The coronavirus pandemic demonstrated that a sufficient level of minimum liquidity is vital in the event of global crises, which generally have a particularly severe impact on airlines. To ensure the requisite volume of liquidity for an extreme crisis scenario, as well as to cover operational expenses, it is also necessary to safeguard capacity to repay working capital liabilities, in particular advance payments received from customers for flight documents not yet used. At present, the Lufthansa Group aims to hold minimum liquidity of between EUR 8bn and EUR 10bn to reduce liquidity risks and thus protect the Group against possible crises. For capital efficiency reasons, part of the strategic liquidity reserve is held in the form of a revolving line of credit. Including its freely available credit lines at year-end 2024, the Company’s available liquid- ity amounted to EUR 11.0bn (31 December 2023: EUR 10.4bn).

Gearing to be further reduced

The Lufthansa Group’s long-term financial strategy continues to focus on reducing its level of gearing, primarily by achieving strong free cash flows, and on optimising net indebtedness.

Gearing is measured as Adjusted net debt/Adjusted EBITDA; the ratio takes into account both net indebtedness (including the financial obligations arising from lease agreements, pri- marily for property and aircraft) and net pension obligations. These are actively managed. To limit any further increase in its liabilities, the Lufthansa Group has largely switched over to a defined contribution pension system. For its largest remaining defined benefit pension plans, the allocation of the pension assets has been adjusted in the context of the introduction of a liability driven investment (LDI) system. This is intended to align the sensitivity of plan assets to interest rates more closely to that of pension obligations in order to permanently reduce the level of volatility of pension provisions.

Net indebtedness stood at EUR 5,744m at the end of the 2024 financial year. It was therefore 1% higher than in the previous year (previous year: EUR 5,682m) and lower than the pre-crisis level at year-end 2019 (EUR 6,662m). Due to the positive market trend for plan assets, net pension liabilities declined in the reporting year to EUR 2,566m (previous year: EUR 2,676m). At the end of 2024, the ratio of Adjusted net debt/Adjusted EBITDA was 2.0 (previous year: 1.7).

Adjusted Net Debt / Adjusted EBITDA

Adjusted Net Debt / Adjusted EBITDA
 2024 in €m2023 in €mChange in %
Net indebtedness1)5,4975,4351
Net pension obligations2,5662,676-4
Adjusted Net Debt8,0638,111–1
Adjusted EBIT1,6452,682-39
Depreciation and amortisation2,3372,2285
Adjusted EBITDA3,9824,910-19
Adjusted Net Debt/
Adjusted EBITDA
2.0x1.7x+0.3x

1) In order to calculate Adjusted net debt, here 50% of the hybrid bond issued in 2015 (EUR 247m) has been discounted. Calculation of net indebtedness Annual report p. 44.

Lufthansa Group benefits from good capital market access and utilises diversified funding sources

The Lufthansa Group successfully raised new funds on the capital market again in the 2024 financial year, benefiting from attractive conditions associated with its investment grade rating. Overall, a volume of EUR 1,734m was borrowed through the placement of three euro bonds. The Lufthansa Group also made use of various other financing instruments, such as sale-and-lease-back transactions and Japanese operating leases.

Future financing activities will likewise be based on the need for capital expenditure and will aim to minimise financing costs. Financing activities are mainly determined by the Lufthansa Group’s rating as well as market conditions. A broad financing mix, favourable financing costs, a balanced maturity profile and a diversified portfolio of lenders are achieved through the segmentation of financing instruments.

New loans or bonds may pay interest at fixed or floating rates of interest. The Lufthansa Group pursues a net fix hedging strategy. This means the volume of floating-rate liabilities should not exceed the volume of funds invested at a floating interest rate. Net debt is thus subject to a fixed interest rate and market-wide interest-rate changes do not have any material impact on the Group’s interest burden. This strategy is managed primarily by means of derivatives.

Securing the investment grade rating

Deutsche Lufthansa AG has received an investment grade rating from all the leading rating agencies.

Standard & Poor’s and Fitch Ratings both still give Deutsche Lufthansa AG an investment grade rating of BBB-, outlook stable. In January 2024, Moody’s raised its rating for Deut- sche Lufthansa AG to Baa3, which is also investment grade, with a stable outlook. Scope Ratings still gives Deutsche Lufthansa AG an investment grade rating of BBB-, outlook positive.

The Group strives to be rated as investment grade on a lasting basis. Investment grade ratings for the Company’s debt ensure good access to the capital markets and low funding costs and thus financial flexibility. Conditions for an investment grade rating are good profitability and adequate gearing, among other aspects.

Structured risk management minimises finance risks

The Group’s financial stability is also ensured through inte- grated risk management. Hedging fuel, exchange rate and interest rate risks minimises the short-term financial risks for the Lufthansa Group. The hedges smooth price fluctuations by means of rule-based processes. Changes in fuel costs can therefore be taken into account in pricing at an early stage.