Deutsche Lufthansa Ag Reg

Good day and thank you for standing by. Welcome to the Lufthansa Group Q1 2026 results analyst call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 and 1 again. please be advised today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Mark Nettersheim. Please go ahead.

Yes, thank you very much and welcome, ladies and gentlemen, also from my side to the presentation of our first quarter results 2026. With me today are our CEO Carsten Spohr and our CFO Till Streichert. Both of them will present our results for the first quarter and discuss the commercial outlook for the remaining nine months of this year. And afterwards, as always, you will have the opportunity to ask a question and please limit your questions to two so that everybody has a chance to participate in the Q&A session. Thank you very much. And with that, Carsten, now over to you.

Yeah, Mark, thank you very much and a warm welcome from me as well. It's exactly two months since we presented here from this building our full year 2025 results to you. And I think you would agree that the dynamics of recent weeks have once again demonstrated how rapidly the environment for our industry can change and how vital it is in our industry to be ready for crisis management at any given time. The ongoing crisis in the Middle East, combined with rising fuel costs, obvious operational constraints, poses enormous challenges for the world at large, for global aviation and, surely, for our company specifically. Historically, though, the Lufthansa Group has grown through crisis and emerged from them stronger So we are confident that this will also be no different this time. For one, we are positioned with greater resilience than many of our competitors to absorb the impact of the Iran war. We are better hedged against fuel prices with more than 80% of the kerosene requirements for our passenger airlines for the current year and more or less 40% for the coming year being hedged as we speak. Equally important to our crisis resilience is our unique multi-hub and multi-airline structure. It gives us the flexibility to quickly adapt our network to shifting demand by consolidating how destinations are served across our hub system. Routes that become uneconomical, for example due to rising costs, can be cut without compromising our network quality. This way, we were able to almost fully offset the recent 1% capacity reduction, which was equivalent to 20,000 flights for the whole summer, and we actually only had to remove four destinations from our network of 300. At the same time, this reduces our fuel requirements in the 20% share that remains unhatched even for us. So every ton of fuel we save by cutting capacity is a ton of fuel at currently twice the price of last year. Strategic setup also gave us the reflexibility to drive forward our fleet modernization in an accelerated fashion. And that obviously was shown in the city line Canada example, where in the light of cost pressure driven by rising fuel prices on the one hand and labor disputes on the other hand, we just decided we had to act. And this included retiring aircraft with the highest operating cost per seat, which was our Canada air fleet. delivering immediate savings through the reduction of an entire sub-fleet. And finally, our multi-hub and multi-airline structure demonstrated its strength most recently during the strikes of our cabin staff in Lufthansa Classic and Lufthansa City Line combined with our pilots, where despite significant cancellations at the core brand, more or less 75 to 80 percent of the group's entire flight program could be maintained in each case, and served our customers to get them to their desired destination. By the way, the recent grounding of our loss-making Lufthansa City Line operations has been, after the closure of SunExpress Germany and Germanwings, the third and final step in our previously announced strategy to consolidate the number of passenger AOCs in Germany. We have now reached our envisioned structure, our main line, and our feeder airline for Frankfurt and Munich, one airline focused on leisure, and a specialist for point-to-point traffic bypassing our hubs. So as you can see, we are responding with the necessary resolve, not only in light of the dynamic developments arising from the Iran war. We hope for the same determination from the regulatory side, both national and European levels, when we see necessary changes due to the situation in Iran. In particular, we have three requests for action on part of the European Commission. First, we need quickly the authorizing of the import of Jet A fuel from the U.S., which is used there at every airport, rather than the Jet A1 fuel, which is currently required out of Europe. This would... require less refinery activity because currently all kerosene imported from the U.S. coming in Jet A quality needs to be refined again to be turned into Jet A1 quality, which is no need, especially in the summer when the different freezing points don't matter. Secondly, we believe that it's time to advocate and decide on the temporary suspension of slot regulations At airports, in case there is the need to cancel flights due to fuel shortages, we shouldn't have an impact on slots. And last but not least, we need an exception for the European anti-tankering rules, which would then allow us additional operational flexibility in case single airports in our short-haul network are becoming short of fuel. Overall, we're quite optimistic these changes Rules and adaptions won't be required because we maintain a certain optimism on the fuel situation, but it's better to be ready, including our regulatory bodies, which sometimes need some time. Ladies and gentlemen, even in this volatile environment, we achieve what we set out to do. This is why we can look back on the first quarter today, in which we significantly exceeded the prior year's financial results. As a result, adjusted EBIT came in at 110 million euros above the prior year figure, this, by the way, without any capacity growth in our network airlines. At the same time, Eurowings' capacity grew by 5%, Lufthansa Technik delivered double-digit revenue growth numbers, and Lufthansa Cargo achieved a 5% increase in revenue over the year as well. Therefore, total revenues reached 8.7 billion euros in the first quarter, which is up 8% compared to last year. This is the highest we've ever seen for a first quarter and shows that demand in our industry remains robust, and that's for sure something we have not always seen in times of geopolitical crisis. We saw additional momentum building in March, with network airlines Rask up 12%, and air freight yields increasing by 5% year over year. This underlines our ability to flexibly profit from elevated demand levels. Obviously, higher fuel prices had only a marginal impact in the first quarter, as most volumes were still priced at pre-crisis levels. Our fleet renewal progressed as planned. With the delivery of seven new aircraft, including five white bodies, which of course are all equipped with Allegri or Swiss Senses, depending on which airline they went to, we not only increased the share of new technology aircraft in our fleet, but we also enhanced the travel experience for our long-range customers. The strong commercial performance we delivered in the first quarter, as did several of our competitors, is, as mentioned, also evidence of a continuous, robust market and resilient demand in our industry, which, again, has seen very different behaviors in global crisis in the past. It's also against this backdrop of optimism that we announced two months ago that we would grow our long-haul business while at the same time consolidating our European network to become more efficient. And we have delivered on that commitment. In Q1, we expanded our long-haul capacity by 1.4% year-over-year, and simultaneously, without reducing our feeding capabilities, reduced short-haul by 3%. We also, as announced, focus on the Southern Hemisphere as a key growth market. Here also, as mentioned, we delivered on our promise. Capacity to South America or Latin America grew by 4%, and to Africa... by an even stronger 10%. It was sold very well, with both seed load factors rising and average yields increasing accordingly. The situation in the Middle East was particularly challenging. Early March marked a turning point in the quarter as the Iran conflict escalated and required swift adjustments. The disruption constrained airspace availability, led to reduction in leisure destinations, especially in the Gulf region, and also limited connectivity of the hubs located in that region. At the same time, the overall travel demand remained consistently strong. However, the travel behavior of passengers shifted regarding where they fly to and very much how they reach their destinations. We therefore reacted fast and adjusted our network accordingly. The cancellations of the Middle East routes freed up 13 aircraft. There are three white buddies, which we now use for additional frequencies to serve India and Singapore, especially in total 13 flights every week on top of our regular network we're currently offering to Asia. And obviously, we also immediately adjusted our commercial strategy, prioritizing yields over volume. We tightened the availability of lower fare classes wherever appropriate and implemented broad-based pricing measures. March and April validated that focusing on this yield discipline was right. In March, yields increased by 5% and seed load factors improved by 6% year on year. Once again, premium demand showed a very positive development. In the first quarter, yields in our premium cabins rose by almost 2% compared to last year and by 5% in March alone. And Don't forget on this that when the Iran war started, of course, a big part of the March seats were already sold. So this is purely driven by the remaining seats being sold at higher fares. And this once again confirms our conviction that investments in premium products are not cyclical, but are long-term value drivers for the Lufthansa Group. Looking ahead. we expect the positive demand trend to continue. Later, Till will walk you through the numbers showing how this translates into our current positive booking outlook. But first, let me quickly take you through the results of our four business segments. In the first quarter, our network airlines were able to make good progress. Average fuel prices were below the prior year E-levels still, but the demand shifts driven by the Iran war were already having a positive effect in the last month. Commercially, this translated into a stronger performance, revenue increased year on year, and adjusted EBIT improved by 135 million euros. The main driver of the improvement was Lufthansa Airlines, which contributed €110 million earnings improvement, or, if you exclude the strikes, even close to €150 million. This demonstrates that the turnaround programme is increasingly delivering results. Swiss also reported an improvement of €49 million, and at ITER Airways, The operating result also improved here by 70 million euros. However, our equity result based on ETA's earning after tax declined by 38 million euros due to currency effects. Unit costs increased by 2.5% across network airlines, broadly in line with inflation. This was primarily due to the very low ASK growth of only 0.1%, which of course doesn't help on reducing unit costs. but this enforces our decision to implement our strategy as quickly as possible in response to current and potential future cost headwinds. The commercial performance is clearly encouraging. RAS increased by 3.3%, regional RAS even by 4.2% versus prior year. High load factors and increased revenues from flight-related ancillary services supported this encouraging trend. Inciliary revenues were mainly driven by our digital channels and rising advanced seat reservations for our new Lufthansa Allegris and Swiss Senses cabin. We didn't have an easy start here, but our upsetting strategy now clearly pays off. And both trends show that we focused on the right topic, namely digitalization and premiumization. Let me now turn to Eurowings. Operationally and commercially, the first quarter delivered strong top-line momentum. As already mentioned, capacity increased by 5% year-on-year, despite the ongoing constraints related to the Middle East in the third month, but demand clearly outpaced this growth even. Traffic revenues therefore rose 14%, and the seat load factor improved to a strong 84.4%. Supported by disciplined pricing, unit revenues increased by almost 7%, And here, as mentioned, a strong infra-European business more than offset the revenue shortfalls in the Middle East in March. In addition, flight-related ancillary revenues rose by 13% versus last year, also here mainly driven by seating options and upgrades and baggage. On the cost side, however, we face significant headwinds compared to previous year. As a result, unit costs increased by 5%, mainly driven by 16 million euros higher EREC impact from winter operations and the Middle East cancellations, as well as 29% higher MRO expenses. Despite these cost pressures, Eurowings delivered an adjusted EBIT broadly stable year-on-year. If you take the whole point-to-point airline segment, the overall result was 14 million euros below prior year due to a 10 million below year delivery of SunExpress. Taking everything into account, this we believe is a solid result for our point-to-point segment in a challenging environment. This brings me now to a sector that usually benefits from volatile markets and short-term shifts, especially in talking about Lufthansa Cargo. They delivered another clear year-on-year earnings improvement in the first quarter, with operational momentum strengthening toward the end of the quarter. Tight market supply and ongoing disruptions in global supply chains supported a recovery in air freight yields compared with recent quarters, driven in particular by continued strong performance in Asia-Pacific. Lufthansa Cargo expanded its capacity by 7%, supported by higher belly capacity, including for the first time additional marketing of ETA's Airways belly spaces, which are equivalent to three Boeing 777 freighters alone. At the same time, load factors remained broadly stable year on year. Total revenue increased by 5%, while operating expenses rose by 3%. Higher charter costs, primarily due to increased fuel costs, especially as we don't hedge in the cargo segments, were a cost driver. Unit costs decreased by 7% thanks to lower MRO expenses and strict cost management. All in all, profitability improved significantly with adjusted EBIT up 35% year-on-year, resulting in an adjusted EBIT margin of 9.5%. Last, but of course not least, our success story of Lufthansa Technik, which likewise continues to be characterized by strong resilience, with its revenues providing a sustainable, stabilizing effect across our portfolio for quite some time now. Its recurring revenue streams stabilize our portfolio, and Lufthansa Technik continues to experience robust demand and takes actions to mitigate headwinds, for example, from a weak US dollar, US tariffs, and still ongoing supply chain burdens. The completion of Lufthansa Technik's 1,000 Pratt & Whitney GTF engine overhaul marks a significant operational milestone, and it underscores the industry's structural shift towards next-generation engines. Strategically, we are advancing our global expansion where it matters most. In the Americas, for example, with progress on the Tulsa, Oklahoma component repair facility or our new engine shop in Calgary. In Asia, by strengthening our market position with the signing of our largest maintenance contract to date in China for the CFM56 engine. Or in the growing defense sector, where the first completed maintenance of the German Navy's P-8 Poseidon aircraft marks an important milestone for growth in this segment. From a revenue perspective, Lufthansa Technik remains structurally strong, with around now 80% of first-quarter revenues attributable to third-party customers, and these external revenues grew by 19% year-on-year. On the cost side, Lufthansa Technik was facing increases in material expenses driven by both volume and pricing effect. This resulted in a 12% increase in operating expenses. The adjusted EBIT was broadly in line with the prior year level overall. However, margins were impacted slightly by ramp-up costs. For the coming quarters, we anticipate a meaningful recovery in margins compared to prior year. After having examined the Q1 results, let me comment on where we stand from a strategic perspective. In the mid-term, this means, as you know, 28 to 30, we target our 8% adjusted EBIT margin, and the crisis makes us execute our strategy even faster than originally planned. The good old never waste a good crisis obviously applies to Lufthansa Group as well. In response to sharply increased kerosene prices following the Middle East situation, we decided to push forward several measures to streamline our operations. This includes the immediate removal of Lufthansa CityLine's 27 operational aircraft from our schedules, leading to a broadly 1% ASK reduction. The phase-out of CityLine's Canadair to harmonize our fleet by reducing another sub-fleet and therefore also reduce operational complexity. The announced early retirement of our not most fuel-efficient long-haul aircraft like the 3-4600 by the mid-October timeframe and also grounding part of our 747-400 fleet at least for the winter. All of this reduces fuel consumption, lowers exposure to unhedged fuel prices, streamlines the fleet and makes us structurally more competitive. In other words, this crisis has acted as a catalyst, bringing forward decisions that were already strategically planned. And with having said that, I hand over to Till, who will guide you through the Q1 financials of the group, will guide you through our full year guidance, and of course the underlying rationale. Till, over to you.