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.

Thank you. In just a few minutes, indeed, on how we jointly believe that we can further strengthen our group for the years to come. An obvious pillar is the organization of our fleet. And that's, on top of that, of course, also commitment to innovation, to sustainability, but also to premium customer experience. As we now saw in the recent months, as you probably know, we have by now introduced 10 aircraft offering the product being 10350s operated out of Munich. And we expect to welcome the first Boeing 787 with the Allegis cabin late this summer operating out of Frankfurt with up to nine more to come by the end of the year. In between, we will also welcome the first ever 350 in Zurich with the new Swiss census product on board, hopefully just in a couple of weeks. And that means that next year alone, we anticipate new aircraft almost on a weekly basis. As a matter of fact, by the end of 26, we expect another 63 next-generation aircraft to join our fleet. Looking now at 28, that means that on widebodies now only, that number, of course, before was including narrowbodies, on widebodies only, by end of 28, we will operate 41 Boeing 787s, 16 Boeing 777-9s, 44 Airbus 350-900s and another 12 350-1000 in our long haul fleet. And these investments deliver benefits on multiple levels. Of course, the financial impact of our fleet modernization will become clearly visible at our bottom line starting in 26, full swing 27 and 28. And also in terms of customer satisfaction, we have made significant progress compared to last year's levels with Allegri and soon then Swiss Census on top. We believe these further premium investments, we are now back to redefining standards in every compartment of our airplanes. On top of that, we're making progress in integrating ITER Airways into our services, including our digital services. One milestone in this harmonization process, for example, will be the availability of the Lufthansa travel ID starting September 1st, which will give ITER Airways passengers full access to Lufthansa Group's digital services. And that also brings us another step forward strategically and maybe one of our most important targets, the ongoing internationalization of the Lufthansa Group. continuing to build international partnerships and collaborations, such as the expansion of the Lufthansa Cargo United Cargo Joint Venture, which will now include Swiss Cargo as of tomorrow, actually. And already today, we are seeing the benefits of the highly integrated business units across the group, the consistency in operations throughout the customer journey, or when it comes also, of course, to our financial performance. And we will, however, further intensify integration across the company and thus further improved customer experiences will generate value for our shareholders. And of course, it also will create value for us in the management team in terms of leaner processes, allowing for quicker decision-making. So let me conclude with an outlook on the future development of the group. At Lufthansa Group, we want to increase the level of integration across the group as a driver of value creation for our stakeholders. Now, at the same time, we are very deliberate about our brands, about our products, and the process variety. And in general, when it comes to brands and products, we definitely believe in the diversity, in the of the group, which in a way also reflects the USP of Europe. But when it comes to varieties in processes, or in structures, then we will only allow that in the future when it either drives commercial value, because customers are willing to pay for it, think about the different style in Swiss first class, whether it's a Lufthansa first class, or it contributes to cost saving, think about different CRAs, or of course, when there's regulatory legal requirements, think about, again, different AOCs in different countries due to traffic right reasons. So these will be exceptions to streamlining processes and organizations. Everything else, we will try to act as one. And of course, at the same time, as mentioned, maintain the feel-file where the customers enjoy it. Going forward, I think that's a big step to further optimize the way we work. And we will share more of this with you soon in September. when we all welcome you hopefully here in what we will have as our first Capital Markets Day since many years. September 29, Till and I would like to invite you to join us most likely in Munich. That's the idea, to share with you where we are moving forward in our organization, where we are moving forward with our Lufthansa TechSpeak, Lufthansa Cargo pillars. I'll also share with you how we use digital and artificial intelligence to further lean processes and reduce cost in the group. So we look forward to that, and the invitation will go out for Mark to sign soon. And with that, of course, we will also talk about mid-term financial targets and how we believe that we will drive sustainable shareholder returns over the next years. I think today results mark a solid step towards that, but I think it's also obvious think about the airplane deliveries that what lies ahead is even more compelling. But with that, let me leave it for now and open the floor together for your questions.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questionnaires on the phone are requested to disable loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star and 1 at this time. One moment for the first question, please. And the first question comes from Jared Castle from UBS. Please go ahead.

Good morning, everyone. Just a little bit more on ITER. You included it in your adjusted EBIT number. And I guess if you strip that out, the underlying operating performance is not as good. But at the same time, I imagine that you're moving things around across your hub network. So maybe that's the right place to put it. But just to get some color in terms of how you're moving things around and you know, why with, you know, the current stake you think it's right to put it there. Secondly, it looks like the tap sale process has kicked off, and obviously, you know, relative to Air France and IAG, South America, LATAM is, you know, a lower part of your mix, and I guess it's something you want to tap into. Do you have any idea of, like, how long the process will be and, you know, where things stand there? And then a question I asked, you know, also on the Air France call, it's just about cargo. I know it's very short term, but just to get your color in terms of comps in Q3, Q4, and, you know, how you feel about air freight at the moment. Thanks a lot.

Yeah, Gerard, let me start with your second and third question. I think on TAP, first of all, we all have seen back and forth on this process in the past. And I think also in this, what is the last quarterly call where I said this will take longer than people think. So I would think latest developments have confirmed that. It's still no surprise that all major European players being based in London, Paris or Frankfurt are looking at this. And for right now, we are quite happy to focus on ITER. So no rush on our side, but we will then talk about things on M&A when things happen and not only when we forecast them. Cargo, as you rightly said, it's the shortest-term business of everything we operate. But I think the logic, which I mentioned, that the more geopolitical tensions exist, the more unpredictable the world is, the less predictable our supply chains. That usually plays to our favor. So I would think that, and on top of the fact that Q3 and Q4 are the strong cargo results, would make me optimistic for cargo for the rest of the year. On ETA and how we put that into our numbers, I hand over to Till.

So, Jared, hello. So, the way we account for ETA is obviously at equity, and it's the 41% that we are putting into our adjusted EBIT. That's the way also in the segment, indeed. This is the way we handle the minority shareholdings. Quite comparable also to SunExpress within the Eurowings account, and equally the joint ventures from Lufthansa Technik, for example, that sit in there. And of course, when you think of ITER, and rightfully, you alluded to the fact of kind of further and deeper integration, which forms part of our synergy case, of course, it is the segment performance, which we have belongs to.

Thanks very much.

Then the next question comes from Stephen Furlong from Davie. Please go ahead.

Yes, good morning, gentlemen. Yeah, two for me. Just maybe, can I just ask about the weakening U.S. dollar, how you think about that? Obviously, it's going to help fuel. Maybe you look at it from aircraft purchases perspective, or even the way the network is shaped into next summer. I mean, maybe the the west to east could be weaker, particularly in economy. I don't know how you think about that overall. And then since I'm talking about aircraft purchases, I think it's very important for your long-term strategic plan. Are the manufacturers telling you, whether it's Boeing or Airbus, that the delivery profile, it's looking more certain now when you'll get deliveries and you can be pretty confident as you put those plans out to 28 beyond that, that they won't be kind of delayed by the OEMs. Thank you.

Let me make a start just a little bit on the FX side. Maybe just a short comment only. On the operational cost side, of course, you know that we are US dollar short as a group, which is obviously impacting on the FX impact. We've got a slight benefit from that. It helps the airline business generally. On Lufthansa Technik, on the upside, it's slightly negative because that's where we've got more contract, more revenue in U.S. dollar. To your point, taking a view on embedding a dollar rate 2026 into the flight planning, look, I'm a bit cautious. We need to see a bit. We'll first focus on where we've got visibility on. On the aircraft purchases, as a matter of fact, that's where obviously the largest part of it is indeed US dollar-based. We've got a hedging strategy. So we secure, we hedge the result at point of purchase with about half of it, and then we'll build up a layered strategy. And that's basically on the aircraft side. That's the way I would describe the situation.

Steven, it's Carsten. On the aircraft manufacturing side, I would like to repeat what I said before on numerous occasions. We believe that until the end of the decade, we will see bottlenecks in the supply chains of the OEMs and airframe manufacturers, obviously resulting in then delays towards the end customer like us. Nevertheless, of course, we have a plan for 28, and if I might say that, the bad luck Lufthansa had that we were hit at the worst of all times with COVID and those delays, I think it's being reduced now every year starting in 26. So I think 25, we call it a transition year. We definitely need for the last time on the complete darkness of these delays. And now the number I gave you 63 new aircraft by the end of next year. And of course, I don't know if all 63 will come on time, but just the sheer number shows you that we are now really seeing customer benefits, and also financial benefits starting next year of the catch-up of our airplane deliveries, including the doubts if everything will do as promised until the end of the decade.

Can I maybe just add one more point, Jared, just on the yields? I just want to highlight one more time that on the U.S., you know, on an FX base, or it's only negative right now due to the US dollar, actually. If you would do an XFX view, we would have stable yield realized on the North Atlantic. So you can see also there the effect.

Okay. Thank you. Thanks, Carson.

Then the next question comes from Harry Gowers from JP Morgan. Please go ahead.

Yeah, good morning, gents. First question, Till, just on the costs. I mean, you talk about the consistent cost pressures, so maybe you could talk about your ex-fuel cask expectations over H2, and if you're able to walk us through, you know, the gross kind of inflationary pressure you still expect to see across those key cost lines, and then maybe how much, if you can give the colour, how much absolute or percentage benefit you expect from your various initiatives restructuring programs, et cetera, over the second half. And then just on the demand outlook, I wanted to ask, in terms of Q3 RASC or early bookings for Q4, has the pricing or the RASC backdrop got worse, do you think, since you last spoke to us a few months ago? And in particular, Germany point-of-sale demand, has that got worse or has decelerated versus earlier this year? Thanks a lot.

Harry, so let me start off on the CAS side. So look, technically, we are not giving kind of specific CAS guidance for the year or for specific quarters. Just as a reminder, Q1, Q2, obviously 4.1% CAS increase. Here also, I'd like to add again, excluding FX, it was about 3.5%. In the first quarter, we have achieved a 3% CAS increase. And if you now think of the second half, I would describe it in a way you shouldn't expect any surprises on cask evolution. We are benefiting from the ramp up of the Lufthansa Airlines turnaround plan as we progress throughout the year. And of course, in the question of ASK growth, of course, in terms of fixed cost, the digression plays a role into what ultimately the cost figure we're gonna look like. But let me be a bit more extensive on the turnaround plan and the progress. We've started obviously some months ago. We've got more than 700 measures. Three quarters of those measures are fully defined and we've got more than 300 measures now indeed in flight. It's a very big program. but obviously it is quite impactful already for this year. And you can see, and this is the point which I'd like to highlight one more time is the focus on operational stability, which you can see in punctuality, regularity has had already a substantial impact on the so-called EREC effect, which we were basically able to substantially reduce. So this is big progress and equally, not only cost, and you can see many of the examples on the slide, what we are working on, also on the revenue side, good progression on ancillaries, higher ancillaries, good progression on what we see on in terms of yield evolution. So, these are things that set us up for 2026 and beyond as we ramp up to improve and ramp up the growth of the Lufthansa Airlines turnaround program.

Then the next question comes from Jamie Robleson from Deutsche Bank. Please go ahead.

Oh, thanks very much. I noticed there wasn't time for management to answer Harry's question about RASC and looking for Q4 and whether the backdrops got worse or not, so I might let you revisit that. The two topics I'd like to explore first is for Carsten. In Europe, where you've talked about intensifying competition, are you just alluding to Condor adding low-cost services to feed the long haul, or is this also competition from other low costs? And in terms of your lobbying of government on the high German location costs, do you see any evidence at all of openness to potential change, perhaps through lower aviation taxes. My second topic is for Till. I wanted to come back to the strong ETA results. I think I've understood that the non-operating one-off there meant the contribution was about four times bigger than it would otherwise have been. So 91 million might have been more like 21. Perhaps you could confirm that. And then looking at what you said on slide 10, it sounds like ETA doesn't have any balance sheet hedging for Forex. Hence, Moves in dollar-euro can mean material unrealized FX gains and losses through the P&L from market-to-market belief liability. I presume that's what happened in Q2. Perhaps it's a bit soon, but is there anything you might do there, either putting hedging in place or stripping out the unrealized FX moves so that we get a less volatile contribution from ITER within the Lufthansa results? Thanks very much.

Jamie Carston, hello. Yeah. When it comes to competition in Germany, the biggest competition actually we feel on domestic routes is Deutsche Bahn, the German subsidized railway system, which is very aggressive. And we do see, due to the short distances between some of the cities, that that doesn't really hurt us on the connecting traffic, because people still prefer to fly to Frankfurt and Munich, but on point-to-point, we definitely see that. And with this cost structure in Germany to fly point-to-point, Like other airlines have pulled out, we and, of course, partly doing the same thing in Euro Wings, we do see more competition, especially from Deutsche Bahn. When it comes to other competitors, obviously, we take everybody serious, be it from Istanbul, Paris, Dubai, , Berlin. We look with respect to everybody and find our commercial answers. When it comes to lobbying or deflocation costs, of course, we had a setback just a few days ago that the aviation tax was not yet reduced. But if I may say, whenever I go to Berlin, people do understand not so much the problem for Lufthansa because they see our numbers and they see that we are able to move towards Rome or Zurich, but they more and more see the problem for the German export-driven economy. There's parts of Germany Paderborn, Friedrichshafen, mid-sized economic centers, which are cut off from aviation. I think that argument is working in the heads in Berlin and will eventually feed my optimism that we have seen the worst when it comes to regulatory cost. Have we seen concrete improvements yet? No.

And Jamie, thanks for the question on the ITER topic. It's true that the about 90 million euro contribution contains an FX effect, which is about 70 million euro. Nevertheless, you can see that also on the operating result, there's a positive contribution already, even if you strip that out, this effect. And you're quite right. When you probably have looked at the results of ETA from also last year, you could see that the fleet is largely a lease fleet. And I would phrase it like that. ETA is currently, for us, a minority shareholder, as you know, and therefore, I would say at the latest, hedging, of course, would be aligned to the way we look at things and we manage things once we would increase our stake to control. It's true that we are currently also looking at that, but that's, for me, an open topic at the current stage.

Thanks very much.

Then the next question comes from Antony Madre from Bernstein. Please go ahead.

Yeah. Good morning, everyone. Two for me, please. First one on Aligris. How are new ancillaries revenue from this project tracking their seed plan? And second, how the blot seeds are going? Thank you.

Okay, I understood the second question was about the blocked seats. We expect this is only a topic on the 787. We expect the first aircraft to come in September with blocked seats in business class. A big part of the business class will be blocked. We will only use the aircraft initially, for example, to destinations like Montreal, where we don't have much business class demand, and we already put it into the booking system. By the end of the year, The partners, which are Boeing, Collins, and the FAA expect that certification to be arriving. So by the end of the year, we hope to release then all seats to the market. When it comes to the lift, it's in a double-digit framework easily, and we only have 10 aircraft at the time. So we believe that this will even further increase once we are able to put the aircraft on all the routes where possible. yield upselling abilities exist. And overall, as I mentioned, I think in the numbers with TIL, our external revenues have significantly outperformed our expectations, including our legals, but not only in our legals. So I think the best is yet to come here as well. And this, as you know, was one of the big innovations of Alegos, having differently priced seats in business class. I even know that some in the capital market were critical. We are now five different seats, and it works not for all five the same way, but for sure the strategy and the innovation behind it is proving right, and we will further now optimize that with more aircraft to come.

And the next question comes from Andrew Lomberg from Barclays. Please go ahead.

Hi, Carsten. Hi, Till. Hi, Mark. Can you talk a little bit about discovery or discover? Where are the numbers? Where do they fit in? How is it trading? And, yeah, how does it compete against its stripy competitor? And then my second question might come back to Itak. until you precise that it made 20 million in the June quarter, benefiting from ETA. I think just recently there was a business plan approved by the board of ETA. So are you able to offer us any colour as to what's in the five-year business plan? And in the context of that 20 million profit in the June quarter, can you offer any colour on what the expectations for its profits are for this year? Thank you.

Andrew Carsten, hello. Discovery Airlines, we consolidate the numbers in the Lufthansa Airlines, so we don't show them, but as I mentioned before, and I'm happy to repeat that here, they are profitable. They are growing, both now not only in Frankfurt, but also in Munich, and we expect them to operate up to 33 aircraft by 27. We are just about to also take a decision on the new generation white bodies, which Discover will need to receive to replace the 230-200s for the longest flights. And we are about to do that as well. So that, I think, is as much as we are willing to, let's say, publish on this. And you know from our previous comments, we are quite happy how we found initially a niche, but that niche is widening and widening and widening. to have leisure-oriented travel out of the German market. And with all the latest stimulus from the German government, we especially expect in this segment additional fuel for the success of this cover. On ITER, and you maybe saw it on some of the disappointed reactions of some of the Italian unions, we were basically having the option of go on value creation first or to go for market share first. And in the dialogue between ITER and us, we have decided to go for profitability and value creation first and not stretch the growth of ITER too much. That's what was decided yesterday. And that's what caused some disappointment in unions who were hoping, of course, for even more jobs to be created, which was a little bit in the Italian media today. But we believe that's the right way of going. And profit outlook for 25, I think it's fair to say this will be the first positive year of ITER. partly due to the first synergies with us, but also due to, of course, the very positive element of the Italian market. And on top of that, we have first synergy effects, which I mentioned in my speech. Think about and . We have put the first flights from Lufthansa to ETA due to its lower cost and other things. So, I think there is more to come on that. But already profit in 25, I think, is a black zero, the CEO of ETA calls it. So, it's what also we expect. more than zero, to be honest.

Okay, thanks. And just to flag, I've got the clients are inviting me to welcome you to answer Harry and Jamie's question on Q3 unit revenues, but I'll leave with you.

Say that again, Andrew? Sorry, we didn't get that.

I think there's a curiosity about Q3. I think there was a question from Harry and also by Jamie. To what extent do you expect Q3 unit revenues, Q3, Q4 unit revenues? How are advanced loads and what commentary can you offer on unit revenues? I appreciate you don't guide, but what commentary can you offer?

If we get you right, this will be a CFO answer. We don't guide on , Andrew, and you know that, so that's why we're wondering if we didn't quite get your question. But let me repeat in qualitative terms what I said before. We did it in Q1 with very soft data. Now we have better data for Q3. There will be a weakening of the lower booking classes towards the U.S., especially in Germany, to a little less degree in Austria and Switzerland. to almost no degree in the rest of Europe. So living in Germany, I do believe there surely is an element of media expect on German consumers on the lower end of our price range spending a vacation in the U.S. who are worried about, let's say, the hospitality of the United States. There have been some crazy stories about immigration, which we try to counter argue by saying that we have no proof of additional problems on U.S. immigrations whatsoever. And all the 26 airports we serve, but still, that seems to be an issue, especially in the mind of Germans, interesting enough, not in the mind of our other European travelers going towards the U.S. From the U.S., of course, we have a little bit of a U.S. dollar effect, but putting that aside, as Till said before, we see strong demand from the U.S. in all booking classes. And another third comment, when it comes to premium, we see no weaknesses in both directions whatsoever. As a matter of fact, first class is even going better than business class. Business class is going better than premium economy, and premium economy better than economy. So nice staggering there.

And that's what we can say about the North Atlantic. Sorry, Till? And if I may add just one point, of course, at a low level of booking, when we look into October, we see also a – a positive evolution as we see, but this is, of course, on a lower seed load factor, respectively, sales.

Okay, thank you.

One comment on that. My perception living here is the worst was the Easter days. Remember when there were the crazy announcements made from the White House, Rose Garden, and the people thought globalization blows up? I think with recent developments, Still not all to my liking, but still I think we see now a spore of rationalization of this question, what's happening on the North Atlantic, and that's maybe already reflected in the October numbers. It's still set too early on the data point of proof, but looking at the papers and the media, I think we have seen the worst, and I'm pretty sure that what we have been seeing in Easter is not, and it's proving not to be the trend for the whole future.

Thank you, Paul. And the next question comes from Wiley Kulinana from RBC Capital Markets.

Please go ahead. Yes. Good morning. Rory Cullinane, RBC. I've got a question linked to the previous question just given the later booking profile. Can you talk about how close in bookings have evolved at the end of Q2 and start of Q3 and then secondly just in MRO how quickly should we expect cost increases and tariffs to be passed through to customers.

Let me start off maybe with the second question and then we'll, I think the first one we answered already to a large extent in terms of booking evolutions. Look, MRO, as Carsten has explained already in his part, we've made good progress in terms of generally increasing the recovery or pass-through of inflation-related input costs. You remember that has been one of the topics we talked in the past. So there's good progress in terms of new contracts being on a different model, which allows us to recover more of the inflationary cost, and also existing contracts are being renegotiated. The way I would phrase it is good progress. That's clearly there. Tariffs is a little bit of a different animal because, of course, this came also relatively short term and appears to be always a almost volatile topic where also kind of part lists are varying in terms of what tariffs are applied where. Generally, as I said, we suffered in the first half of the year about 20 million headwinds. from the aluminum and steel tariffs for Lufthansa Technik. We now need to see the exact definitions, how we're going to play out in the second half of the year. But again, of course, if you just think of the longer term, in the end, this is also an input cost. If it goes up, there needs to be also a certain way of sharing that or passing it on in the end, okay? I think it's worth to mention,

both Brussels and Washington have confirmed that not only airplanes are out of the terrorist scheme, but also aircraft parts. And they don't seem to be agreeing on much what they agreed on in Scotland. But this one, interesting enough, both sides of the Atlantic sent the same messages to the industry. Not only airplanes are out, also aircraft parts. And that, of course, applies to the technique in a positive way.

And the next question comes from Antonio Duarte from GoodBody. Please go ahead.

Good morning, gentlemen, and thank you for taking my questions. Two for me, if I may. One of them is related to ancillaries. You clearly mentioned quite good performance and growth year-on-year. I would like to know if all the projects you intend to roll out are now being completed if you are still seeing this type of growth going forward into the full year until the next year. And my second question is about the Middle East impact, if it would be possible for you to quantify this impact, and if you are seeing any adjustments in terms of capacity and deals drawn from this region. Thank you.

Yeah, maybe worth to mention on the there are up 25% at Lufthansa Airlines only. And if you now look at the fact that big part of that comes from and we only have 10 aircraft out of 200 white bodies now being and that gives you an idea how much more there is to come on . And also, the commercialization due to our improved app. And they looked at the digital hanger, which is continuously improving our app. I think it's the right tool to take advantage of this. So, in short, yes, we do believe there's much more room for growth. We are very convinced to be seen. And the second question, sorry, none of us caught. So, if you can repeat that, maybe closer to the microphone or a better microphone.

Pardon, the second question is related to the Middle East. If it would be possible to please impact, specify the impact it had on your operations, namely going forward, and any adjustments you're planning to do in terms of capacity and its impact on yields. Thank you.

Thank you. This is the very last question of our conference. I was waiting for that question all morning because the Middle East being taken away from us has a huge impact on profitability for us, which is very unfortunate. And there was no question on this whatsoever yet. So, yes, we're actually starting Tel Aviv tomorrow. And don't forget, for us, in Lufthansa at least, it's not only the between the Middle East and Europe. There's a huge amount of people going on to the North Atlantic of the Middle East, be it Iran, where we are one of the few operators who have flown to Tehran at all. But also, we are very strong as a group in Tel Aviv. So, yes, this has huge impact. We're very happy for various reasons to restart tomorrow. And this is easily a three-digit number we have lost due to the developments there out of the Middle East, which we are now hopefully able to recover step by step starting, yeah, interesting enough tomorrow.

Perfect. Thank you.

Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Marc-Dominik Nettersheim for any closing remarks.

Thanks to all of you for your interest, for dialing in for the questions and for the constructive discussions. Thanks to you, Carsten, for your answers. We from Investor Relations are looking forward to continuing the dialogue. And to all of those who go on vacation, we wish you a great summer. Thanks.