Operational and financial outlook Appendix Page 12
Slide 13: 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 13
Slide 14: Operational measures have successfully stabilized operations
Customer Product Multi-Airline Airline Group Operational measures have successfully stabilized operations Measures to support stable operations Punctuality improved Departure Punctuality 9,000 new employees YTD in 2023 mainly in operations 75% Close alignment with system partners 70% Flight plan adj
Slide 15: Continuous implementation of innovative solutions along the customer journey
Customer Product Multi-Airline Airline Group Digital Green offers Fares Biometric Boarding Continuous implementation of innovative solutions along the customer journey Self- New Service Lounges Lufthansa App Page 15
Slide 16: Comprehensive product and service innovations underline premium aspiration
Customer Product Multi-Airline Airline Group Comprehensive product and service innovations underline our aspiration to define premium in the European airline industry New Premium Introduction of 27 Economy already in the air New First hirings in at SWISS ground Class suite 7 seat options in Business
Slide 17: Lufthansa Group accelerates fleet modernization
Customer Product Multi-Airline Airline Group Lufthansa Group accelerates fleet modernization Order book well filled with nearly 100 NewGen long-haul aircraft Today New Normal 380 748 748 744 789 34x 779 773 773 779 20x 772 6 older A/C 35K types to be 35K 10x phased out 359 359 completely in 789
Slide 18: 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: New Green fares launched Received top score (A-) in -11%
Slide 19: 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) Major levers for CO2 Reduction: 110 Growth Fleet (SBTi relevance) Reduction ▪ Fleet rollover 100 SBTi Sector Guidan
Slide 20: 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 21: Significant progress in the transformation into an Airline group
Customer Product Multi-Airline Airline Group Significant progress in the transformation into an Airline group June May April Transformation Acquisition of 41% of Sale of payment into Airline specialist AirPlus Sale of LSG ITA Airways incl. option to SEB Kort Group to International to for a full take
Slide 22: Investment in ITA Airways
Second Quarter 2023 Results Strategy Investment in ITA Airways Operational and financial outlook Appendix Page 22
Slide 23: ITA provides even better access to the Italian market
ITA provides the Group even better access to the very attractive Italian market and regional diversification Italy– aiskey market for Lufthansa Group Italy ITA & Lufthansa Group 3rd largest Economy in ▪ Attractive proposition to grow a profitable long- the EU (GDP) haul business in Rome Fiumicino ▪
Slide 24: Transaction terms minimize the Group’s financial risk
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 25: ITA Airways has been fully restructured
ITA Airways has been fully restructured and set up as a structurally cost- competitive airline with no legacy issues associated with the old Alitalia 2019 2020 / 2021 2022 Crew and cabin contracts renegotiated Passengers Italia Passengers: 10.1m Nov & no pension obligations from Alitalia Trasporto 2
Slide 26: Sound plan to turn ITA into a profitable airline
Lufthansa Group has a sound plan to turn ITA into a profitable airline Optimizing the network Driving profitable growth Maximizing synergies ▪ Ensure that ITA’s network is ▪ Capitalize on ITA’s favorable ▪ Unlock the significant potential complementary to the existing cost position for revenue and c
Slide 27: Rome Fiumicino as new Southern Hub and Milan Linate
Network Profitable growth Synergies Rome Fiumicino as new Southern Hub and Milan Linate as premium point-to-point airport will interconnect the ITA and LHG networks Feeder network Rome Fiumicino Milan Linate ▪ Enhance the short-haul network for ▪ Focus the long-haul network on ▪ Expand the touristic
Slide 28: Competitive cost base and modern fleet form a base for growth
Network Profitable growth Synergies Competitive cost base and homogenous, modern fleet form a solid base for future growth Favorable cost position Modernized fleet 94 NewGen Highly competitive A330-900neo ▪ Homogeneous, all Airbus labour cost A350-900 fleet, allowing for 66 A320 efficiencies in oper
Slide 29: ITA can realize its full potential in combination with Lufthansa Group
Network Profitable growth Synergies In combination with Lufthansa Group, ITA can realize its full potential by benefitting from the size and synergies of a global group COMMERCIAL & Global network management Access to global airline partner network (e.g. A++ JV with United and Air Canada) Global Int
Slide 30: Investment in ITA Airways has significant value for our shareholders
Investment in ITA Airways has significant value for our shareholders Upgrade picture ITA Airways is a perfect addition to the quality portfolio of Lufthansa Group airlines Restructured and structurally cost-competitive airline: Sound plan in place to turn ITA profitable Investment approach minimizes
Slide 31: Operational and financial outlook
Second Quarter 2023 Results Strategy Investment in ITA Airways Operational and financial outlook Appendix Page 31
Slide 32: Demand remains strong also beyond summer – premium outperforms
Demand remains strong also beyond summer – premium outperforms Passenger development and booking outlook Recovery per customer segment Pax and yield vs. 2019 Flown pax in % of 2019 +19% +25% ~+25% 100 Premium Non-premium Leisure >90% 86% 80% Premium 50 Non-premium Corporate Q1 2023 Q2 2023 Q3 2023 Q
Slide 33: Various constraints will limit industry growth
Various constraints in the system will limit growth in the industry for a long time to come Bottlenecks Staff shortages Missing in air traffic at handling spare parts control providers Significant delays Engine Industry-wide in aircraft durability personnel deliveries issues shortage Page 33
Slide 34: Lufthansa Cargo’s unique market position expected to support performance
Lufthansa Cargo’s unique market position expected to support performance also in 2023 Evaluation of At the Modern aircraft k retirement of all forefront of Pure 777F aircraft >25 years digitization long haul fleet Yields will normalize in 2023 but eCommerce remain above pre-crisis level push LCAG yi
Slide 35: Lufthansa Technik well positioned to remain a leader
Lufthansa Technik well positioned to remain a leader in a very attractive market Leading position in highly Strongest portfolio of At the forefront of the attractive MRO market customers and OEM industry’s digital partnerships transformation ▪ >4,000 aircraft under exclusive ▪ Leading MRO portfolio
Slide 36: Significant progress towards 2024 targets expected in 2023
Significant progress towards 2024 targets expected in 2023 Q3 2023 Full Year 2023 Full Year 2024 Capacity (ASK) Capacity (ASK) Adjusted EBIT margin c. 88% of 2019 levels Around 85% of 2019 levels At least 8% Adjusted EBIT Adjusted EBIT Adjusted ROCE (excl. cash) Above 2019 level of Above EUR 2.6bn A
Slide 37: Confident outlook
Confident outlook ✓ Demand remains strong, supply constrained ✓ Product and service innovations will support our premium positioning ✓ Transformation into Airline Group well underway Page 37
Slide 38: Appendix
Second Quarter 2023 Results Strategy Investment in ITA Airways Operational and financial outlook Appendix Page 38
Slide 39: Traffic Data
Traffic Data Apr vs.2019 May vs.2019 Jun vs.2019 Q2 vs.2019 Passengers in 1,000 10,234 -18.3% 11,235 -14.9% 11,826 -14.4% 33,296 -15.8% Available seat-kilometers (m) 24,857 -18.9% 26,369 -18.4% 27,295 -15.2% 78,520 -17.5% Revenue seat-kilometers (m) 20,374 -20.2% 21,653 -17.5% 23,262 -15.3% 65,289 -
Slide 40: Operating KPIs of Passenger Airlines by region
Operating KPIs of Passenger Airlines by region vs. 2019 (unless stated otherwise) Total Q2’23 Europe Q2’23 Asia / Pacific Q2’23 Number of flights -19.0% ASK -7.7% ASK -37.4% ASK -17.5% RPK -6.0% RPK -39.5% RPK -17.6% SLF +1.5pts. SLF -2.8pts. SLF -0.1pts. RASK incl. currency1) +15.6% RASK incl. curr
Slide 41: Calculation of operational airline KPIs
Calculation of operational airline KPIs Passenger Airlines, Q2 2023 1) Traffic revenues (€m) 7,270 1) Total Revenues (€m) 7,669 2) Not assignable (€m) 763 2) Other operating income (€m) 218 Yield = 3) Basis for Yield (1)–(2) (€m) 6,507 3) Reversal of provisions (€m) 33 RASK 4) RPK (m) 1 65,289 4) FX
Slide 42: Group P&L
Group P&L Lufthansa Group (in EUR m) Q2 ’23 vs. Q2 ’22 Revenues 9,389 +17% Total operating income 10,154 +19% Operating expenses 9,064 +11% Of which fees & charges 1.202 +20% Of which fuel 1,934 -10% Of which staff 2,064 +18% Of which depreciation 555 +1% Result from equity investments -5 +60% Adjus
Slide 43: EBIT / Adjusted EBIT bridge H1 2023
EBIT / Adjusted EBIT bridge H1 2023 in EUR million 812 777 18 (8) (4) 29 EBIT Impairment of non- M&A related expenses net Book gains Others Adjusted EBIT current assets / assets held for sale Page 43
Slide 44: Adjusted EBIT / Net Income H1 2023
Adjusted EBIT / Net Income H1 2023 in EUR million 812 (35) (172) (74) (78) (37) 414 (2) Adjusted EBIT Adjustments Interest result Others Tax result Profit/loss from Profit/loss Net EBIT discontinued attributable to Income operations minority interests Page 44
Slide 45: Adjusted EBIT by Airline
Adjusted EBIT by Airline Adjusted EBIT (in EUR m) Q2 ’23 Q2 ’22 Change in % 6M ’23 6M ’22 Change in % Lufthansa German Airlines 515 -83 n.m.f. 149 -798 n.m.f. SWISS 272 107 +154% 349 45 n.m.f. Austrian Airlines 88 3 n.m.f. 15 -106 n.m.f. Brussels Airlines 31 -27 n.m.f -12 -89 87 Eurowings 69 -76 n.m
Slide 46: Cash flow statement
Cash flow statement Lufthansa Group (in m EUR) Q2 ’23 vs. Q2 ’221 EBT (earnings before income taxes) 1,086 +730 1 Depreciation & amortization (incl. repairable MRO materials) +562 +22 Net proceeds from disposal of non-current assets -16 -13 1 Significant improvement in the operating result compared
Slide 47: Multi-year financial overview
Multi-year financial overview Lufthansa Group (in EUR million, as reported) 2016 2017 2018 20191 2020 2021 20224 Operating KPIs RASK ex currency -5.9% +1.9% -0.5% -2.5% -26.7% -6.1% -6.1% CASK ex currency, ex fuel2 -2.5% -1.8% -1.7% -1.5% +84.6% -25.8% -25.8% Profit & Loss Revenues 31,660 35,579 35,
Slide 48: Maturity profile of borrowings as of June 30, 2023
Maturity profile of borrowings as of June 30, 2023 3,000 2,500 2,000 1,500 1,000 500 0 YTG 2023 2024 2025 2026 2027 2028 2029 2030 Straight Bond Hybrid Convertible Bond Schuldscheindarlehen Aircraft Finance (secured) Other* *Mainly bilateral loans – does not include operating leases; as drawn on Jun
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