November 2012
Q3 Road Show Presentation
Simone Menne, Member of the Executive Board and CFO
lufthansagroup.com
Executive Summary
Strong Q3 but challenges ahead – Bottom line improvement in focus
Strong Q3 / 9M 2012
•
•
•
•
Q3 result above last year, 9M below last year – both above market expectation
Increase in result based on forex driven improvement in traffic revenue
Strongly improving earnings at service companies
Heavy fuel impact only partly compensated, hedging with little effect
Risks have increased but profit outlook for FY 2012 confirmed
•
•
•
Q4 booking outlook for passenger business weakened
Cargo market recovery not expected before mid 2013
Guidance 2012 confirmed: mid-three digit million Euro operating profit
excluding restructuring costs from SCORE (max 100 m EUR)
Structural earnings enhancements required
•
•
•
•
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Lufthansa Passenger Airlines single biggest entity but lowest margin
Restructuring of heavy loss maker non-hub operations initiated
Additional efforts in preparation; focus on capacity management
SCORE to increase Group operating profit to 2.3 bn EUR by 2015
Key figures improved, operating result remains below previous year
Key figures for the Group Q1-Q3 2012 vs. Q1-Q3 2011
in m EUR
+6.1%

18,786
+5.4%

628
-13.3%

3.1%
-0.7 PP

697
-1.6%

2,078
+4.0%

474
+64.6%

Operating cash flow
2,428
+14.5%

Capital expenditure (gross)
1,878
-5.9%

30.09.12
31.12.11
2,043
2,328

28.8%
28.6%

4,846
4,208

- thereof traffic revenue
Operating result
Adj. operating margin [in %]
EBIT
EBITDA
Net profit
in m EUR
Q1-Q3 2012
21,510 22,821
724
628
in m EUR
Net debt
Equity ratio [in %]
Market capitalisation
Revenue
vs. PY
22,821
Revenue
Q1-Q3 2011
Q1-Q3 2012
Operating result
Previous year's figures of the profit and loss statement have been adjusted due to the disclosure of bmi as a 'discontinued operations' (IFRS 5).
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Revenue growth continues, supported by currency
Group revenue Q1-Q3 2012 vs. Q1-Q3 2011
Currency
+558
Volume
in m EUR
18,786
Price
+59
+351
17,818
Traffic revenue (+5.4%)
3,692
∑ 21,510
Q1-Q3 2011
Other revenue (+9.3%)
∑ Group revenue (+6.1%)
4,035
∑ 22,821
Q1-Q3 2012
Previous year's figures of the profit and loss statement have been adjusted due to the disclosure of bmi as a 'discontinued operations' (IFRS 5).
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Small increase in manageable costs but fuel costs weigh heavily
Operating expenses Q1-Q3 2012 vs. Q1-Q3 2011
Q1-Q3 2012
in m EUR
Cost of materials
13,545
Staff costs
5,107
Depreciation &
amortisation
1,345
Other operating expenses
3,726
TOTAL
Change
in %
23,723
+1.5% excl. fuel costs
Previous year's figures of the profit and loss statement have been adjusted due to the disclosure of bmi as a 'discontinued operations' (IFRS 5).
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Oil price and currency drive up costs, hedges are hardly effective
Fuel costs Q1-Q3 2012 vs. Q1-Q3 2011
Currency
+455
Price
Hedging
+720
-154
5,567
in m EUR
Volume
4,595
-49
+972 m EUR (+21.2%)
Q1-Q3 2011
Q1-Q3 2012
Previous year's figures of the profit and loss statement have been adjusted due to the disclosure of bmi as a 'discontinued operations' (IFRS 5).
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Airlines are down year-on-year, service companies increase results
Key figures of the business segments and airlines Q1-Q3 12 vs. Q1-Q3 11
in m EUR
Passenger
Airline Group
Logistics
MRO
IT Services
Catering
Revenue
vs. PY in %
17,851
+7.0%
2,005
-9.7%
3,002
-1.5%
448
+2.8%
1,897
+10.9%
Op. result
vs. PY in %
345
-2.5%
66
-61.8%
227
+14.6%
13
+8.3%
73
+30.4%
EBITDA
vs. PY in %
1,451
-0.7%
125
-48.3%
339
+11.5%
59
+55.3%
122
+20.8%
Revenue
vs. PY in %
13,067
+6.8%
3,194
+8.0%
1,648
+6.4%
Op. result
vs. PY in %
64
-53.6%
163
-33.2%
73
-
EBITDA
vs. PY in %
861
-4.8%
397
-9.8%
195
+91.2%
in m EUR
Previous year's figures of the profit and loss statement have been adjusted due to the disclosure of bmi as a 'discontinued operations' (IFRS 5).
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Different drivers for positive traffic revenue, premium is stable
Traffic regions Passenger Airline Group Q1-Q3 2012 vs. Q1-Q3 2011
Americas
Europe
Asia / Pacific
ASK
+0.2%
ASK
+3.5%
ASK
+1.7%
RPK
+2.4%
RPK
+4.9%
RPK
+2.6%
SLF
+1.8PP
SLF
+0.9PP
SLF
+0.7PP
Yield per RPK
+8.6%
Yield per RPK
+2.3%
Yield per RPK
+1.5%
Traffic revenue
+11.2%
Traffic revenue
+7.3%
Traffic revenue
+4.1%
Total
Premium share of long haul
revenue*
Middle East/ Africa
ASK
+1.8%
ASK
-0.5%
RPK
+3.3%
RPK
+1.2%
SLF
+1.2PP
SLF
+1.2PP
Yield per RPK
+4.0%
Yield per RPK
+3.7%
Traffic revenue
+7.5%
Traffic revenue
+4.9%
49.2%
+0.1PP
49.3%
*Lufthansa Passenger Airlines
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Strong Q3 / 9M 2012
•
•
•
•
Q3 result above last year, 9M below last year – both above market expectation
Increase in result is based on forex driven improvement in traffic revenue
Strongly improving earnings at service companies
Heavy fuel impact only partly compensated, hedging with little effect
Risks have increased but profit outlook for FY 2012 confirmed
•
•
•
Q4 booking outlook for passenger business weakened
Cargo market recovery not expected before mid 2013
Guidance 2012 confirmed: mid-three digit million Euro operating profit
excluding restructuring costs from SCORE (max 100 m EUR)
Structural earnings enhancements required
•
•
•
•
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Lufthansa Passenger Airlines single biggest entity but lowest margin
Restructuring of heavy loss maker non-hub operations initiated
Additional efforts in preparation; focus on capacity management
SCORE to increase Group operating profit to 2.3 bn EUR by 2015
Airlines continue to focus on flexible capacity management
Booking and capacity development in passenger and cargo business
Passenger business
Freight business
Short-term booking patterns require tight
capacity management
Sales remain depressed,
capacity adjustments stay in focus
•
Solid traffic development in October
•
Volumes still down year-on-year
•
Booking lead times have shortened
•
Recovery not expected before mid 2013
•
Booking indicators have weakened for the
winter season
•
Capacity is being managed on a shortterm basis according to demand
•
Yield situation remains overall positive
•
Current plan for 2012: -7.5% ATK vs. PY
•
Capacity is tightly managed; current plan:
-3.0% ASK in winter 12/13 vs. PY
•
Scenarios for summer 13 under review
FY2012
FY2012
Winter
12/13
Passenger Airline Group (ASK vs. PY)
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Lufthansa Cargo (ATK vs. PY)
Despite hedging fuel remains significant cost driver
Fuel costs and hedging 2012
Oil price scenarios for the Lufthansa Group
Expected fuel costs and sensitivities
Fuel expenses LH Group
(in bn EUR post hedging)
150
LH price
2012
140
7.5 (+1%)
137USD/bbl (+20%)
7.5 (+1%)
125 USD/bbl (+10%)
USD / bbl
130
7.3 (-1%)
102 USD/bbl (-10%)
Market price
120
7.2 (-3%)
91 USD/bbl (-20%)
110
100
90
as of 15.10.2012
Brent forward rest of 2012:
114 USD/bbl
(1,2865 USD/EUR)
80
70
70
80
90
100
110
120
130
140
150
USD / bbl
Previous year's figures of the profit and loss statement have been adjusted due to the disclosure of bmi as a 'discontinued operations' (IFRS 5).
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Cost base heavily effected by oil price and currency
Lufthansa hedging strategy and oil price development 2006-2012
•
Lufthansa's hedging strategy designed to
reduce volatility – not price effects – by
rolling system with 24 months lead time
•
Oil price in USD below old levels
– but not in Euros
160
Fuel hedging level (in %)
5
9
14
19
24
28
33
38
42
47
52
56
61
66
71
75
80
85
24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1
Number of months before actual date of consumption
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140
120
100
80
60
Brent in USD
40
Brent in EUR
20
0
2006
2007
2008
2009
2010
2011
2012
Profit guidance for financial year 2012 is unchanged
Operating result in the mid three-digit million euro range*
Development of operating result
in m EUR
Outlook 2012
 Increase in revenue
 Operating result in the mid three-digit
million euro range
 Dynamic market parameters will define
absolute profit level
 Excluding restructuring costs resulting
from SCORE
(max. 100 m EUR for 2012 expected)
 Focus is on offsetting higher costs
(in particular fuel costs)
 Service companies stabilise earnings
development
* pre SCORE restructuring costs
Previous year's figures for 2011 and 2010 have been adjusted due to the disclosure of bmi as a 'discontinued operations' (IFRS 5).
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Strong Q3 / 9M 2012
•
•
•
•
Q3 result above last year, 9M below last year – both above market expectation
Increase in result is based on forex driven improvement in traffic revenue
Strongly improving earnings at service companies
Heavy fuel impact only partly compensated, hedging with little effect
Risks have increased but profit outlook for FY 2012 confirmed
•
•
•
Q4 booking outlook for passenger business weakened
Cargo market recovery not expected before mid 2013
Guidance 2012 confirmed: mid-three digit million Euro operating profit
excluding restructuring costs from SCORE (max 100 m EUR)
Structural earnings enhancements required
•
•
•
•
Seite 14
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Lufthansa Passenger Airlines single biggest entity but lowest margin
Restructuring of heavy loss maker non-hub operations initiated
Additional efforts in preparation; focus on capacity management
SCORE to increase Group operating profit to 2.3 bn EUR by 2015
Earnings of Lufthansa Pass. Airlines need structural improvement
Adjusted operating margin per airline and business segment Q1-Q3
10%
8.3%
8.2%
8.2%
8%
7.1%
6%
5.2%
4.6%
3.5%
4%
2%
1.6%
0.8%
-2%
Catering
LH Group
-2,0%
Lufthansa
Passenger
Airlines
Q1-Q3 2012
SWISS
Austrian
Airlines
Passenger
Airline
Group
Logistics
MRO
Q1-Q3 2011
* adjusted operating margin excluding one-off effect from transfer of operations
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3.8%
3.1%
0.5%*
0%
-4%
2.9%2.8%
2.5%
2.2%
3.8%
3.3%
IT Services
"New Germanwings": Reducing complexity, improving productivity
Full integration of LH's non-hub traffic into Germanwings by 2015
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Lufthansa merges administrative functions across the Group
Project GLOBE develops Global Business Service Organisation by 2015
Group 1
Group 2
Group n
Core business
Shared
Services
SSC HR
SSC Finance
Deutschland Deutschland
Group 1
Admin
Functions
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Merging Finance, HR and
Procurement into one Global
Business Services (GBS)
organisation

Competitiveness through
increased flexibility of
administrative structures

Significant cost advantages
through bundling, enhancing
efficiency and using international
platforms

Approx. 1,100 jobs identified
worldwide that could be
transferred into GBS centers in
the mid-term

Consultation with employee
representatives until end of 2012
ABC
Admin
Functions
Core
business

SSC FI
SSC HR
International
Group 2
Group n
GBS
Group-wide SCORE projects make progress
1.5 bn EUR profit improvement targeted by 2015
• Staff cost package (~500 m EUR)
Project package I
Q1 2012
• Joint Group-wide procurement (500 m EUR until 2015)
• Optimization of neighborhood traffic (30 m EUR)
• Review of fleet structure and aircraft specifications
Project package II
Q2 2012
• Synergies in the field organization (stations, sales, …)
• Airline project: Fuel efficiency
• Restructuring of non-hub traffic
(Project DIRECT4U, Germanwings)
Project package III
Q3-Q4 2012
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• Flight Training, Online Sales, Call Center
• Shared Business Services for Group-wide HR,
Finance and procurement (GLOBE)
SCORE works, but results not yet visible – further measures to come
SCORE is a net program
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back-up material
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Operating result remains some 100 m EUR below previous year
Profit from op. activities and op. result Q1-Q3 2012 vs. Q1-Q3 2011
in m EUR
Q1-Q3 2012
Q1-Q3 2011
vs. PY
Profit from operating activities
640
791
-151
Net book profit / loss assets / financial investments
-25
-4
-21
-20
-31
+11
5
-6
+11
Past service costs
-3
19
-22
Impairments
83
13
+70
Reversal of provisions
-72
-89
+17
Operating result
628
724
-96
3.1%
3.8%
-0.7PP
- thereof aircraft disposals
Valuation from non-current borrowings
Adjusted operating margin*
*Adjusted operating margin = (operating result + reversal of provisions) / revenue
Previous year's figures of the profit and loss statement have been adjusted due to the disclosure of bmi as a 'discontinued operations' (IFRS 5).
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Earnings figures show different developments
Earnings figures Q1-Q3 2012 vs. Q1-Q3 2011
in m EUR
Q1-Q3 2012
Q1-Q3 2011
vs. PY
640
791
-151
77
62
+15
-20
-145
+125
+20
-113
+133
697
708
-11
-241
-207
-34
-8
-59
+51
Profit / loss from continuing operations
448
442
+6
Result from discontinued operations (bmi)
36
-143
+179
Minority interests
-10
-11
+1
Net profit
474
288
186
Earnings per share (in EUR)
1.04
0.63
+0.41
Profit from operating activities
Income from subsidiaries, joint ventures and associates
Other financial items
- thereof changes in time value of fuel hedge options
EBIT
Net interest
Income taxes
Previous year's figures of the profit and loss statement have been adjusted due to the disclosure of bmi as a 'discontinued operations' (IFRS 5).
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Free Cash Flow and liquidity strengthened
Cash flow statement Q1-Q3 2012 vs. Q1-Q3 2011
in m EUR
Q1-Q3 2012
Q1-Q3 2011
vs. PY
456
501
-45
1,423
1,254
+169
Result from fixed asset disposals
-22
-34
+12
Income from subsidiaries, joint ventures and associates
-77
-62
-15
Interest result
241
207
+34
Income tax payments / reimbursements
-38
-228
+190
14
126
-112
513
467
+46
2,510
2,231
+279
-82
-110
+28
2,428
2,121
+307
-1,453
-1,253
-200
975
868
+107
Liquid funds as of 30.09.
1,448
1,021
+427
Liquidity reserve (long-term securities)
3,450
3,329
+121
Total liquidity of the Group
4,898
4,350
+548
EBT (earnings before income taxes)
Depreciation and amortisation
Non-cash expenses of market value changes of financial derivatives
Change in working capital
Operating cash flow from continuing operations
Operating cash flow from discontinued operations
Operating cash flow
Capital expenditure (net)
Free cash flow
Previous year's figures of the profit and loss statement have been adjusted due to the disclosure of bmi as a 'discontinued operations' (IFRS 5).
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High flexibility is the key in volatile times
Example: LH Cargo flexibly adapts to all market phases
%
50
ton km sales in % vs. previous year
40
30
2010
2011
2012
Operating profit in m EUR (per quarter)
20
10
2009
2008
109
47
0
-10
29
4
-72
-62
86
35
80
64
69
40
76
28
19
19
-66
-20
3rd
-30
full fleet reactivated
global price increase of 20%
first aircraft activated
-40
capacity cuts
begin again
2nd global price increase of 10%
1st global price increases of 20%
2 more aircraft grounded
capacity reallocated
from APAC to Americas
short-time work intensified (-25% working hours)
first 2 aircraft grounded
introduction of short-time work (-20% working hours)
start of Earnings Savings Program
capacity -10% plus cost cuts
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capacity
equaling
2 a/c grounded
Closer international cooperations enhance our offer to the customer
Largest alliance, complemented by strong intercontinental JVs
Scope of Atlantic++
•
•
•
•
27 airlines
21,500 daily flights
to 1,356 airports
Strengthen
competitiveness
Increasing
yields
in 193 countries
Enhancing customer
proposition
Metal Neutrality
Network
Rev. Mgt.
Sales
FFP
– Joint network
planning
– Joint pricing
– Joint sales
strategies
– A ++ wide
benefits
– Joint programs
& targets
Airports
– Joint processes
– Seamless-ness
– Joint scheduling
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Scope of Japan+
– Coordinated
inventory
management
Product enhancement through heavy investments
Cumulative 9 bn EUR capex in the next three years
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Dividend policy is embedded in financial strategy
Guidelines for distributing profits to shareholders
Our dividend policy
• Dividends are linked to operating result
• Net profit of Deutsche Lufthansa AG (German GAAP/HGB) must allow for dividend payment
• In this framework we seek continuity (30-40% payout ratio of operating result)
• Further payments possibly from extraordinary income, if capital structure targets are met
Lufthansa results and dividends
2004
2005
2006
2007
2008
2009
2010
2011
383
577
845
1,378
1,280
130
876
820
404
453
803
1,655
542
-34
1,131
-13
265
455
523
1,123
276
-148
483
114
0.30
0.50
0.70
1.25
0.70
-
0.60
0.25
Payout ratio (Op. result)
36%
40%
38%
41%
25%
-
31%
14%
Dividend yield (gross)
2.8%
4.0%
3.4%
6.9%
6.3%
-
3.7%
2.7%
Operating result
m€
Net profit/loss (Group)
m€
Net profit/loss (HGB)
m€
Dividend paid (per share)
€
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Disclaimer in respect of forward-looking statements
Information published in this presentation 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. 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 very 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. Lufthansa makes a point of checking and updating the information it
publishes. It cannot, however, assume any obligation to generally update or adapt
forward-looking statements to accommodate events or developments that may occur
at some later date. It neither expressly nor conclusively accepts liability, nor gives
any guarantee, for the actuality, accuracy and completeness of this data and
information.
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Lufthansa Investor Relations contact
Deutsche Lufthansa AG
Investor Relations / FRA IR
Lufthansa Aviation Center
Airportring
D-60546 Frankfurt
Phone: +49 (0) 69 696 28010
Fax: +49 (0) 69 696 90990
E-mail: [email protected]
Andreas Hagenbring
Senior Vice President Investor Relations
Phone: +49 (0) 69 696 28001
Visit our webpage: lufthansa.com/investor-relations
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