Deutsche Lufthansa Ag Reg

Welcome to the Q3 2024 Results Analyst Conference Call and Live Webcast. I'm Moritz, the 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 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcasting. At this time, it's my pleasure to hand over to Marc-Dominik Neptersheim, Head of Investor Relations. Please go ahead.

Thank you very much. And also from my end, very warm welcome to all of you. Happy to have you here to our third quarter results presentation. With me today are Carsten Spohr, our CEO, and our new CFO, Till Streichert. And they will both guide you through what happened in Q3, main results, and the outlook for the rest of the year. As mentioned before, there will be a Q&A session at the end. We ask you to limit yourselves to two questions so that everybody has a chance to participate. And with that, I hand over to you, Carsten.

Yeah, Mark, thank you very much, and warm welcome on my behalf as well, and that's also on behalf of my new colleague, Phil, who I've now had the pleasure of working with for a few weeks, and the two of us, as mentioned by Mark, will do our very best after a short introduction to answer questions your questions, whatever topic you are raising them regard to. You all have been in this industry probably for some time, so you're all well aware, like us today in aviation, we have always mastered ups and downs. Is it market changes? Is it increased operational demands? political conditions which are changing, or especially in the last month, of course, global uncertainties, these all require us to be flexible and decisive. And I think this year, 24, is no exception. Just think about the Near East situation alone. But it also shows once again that we have set the right strategic course for profitable growth in the future being set in the past. So that's why I would like to start with focusing on three points today. First, the fact that the global demand is quite intact and continues to grow, and not only were we able to fully sell our significant growth this year, but we also increased the seed load factor to new record levels. And, however, once again, it also became clear that the global air traffic system is currently at the limits of its operational capacity, and that is not always to the pleasure of our customers, and also the long-term effect for new aircraft demand probably will be that these demands cannot be met for many, many years to come. In the end, all this will lead to a healthy balance between supply and demand in the years to come, and in addition, I think also, especially for us at the Lufthansa Group, this will also result in healthy demand for MRO, sorry for some technical problems here. This will also, sorry, just a second. Okay, we could do this. This will, in my view, also have a positive impact on the technical outlook because basically missing aircraft will partly but only partly be replaced by older aircraft flying. which will require additional M&O activities around the world. And you add to this quite positive outlook on air freight, and you know why we are presenting here in a quite optimistic tone today. Second pillar of my introduction is the fact that, on the one hand, the Lufthansa Group is remaining on course for our economic success. We are able to fulfill our financial targets, which we have shown to you before. But at the Lufthansa brand, core brand especially, we do see external and also internal factors challenging also our financial success, which we will come back to in a few minutes. And last but not least, on the third pillar, it is our conviction that by further strengthening our strategy and our implementation of our strategy, we will enhance our role as Europeans, number one, On the other hand, the fact that we are European also means that we continue to face regulatory challenges and disadvantages others around the world don't have. Let's look first at our third quarter results. We have achieved as a group a revenue of 10.7 billion, which is an increase of 5% compared to the previous year. As a matter of fact, it's the strongest revenue we ever have seen in the history of our company for one quarter. By this, we achieved an adjusted EBIT of 1.3 billion euros in the third quarter, and we have done that partly by increasing the number of available seat kilometers by 6% compared to the previous year, quite some less growth than we expected to be able to produce, which probably helped for a certain amount stabilizing the RAS development, especially over the last weeks. We'll come back to that. But for the first time in history, we have in August achieved a load factor of more than 88%, and we welcomed more than 40 million people on board in just the third quarter alone. We see that customers, and that's, I think, important also for the long-term outlook, in almost all our global markets tend to spend a higher proportion of their income on travel, and that's, in our view, another indication of the stable market outlook for the entire industry for the years to come. The pressure of yields, as just mentioned, has somewhat stabilized in the recent weeks and months. Also, on the other hand, when it comes to the cost side, irregularities, for example, due to weather conditions or bottlenecks in European air traffic control, cost us approximately 240 million euros in just the third quarter. Overall, as mentioned, we believe we are on track to meet our overall financial targets. All our passenger airlines achieved positive results in the third quarter, but Three of them, Austrian, Brussels, and Euron were even able to post record results. Also, Lufthansa Cargo and Lufthansa Technik developed quite positively as expected, while the cargo business is very much driven by China. The key word is e-commerce here. That's why we have shifted cargo freighter capacity from the transatlantic to Asia to take full advantage of that healthy market development out of China. However, the situation at the core branch, Lufthansa Airline, remained tense also in the third quarter. It again earned less than the previous year, and it's not only because of its size and strategic importance that this trend must and will be reversed. Lufthansa Airline is obviously our core business, it's our core brand, and has a revenue share of more than 40%, therefore the most important airline by far in our group also in economic terms. And the negative adjusted EBIT of the Lufthansa Airlines in the last nine months shows the importance of the turnaround program, which is mainly focusing on efficiency and has been launched and will be required for the future viability of this brand in our portfolio. And Tim Silosori will get back to that with more details in a few minutes. But there's also some external factors, such as delayed aircraft deliveries or operational challenges especially at our hubs, Frankfurt and Munich, which are hitting Lufthansa Airlines and Lufthansa City Line particularly hard. In addition to these external difficulties, nevertheless, there are also internal structural problems and especially efficiency challenges, and improving these is crucial and is where the turnaround program has its focus on. Let's speak a little bit about premium. I think customer satisfaction to be raised with the new Allegri product on the intercontinental cabin side was clearly in our view, but we're very happy to see those expectations being exceeded with the flights we have already been operating. In mid-October, we were now finally able to take delivery of the first Airbus 350, including the new first class. We are now in the fine-tuning process and wait for the official approval by the German authorities, and we'll be able to take the aircraft into the skies with passengers in just a few days. By the end of the year, we expect to have two more of these 350s with Allegri in all four travel classes in our possession, even more to come in early 25 with three, and also in 25 we'll be starting to put the first class into those airplanes which were already delivered without them over the last weeks, and that will be a significant improvement of our premium offer. Keyword operations. I think it's Obvious in our industry is our employees, be it at the airport or in the cabin, in the cockpit or on the ground or in the hangars, who make the Lufthansa Group unique and, in the end, guarantee our premium positioning. And at the airline alone, Lufthansa airline alone, we have recruited more than 5,600 new colleagues in the last 18 months. And another number which is remarkable is that over the last four years after COVID, we have recruited 40,000 people out of 100,000 total staff newly into the Lufthansa group, including the challenges that create in training, in licensing, and so on. But in the end, this is an investment into our future, into stabilizing our operations with additional people, and it's obviously something we are focusing on doing as well as we can. When it comes to growth beyond hiring new people, it's important to mention the city airlines. Our newest airline has commenced flight operations and will now increasingly contribute to ensuring that our important feeder and outbound flights for our hubs again cover their costs and become profitable. There's on top growth, significant growth in Brussels Airlines, in Edelweiss, in Discover Airlines. Both Brussels and Discover Airlines will receive additional aircraft and modernize their long-haul cabins as early as over the next years. In Edelweiss, we even already take delivery of newly configured Airbus 350s this spring of 25. While Till will explain the turnaround measures in detail in a few minutes, I would like to highlight the important level of automation and digitalization just for a few minutes. We took a strategic decision some time ago to create a dedicated area for digital innovations in the Lufthansa Group, so-called Digital Hangar. That decision is paying off. Our app, which is compatible with all hub airlines and developed with identical functionality from a single source for all the hub airlines, has just been named the best airline app in the world at the World Aviation Festival. And that makes us proud, considering that we were probably saving a little bit too much on investments in this term when it came to the years of COVID. They're now nicely catching up and are leading the pack from the front. The number of daily users has doubled since 23 alone. One in two customers book their flights through the app. One in four requests are now managed digitally. And the app grouping bookings, sorry, the bookings through the app are growing at eight times as fast the rate as our website bookings. More than 40% of digital check-ins are now made through the app. More than 80 features make travel more convenient. And also importantly, we now integrated our Mitre More frequent flyer program so users can now book award flights directly in the app. Usually IT services, especially internal IT services, are sometimes considered uneconomical or difficult at least to judge. In our case, that's not so. The digital hangar activates automatically. generates cost savings over a year, which easily cover the cost of we invest there. And I think it's one of the most probable things and ideas we have probably implemented over the last years. But in the end, it's not only about investing into digital technologies and tools. It's also of course about investing into aircraft and new cabin interiors to first of all, improve customer satisfaction, but let's be honest, also needed for long-term profitability. That brings me to the recurring topic that the entire industry is suffering from, the ongoing delivery problems at the aircraft manufacturers Airbus and Boeing. In the group alone, we're currently waiting for 41 aircraft just from Boeing, aircraft that should be flying by now. And by that, we actually, in the core brand, miss more Boeing aircraft than we currently operate. And that gives you a dimension of our problem, which on top comes at a very critical time in our largest fleet modernization ever. So over the next few years, we've faced the most fundamental fleet transformation in our history. We have 250 new aircraft on our order list. Each, as you know, uses about 30% less fuel and emits 30% less CO2. So this is also so important because in the end, new, more full efficient aircraft and engines are the most effective lever for reducing CO2 emissions, at least in our industry. This will require record investments and our investment rating will help us to do so, but it will also require a major operational effort, which we know is well worth it. Because in the end, this will allow us to reduce fuel emissions and maintenance costs significantly. It will lower the complexity by strictly harmonizing our fleet, and at the same time, it will allow us to modernize our cabin interiors to take our premium offering to a new level. Ladies and gentlemen, we know that the success of all of our efforts to improve premium quality and customer experience in the end depend on the operational stability of our flight operations. And that's why we, again, stepping up here with additional reserves by extending connecting times, and by relieving transfer hubs during daily peak periods. We're doing everything we can to further increase our stability in the coming months, and especially this coming summer. It's not only required for passenger convenience, but also will require significant reductions of our cost. And in the end, we are convinced that our strategy is strengthening our resilience to the various challenges in the industry. by first consistently focusing on our core business, airlines, including cargo, and of course, strategically developing groups of that technique, by the way, including additional defense business. And as mentioned, by successfully implementing this turnaround program and in parallel, the largest fleet organization ever, we will be creating a stable base for sustainable and profitable growth. We're positioning ourselves more internationally to become less dependent on our home markets, not only on demand, but we already are below 25%, but also on the production side. And third, we are obviously making every effort, as mentioned, to consistently live up to our premium standards and deliver on our quality promise to our guests every day, be it summer or winter. So I will now hand over to Till, who will present our figures in more detail, give you an update on the Lufthansa Airlines efficiency program, which we call Turnaround, and also introduce his own topics for the coming weeks and months, which we're looking forward to work together. Thank you for right now.