Lufthansa Group Conference & Roadshow Presentation Continued - PowerPoint PPT Presentation

Lufthansa Group Conference & Roadshow Presentation Continued good development in Q2 – strong operational performance  Adj. EBIT down 35m EUR, affected by one-off integration costs at Eurowings  Network Airlines more than offset higher fuel costs, Adj. EBIT +40m EUR  Cargo, MRO and Catering Adj. EBIT up 69m EUR; margins increase Unit revenues increase as unit costs continue to come down  Stable load factor on growing capacity, cc yields rise 1.1%  Q2 cc RASK +1.3% (Network Airlines +1.3%, Eurowings +3.6%)  Q2 cc CASK -0.7% (Network Airlines -2.3%, Eurowings +7.7% due to one-off costs) Adjusted EBIT 2018 still expected to be slightly below previous year  c. 8% total ASK growth (reduced from 8.5% as of last guidance)  RASK now assumed to be slightly up in the full year (up from “roughly stable”)  CASK down 1% despite Eurowings one-offs and industry-wide challenges  Fuel costs expected to increase c. 850m EUR compared to prior year September 2018

Disclaimer The information herein is based on publicly available information. It has been prepared by the Company solely for use in this presentation and has not been verified by independent third parties. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. The information contained in this presentation should be considered in the context of the circumstances prevailing at that time and will not be updated to reflect material developments which may occur after the date of the presentation. The information does not constitute any offer or invitation to sell, purchase or subscribe any securities of the Company. Withou t the Company’s consent the information may not be copied, distributed, passed on or disclosed. This presentation contains statements that express the Company‘s opinions, expectations, beliefs, plans, objectives, assumpti ons or projections regarding future events or future results, in contrast with statements that reflect historical facts. While the Company always intends to express its best knowledge when it makes statements about what it believes will occur in the future, and although it bases these statements on assumptions that it believes to be reasonable when made, these forward-looking statements are not a guarantee of performance, and no undue reliance should be placed on such statements. Forward-looking statements are subject to many risks, uncertainties and other variable circumstances that may cause the statements to be inaccurate. Many of these risks are outside of the Company‘s control and co uld cause its actual results (positively or negatively) to differ materially from those it thought would occur. The forward-looking statements included in this presentation are made only as of the date hereof. The Company does not undertake, and specifically declines, any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments. Page 2

 Market participants benefit from improving industry dynamics - Airline industry increasingly profitable, driven by more discipline and consolidation - Consolidation in Europe still in early stages but gaining momentum  Lufthansa Group financials improve due to consistent implementation of strategy - All relevant financial metrics improve continuously - Multiple focus areas to increase through-the-cycle-profitability  Continued good development in Q2 2018 after another record year 2017 - Adj. EBIT Q2 18 only slightly below last year despite Eurowings one-off costs; net debt decreases further - Adj. EBIT 2017 of 3.0bn EUR, free cash flow doubles, net financial debt stable; pension liabilities down 3.5bn EUR  Profit guidance unchanged: Adjusted EBIT 2018 expected to be slightly below previous year - Total ASK growth of c. 8%; RASK slightly up in full year; CASK down c. 1% - Additional fuel cost of c. 850m EUR; profit contribution from Aviation Services slightly below last year Page 3

Performance of the airline industry is constantly improving Long-term EBIT margin and ROIC development Global Commercial Airline Profitability Return on Invested Capital 12% 50 10% 40 8% 10% 30 6% 08% 20 4% 06% 10 2% 0 0% 04% -10 -2% 02% -20 -4% -30 -6% 00% '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17e '18e '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17e '18e Return on capital (ROIC) Net profit EBIT Margin Major Drivers: Increasing consolidation Clear strategic positioning of airlines More rational management teams Source: IATA World Air Transport Statistics Page 4

Industry consolidation is a major driver Degree of consolidation in US and EU US EU ‘ 97 ‘13 ‘ 97 ‘13 ‘ 96 ‘ 98 ‘ 99 ‘ 00 ‘ 01 ‘ 02 ‘ 03 ‘ 04 ‘ 05 ‘ 06 ‘ 07 ‘ 08 ‘ 09 ‘ 10 ‘ 11 ‘ 12 ‘ 14 ‘ 15 ‘ 16 ‘ 17 ‘ 18 ‘ 96 ‘ 98 ‘ 99 ‘ 00 ‘ 01 ‘ 02 ‘ 03 ‘ 04 ‘ 05 ‘ 06 ‘ 07 ‘ 08 ‘ 09 ‘ 10 ‘ 11 ‘ 12 ‘ 14 ‘ 15 ‘ 16 ‘ 17 ‘ 18 American Airlines American Airlines Lufthansa Lufthansa Group Swiss TWA Austrian America West Sabena Brussels Airlines U.S. Airways Partly Air Berlin Delta Delta British Airways International Airlines Group Northwest Iberia United Vueling United Continental Continental Aer Lingus Southwest Southwest Air France Air France KLM KLM AirTran Ryanair Ryanair Jetblue Jetblue Easyjet Easyjet ‘ 96 ‘ 97 ‘ 98 ‘ 99 ‘ 00 ‘ 01 ‘ 02 ‘ 03 ‘ 04 ‘ 05 ‘ 06 ‘ 07 ‘ 08 ‘ 09 ‘ 10 ‘ 11 ‘ 12 ‘13 ‘ 14 ‘ 15 ‘ 16 ‘ 17 ‘ 18 ‘ 96 ‘ 97 ‘ 98 ‘ 99 ‘ 00 ‘ 01 ‘ 02 ‘ 03 ‘ 04 ‘ 05 ‘ 06 ‘ 07 ‘ 08 ‘ 09 ‘ 10 ‘ 11 ‘ 12 ‘13 ‘ 14 ‘ 15 ‘ 16 ‘ 17 ‘ 18 US Market share EU 2007 2017 2007 2017 Top 5 US carriers Top 5 EU carriers 65 % 85 % reach 85% market 33 % 44 % reach 44% market share in terms of ASK share in terms of ASK Source: FLASH Flight data statistics Page 5

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 Market participants benefit from improving industry dynamics - Airline industry increasingly profitable, driven by more discipline and consolidation - Consolidation in Europe still in early stages but gaining momentum  Lufthansa Group financials improve due to consistent implementation of strategy - All relevant financial metrics improve continuously - Multiple focus areas to increase through-the-cycle-profitability  Continued good development in Q2 2018 after another record year 2017 - Adj. EBIT Q2 18 only slightly below last year despite Eurowings one-off costs; net debt decreases further - Adj. EBIT 2017 of 3.0bn EUR, free cash flow doubles, net financial debt stable; pension liabilities down 3.5bn EUR  Profit guidance unchanged: Adjusted EBIT 2018 expected to be slightly below previous year - Total ASK growth of c. 8%; RASK slightly up in full year; CASK down c. 1% - Additional fuel cost of c. 850m EUR; profit contribution from Aviation Services slightly below last year Page 7

Our goal remains: #1 for customers, employees and shareholders Set-up of Lufthansa Group Customers #1 Employees Shareholders Network Airlines: Eurowings: #1 in Aviation Services: #1 in Europe home markets #1 world-wide Strategic focus topics Aspirations Shape and lead the industry Consolidation Grow the business Flexibilization … and others Invest steadily Digitalization Stay competitive Cost Reduction Page 8

Balancing stakeholders’ interests is key to our success Drivers of record results in 2017 New digital customer services Lufthansa: 5 Star Airline LH, LX, OS: Best three European Airlines Customers #1 Employees Shareholders Long lasting labor agreements 3bn EUR Adj. EBIT 3,000 new jobs in 2017, revenue per FTE +7% Continuous unit cost reduction 1 Leaner management structure Dividend up 60% Page 9

Three key themes to develop strategic pillars of the group Key areas of action Expansion of market position through growth Consolidation (organic & inorganic) will redesign the structure of the airline industry Efficient and flexible forms of organization and new production logic will determine the way of Flexibilization working within the Lufthansa Group. Cost focus remains key to sustainable success New business models and digital solutions will Digitalization determine Lufthansa Group’s position in the airline industry Page 10

Focus on value creation Financial strategy • Improve Profitability • Focus Capital Allocation • Maintain Financial Stability Focus • Sustainable value generation • Continuous shareholder • Stable investment grade rating participation • Strict cost management • Hedging of financial risks • Balanced investment level • Access to different forms of funding • Tight working capital management • Securing appropriate liquidity Adj. ROCE Dividend Adj. Net Debt / Adj. EBITDA KPIs • • • Adj. EBIT Margin Capital expenditure • • Target 2017 Target 2017 Target 2017 Targets Adj. Net Debt / 10 – 25% Adj. ROCE 11.6% Dividend 11.4 % < 3.5 x 1.7 x constantly of EBIT Adj. EBITDA increasing in line with through the Capex best-in-class 3.0bn EUR Adj. EBIT Margin cycle 8.4% peers Page 11