Deutsche Lufthansa Ag Reg

Yes, thanks a lot also from my end. Welcome, ladies and gentlemen, to the presentation of our second quarter results 2025. With me sitting here today are our CEO, Carsten Spohr, and our CFO, Till Streichert. They will present our results for the second quarter and discuss our commercial outlook for the remaining six months of the year. And at the end, you will have the opportunity to ask your questions. Like always, I want to ask you to limit yourselves to two questions. so that everybody has a chance to participate. Thank you very much, and Carsten, now with that, I hand over to you.

Yeah, Mark, thank you very much, and a warm welcome also from my side to all of you for this year's half-year endless conference. By nature, it's a quarter away from us, three months ago, that we were speaking about the summer, and Till and I announced that we are convinced that the Lufthansa Group is heading for a positive summer in various regards, and I think it's fair to say in the summary that now at the end of July, Till and I can confirm this. Despite, and you're all aware of this, a continuous challenging environment due to the geopolitical crisis, global trade conflicts, nevertheless, we are operationally very stable, economically on track, and maybe most important in terms of sustainability and long-term value creation of our shareholders, we are making solid progress on our key strategic initiatives. This is particularly remarkable given that in addition to these global challenges, we as an industry and even more we as Lufthansa are still facing the specific issues of delayed aircraft deliveries, although I'm happy to say that there is now light at the end of the tunnel and signs of improvement in this area visible. The industry as a whole, but also we as a company, have become much more resilient and I think about the geopolitical situation as of today. A few years ago, I'm pretty sure not only us, but also our competitors would give very different outlooks than what we're doing today. The resilience is also reflected, though, not only in financials, but also by our high operational stability. Network reliability has significantly improved by one percentage point to now more than 99%. Our punctuality increased by an impressive eight percentage points. This shows that that our investments and measures, especially those under the Lufthansa turnaround program, are delivering results, operational results, but also financial results. Till and I will come to that in a minute. Our customers, once again, now can rely on us to get them to their holiday destination or to their business destination on time. With talking about Europe, top Mediterranean destinations, once again, leading the pack and basically being fully booked this year. On long haul, it's Japan and Argentina, which are standing out, interesting enough, as much more popular than in the past. But we're also on track with the integration of ITER Airways. Besides the turnaround of our core business, this is, next to the fleet modernization, our most important strategic project. And we have already expanded the joint culture offering to include our long-haul flights and, of course, our short-haul flights already a few months ago. We have now harmonized the two frequent flyer programs, and therefore, also due to these measures earlier than expected, we see positive financial effects from our investment and ETA already in the second quarter. The success of the overall engagement has exceeded expectations after only a few months already. And while I remain optimistic about a strong summer 25, my outlook is somewhat clouded by the development of our location costs. Especially in Germany, but also in Europe in general, the competitive disadvantage tied to location costs in our European home markets are becoming increasingly evident. And on top of this, we face constantly rising taxes and fees, and a very one-sided regulation from the European Union that puts additional burden on us as a European operator. But let's return to the positive side of things. In the second quarter, our airlines benefited from high demand for tickets and travel. In the first half of this year, we welcomed a total of 61 million passengers on board our aircraft, and if you compare that to the previous year, we see an increased capacity of 3.8%, and we were able to successfully place this in the market. Thanks to the improved operational performance, we also reduced the financial impact of irregularities by 38%, which is significant compared to last year. We're also making progress, even though slower than we were hoping for, in our fleet modernization. In June, we put the 10th Airbus 350-900 with the Alegis premium product into service. And it's not only the very positive customer feedback, which is coming back from this, but it's also showing a significant yield uplift. And additionally, we're seeing a high willingness to pay for the various different seating options in the new business class that confirms and outperforms our expectations for additional ancillary revenues due to Alegis. Nevertheless, this year remains a transition year, again, due to the delayed aircraft, for example. But nevertheless, we were able to achieve a one-third increase in our adjusted EBIT in the second quarter compared to the year before. We went up 185 million to now 871 million euros. But apart from the improvement we see in our passenger airline segment, we also benefit from the continued strong performance of Lufthansa Cargo. which doubled its result of 73 million Euro compared to last year. And even more important in terms of impact and volume, financially, Lufthansa Technik is also on track delivering, once again, a record level, not quite a record, but record level adjusted EBIT in the first half of this year. And these developments that highlight, on the one hand, the improvement in our group's operational profitability, And on the other hand, confirm the effectiveness of our especially Lufthansa Airline-focused turnaround measures which we have implemented for our core brand. So let's have a brief look at the traffic regions before I hand over to Till for more details in the numbers. As you all know, commercially, the North Atlantic remains our by far most important traffic area. We're now in more than 400 flights every week to and from the U.S. And they were, as we also promised you in the Q1 call, well-booked in the second quarter. We have significantly grown on the North Atlantic throughout the past half year, more than our competitors, and we're nevertheless at the same time able to keep yields up for this prior year. The strong demand continues to be driven primarily by the premium classes, and in top, Connected with that, we're seeing an increase in ticket sales with the point of sale U.S., but on the other side, and we already pointed at that in the Q1 call, we see that demand for flights to the U.S. from our home market, Germany, is growing with some softness and is growing less than the demand from other parts of the world. In the second half, corresponding to that of the year, we are still expanding our capacity on the North Atlantic by about, Five percent, a little less than the first half, but this will still be above the market average. And maybe more important even, we remain flexible regarding our capacity growth. This is important, as I said, since our bookings for the coming months show somewhat of a mixed picture between premium and non-premium, and the yields are slightly below last year. So we will not only take into consideration, but we will execute on reducing our growth for the fourth quarter. and details to be seen. We also remain flexible on our Asian roots. As you know, last year we saw significant revenue declines, mainly due to the competitive disadvantage of the closure of the Russian airspace. So consequently, we have reduced our capacity towards Asia, and that succeeded in terms of stabilizing our yields. Nevertheless, we now see very promising developments, particularly to and from South Korea and Japan. And we will look at that in themes of additional opportunities. But the bigger picture of things, it's the geopolitical circumstances, which need to enable a level playing field again, which will only happen when the Russian airspace reopens. And of course, once that happens, we are prepared to act swiftly and accelerate our promising recovery in Asia. Overall, talking about the intercontinental business, I think we're quite satisfied with developments in the second quarter. When we now turn to the European traffic, it's a more mixed picture. We surely see some spillover effects from the softer growth and the softer demand on the North Atlantic, which also results in a little bit softer growth and demand for connecting traffic on short haul. We definitely, in some of our markets, see more intense competition. And the already mentioned high location costs in our home market, especially Germany, all that have not only put yields under pressure, but also our results in the second quarter. And we do see a similar market development in the coming months. As one answer out of many to this challenge, we will focus the way in how we steer our continental network. We will introduce soon a more centralized management of our continental networks during across all hub airlines, also for cont and short haul as we have done it now for quite some years on long haul. This will further reduce complexity and increase the efficiency of our short haul capacity in the way how we deploy it among our six hubs. Let's shift our focus to a business segment that continuously withstands macroeconomic turbulences. As a matter of fact, it actually benefits from macroeconomic and geopolitical tensions. It's Lufthansa Cargo. In the Lufthansa logistic segment, the positive trend in financial performance, which was already evident in the first quarter of the year, could successfully be carried forward to the second quarter. we achieved an adjusted EBIT in Lufthansa Cargo of 73 million Euro, which is an increase of 37 million Euro, which are more than doubling compared to its result to 24. This growth was mainly driven by volume, while the base yield was stable versus prior year. And despite increasing capacity by 3%, the low factor was able to be increased by two percentage points versus the previous year. I think that demonstrates that Lufthansa cargo was able to profitably utilize its increased capacity based both on the expansion of its freighter network, but also of the expansion of its belly capacity of the passenger airline business aircraft. The high demand from Asian e-commerce players and semiconductor producers, as well as capacity constraints in sea freight, led to that underlying increase in demand for Lufthansa cargo, and it's obvious that some of the cargo, which was supposed to go from Asia to the U.S., is now due to the tariffs redirected towards Europe. As you all know, we are not active very much between China and the U.S., but we are very active between China and Europe, and therefore, this played to our advantage of Lufthansa cargo. On top, since June, Lufthansa cargo has been able to market the ITER Airways, belly capacities, starting with the South American routes through its hub in Rome. And on top of this, we plan to gradually now extend the use of ITER's belly capacities to all continental and intercontinental routes of our new partner airline, ITER, and basically copy and paste the success model of Rufinza Cargo with the other belly airlines in the group, belly cargo aliens. And as I mentioned, the prevailing global uncertainties present both opportunities but also risks to the air freight industry. And I think the Lufthansa cargo also available freighter fleet ensures the necessary flexibility needed to adapt swiftly and effectively to those potential shifts in demand pattern. And that's also seen by the fact that the recent approach to reestablish more charter contracts as well as our expertise in handling special goods leaves cargo well prepared for what we believe is a positive outlook for cargo in the next years. That turns me to an even more strategic and more long-term optimization of another business segment, Technic, which demonstrated once again its strength in the first six months of the year. We achieved another record with an adjusted EBIT of 310 million euros. And the total revenue in the second quarter alone increased by 8% compared to 24, which is, I think, reflecting the sustained high demand in this industry. The adjusted EBIT for Q2 stands at 149, which is below prior year. But it's important to note that last year's second quarter was somewhat inflated by catch-up effects following the strike impact in Q1. And therefore, the release of end, the release, not therefore, but end on top, the release of variable compensation provisions. So despite challenges such as tariffs, cost inflation, and ramp-up costs for new international locations, Lufthansa Technik has strengthened its competitiveness through strategic measures, including renegotiations of maintenance contracts to include improved inflation adjustment clauses. And these initiatives not only enable the effective passing on of cost increases to customers, but also secure long-term recurring revenue streams. The growth strategy of Lufthansa Technik Ambition 2030 is on track, and Lufthansa Technik is successfully focusing on further international expansion and digitalization and expands more and more into the defense sector. So now let me hand over to Till for the financial details and further insights, and then with a few thoughts on the strategic outlook, we will go to questions and answer data on. Thank you.

Thank you, Carsten, and a warm welcome also from my side. Thank you for joining us today to elaborate on our second quarter 2025 results and the financial outlook for the rest of the year. So, first of all, I'd like to walk you through our Q2 financial performance in a bit more detail. With an operating result of 871 million euro, we've clearly exceeded prior year's level, and we are on track to deliver an adjusted EBIT significantly above prior year's level by the end of this year. Let's start at the top. Our total revenues grew by 3% compared to the prior year broadly in line with our capacity increase of 3.8% in available seat kilometers. But most importantly, this top line growth translated into the bottom line. In the second quarter, the adjusted EBIT reached 871 million euro, a strong 27% increase, leading to an operating margin of 8.4%, which is a gain of 1.5 percentage points versus last year. This year-over-year adjusted EBIT improvement of 185 million euro was mostly supported by four factors. Of course, revenue growth at our passenger airlines, favorable fuel costs, which decreased by 290 million Euro versus 2024, despite the higher production level, or including the higher production level, and the growth of ancillary revenues, which contributed an additional 71 million Euro compared to last year. And lastly, our cargo business, which increased its operating result by 38 million Euro versus last year. However, one thing is clear, cost pressures are not easing They are there, albeit as expected. And let me highlight a few areas of continued challenges. Material cost ex-fuel rose by more than 9% versus prior year. Fees and charges increased by 11%, especially driven by 18% higher air traffic control costs and 13% higher airport charges. As Carsten has highlighted, This is a serious concern for Germany as a location. And if location cost stays at this level, it will continue to slow down growth and the recovery of flight activities, which is still below 2019 and below our European peers. And lastly, cost for third-party MRO expenses, which went up by about 19% versus 2024. Going to personnel expenses, they were up. by 10%, largely due to the timing of tariff increases from the collective bargaining agreements concluded a year ago, higher variable compensation, and a small increase in workforce, all resulting in a step-up effect, which we already highlighted in our Q1 call. While all of the mentioned cost increases were factored into our plan, they remain out of proportion. and we need to continue tackling them by unlocking productivity gains. That is why the Lufthansa Airlines turnaround remains our number one priority. Apart from the passenger airline segment, Lufthansa Cargo and Lufthansa Technik have also contributed significantly to our operating result. And as Karsten has already mentioned, combined, they delivered an EBIT contribution of more than 220 million euro and have therefore contributed more than a quarter of our operating result in the second quarter. In doing so, they have successfully mastered the current macro challenges. While Lufthansa Technik has dealt also with a headwind of €20 million due to tariffs, Lufthansa Cargo could keep their base yield stable despite the tariff-related burden on global trade. In Q2, both segments, Lufthansa Cargo and Lufthansa Technik, have proven once again their strategic and commercial value as they stabilize our portfolio and profit streams, even in times of volatility. Now, let's look at below the adjusted EBIT line. Compared to last year, we've seen significant improvement in our financial results. which has helped us to more than double our net income, which is ultimately the figure most relevant for our shareholders. Key drivers include lower income tax expenses due to beneficial audit outcomes for prior periods, resulting in tax repayments and positive valuation effects, particularly from unhedged FX financial debt. On the cash flow side, adjusted free cash flow amounted to 138 million euro, which is a solid second quarter result. Now let's have a look at the result of our passenger airline business. In total, the passenger airlines operating result amounted to 690 million euro in the second quarter, which is 109 million euro above the previous year's level. And the overall operating performance reflects the impact of various factors. In the second quarter, we grew our capacity moderately by 3.8%, which translates into a 95% recovery of 2019 levels in terms of ASK. While the feed load factor remained roughly stable versus the previous year, overall yields were slightly down, mostly driven by the short-haul business within Europe. Meanwhile, intercom yields remained on par with prior year, and were driven by stable yields on an FX-adjusted basis in our most significant intercontinental traffic region, the North Atlantic, while in Euro terms it was slightly negative by 0.8%, and positively strong yields in South America, traffic with an almost 5% increase versus last year. Because of the yield softness, RASC also declined versus prior year, And the decline was mitigated to some extent by the positive development of ancillary revenues since flight-related ancillaries rose by 18% versus prior year. Also, we achieved around 30 million euro less revenue deductions as compensation payments thanks to the improved regularity of our flights. These two positive effects are proof points of the success of our turnaround program. which I'll come to in more detail in a second. As mentioned before, cost pressure remains a challenge. As a result, unit cost increased by 4.1%. However, FX adjusted unit cost increased only by 3.5%. Lastly, we are pleased with ETA's contribution to our Q2 results. 41% of ETA's earnings after tax are included in our adjusted EBIT. In Q2, this contribution amounted to 91 million euro, largely driven by FX effects and improving operating results. Let me now turn to the Lufthansa Airlines turnaround program, our most critical lever for restoring long-term sustainability, sustainable profitability in the core of our group. The first half of 2025 has delivered tangible proof points that our efforts are bearing fruit. As Carsten mentioned, operational stability has reached its highest level since 2017. Punctuality improved by 11 percentage points year on year, averaging 77% across the first six months. And beyond these numbers, this performance sends also a very clear message. Lufthansa is regaining the trust of its passengers. and this operational progress has translated into financial impact. Irregularity costs were reduced by 35% compared to the first half of 2024, and this is a direct result of fewer disruptions and a better operational delivery. At the same time, We are taking difficult but necessary structural decisions, including streamlining our support functions while maintaining service quality through digitalization and automation. Additionally, we make progress on several measures, all targeting higher efficiency levels. One key initiative, for example, is the implementation of new crew planning rules and systems which we expect to lead to a 5% increase in crew productivity next year, which is a considerable leap forward. On the commercial side, we are beginning to see first monetization effects from Allegris. We have achieved yield uplifts of up to 15%. This is a strong validation of our strategy to personalize and differentiate our offer. Ancillary revenues have also seen a significant boost, up more than 25% versus the first half of 2024. And this is driven by a more innovative and targeted approach to upselling, particularly in flight-related services. To sum up, the Lufthansa Airlines turnaround is progressing on all fronts, operationally, structurally, and commercially. And the first half of 2025 has laid a solid foundation. And our focus now is to maintain this momentum and deliver further improvements in the second half of the year and the years to come. Let's now turn to the cash flow development in the first six months of the year. The operating cash flow was 2.8 billion euros, surpassing last year's 2.7 billion euros, supported by seasonally strong ticket prepayments. Compared to last year, changes in trade working capital were around 180 million below the previous year's level. The main reason for the lower trade working capital in 2025 compared to 2024 is a smaller increase in unflown ticket liabilities combined with higher payouts for other payables. In addition, there was an increase in prepaid expenses relating to more wet leases and IT maintenance services. Net capex. in the first half of the year amounted to 1.6 billion Euro. The number was mainly driven by 10 aircraft deliveries, including one A350, as well as investments in the cargo hub in Frankfurt and Lufthansa Technics' new facility in Portugal. In total, the adjusted free cash flow amounted to around 1 billion Euro, marking an approximately 150 million Euro improvement versus the first half year result in 2024. Our balance sheets. further strengthened in the first half of 2025. Net debt as of June 30th, 2025 was 5.5 billion euro, down 289 million euro from the end of 2024. And this decrease, of course, is also relating to the weaker US dollar. Our strong liquidity position ensures that we are well positioned for the upcoming aircraft deliveries and debt maturities. Net pension obligations reduced primarily due to the increase in the discount rate by roughly 340 million down to 2.2 billion euro. The leverage ratio for the last 12 months was 1.7 times as of end of June, which was below the level at the end of 2024 and stable versus the first quarter. This underscores the continued robustness of our balance sheet as evidenced by holding full investment grade ratings by all our four rating agencies. Since the beginning of the year, we've seen encouraging developments regarding our fuel costs, and I'm pleased to report that this trend still holds true. As of July 25th, which you can see there on the slide, our projected fuel bill for the full year stands at 7.2 billion euro, which is another 100 million euro lower than our previous guidance based on April 24 calculations. Remarkably, this figure is also 600 million below last year's fuel costs, despite increased capacity and the additional expenses associated with sustainable aviation fuel. This positive development reflects the effectiveness of our option-based hedging strategy. It allows us to benefit from falling fuel prices while maintaining a high level of protection against price increases. As of now, 81% of our total fuel requirements for 2025 are hedged, with the passenger airline segment well covered at 86%, providing a solid safeguard against fuel price volatility and enhancing therewith our financial stability. For 2026, we have already hedged our passenger airline business at about 60%. Finally, the expected cost of SAF remains stable with an additional expense of 200 million Euro included in our total full year fuel bill. Of course, the projected fuel cost savings will fully materialize only if fuel prices and exchange rates remain at the current levels throughout the remainder of the year. Let me now comment on the financial outlook. We are confirming our full year 2025 guidance, which we communicated earlier this year. And the underlying rationale does not differ much from what the one presented end of April, also due to the fact that the global uncertainty and uncertainties still persist. And those uncertainties still bring both risks and opportunities. Let me share my thoughts on these while reflecting on the progress we've made and also, of course, on the challenges ahead of us. Starting with the broader environment, the demand situation continues to be affected by overall volatility resulting in current demand softness on the North Atlantic. On the positive side, favorable fuel price developments and FX trends appear to persist for the time being and have already materialized. in our half one numbers, as you can see. Taken together, risks and opportunities appear to be broadly balanced. We are working on what we can control, and we've made good progress so far. The turnaround at Lufthansa Airlines is well on track and has already made meaningful contribution in the first half. We are making progress on fleet modernization, The ITER Airways integration is advancing as planned, and the market for MRO is structurally a growth market. We are ramping up operations in Portugal and Calgary, and Lufthansa Technik continues to be well on track to deliver the Ambition 2030 plan, and Lufthansa Cargo continues to demonstrate its agility in a dynamic market with a strong start into the year. For me, these are proof points. that we are capable of delivering against our financial targets, even in a more complex macro environment. Finally, I want to remind you again that 2025 remains a transition year, but an important one for us to lay the foundation for the successful turnaround of our mainline Lufthansa Airlines. To summarize, the environment is challenging and remains challenging overall, but in total, we are delivering, we have delivered on our half one plan, and our full year guidance remains in place, and we are actively managing the moving pieces with a clear view toward long-term value creation for our shareholders. And with that, let me hand back to Carsten, who will provide you with some thoughts on the strategic outlook.