Financial Outlook: Prepared for all demand scenarios Investor Day 2011

Transcription

1 Financial Outlook: Prepared for all demand scenarios Investor Day 2011 Stephan Gemkow Member of the Executive Board and CFO Zurich, September 21 st,

2 Growth expectations have been revised downwards High level of uncertainty in many markets GDP forecast development during the last 12 months Sep 10 Mar 11 Sep 11 GDP Growth 2011 (in %) GDP Growth 2012 (in %) Actual GDP forecasts In % World Germany Europe North America South America Asia/Pacific Source: Global Insight 15.Sep

3 We strengthen our profile to cope with every potential development We strengthen our business segments We benefit from our risk management We leverage our strong financial profile Lufthansa can handle every possible demand scenario Lufthansa offers higher stability in bad times and outperformance in recent upswing 2

4 We strengthen our business segments Group structure provides higher stability and upside potential Airlines Aviation Services in EUR Passenger Airline Group Logistics MRO IT Services Catering Revenue bn 2.8bn 4.0bn 2.2bn 0.6bn Operating result m 310m 268m 10m 76m Adj. operating margin Range 6.0% (2007) 11.4% (2010) 8.8% (2008) 8.1% (2006) 4.2% (2007) 0.8% (2009) -8.0% (2009) 7.4% (2010) 1.8% (2010) 3.1% (2008) 3

5 Passenger Airline Group and Logistics business segments Summary Balanced network and customer portfolio Strong airline partnerships Cost management initiatives deliver Investments into modern fleet, product and quality New runways in FRA and MUC provide growth opportunities Fleet roll-over improves underlying costs Fleet structure allows for short-term capacity adjustments Balance and flexibility are key factors in times of high uncertainty 4

6 Balanced regional mix and customer portfolio in passenger business 56 % of corporate customers from various production industries Highly diversified network > 50% of traffic revenue from long-haul routes Strong corporate exposure across all sectors > 50% of corporate customers from production industries Europe Americas Asia/Pacific Mid.East/Africa 10% Others 12% Automotive 8% Metals & Machinery 12% 20% 44% Services 23% 25% Passenger Airline Group FY 2010 Finance & Consulting 12% Supported by world s largest frequent flyer program > 20 million members Pharma & Chemicals 11% Other Production 22% LH Passenger Airlines FY

7 Fleet structure allows flexible and quick capacity decisions Valuable asset base, unencumbered ownership Flexible capacity management Case study crisis 2009: intrayear capacity adjustments 6 % planned Lufthansa Group 67% 33% 2 Unencumbered fleet Encumbered fleet 0 LH Passenger Airlines & Lufthansa Cargo 82% 18% Unencumbered fleet Encumbered fleet actual

8 MRO business segment Provisions weigh on 2011 performance, to be improved as of 2012 again in m EUR H H in % Revenue 2,047 1, % - of which external revenue 1,166 1, % Operating result % Segment result % EBITDA % Segment capex % Employees 19,584 20, % Revenue 157 Operating result

9 IT Services business segment Increased profitability targeted for FY 2011, restructuring underway in m EUR H H in % Revenue % - of which external revenue % Operating result % Segment result % EBITDA % Segment capex % Employees 2,870 2, % Revenue Operating result

10 Catering business segment Profitable growth to be continued in m EUR H H in % Revenue 1,089 1, % - of which external revenue % Operating result % Segment result % EBITDA % Segment capex % Employees 29,210 28, % Revenue 2667 Operating result

11 Leading businesses to be continuously improved Dedicated efficiency and cost-cutting programs Operating results Lufthansa Group (in m EUR) and cost management initiatives Programm 15 Programm 93 Action plan CLIMB

12 Revenue and cost management initiatives in all business segments Examples Passenger Airline Group Revenue Actions Network Optimization Cost Actions Increase in ticket price Base load strategy Focus routes Reduced capacity WI 11/12 Postpone new routes Cancelation HYD Closing down of LHI Postpone project cash out Cost savings overhead Review sales and pricing activities Change of frequencies and aircrafts Reduce overhead costs Dedicated cost initiatives (e.g. maintenance) Secure based loads Fare increases Extend ancillary revenues Sales initiatives Increase fuel surcharge Enhanced revenue management Price increases Strengthen ancillary revenues Frequency reduction Single route cancellations Shift planned IC growth Capacity reductions New routes in Scandinavia New JV with SWISS Capacity adjustments Budget cuts Freeze of personnel cost Closure of bmibaby bases in MAN and CWL Closure of Mainline base in GLS Reduction in budgets Hiring freeze Supplier contributions 11

13 Revenue and cost management initiatives in all business segments Examples Logistics, MRO, Catering and IT-Services Revenue Actions Cost Actions Logistics MRO Enforce surcharge premium Flexible pricing Acquisition of special businesses Capacity shift from Asia/Pacific to North & South Atlantic Sales push Contract management Review FTE targets Reinforce cost management Strengthen cost flexibility Partial reduction of project volume up to 25% Primary cost reduction by 10% vs. budget Catering Assure contract extensions Acquire new customers Realize additional revenue potential Upgrade plus programme with approx individual projects Procurement initiative Lean labour projects IT Services Generate additional revenue - with LH Group companies - and third parties Cutting 1/3 management positions Resizing operational staff 12

14 Solutions for loss making entities Examples Closure after unsuccessful operation Successful restructuring Agreement on restructuring after liquidation process was initiated Looking for strategic solutions 13

15 Cost development H1 and cost outlook 2011 H Outlook FY 2011 Revenue growth vs. cost increase 1.6 : 1 Revenue growth outpaces higher costs Fuel +24.6% Increase to 6.4 bn EUR (incl. AUA and bmi), upside protection and downside participation Staff costs +6.3% Moderate Increase in staff costs (e.g. collective salary increase, higher expenses for pension provisions, exchange rate effects). Increases to be partially compensated D&A +4.8% Increase of 4-6% due to new a/c Fees & Charges +17.8% Increase due to new air traffic tax and volume growth 14

16 Fuel efficiency is structurally improved - hedging gives time to react Comprehensive strategy to optimise short-term and long-term impact 6,5 6,0 Long term: Invest in modern fleet enhances fuel efficiency 5,5 5,0 4,5 4,0 Progress in average fuel consumption Average of the Group s fleet in litres / 100 pkm 4.20 Short term: Fuel hedging reduces volatility Fuel hedging level (in %) ,5 3,0 A Number of months until actual date of consumption Capex plan (in bn EUR) Current fuel hedging levels for the Group e 2012e 2013e Primary invest Secondary invest Financial invest Ø2011: 77 % (break-even: 95 USD/bbl) Ø2012: 58% (break-even: 103 USD/bbl) 15

17 Fuel hedging strategy supports in both directions Upside protection and downside participation Market price 110 Break-even 2011 Break-even 2012 USD / bbl LH price 2011 LH price as of 1 Sep, USD / bbl Downside participation Progressive upside protection 16

18 A modern fleet limits another burden on the industry Airlines to be included in European ETS from 2012 Development of ETS prices March 2008 August 2011 Cash-out scenarios for ETS ETS hedging follows established structural approach Amount of acquired CO 2 certificates 100% t Time period until submission of the certificates m EUR EUR 30 EUR price per certificate 17

19 Lufthansa continues to have a strong liquidity position Excess cash used to fuel capex bn EUR 7,0 6,0 5,0 4,0 3,0 2,0 1,0 2.3 bn EUR Strategic minimum liquidity (2.0 bn EUR until 2010) 5 bn EUR liquidity 0, , ,0 1.9 bn EUR credit lines Our strong liquidity position safeguards our operations and maintains entrepreneurial freedom - irrespective of macro environment 18

20 and a track record of delivering free cash flow Operating cash flow and free cash flow 2003 H H Operating cash flow Free cash flow 19

21 Pension provisions have been systematically reduced Remaining amount includes transitional pension payments Development of pension provisions in bn EUR Recent decision of the Court of Justice of the EU Includes 1.6 bn EUR transitional pension payments for period from retirement to pension date Present value (gross) Net provisions (reported) 20

22 Earnings and financial profile improved despite external burdens Productivity increased as fuel, fees & charges climbed Fuel cost in % of revenue Fees & charges in % of revenue Staff cost in % of revenue Adj. operating margin in % 4.1 Equity ratio in %

23 Dividend policy is embedded in our financial strategy % target corridor for payout ratio Our dividend policy Dividends are linked to operating performance Net profit of Deutsche Lufthansa AG (HGB) must allow for dividend payment In this framework we seek continuity (30-40% payout ratio) Additional payments could result from extraordinary income, provided capital structure targets are met Lufthansa results and dividends Operating Result m ,378 1, Net Profit / loss m , Dividend paid Payout ratio (op.res.) % Dividend yield (gross) %

24 Airline share prices have been hit hard Lufthansa s market cap is back to the level of 2001 Share price development 2011 ytd in % 0 RYA DAX EZJ AB1 LHAG AERL IAG FIN SAS AIFR

25 Disclaimer in respect of forward-looking statements Information published in this presentation with regard to the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of definitive historical facts. These forward-looking statements are based on all discernible information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication. Since forward-looking statements are by their very nature subject to uncertainties and imponderable risk factors such as changes in underlying economic conditions and rest on assumptions that may not or divergently occur, it is possible that the Group's actual results and development may differ materially from those implied by the forecasts. Lufthansa makes a point of checking and updating the information it publishes. It cannot, however, assume any obligation to adapt forward-looking statements to accommodate events or developments that may occur at some later date. It neither expressly nor conclusively accepts liability, nor gives any guarantee, for the actuality, accuracy and completeness of this data and information. 24

26 Thank you! Stephan Gemkow Member of the Executive Board and CFO London, September 12 th,