Deutsche Lufthansa : Q1 2022

NEW NORMAL. NEW STRENGTH.

1st Interim Report

January - March 2022

lufthansagroup.com

investor-relations.lufthansagroup.com

The Lufthansa Group

KEY FIGURES

Revenue and result

Total revenue

of which traffic revenue

Operating expenses1)

Adjusted EBITDA1)

Adjusted EBIT1)

EBIT

Net profit/loss

Key balance sheet and cash flow statement figures

Total assets

Equity

Equity ratio

Net indebtedness

Pension provision

Cash flow from operating activities1)

Gross capital expenditures2)

Net capital expenditures

Adjusted free cash flow1)

Key profitability figures

Adjusted EBITDA margin1)

Adjusted EBIT margin1)

EBIT margin

Lufthansa share

Share price as of 31 Mar3)

Earnings per share

Traffic figures4)

Flights

Passengers

Available seat-kilometres

Revenue seat-kilometres

Passenger load factor

Available cargo tonne-kilometres

Revenue cargo tonne-kilometres

Cargo load factor

Employees

Employees as of 31 Mar

		Jan - Mar		Jan - Mar		Change
		2022		2021		in %
€m		5,363	2,560	109
€m		3,833		1,542		149
€m		6,361		3,885		64
€m		-28		-482		94
€m		-591		-1,048		44
€m		-640		-1,135		44
€m		-584		-1,049		44
€m		44,386		38,453		15
€m		5,426	2,052	164
%		12.2		5.3		6.9 pts
€m		8,283		10,924		-24
€m		5,711		7,821		-27
€m		1,496		-775
€m		640		153		318
€m		637		87		632
€m		780		-953
%		-0.5	-18.8		18.3 pts
%		-11.0		-40.9		29.9 pts
%		-11.9		-44.3		32.4 pts
€		7.36	8.07	-9
€		-0.49		-1.75		72
number		135,539	41,013	230
thousands		13,173		3,046		332
millions		45,656		16,855		171
millions		29,862		7,582		294
%		65.4		45.0		20.4 pts
millions		3,142		2,527		24
millions		2,138		1,947		10
%		68.0		77.0		-9.0 pts
number		104,034	111,262	-6

1. Previous year's figures have been adjusted due to amendments in the definition of the figures ↗ Financial performance, p. 4, ↗ Notes, p. 30.
2. Without acquisition of equity investments.
3. Share price development adjusted for the effects of the issue of new shares in connection with the capital increase in September 2021.
4. Previous year's figures have been adjusted.

Date of publication: 5 May 2022.

Contents

3	Interim management report	17	Interim financial statements	34	Further information
3	Course of business	17	Consolidated income statement	34	Declaration by the
3	Significant events	18	Consolidated statement of		legal representatives
4	Events after the reporting period		comprehensive income	35	Credits/Contact
4	Financial performance	19	Consolidated statement of		Financial calendar 2022
9	Business segments		financial position
16	Opportunities and risk report	21	Consolidated statement of
16	Forecast		changes in shareholders' equity
		22	Consolidated cash flow statement
		23	Notes

• INTERIM MANAGEMENT REPORT Course of business, Significant events

Course of business

Performance of the Lufthansa Group improves over the course of the first quarter of 2022

• The performance of the Lufthansa Group improved sig- nificantly over the first quarter of 2022; however, in view of the deterioration in the pandemic situation towards the end of 2021 and the seasonality of the airline busi- ness, which causes flight traffic to be significantly lower in the first three months than in the rest of the year, the Lufthansa Group nonetheless posted an operating loss.
• At the beginning of the year, demand for air travel was significantly impacted by the spread of the Omicron vari- ant; however, towards the middle of the first quarter, the development of demand decoupled from the develop- ment of infection figures; accordingly, capacity was also significantly expanded at the end of the quarter.
• Though the war in Ukraine only led to a temporary down- turn in bookings, it had an adverse impact on the course of business of the Lufthansa Group; this was due in par- ticular to the substantial increase in kerosene prices and, to a lesser extent, to the loss of markets in Ukraine and Russia and the necessary adjustments of flight routes to Asia.
• Available capacity at the Passenger Airlines was 171% up on the previous year's level in the first quarter of 2022, corresponding to 57% of its pre-crisis level in 2019.
• Traffic revenue for the Lufthansa Group rose year-on- year by EUR 2,291m or 149% to EUR 3,833m (previous year: EUR 1,542m); revenue of EUR 5,363m was EUR
  2,803m or 109% higher than a year ago (previous year: EUR 2,560m).
• The Lufthansa Group's cargo business profited from continuing strong demand for cargo capacities and high yields; Adjusted EBIT of EUR 495m (previous year: EUR 315m) was the highest ever in a first quarter.
• The MRO business segment profited from increasing demand for maintenance services and also reported posi- tive Adjusted EBIT of EUR 120m (previous year: EUR 45m).
• The Lufthansa Group made further progress with the implementation of its restructuring programme in the first quarter of 2022; the measures implemented to date will account for approximately 80% of the annual savings totalling EUR 3.5bn that are to be achieved from 2024 onwards.
• The positive performance by the Logistics and MRO segments, along with progress in the restructuring pro- gramme, partially made up for the losses in Passenger Airlines; the operating loss in the first quarter of 2022 was reduced significantly year-on-year as a result; Adjusted EBIT came to EUR -591m (previous year: EUR -1,048m); the Adjusted EBIT margin was -11.0% (previous year: -40.9%); EBIT amounted to EUR -640m (previous year: EUR -1,135m).

LUFTHANSA GROUP 1ST INTERIM REPORT JANUARY - MARCH 2022

• The net loss came to EUR -584m in the first quarter of 2022 (previous year: EUR -1,049m).
• Adjusted free cash flow came to EUR 780m (previous year: EUR -953m), mainly thanks to a high level of incom- ing bookings and the resulting advance payments, particularly for flights in spring and summer 2022.
• The equity ratio rose by 1.6 percentage points to 12.2% (31 December 2021: 10.6%), largely due to a decline in pension provisions compared with year-end 2021; posi- tive Adjusted free cash flow brought net indebtedness down to EUR 8,283m, a reduction of EUR 740m or 8% on year-end 2021 (31 December 2021: EUR 9,023m).
• At the end of March 2022, the Group had available liquidity of EUR 9.9bn in total; this does not yet include a
  revolving credit facility that was signed in early April.
  ↗ Financial performance, p. 4.

Significant events

Ukraine war weighs on the outlook for the world economy, the industry and the Group

• The escalation of the conflict between Russia and Ukraine, which led to the outbreak of war on 24 February 2022, is expected to have an adverse impact on the global economy, the airline industry and the Lufthansa Group. At the time of reporting, it is not possible to fore- cast these effects in detail.
• The Group has incorporated these uncertainties into its
  financial outlook for the 2022 financial year. 
  ↗ Forecast, p. 16.

Contracts with Christina Foerster and Michael Niggemann renewed ahead of schedule

• At its meeting on 2 March 2022, the Supervisory Board of Deutsche Lufthansa AG decided to renew the contracts with Christina Foerster and Michael Niggemann ahead of schedule for five more years until 31 December 2027.
• The Supervisory Board also decided on changes in the allocation of Executive Board responsibilites with effect from 1 July 2022: Michael Niggemann will also assume responsibility for Infrastructure & System Partners from the summer; Detlef Kayser will in future also be responsi- ble for IT & Cyber Security and Procurement; Christina Foerster will now lead Employer Branding & Talent Management; the management of the worldwide stations of Lufthansa Group Airlines will in future be assigned to the area of responsibility of Harry Hohmeister.

4	INTERIM MANAGEMENT REPORT	LUFTHANSA GROUP 1ST INTERIM REPORT JANUARY - MARCH 2022
	Events after the reporting period, Financial performance

Events after the reporting period

Lufthansa Group agrees inaugural revolving credit facility of EUR 2.0bn

• The Lufthansa Group signed its first revolving credit facility with a broad syndicate of international relation- ship banks on 8 April 2022.
• The total facility amount of EUR 2.0bn is being provided for three years, with two extension options of a year each; this revolving credit facility replaces existing un- used bilateral credit lines of some EUR 0.7bn and thereby
  increases the Lufthansa Group's available liquidity by an additional EUR 1.3bn. ↗ Financial position, p. 7.

Financial performance

Key performance indicators modified

• Beginning with financial year 2022, the reconciliation from EBIT to Adjusted EBIT adjusts restructuring expens- es in the form of severance payments and significant costs of legal procedures and company transactions not arising in the normal course of business, as well as and
  other material non-recurring expenses caused directly by extraordinary external factors. ↗ Notes, p. 30.
• The definition of Adjusted free cash flow has been amended so that cash inflows and outflows from the sale and acquisition of companies or individual business units which are allocated to investing activities are not recog- nised.
• Finally, contributions to and withdrawals from plan assets
  are disclosed in cash flow from operating activities.
  ↗ Notes, p. 30.

EARNINGS POSITION

Traffic revenue up 149% year-on-year

• Sales by the Passenger Airlines in the Lufthansa Group (revenue seat-kilometres) were up by 294% year-on-year in the first quarter of 2022; capacity (available seat- kilometres) was increased by 171%; the passenger load factor rose by 20.4 percentage points to 65.4%; traffic revenue in the passenger business rose by EUR 1,852m or 281% to EUR 2,510m (previous year: EUR 658m); com- pared to pre-crisis levels, i.e. the first quarter of 2019, capacity was at 57%.

• The Lufthansa Group's cargo business continued to per- form very well in the first quarter of 2022; strong demand due to ongoing disruption to global supply chains had a very positive impact on yields; capacity (available cargo tonne-kilometres) was up 24% on the year due to in- creased belly capacities, though still below its pre-crisis level; sales (revenue cargo tonne-kilometres) rose by 10%; the cargo load factor of 68.0% was 9.0 percentage points below last year; traffic revenue in the cargo busi- ness rose by EUR 439m or 50% to EUR 1,323m (previous year: EUR 884m).
• Compared with the previous year, in total, traffic revenue at Lufthansa Group airlines rose in the first quarter of 2022 by EUR 2,291m or 149% to EUR 3,833m (previous year: EUR 1,542m).

Revenue up by 109% on the previous year

• Other revenue increased by EUR 512m or 50% to EUR 1,530m (previous year: EUR 1,018m), largely as a result of higher income in the MRO and Catering segments.
• Revenue, which consists of traffic revenue plus other revenue, rose by EUR 2,803m or 109% to EUR 5,363m (previous year: EUR 2,560m); other operating income rose by EUR 122m or 37% to EUR 450m (previous year: EUR 328m), particularly due to an increase in own work capitalised (mainly maintenance work on aircraft); operat- ing income rose by EUR 2,925m or 101% to EUR 5,813m (previous year: EUR 2,888m).

• INTERIM MANAGEMENT REPORT Financial performance

REVENUE, INCOME AND EXPENSES
		Jan - Mar		Jan - Mar		Change
in €m		2022		2021		in %
Traffic revenue	3,833	1,542	149
Other revenue	1,530	1,018	50
Total revenue	5,363	2,560	109
Other operating income	450	328	37
Total operating income	5,813	2,888	101
Cost of materials and services	3,152	1,412	123
of which fuel	987	275	259
of which other raw materials, con-
sumables and supplies and pur-	655		357		83
chased goods
of which fees and charges		678		285		138
of which external		380	216	76
services MRO
Staff costs1)	1,788	1,296	38
Depreciation	563	566	-1
Other operating expenses	858	611	40
Total operating expenses1)	6,361	3,885	64
Result from equity
-43	-51	16
investments
Adjusted EBIT1)	-591	-1,048	44
Total reconciliation EBIT1)	-49	-87	44
EBIT	-640	-1,135	44
Net interest	-83	-118	30
Other financial items		33	-60

LUFTHANSA GROUP 1ST INTERIM REPORT JANUARY - MARCH 2022

343m); this was partially offset by the 6% decline in the average number of employees.

• Depreciation and amortisation fell by EUR 3m or 1% to EUR 563m (previous year: EUR 566m) and was mainly related to aircraft and reserve engines.
• Other operating revenue rose by EUR 247m or 40% to EUR 858m (previous year: EUR 611m), particularly be- cause of increased sales and marketing costs, higher travel and outside staff costs and foreign currency losses.

Adjusted EBIT and net result less negative

- The operating result from equity investments came to

EUR -43m in the first quarter of 2022 (previous year:

EUR -51m), a development that is attributable primarily to

lower losses at joint ventures in the passenger and MRO

business compared with the previous year.

- Adjusted EBIT for the Lufthansa Group came to EUR

-591m in the first quarter of 2022 (previous year: EUR

-1,048m); the Adjusted EBIT margin, i.e. the ratio of

Adjusted EBIT to revenue, came to -11.0% (previous year:

-40.9%).

- EBIT in the reporting period came to EUR -640m (previ-

ous year: EUR -1,135m); in contrast to Adjusted EBIT, this

includes costs of EUR 110m directly related to the

Ukraine war as well as net income of EUR 52m in connec-

tion with restructuring measures (previous year: net

Profit/loss before income taxes

Income taxes

Profit/loss after income taxes

Profit/loss attributable to minority interests

Net profit/loss attributable to shareholders of Deutsche Lufthansa

AG

-690	-1,313	47
108	259	-58
-582		-1,054		45
-2	5
-584	-1,049	44

expenses of EUR 95m); the net income is the result of

balancing restructuring expenses against the reversal of

unused provisions following the successful completion of

restructuring measures.

- Net interest rose by EUR 35m or 30% to EUR -83m

(previous year: EUR -118m), mainly due to lower interest

expenses following the reduction of debt, especially the

repayment of the stabilisation measures in Germany.

1. Previous year's figures have been adjusted due to amendments in the definition of the figures ↗ Notes, p. 30.

Operating expenses up 64% on last year

• Operating expenses at the Lufthansa Group rose overall year-on-year in the first quarter of 2022 by EUR 2,476m or 64% to EUR 6,361m (previous year: EUR 3,885m).
• The cost of materials and services at the Lufthansa Group came to EUR 3,152m, which was EUR 1,740m or 123% higher than a year ago (previous year: EUR 1,412m); fuel expenses increased by EUR 712m or 259% to EUR 987m based on higher volumes, higher prices and currency effects; the impact of the significant increase in prices was reduced by price hedging, the result of which was EUR 179m.
• Operating staff costs were up by EUR 492m or 38% to EUR 1,788m (previous year: EUR 1,296m); the increase is particularly due to reduced effects from short-time work- ing; state support of EUR 77m for short-time work was received in the first quarter of 2022 (previous year: EUR

- Other financial items improved to EUR 33m (previous

year: EUR -60m) and were mainly related to positive

effects from the recognition in profit or loss of strategic

interest rate swaps as a result of higher interest rates.

- A positive income tax effect of EUR 108m (previous year:

EUR 259m) was mainly related to the recognition of de-

ferred taxes on losses in the first quarter of 2022; the tax

ratio came to 15.7% as a result.