Deutsche Lufthansa Ag Reg

And gentlemen, welcome to the Q2 2024 Results Analyst Conference Call and Live Webcast. I'm Moritz, the course call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may... With the question in the written field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's our pleasure to hand over to Marc-Dominik Nettersheim, Head of Investor Relations. Please go ahead.

Good morning here from Frankfurt. Welcome to all of you. Thanks for your interest. We need to give you an update on our future results on strategic outlook and milestones and on the business going forward for the rest of the year. Sitting with me today are our CEO, Carsten Spohr, and our board member, Michael Niggemann, who's also acting CFO. And as always, after the presentation, you have the chance to ask questions, but also, as always, we ask you to limit your questions to two so that everybody can participate. And with that, I hand over to you, Carsten.

Yeah, thank you very much, Marc, and warm welcome on my behalf as well. Ladies and gentlemen, Some of you I met many times before and you know I have said before that the pace of change in our industry is further accelerating and you only have to look at the last months to get a sense of the pace of economic change in aviation. In March this year, we were enjoying the third best financial guide in our company's history and just one month later, We need to adjust our full-year guidance due to the significant impact of the strikes, especially at Lufthansa Airlines. And then two weeks ago, we provided an ad hoc update on the quarter's key figures and again adjusted our outlook. And this time not for strikes, but for commercial reasons. And I don't want to sugarcoat this in any way. The first half of the year did not go as expected, as you well know, for the entire industry, and that surely includes us with the numbers we are presenting here today. But let me allow to begin by highlighting some positive aspects. There is a continued high level of interest in travel and demand for tickets of airlines around the world in basically all our markets. obviously shows that the most important trend for our industry after COVID does remain intact. And especially important for us at the Lufthansa Group is that this is more than true for the premium cabins in long range, which of course are at the core of the core of our commercial business. The first half of the year, our passenger airlines brought over 60 million passengers safely to the destinations. That represents a 10 percent increase compared to the previous year. This figure is very much in line with our capacity expansion of 11 percent in the first half of the year. At the end of June, this brought us back to nearly 93 percent ASKs compared, of course, as always, to the reference year 2019. This growth in capacity both for us and obviously for our competitors, increases supply in the market, which in turn puts some pressure on prices. And although these are still well above pre-crisis levels, yields are somewhat normalizing across the world. This obviously is felt by airlines around the world. And this is, by the way, why we have decided to reduce our planned capacity growth for the coming winter by a certain degree, and we'll come to that later on. Moreover, also no secret that some Asian markets and business travel in general continues to recover more slowly than planned, different parts of the world, but in general. And in addition to these market-wide, industry-wide organization of yields, the first half of the year did see some several special one-time effects for us in the Lufthansa Group. Most of all, of course, the strikes in the first quarter which had an adverse effect on our financial performance, performance more or less up to half a billion euros. Second, the ongoing delivery difficulties of basically all aircraft and engine manufacturers are affecting us at Lufthansa Group somewhat more than others because we are right in the critical phase of the largest fleet modernization in our history. And to illustrate this, this year alone, 24, we wanted to put 15 new 787 into service. In the end, none of them will enter service in 2024. Thirdly, the certification process for new seats, for new cabin interiors, is taking significantly longer than it did before the pandemic. This is also unfortunate timing for us as this coincides with the launch of our new Allegri's next year Swiss Census cabin reconfiguration, bad timing again. And these circumstances combined with indeed complex collective bargaining and operational regulations we have in the main line are leading to additional inefficiencies, especially in the main line itself and the Lufthansa City line feeding our hubs in Frankfurt and Munich. On top, here in Germany, our most important home market, we are affected by significant increases in taxes and fees, and all that combined These aforementioned factors means that the consolidated results for the first half of the year fell below our own expectations of last year and now we expect an adjusted EBIT of between 1.4 and 1.8 billion euros for the full year. This outlook is largely dependent on the traditionally important fourth quarter in Lufthansa Cargo and the earning performance at Lufthansa Airlines. And to achieve the balanced results for Lufthansa Airlines for the full year, at least hopefully, and to accelerate the overall modernization of Lufthansa Airlines, a comprehensive turnaround program has been launched. Michael will go into some more detail on this in a moment. Let's look at the results of the whole group in the second quarter for a moment. We increased the number of available seat kilometers by 9% compared to the previous year. Lufthansa Group reached 10 billion euros, by the way, for the first time in the second quarter, which represents a 7% increase compared to the previous year. And we were able to keep unit costs at a constant level, which was obviously at least the achievement we are a little bit proud of, because at the same time, with unit revenues falling by 5% compared to the previous year, this alone resulted in a 300 million euro earnings impact. The whole group achieved an adjusted EBIT of 700 million for the second quarter, as you know. And it's pleasing that apart from Lufthansa Airlines, which I already referred to, all the other passenger airlines in the group are more or less developing in line with the market developments in this very challenging environment. And the same applies to Lufthansa Cargo. For Lufthansa Technik, I would like to say that they probably outperformed expectations in our course for at least what they were, achieving another record result in the first half of the year. I think it's worth to say they will be finishing this in a very positive way this year, 24, as well. Nevertheless, it's evident that our combined half-year results are below expectations. However, we manage our group, as you well know, with a long-term perspective rather than focusing on one quarter after the other. Therefore, let me spend a few minutes on the important fact that we achieved four significant strategic milestones in this second quarter alone. First, the premium business, especially in the long haul, is doing extremely well, as I already mentioned. It's key for us Therefore, in April, we were finally able to present the first Airbus A350 with the new Lucas cabin. We now add one each month until the end of the year, including introducing our new first class. Starting next year, we even add two aircraft per month, one from Airbus or Boeing and one including Hurst. We have had now a triple number of flights with more than 50,000 guests, and I'm delighted to say that the feedback from the guests is even above the quite optimistic expectations we have had. And again, I mentioned for the third time, this is key for our business and therefore so important also that our crews come back with very positive feedback, so that makes me quite optimistic on going the right path here for years to come. As you know, by the end of the year already, we will expand the network to six destinations. It's Vancouver, Toronto, Montreal, Chicago, San Francisco, and Shanghai. Even more important, I think this will be installed on more than 100 aircraft in Lufthansa, and also the introduction of Swiss sensors, which is how we call the similar product in Swiss, will start next year. Second strategic milestone is that we continue our internationalization to be less dependent on the German market. And this is obviously demonstrated by our investment into ITER. After the United States, Italy is our second most important market outside our home markets. And with ITER, we're not just acquiring a company with a quite positive growth perspective being based on the startup culture and cost structure as they have been able to achieve, but we are also further developing this very important Italian market for us, as I just mentioned. And last but not least, I think this is sometimes getting lost in the discussion, we are getting access to adding Home Fiocino as hub number six to our multi-hub network. It's next to Munich, the only other five-star hub on the European continent. Both will be part of our system. And last but not least, it's one of the few hubs in Europe which has room for extension. might not be important for the next one, two, or three years, but surely for the strategic outlook, which is professional for this trend action. Our customers will have access to more destinations, more connections, especially to southern destinations. Think about Latin America, North Africa, the Middle East. And already today, 90% of our connecting passengers have the option to use at least one alternative hub in our network. That number by math will increase with an acquisition of the sixth hub. And 10% of our customers today can reach their connecting destination by using all of the Lufthansa group hubs. Also, that, of course, is the logic which another hub will further enhance. So that brings me to the third strategic milestone, the launch of Lufthansa City Airlines, which is our very cost efficient answer to the need to feed our growth on long range, which we have decided to invest in. Being based on rather small European catchments compared to London and Paris, you all well know for us speed is even more important than for many of our competitors. Therefore, cost-efficient speed is key. We will lose the option to do that with city line and we will continue even in an enhanced way to do that with the city airlines and the first airplane is flying while we speed. And last but not least, we announced to our shareholders and the public some time ago that we want to focus more on the core of our business, which is the airline business and Lufthansa Technik. After selling our catering business last year, we're happy to announce that we'll be closing the sale of AirPlus actually at midnight tonight. And we'll have not only half a billion euro earnings coming from that, but also we'll be able to focus even more on what we believe is the strategic core of Lufthansa. And I will now hand over to Michael for some more details on our key financial figures and some details on the mentioned turnaround program of Lufthansa Airlines.