Shareholder Information 4/2022

Dear Shareholders,

The Lufthansa Group recorded a positive development in the third quarter of 2022. Demand for air travel increased significantly. Accordingly, we welcomed more than 33 million passengers on board our aircraft between July and September. After the operational challenges of recent months, which led to numerous cancellations and delays in the European air traffic system, more than 99% of our flights are now operating regularly again and over 70% on time. We now have 650 aircraft in operation again - this will rise to 700 by summer 2023. In summary, it can be said that the Lufthansa Group has left crisis mode behind.

This was also evident in the financial development. The Lufthansa Group achieved an Adjusted EBIT of EUR 1.1bn in the third quarter. Group revenue came to EUR 10.1bn, almost double the figure for the same period last year.

All our key business segments - Passenger Airlines, Lufthansa Technik and Lufthansa Cargo - contributed to this very positive quarterly result. Lufthansa Technik benefited from the high demand for maintenance and repair services from airlines worldwide. Lufthansa Cargo expects another record result in 2022.

We also remain optimistic for the rest of the year. Demand for air travel remains strong, our yields remain high and, based on the current booking situation, our flights are better booked in the fourth quarter than in 2019. In view of these positive developments, we have doubled our earnings forecast for 2022. We now expect an Adjusted EBIT for 2022 of more than EUR 1bn and an Adjusted Free Cash Flow of more than EUR 2bn.

In addition to the positive operational and financial development, we have also made significant progress in other areas:

For example, we recently presented details of our product and quality push. Under the name "Allegris" we are introducing a new premium product in all long-haul travel classes. This underlines our ambition to be the leading Western premium airline in the future as well. The modernization of our fleet also contributes to this. In that regard, we recently welcomed the first Boeing 787 "Dreamliner", a new, modern and efficient aircraft type, into our fleet.

With the sale of the remaining equity stake by the Economic Stabilisation Fund in mid-September, the government stabilisation measures in Germany were successfully concluded. This also removes all conditions, including the ban on dividend payments. By the end of the year we will also repay the last remaining stabilisation measures in Austria and Belgium.

Now it is a matter of shaping the future for the Lufthansa Group. To this end, we have set ourselves three priorities - the "three P's": to further improve the product offering for our guests, to create new perspectives for our employees and to return to and continuously increase profitability. The Lufthansa Group is thus optimally positioned for a successful future.

We are pleased that you are accompanying us on our path to new strength. We look forward to welcoming you on board our aircraft again soon.

Dennis Weber

Head of Investor Relations
Deutsche Lufthansa AG

Key figures Jan - Sep 2022

23,839 (+118%)

Revenue €m

934

Adjusted EBIT €m

Business Development

Performance of the Lufthansa Group improves significantly over the course of the reporting period

The Lufthansa Group’s performance improved significantly over the course of the first nine months of 2022. Although the first months of the year were still burdened by the spread of the Omicron variant, demand for flights rose significantly over the remainder of the year. Capacity at the Passenger Airlines was continuously expanded during the year. It was 105% up year-on-year in the reporting period, and thus at 70% of the pre-crisis level in 2019.

Revenue for the Lufthansa Group increased accordingly by 118% year-on-year to EUR 23,893m (previous year: EUR 10,978m).

The war in Ukraine had a negative impact on the Lufthansa Group’s results due to the significant increase in kerosene prices. However, demand was hardly affected.

The Lufthansa Group was able to achieve a positive Adjusted EBIT of EUR 934m again in the reporting period (previous year: EUR -1,624m). The Adjusted EBIT margin was 3.9% (previous year: -14.8%). The Logistics and MRO segments were the main contributors to the positive result. In the Passenger Airlines segment, SWISS and Austrian Airlines reported positive earnings, whereas the other Group airlines posted operating losses due to the difficult market environment at the start of the year.

Further progress was made in implementing the restructuring programme. Measures taken by 30 September 2022 account for around 90% of the EUR 3.5bn in total annual savings targeted from 2024 onwards.

Adjusted free cash flow came to EUR 3,312m (previous year: EUR -528m) and benefited primarily from the earnings increase, improvements in working capital management, strong new bookings and the associated advance payments for flights, as well as from disciplined investing activities.

Key Figures Lufthansa Group

5 year development

Revenue and result

Revenue and result
  Jan – Sep 2022Jan – Sep 2021Change in %
Total revenue€m

23,893

10,978

118

of whichtraffic revenue€m

18,891

7,550

150

Operating expenses1)€m

24,593

13,685

80

Adjusted EBITDA1)€m

2,636

60

4,293

Adjusted EBIT1)€m

934

-1,624

 
EBIT€m

826

-2,123

 
Net profit/loss€m

484

-1,877

 

Key balance sheet and cash flow statement figures

Key balance sheet and cash flow statement figures
  Jan – Sep 2022Jan – Sep 2021Change in %
Total assets€m

47,559

41,903

13

Equity€m

9,181

3,694

149

Equity ratio%

19.3

8.8

10.5 pts

Net indebtedness€m

6,190

9,006

-31

Pension provisions€m

2,075

2,764

-25

Cash flow from operating activities1)€m

5,328

513

939

Gross capital expenditure€m

1,816

967

88

Net capital expenditure€m

1,753

785

123

Adjusted free cash flow1)€m

3,312

-528

 

Key profitability figures

Key profitability figures
  Jan – Sep 2022Jan – Sep 2021Change in %
Adjusted EBITDA-margin1)%

11.0

0.5

10.5 pts

Adjusted EBIT-margin1)%

3.9

-14.8

18.7 pts

EBIT-margin%

3.5

-19.3

22.8 pts

Lufthansa Share

Lufthansa Share
  Jan – Sep 2022Jan – Sep 2021Change in %
Share price as of 30 September€

5.92

5.94

0

Earnings per share€

0.40

-3.17

 

Employees

Employees
  Jan – Sep 2022Jan – Sep 2021Change in %
Employees as of 30 Septembernumber107,970106,6841

Traffic figures

Traffic figures
  Jan – Sep 2022Jan – Sep 2021Change in %
Flightsnumber

615,603

291,329

111

Passengersthousands

75,722

29,664

155

Available seat-kilometresmillions

193,307

94,073

105

Revenue seat-kilometresmillions

152,868

55,967

173

Passenger load factor%

79.1

59.5

19.6 pts

Available cargo tonne-kilometresmillions

10,456

8,458

24

Revenue cargo tonne-kilometresmillions

6,355

6,139

4

Cargo load factor%

60.8

72.6

-11.8 pts

1) Previous year's figures have been adjusted due to amendments in the definition of the figures.

Date of publication: 27 October 2022.

Share Price Development

Lufthansa share continues to perform significantly better than the market environment

Starting from a year-end price of EUR 6.18 in 2021, the Lufthansa share price developed much more positively than the market as a whole in the first nine months of the financial year 2022. The share price also outperformed its competitors.

Driven by the expectation of an incipient recovery in demand after the spread of the omicron variant in the months before, the price rose to EUR 7.81 by mid-February. Due in particular to the outbreak of the Ukraine war and the associated rise in the oil price, emerging economic concerns in connection with sharply rising inflation and operational impairments in the European aviation system, the share price subsequently fell to EUR 5.51 on 6 July 2022. Thereafter, the share price recovered significantly in the timing of the publication of the Group's half-year results, before concerns that sharply rising costs of living could affect consumer confidence and thus demand for air travel weighed on the development. On 30 September 2022, the Lufthansa share was quoted at EUR 5.92. The share price thus recorded a slight loss of 4% in the period under review.

The Lufthansa share nevertheless performed significantly better than the shares of its main competitors Air France-KLM and IAG, whose prices fell by 33% and 34% respectively. The prices of the European low-cost carriers also underperformed the Lufthansa share. The share of WIZZair in particular suffered badly from the effects of the Ukraine war due to the airline's regional focus on Eastern Europe and the since-revised decision not to hedge fuel expenses, and fell by 62% in the first nine months of the 2022 financial year. The benchmark MDAX index fell by 36% in the same period.

Performance of the Lufthansa Share

Outlook

Lufthansa Group expects revenue growth and an Adjusted EBIT of more than one billion euros

The Group’s financial outlook remains subject to a high degree of forecast uncertainty caused among other things by the recession risk inherent in the current outlook for the global economy, the ongoing war in Ukraine and its impact on energy supplies to Western Europe, and the further uncertain development of the coronavirus pandemic. All of this has a potentially significant influence on consumer confidence and demand for air travel. The further progress of negotiations with the collective bargaining partners and any strikes, as well as currently unforeseeable events, may also influence the Group’s financial performance in the remainder of the year.

The Lufthansa Group expects to be able to expand the capacity offered by its airlines in 2022 compared with the previous year. The capacity expansion will be driven largely by short-haul tourist routes in Europe. The Lufthansa Group also anticipates a continued recovery on long-haul routes and in the business travel segment, albeit at a lower level.

Overall, the Lufthansa Group anticipates that available capacity for the Passenger Airlines in 2022 will be around 75% of its pre-crisis level, subject to the uncertainties mentioned above.

Primarily due to the recovery at the Passenger Airlines, still favourable supply and demand dynamics in the Logistics segment, and a continued upswing in the MRO segment, the Lufthansa Group expects revenue to increase in 2022. However, the revenue level of the pre-crisis period will probably not yet be reached in 2022.

In view of the positive performance in the third quarter, the current booking situation, which points to demand for flights remaining strong in the months ahead, and ongoing high freight rates in the Logistics segment, the Lufthansa Group is raising its earnings forecast for the full year. The Lufthansa Group now expects to report Adjusted EBIT of more than EUR 1bn for the full year 2022.

The results in the Logistics segment should surpass last year’s record level. A year-on-year increase in Adjusted EBIT is also expected from the MRO segment. The Adjusted EBIT loss in the Passenger Airlines segment is expected to decline significantly year-on-year. Further progress in implementing the cost reduction programme in all business segments of the Group will support the earnings performance.

The Lufthansa Group also expects to generate Adjusted free cash flow of more than EUR 2bn in 2022. The anticipated earnings improvement, inflows from strong demand for bookings, improvements in working capital management and disciplined investing activities are expected to contribute to this.

Topics

Fleet

First Boeing 787 from Lufthansa German Airlines arrives in Frankfurt

Lufthansa German Airlines welcomes a new aircraft model to its fleet. The first Boeing 787, registered D-ABPA, landed at Frankfurt Airport at the end of August.

“With the Boeing 787, we are introducing another modern aircraft type that is one of the most fuel-efficient long-haul aircraft in our fleet. This will allow us to further improve the average CO2 balance. This aircraft is sustainable and offers customers a premium flying experience," said Jens Ritter, CEO Lufthansa Airlines.

The ultra-modern "Dreamliner" long-haul aircraft consume an average of only around 2.5 liters of kerosene per passenger per 100 kilometers flown. That is around 30 percent less than their predecessor model. Between 2022 and 2027, the Lufthansa Group will receive a total of 32 Boeing "Dreamliners." Around 60 percent of the Lufthansa Group's total fleet investment goes to Lufthansa German Airlines and Lufthansa Cargo. Boeing and Lufthansa German Airlines have been partners for 90 years, during which Lufthansa German Airlines has often been the launch customer for new aircraft models, such as the Boeing 737, 747-230F and the 747-8.

The Boeing 787-9 also offers travelers an enhanced travel experience: The wide cabin of the Boeing 787 Dreamliner family offers passengers an even more spacious environment. The 787's windows are the largest of any aircraft type. Human Centric Lighting, a specially programmed, flexible lighting system, illuminates the cabin with warm red light, graduated intermediate tones, and colder blue light. Depending on the time of day or night, the light in the aircraft cabin is thus geared to the passengers' biorhythms.

Product & Services

Premium and quality offensive at Lufthansa German Airlines

Premium and quality products have always been Lufthansa German Airlines’ promise to its passengers. With this, the airline is introducing a new premium product on longhaul routes under the name "Allegris" in all travel classes (i.e. Economy, Premium Economy, Business and First Class). “Allegris” has been developed exclusively for the Lufthansa Group.

For the very first time in the company's history, the Lufthansa First Class is receiving spacious suites that offer nearly ceiling-high walls that can be closed for privacy. The seat, which is almost one meter wide, can be converted into a large, comfortable bed. All seats and beds are positioned in the direction of flight, without exception.

Also guests in Business Class can now also look forward to their own suite, which offers even more comfort and privacy due to higher walls and sliding doors that completely close. The Lufthansa Business Class of the "Allegris" generation offers six more seating options with the highest level of comfort. Passengers have direct access to the aisle from all Business Class seats.

With the "Allegris" product generation, Lufthansa German Airlines will also give its guests significantly more choice in Economy Class. For example, in the future, travelers will have the option of booking seats in the first rows, which have a greater seat pitch and offer additional comfort. Following the success of the “Sleeper's Row”, which offered Economy Class passengers greater relaxation on long-distance flights since August 2021, Lufthansa German Airlines now plans to introduce a “Sleeper's Row 2.0” on all new long-haul aircraft, as part of "Allegris."

The new Lufthansa Group Premium Economy Class was already introduced at SWISS in spring 2022. The comfortable seat is integrated into a hard shell and can be adjusted effortlessly, without affecting fellow passengers in the row behind.

Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG, said: "We want to set new, unprecedented standards for our guests. The largest investment in premium products in our company's history underpins our claim to continue to be the leading Western premium airline in the future."

More than 100 new Lufthansa Group aircraft, such as Boeing 787-9s, Airbus A350s and Boeing 777-9s, will fly to destinations around the world with the new “Allegris” service. Additionally, aircraft already in service with Lufthansa German Airlines, such as the Boeing 747-8, will be converted. The simultaneous improvement of the travel experience in all classes, along with the Lufthansa Group-wide replacement of more than 30,000 seats, are unique in the Group's history. With these initiatives, the company is underscoring its clear premium and quality standards. By 2025, the Lufthansa Group will invest a total of 2.5 billion euros in product and service alone to further improve the customer experience at every stage of the journey – from initial booking, throughout the airport, lounge and border experience, to customer requests even after the flight.

HR policy

Lufthansa Group concludes new agreements with ver.di and Vereinigung Cockpit

The Lufthansa Group and the trade union ver.di agreed on a new wage settlement for some 20,000 Lufthansa payscale ground staff on 4 August 2022. The agreement provides for a phased increase in basic pay, especially for the lower pay groups, and runs for 18 months. ver.di had previously called a one-day strike at the end of June.

The Lufthansa Group and the Vereinigung Cockpit pilots’ union agreed on 12 September 2022, among other things, to increase the basic salary for pilots at Lufthansa and Lufthansa Cargo in two steps by a total of EUR 980. The agreement also includes a no-strike commitment for the remuneration and collective bargaining agreement until the end of June 2023. The pilots had previously followed the call from Vereinigung Cockpit and held a one-day strike on 2 September 2022.

Still pending is an agreement with the pilots of Eurowings Germany. Following a call by the Vereinigung Cockpit pilots’ union, the pilots at Eurowings Germany held a one-day strike on 6 October 2022 and a three-day strike from 17 October to 19 October 2022 in support of their demand for more days off, stricter limits on working hours and longer rest periods, among other things; the strike meant that only around 50% of the daily flights could take place as planned.

Financing

Stabilization of Deutsche Lufthansa AG successfully completed

Through its notification of voting rights of 14 September 2022, the Republic of Germany notified Deutsche Lufthansa AG that the remaining interest of the Economic Stabilisation Fund (ESF) in the shares of Deutsche Lufthansa AG was sold in full on 13 September 2022.

The ESF last held around 6.2% of the company's share capital (74.4m shares). The ESF had acquired its original shareholding of 20% of the share capital of Deutsche Lufthansa AG for EUR 306m in the summer of 2020. It was agreed at the time that the holding would be sold by October 2023 at the latest. Deutsche Lufthansa AG had already repaid all the loans and deposits it had received from the German government ahead of schedule in November 2021.

Following the sale of its remaining shares, the ESF no longer holds any equity stake in Deutsche Lufthansa AG. As a result, all remaining conditions will now also end.

Carsten Spohr, Chairman of the Executive Board and CEO of Deutsche Lufthansa AG, says: "On behalf of all Lufthansa employees, I would like to thank the current and previous German government and all German taxpayers for their support of our Lufthansa during the most severe financial crisis in our company's history. The stabilization of Lufthansa was successful, and is also paying off financially for the German government and thus for the taxpayer. We had already repaid the stabilization loan amounts earlier than expected; and the ESF has now also sold its last remaining shares one year before the deadline. This brings the stabilization of Lufthansa to a successful conclusion. Lufthansa is once again fully in private hands. All Lufthansa employees worldwide will continue to work hard to strengthen our position among the world's leading airline groups, for example through a broad-based premium product and quality offensive."

Largest shareholder of Deutsche Lufthansa AG now is Kühne Aviation GmbH. Through its notification of voting rights of 6 July 2022, Kühne Aviation GmbH notified Deutsche Lufthansa AG that on 5 July 2022 its interest in the shares of Deutsche Lufthansa AG had exceeded the threshold of 15% of issued capital and amounted to 15.01% on this date. The holding was further increased to 17.5% in the third quarter.

Partnerships

Fraport and Lufthansa German Airlines establish “FraAlliance” joint venture

Fraport and Lufthansa German Airlines have formed a new joint venture called “FraAlliance”. Each company holds a 50% share in the new venture. The two companies intend to use FraAlliance to strengthen their existing cooperation on strategic and operational matters at Frankfurt Airport and thus, plan to deepen their long-standing partnership in relation to enhancing services at Frankfurt Airport’s Terminal 1. The aim is to improve the quality of products and services at Frankfurt Airport.

The joint venture seeks to improve aspects relating to business development and operations, customer experience, infrastructure, intermodality, and sustainability. Improvements are to be achieved by analyzing and optimizing processes in terminal operations, as well as by taking a joint, customer-focused approach to product development. The goal is to bring about a journey-wide enhancement of processes and product offerings for flights, while boosting the competitiveness of the airport.

One initial outcome of the enhanced partnership is the availability of real-time updates for aviation security checkpoints in the Lufthansa App. This allows Lufthansa German Airlines passengers to see checkpoint waiting times in Frankfurt via the app, enabling them to take these times into account when planning their schedule and travel arrangements.

In another project, passenger flows have been carefully analyzed and optimized. This will significantly reduce transfer times for around a million passengers per year by removing unnecessary, duplicate security checks.

Jens Ritter, CEO Lufthansa Airlines, says: “We want to offer our customers a reliable, punctual, and first-rate travel experience. The joint venture will allow us to place stronger and more targeted emphasis on the projects required to realize these aims. The new partnership at our Frankfurt hub will deliver significant added value for our customers by implementing innovative, future-focused measures.”

Corporate Responsibility

SBTi validates Lufthansa Group climate targets

The Lufthansa Group has set itself ambitious climate protection goals and aims to achieve a neutral CO2 balance by 2050. Already by 2030, the aviation group wants to halve its net CO2 emissions compared to 2019. To this end, the Lufthansa Group is pursuing a clearly defined reduction path. This has now been successfully validated by the so-called "Science Based Targets Initiative" (SBTi). This makes the Lufthansa Group the first aviation group in Europe with a scientifically based CO2 reduction target in line with the goals of the Paris Climate Agreement of 2015.

In reducing CO2, the Lufthansa Group is focusing in particular on the accelerated fleet modernization, the continuous optimization of flight operations, the use of sustainable aviation fuels and innovative offers for our customers to make a flight CO2-neutral.

Deutsche Bahn becomes the first Intermodal Partner of Star Alliance

As of 1 August 2022, Deutsche Bahn (DB) will be the world's first Intermodal Partner of Star Alliance. With this, DB and the aviation industry are sending another strong signal for the environment-friendly evolution of the travel industry. Under the new cooperation, DB customers and passengers of Star Alliance member airlines will be able to start or end their long-distance journey comfortably on the climate-friendly train. Germany is the first market and DB is the world's first partner in the new Star Alliance initiative.

An industry-first, Star Alliance’s Intermodal Partnership model intelligently combines airlines with railway, bus, ferry or any other transport ecosystem, alliance-wide. It is designed to link loyalty systems and facilitate seamless airport/station/port transit. Star Alliance plans to expand intermodal partnerships in the future.

Harry Hohmeister, member of the board at Deutsche Lufthansa AG: „ Our partnership is unique worldwide. Once again, we are pioneers in Germany for intelligently linking different types of transport. We are creating added value for customers, for Germany as a business location, for the environment and for society. Mobility of the future means mastering challenges together. The successful Lufthansa Express Rail cooperation is an outstanding example of this – and on this foundation, we are now taking the next logical step. Our customers will benefit from this partnership more than ever before.“

Lufthansa Group and OMV further strengthen partnership on Sustainable Aviation Fuel

The Lufthansa Group and the global energy and chemicals group OMV have signed a Memorandum of Understanding (MoU) for the supply of more than 800,000 tons of SAF for the years 2023 to 2030. The companies intend to expand their existing partnership by adding new locations for SAF production and offtake as well as new technologies. OMV has already been supplying Sustainable Aviation Fuel (SAF) to Austrian Airlines at Vienna International Airport since March 2022.

With the expansion of the cooperation, the Lufthansa Group can drive the availability, market ramp-up and use of SAF as an essential element for a CO2-neutral future of aviation. The Lufthansa Group is continuously reviewing options for long-term purchase agreements and is already the largest SAF customer in Europe. For OMV, the planned SAF supply partnership with the Lufthansa Group is a further step towards reducing the CO2 intensity of the product portfolio and providing solutions for the sustainable development of the aviation industry.

SAF is aviation fuel that is produced without the use of fossil energy sources, such as crude oil or natural gas. Various production processes exist and different feedstock are available as energy sources. The current generation of SAF, which saves 80% CO2 compared to conventional kerosene, is mainly produced from biogenic residues, for example from used cooking oils. Before being transported to the airport, SAF is currently mixed with fossil kerosene. In the long term, SAF can enable virtually CO2-neutral aviation.

The Lufthansa Group has been involved in SAF research for many years, has built up an extensive network of partnerships and is driving forward the introduction of sustainable next-generation aviation fuels in particular. Special focus is placed on the forward-looking Power-to-Liquid and Sun-to-Liquid technologies, which use renewable energies or solar thermal energy as energy carriers.

Contact

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Disclaimer in respect of forward-looking statements

Information published in this Shareholder Information with regard to the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of definitive historical facts. Its purpose is exclusively informational and is identified by the use of such terms as ‘believe’, ‘expect’, ‘forecast’, ‘intend’, ‘project’, ‘plan’, ‘estimate’, ‘assume’ and ‘endeavour’. These forward-looking statements are based on all discernible information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication.

Since forward-looking statements are by their nature subject to uncertainties and imponderable risk factors – such as changes in underlying economic conditions – and rest on assumptions that may not, or divergently occur, it is possible that the Group’s actual results and development may differ materially from those implied by the forecasts. The Lufthansa Group makes a point of checking and updating the information it publishes. It cannot, however, assume any obligation to adapt forward-looking statements to accommodate events or developments that may occur at some later date. Accordingly, it neither expressly nor conclusively accepts liability, nor gives any guarantee for the actuality, accuracy or completeness of this data and information.