Fundamental Value and Profitable Growth

Transcription

1 - Fundamental Value and Profitable Growth Commerzbank German Investment Seminar 2010 Stephan Gemkow Member of the Executive Board & CFO Deutsche Lufthansa AG New York / January 11, 2010

2 Disclaimer This presentation is for informational purposes only, contains preliminary financial and other information about Lufthansa and is subject to updating, revision, amendment and completion. This presentation does not and is not intended to constitute or contain any offer of securities for sale or a solicitation of an offer to purchase any securities of Deutsche Lufthansa AG or any other company and neither this presentation nor anything contained herein shall form the basis of any contract or commitment. Certain statements contained in this presentation may be statements of future expectations and other forward-looking statements or trend information that are based on management's current views and assumptions and involve known and unknown risks and uncertainties. In addition to statements which are forward-looking by reason of context, including without limitation, statements referring to risk limitations, operational profitability, financial strength, performance targets, profitable growth opportunities, and risk adequate pricing, as well as the words "may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, or continue", "potential, future, or further", and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements. Lufthansa assumes no obligation to update any such statements or any other information contained herein. 2

3 Agenda I. Fundamental Value II. Profitable Growth 3

4 Agenda I. Fundamental Value II. Profitable Growth 4

5 is made up of five business segments - Each with a leading role in its industry Passenger Airline Group Logistics MRO IT Services Catering Lufthansa s core is passenger transportation Second largest cargo airline worldwide World s leading provider of maintenance, repair and overhaul Global IT provider for the airline industry and other sectors Leading airline caterer with global market share of nearly 30 percent Annual revenues in bn , Share of external Group revenue , , % 12% 9% 1% 7% 5

6 Different cycles of business segments stabilize Group profitability Operating result in m TOTAL Logistics V o l a t i l i t y Passenger Airline Group* Catering Σ S&F Comp.** IT Services MRO Q1-Q3 06 Q1-Q3 07 Q1-Q3 08 Q1-Q3 09 * Until 2008 Passenger Transportation ; from 2008 excl. central Group functions ** From 2008 incl. central Group functions (IFRIC 8) 6

7 Lufthansa continuously outperforms the industry in terms of profitability and creates value Mid-term development of operating result Financial performance ytd* 2009 Operating result of airline industry (in bn USD) Revenue Op. result Source: IATA e Lufthansa 16.2 bn 226 m Air France-KLM 10.8 bn -543 m British Airways 4.1 bn -111 m * Lufthansa: Jan-Sep; Air France-KLM and British Airways: Apr-Sep Lufthansa value creation (CVA in m ) Operating result of Lufthansa (in m ) Total: 2.9 bn EUR , e

8 Solid and valuable asset base Conservative fleet policy provides financial and operational buffers Aircraft & Engines 10.3 bn Total aircraft: 725 long-haul: 162 short-haul: 312 regional: 251 Average age: 10.9 years Conservative fleet structure Majority of aircraft in ownership 35% financially encumbered 65% financially unencumbered Liquidity 5.1 bn Others 2 bn strategic minimum liquidity held at any time Additional support through 1.5 bn credit lines LH Group as of Q Shortest aircraft depreciation period LH AF / KLM BA years 27.3 bn Total assets As of: Q3 09 Source: Air France & British Airways Annual Reports

9 Forward looking risk management protects Group development Fuel cost scenarios benefit from ongoing hedging transactions Systematic approach in fuel hedging Projected fuel costs and sensitivities Hedging in monthly increments of approx. 5% Maximum hedge level of up to 85% is realized 6 months before consumption Preference on collar options vs. swaps/forwards Oil price scenarios 2010 USD / bbl LH price USD / bbl Market price Fuel costs (in bn after hedging) e 2010e 5.2 (+9%) 100 USD/bbl(+20%) 5.0 (+5%) 92 USD/bbl (+10%) 4.5 (-6%) 75 USD/bbl (-10%) 4.1 (-13%) 67 USD/bbl (-20%) AUA and bmi As of 04 Jan 10 Fwd price 10: 83,53 USD/bbl 1,4378 USD/EUR) 9

10 Agenda I. Fundamental Value II. Profitable Growth 10

11 The airline industry offers fundamental growth prospects but short term volatility implies high risks Mid- and long-term growth prospects are intact - Airlines remain economy multipliers 20% 15% 10% % yoy change Revenue airline industry Short-term volatility 5% 0% -5% -10% -15% -20% e 2010e World economic growth Revenue growth airline industry World economic growth Fuel price volatility Kerosene = 100% e 2010e Aggregated economic and industry development in % since 2000 (=100) Source: IATA Crude oil USD per bbl 11

12 In 2009 Lufthansa has been hit by the crisis, too RPK* and RTK development (Jan 2008 Nov 2009, % yoy) Premium passengers** % Long-haul LH RPK (Passenger traffic) LH RTK (Freight traffic) IATA RPK IATA RTK Short-haul -30 LH AEA Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug SepNov Oct *incl. SWISS since July 08, excl. bmi and Austrian Airlines Source: IATA, LH ** Lufthansa Passenger Airlines change yoy Jan-Nov 09 Source: AEA, LH 12

13 Focus remains on safeguarding profitability High fleet flexibility enables short-term adjustment of capacity Embedded flexibility in fleet capacity...applied in current crisis to manage capacity Capacity development ytd* 6% 5% 5% 4% fully flexible 3% 2% 1% 0% -1% -2% -3% ASK vs. PY in % * as of Nov % -4% Includes structural effects: Fleet structure (larger a/c replace smaller a/c) Configuration (more Eco / less Business) Selected growth opportunities (e.g. Africa, Middle East, Lufthansa Italia) Equals -5.3% reduction of flights 13

14 Cost management in all business segments benefits from increased flexibility Quarterly development of expenses LH Group Passenger Airline Group Logistics MRO IT Services Catering 17.1% 10.7% 6.5% 5.3% -0.2% -2.2% -7.3% -7.8% -4.9% -8.0% -4.4% -14.5% (ex AUA and bmi) -12.1% -23.3% -3.1% -12.9% Q1 09 vs. Q1 08 Q2 09 vs. Q2 08 Q3 09 vs. Q % -11.7% -24.1% 14

15 All business segments and new group members continue their actions to improve results Passenger Airline Group Logistics MRO IT Services Catering Lufthansa Climb 2011: 1 bn SWISS further unit cost decrease AUA Cost base until m Staff costs m FTE reduction towards 6,000 bmi Restructuring ESP 2.0 Capacity -4 own freighter a/c -4 charter a/c Short-time work of ground personnel increased to 25% vs. 20% Price adjustments Capacity reductions Suspension 40h week Reduction of timebanking accounts Staff Reduction of external personnel Project budget cut by approx. -30% vs External staff up to 50% reduction Staff Hiring freeze Costs -20% non-staff costs Invest 2009: Reduction 2010: c.-33% vs. 09 Performance m cost reduction Upgrade plus 200m sustainable cost reduction 50m result improvement Short-time work at several German locations + Group functions -15% staff capacity (-5% p.a. until 2011) -21% non-staff costs (-7% p.a. until 2011) 15

16 Lufthansa maintains profitable and continues to outperform its peers Development of operating margins Lufthansa vs. peers (in %) British Airways FY 2008 Air France Apr-Sep 09: 3.1% Lufthansa FY 2008/09 * * * * * * Jan-Sep 09: 2.0% FY 2008/09 Apr-Sep 09: -2.7% Apr-Sep 09: -5.0% * BA s and AF s financial years end on March 31 16

17 Challenges 2010 Uncertain timing and intensity of global recovery Impact of oil price, influenced by speculation on recovery Irrational capacity growth continues (e.g. Gulf region) Labor disputes? Market exits / consolidation? OTC regulation? 17

18 Lufthansa is particularly able to benefit from economic growth Mid- and long-term growth perspective (incl. LH) Disproportionate participation in growth Revenue Revenue airline industry World economic growth 2000 = 100% * *Lufthansa: Q yoy Aggregated economic and industry development since 2000 in % Source: IATA Customer orientation, quality & innovation Global presence of business segments Strong network (LH, Star Alliance) Broad customer base (regions, sectors) Strengthened positioning in growth markets Ability to integrate new partners and realise synergies Continuous efforts to enhance efficiency Focus on profitable growth

19 With its global presence and customer base Lufthansa is well positioned to participate in pick-up in demand Regional revenue split Passenger Airline Group Corporate revenues are well diversified over the respective sectors World: +3.5% +1.4% Production; 50% +2.9% Americas 25% Europe 47% Middle East & Africa 9% Asia/Pacific 18% +6.3% Others; 11% Automotive 6% Pharma & Chemicals 11% Metal & Machinery 13% Others 20% +4.0% +4.8% LH exposure by traffic region Jan-Sep 09 % GDP growth 2010e 2012e Source: LH, Global Insight Services; 26% Finance & Consulting ; 13% Lufthansa Passenger Airlines, Jan-Nov

20 Structural changes and consolidation take place in the industry Lufthansa gains market share in long-haul traffic Development of total AEA sales (RPK) and Lufthansa share in long-haul traffic ex Europe LH Group 18.3% Market Share ytd AEA Lufthansa Passenger Airlines 2009 ytd* LH Group: 24.7% +65.1% +27.1% +22.5% Source: AEA, LH Group incl. SWISS from FY 2005 and AUA in FY 2009 * calendar week 50 20

21 Enlarged airline group further improved position in growth markets BRU FRA c MUC ZRH VIE Lufthansa s and Austrian Airlines combined flight schedule offers the strongest network to Eastern Europe Brussels Airlines: 9 additional destinations in Africa for all airlines in the Group 21

22 Network expansion in the US market by partnerships with JetBlue and Continental Airlines JetBlue: code-sharing via NYC (JFK) and Boston New partner in Star Alliance 22

23 Ongoing investments for cost-efficient growth bn 3.5 3,5 Capex plan Fleet Fuel, Co 2 and unit cost 3.0 3, , , , A380 B747-8 A330 A320-Family B747-8 vs. B * - 18% fuel/co 2-15% unit costs 1.0 1, , E190-Family Bomb. C-Series E190 vs. RJ85* - 20% fuel/co ,0 2009e 2010e 2011e 2012e Primary Invest Secondary Invest Financial Invest 6 3 Bomb. CRJ900 Bomb. DH8-Q % unit costs -2.1bn vs. initial plan 146 Total LH Group * per pax 23

24 Lufthansa Cargo grows asset-lean Joint ventures Jade Cargo Int l and Aerologic complement network Joint venture of Shenzhen Airlines(51%), DEG (24%) and LH Cargo (25%) 6 Boeing 744F in Shenzhen Growth opportunity in the world largest air cargo market Joint Venture of DHL Express (50%) and LH Cargo (50%) 8 Boeing 777F in Leipzig Integration with the biggest single customer of Lufthansa Cargo 24

25 Lufthansa Technik is market leader in civil MRO Its growth is supported by its global presence and broad product range Lufthansa Technik Group Supported fleet [in no. a/c] 2,025 Aircraft Maintenance Services Aircraft Component Services Engine Services Aircraft Base Maintenance Landing Gear Services VIP & Executive Jet Solutions 1,776 1,551 1,279 1, Nov 09

26 Summary I. Fundamental Value Industry leading business segments with stabilizing effect on Group profitability Solid asset base and conservative fleet structure Systematic risk management protects Group development Outperformance in value creation II. Profitable Growth Aviation remains fundamental growth industry, Lufthansa participates disproportionally Current focus on safeguarding profitability without giving up future perspectives Market share gains supported by structural changes and consolidation Cost flexibility and fuel efficient fleet back profitable growth 26

27 The investor perspective Lufthansa multiples and share price performance Total shareholder return Lufthansa vs. DAX & peers Price to book 130% 1,4 1,2 1,33 1,29 1,17 120% 1 0,86 0,85 0,82 110% 100% 0,8 0,6 0,4 90% 0,2 80% % 60% 50% 40% 30% 20% 10% 0% Jan 08 Indexed last 24 months Apr 08 DAX Index BA Index Jul 08 Okt 08 Jan 09 AF Index LH Index Apr 09 Jul 09 Okt 09 EV / EBITDA , ,7 5,76 4,4 4 3,6 3, Lufthansa Peers Average: AF,BA, IB, EZJ, RYA Source: Bloomberg, December

28 Thank you for your attention! 28

29 Key figures of the Q1 - Q Back-up in m Q1-Q yoy Revenue 16, % -thereof traffic revenue 12, % Operating result % Adj. operating margin 2.0% -3.4PP EBIT % Net result ,611 16, Operating cash flow Capital expenditure (gross) in m 1,438 1, % +7.0% vs. Dec Revenue 226 Operating result Net debt Equity ratio Market capitalisation 1, % 5, ,9PP +8.2% in m Q1-Q3 08 Q1-Q3 09 Some previous year s figures have been adjusted for the valuation changes under IFRIC 13 29

30 Development by business segment Q1 Q Back-up Key figures (in m) Q1-Q Q1-Q Change Passenger Airline Group Total revenue Operating result 12, , ,5% -7,3% Logistics Total revenue Operating result 1, , ,3% - MRO Total revenue Operating result 3, , ,9% +0,9% IT Services Total revenue Operating result ,0% -58,6% Catering Total revenue Operating result 1, , ,6% -5,4% 30