Deutsche Lufthansa AG

Andreas Hagenbring - Head, IR Simone Menne - CFO

Neil Glynn - Credit Suisse Oliver Sleath - Barclays Capital Andrew Lobbenberg - HSBC Damian Brewer - RBC James Hollins - Nomura Michael Kuhn - Societe Generale Gerald Khoo - Liberum Johannes Braun - Commerzbank Anand Date - Deutsche Bank Edward Stanford - Lazarus Stephen Furlong - Davy Research

Yes, thank you very much and good morning, ladies and gentlemen. Welcome to the presentation of the third quarter results of Lufthansa Group and with me is, as usual, Simone Menne, CFO of the Lufthansa Group.

Simone will, as usual, guide you through the figures and, as always, you will then have the opportunity to ask your questions.

Thank you very much, Andreas. Ladies and gentlemen, warm welcome from me, as well.

Now, before we look at the figures, I'd like to say that the past weeks have been very hard for us all, here at Lufthansa and at Germanwings. We are still shocked about the accident of Germanwings flight 9525 in which so many people lost their lives.

And as we mourn their loss, we are aware of our responsibilities towards the relatives and friends of the victims; people who have lost their loved ones that day. I have received numerous messages of condolences and support also from among you and we would like to offer our sincerest thanks for your sympathy.

As we continue to mourn, we are aware that we bear responsibility for the Lufthansa Group, its customers, its staff and its shareholders, and we take this responsibility seriously. Doing so let me now shed some light on the economic development of our Company in the first three months of this year.

As you know, we have modified the key performance indicators used by the Lufthansa Group at the start of the new financial year. The main measures of performance in the quarterly publication are now EBIT and adjusted EBIT.

These figures saw positive developments in the first quarter. Let me briefly outline the highlights.

EBIT and adjusted EBIT rose by €73 million each, which represents a more than 30% year-on-year increase. All operating segments have improved their results.

SWISS and Lufthansa Cargo have seen significant increases in earnings and also Lufthansa Passenger Airlines has shown a positive development even though it has been put under more strain than last year by strikes and other non-recurring tax. Unit revenue and unit costs were significantly affected by the lower oil price and the weak euro.

This is the reason for some significant movement in the individual KPIs today. I would like to highlight, in particular, the fact that our cash flow from operating activities is €539 million higher than in the previous year.

Our net profit for the period has grown by as much as €677 million. Our equity ratio, however, fell by 5.7 percentage points due to the further reduced discount rate for pensions.

Our profit development was negatively affected by strikes by the Vereinigung Cockpit pilots union. The Germanwings disaster also temporarily influenced advance bookings, although not to the same degree.

For Germanwings, new bookings were already normalized in several dates after the accident. Advance bookings for Lufthansa were practically unaffected by the accident.

The balance sheet is also barely impacted. Any liabilities, with the exception of the insurance value of the aircraft itself, are accurately reflected in the amount we have earmarked from insurance company receivables which is equal to the disclosed sum of $300 million.

Based on these figures and on the current trends and tendencies we have observed in our business, we can confirm our forecast for the full year. We still expect an adjusted EBIT of more than €1.5 billion before flight costs.

However, the likelihood of significantly continue the minimum value stated in the forecast had fallen since publication, due to the aforementioned event. Let us now take a closer look at the results of the first quarter.

Revenue has grown significantly at 7.9% compared with the same period last year, including the rise in traffic revenue of 5%. This was caused by a slight increase in sales and especially by positive currency rate effects, which has helped to drive up yield partly to a significant extent.

Both EBIT and adjusted EBIT grew by €73 million each. We have not identified any noteworthy transition items in this quarter.

In the operating business, the changes in profit has been driven significantly and in equal measure by increased unit revenues and costs with positive development in sales and low taxes. However, this does also include three non-recurring financial effects which I partly addressed before and which I would like now to provide you with in this effective on.

Our holdings in Venezuelan bolivars had to be written down again and this reduced the net profit for Lufthansa German Airlines by €60 million. We had already seen a negative impact of €38 million on the net profit in the previous year's first quarter.

Moreover, as Carsten [ph] mentioned in our AGM last Wednesday, the strikes had an impact of around €100 million so far. €42 million occurred in the first quarter and €58 million will come through in the second quarter from lost bookings.

We see that we are in urgent need of a solution here and cannot afford to burden our customers further. Therefore, this past week, we proposed a comprehensive arbitration for all open, connected, bargaining issues.

One final non-recurring effect contributed to the significant rise in the Group's net profit for the period. The earning redemption of debt through convertible bonds caused an equity neutral increase in the financial results of €503 million.

The Group's net profit for the period rose by a total of €677 million to €425 million due to the improvement in operating performance and the significantly increased financial results. The equity ratio declined to now 7.5%.

The discount rate for the measurement of pension obligations slumped from 2.6% to 1.7% which, with year-end and the reporting date, usually expensive monetary policies of the European Central Bank. This caused pension obligations to increase by €3.4 billion, which was offset by a growth in our pension assets of around €500 million.

This developed shows, once again, how volatile equity ratios have become since the introduction of the new accounting standards in 2013. We are not the only Company which has to deal with this situation and other companies have already made the necessary structural changes from a defined benefit pension scheme to a defined contribution pension scheme.

We'd hope to find a solution with the pilots as part of the arbitration we offered. With the cabin crews we have already agreed on a change of the system and the scope of agenda cabins.

Reworking the outdated structures is hence, not only in the interest of management but in the interest of our bargaining partners too. Cash flow has performed encouragingly, despite an increase in net capital expenditure.

It is worthwhile to look at both the cash flow from operating activities and capital expenditure in more detail and I will do so later. With a goal of strengthening our net asset position, we will soon review our issues of hybrid securities which we have temporarily suspended in March.

A detailed look at the cost items shows strong alleviation compared with the same quarter in the previous year. This has been caused by three factors of influence; the much lower oil price, the weak euro and the low interest rate.

€209 million were saved in fuel costs compared to the previous year period. We benefited, in particular, from cheaper oil and kerosene prices, although this was offset, in part, by a negative hedging result and the weakness of the euro against the US dollar.

The weak euro also had a negative effect on almost all other cost items but, in particular, in MRO costs where the components used in aircraft maintenance are typically billed in US dollars. This further increased the MRO costs which had already seen rises as the result of the refurbishment of the whole cabin at Lufthansa Passenger Airlines.

We will likely see lower cost in this area in the second half of the year when we have successfully completed the biggest product upgrade in the history of Lufthansa Passenger Airlines and that achieved a five-star rating. Fees and charges rose by 6.7% despite the reduced numbers of flights and passengers.

For example, Deutsche Flugsicherung, the traffic – the German air traffic control services, raised their fees by 14.4% at the beginning of the New Year. And other service providers such as airports have also parked their increased costs directly onto us, which has caused this cost item to grow well beyond the regular pace of cost inflation.

This clearly shows that we also need to engage in more intensive discussions on [indiscernible] charges. We have also seen higher staff costs, mainly caused by the increased pension expenses as a result of the reduced interest rate and, secondly, by the weak euro.

Contrary to this, the number of employees has fallen compared with the end of first quarter of 2014, despite an increase in the number of employees at Lufthansa Sky Chefs by about 600 caused by higher production. Depreciation and amortization rose by €34m into the high capital expenditure in the past quarter.

And, finally, we have observed a strong increase in other operating expenses; in particular, due to exchange rate losses. Exchange rate development, not including the negative effect of the write-down of our holding in Venezuelan bolivars, affected EBIT by a further €56 million.

The cash flow from operating activity saw significant improvement with one of -- which is one of the main -- sorry, with one of the main reasons for this, the better operating performance. Moreover, there are two topics relating to accounting items that play a role and marginally cancel each other out.

The impairment of financial derivatives had a negative effect, in particular as a result of the changes in the JetBlue convertible bond. This offset the positive effect and the financial results which have an increased -- which have increased our pretax results.

The change in working capital, unlike the effects in the financial year 2014, had a positive effect of almost €600 million this quarter. This is mainly achieved with a change in trade working capital; in particular, due to higher liabilities from unused flight documents as well as trade payables.

Net capital expenditure grew compared to the same quarter in the previous year. Our gross capital expenditure fell by €44 million.

The growth investment plan for the full year 2015 remains at €2.9 billion. The free cash flows for the quarter are encouraging €532 million.

As before, we still expect a balanced free cash flow for the full year 2015. Cash and cash equivalents have risen again since year-end 2014.

At around €3 billion, we are well above our minimum liquidity target of €2.3 billion. We have seen a positive performance throughout all of our operating segments.

The biggest result improvement has indeed come from our largest segment. The Passenger Airline Group grew revenues by a significant 5.2%, mainly due to the increased traffic revenue.

Adjusted EBIT rose by €78 million or 23.5%. The largest contribution came from SWISS.

The Company profited disproportionately from the unpegging of the Swiss franc from the euro. The Company expects business to continue performing positively, such as the guidance is raised to a level of earnings slightly than past previous years.

This means that SWISS has now been clearly profitable for the second year in a row in the typically difficult first quarter. A great achievement, we think.

Lufthansa Passenger Airlines, including Germanwings, also grew their revenue and profit. However, we expect profit to improve less in the second quarter; in part, due to the more intense competition.

Boston Airlines [ph] has found a stable performance. The Company had reduced its capacity significantly in the first quarter and have taken measures such as bringing forward a number of maintenance activities for its fleet in order to improve productivity in the high demand summer months.

However, the business continues to be negatively impacted by weak demand from Eastern Europe and particularly from Russia. At all airlines, foreign exchange effects have supported revenue performance considerably by cost of increase more significantly and this is the situation which will rightly remain with us for the coming months.

Lufthansa Cargo has seen a positive performance, as well. Foreign exchange effects, in particular, caused us to rise significantly by up to 12%.

The number of freighter flights fell by around 10% while the net costly usage of the valid [ph] space of passenger aircraft grew. Moreover, Lufthansa Cargo benefited, in particular, from reduced fuel costs.

We expect this segment to continue performing well, even in the growth in net profit is unlikely to reach such magnitudes again in the coming quarter. Lufthansa Technik and our catering company, LSG Sky Chefs, each saw a stable and strong performance, and they continue to expand.

Lufthansa Technik currently established with [indiscernible] in Puerto Rico which is expected to commence operation within the next three months. LSG Sky Chefs is currently developing a major operating facility in Chicago, which is to enter service at the beginning of next year.

The strong growth in external revenue in the first quarter of more than 20% in each case shows that we are on the right path. By the year 2020 we aim to increase the share of revenue from our service segment and Eurowings from currently 30% to then 40%.

For this year, we expect both Lufthansa Technik and LSG Sky Chefs to perform stable and within the forecast we set at the beginning of the year. As you know, we did start the IT services segment as of the start of the new financial year, which also had an impact on the segment others with the remaining activities now being consolidated and the results being adjusted accordingly.

However, the negative performance in the segments was caused particularly by unstable exchange rates, which are centrally booked here for the whole Lufthansa Group. In the key operating performance indicators of our airlines, we see again large direct and indirect effects caused by changes in exchange rates.

The growth in unit revenues and yields were strongly driven in all regions by positive foreign exchange effects which will continue to be well supported by favorable conditions in the coming months, for which reason I will only address the performance on a constant currency basis from this point. In total, pricing remains within our guidance for the fourth quarter, with a reduction in yields of 2.9%.

Because the load factor was slightly higher, the decline in unit revenue was somewhat less pronounced by 2.5%. Unit costs rose after adjustment for fuel costs and exchange rates.

In addition to increased depreciation and amortization, higher MRO costs also played a role in the first quarter. In terms of regional performance of income, the picture is better.

While targeted capacity reductions in euro resulted in a higher load factor, the pricing environment remained stable with slightly increased unit revenue. In the coming months, however, the pressure of competition from the increasing growth of low-cost carriers will rise, as expected, on the strong domestic routes.

The best performance can be seen on the America routes; there, we were able to fully sell the capacity extension of 4.6% and yields remained stable. The other two traffic regions saw a more weaker performance.

The additional capacity to Asia and to the Middle East/Africa could not be fully sold. The pricing environment also continues to decline significantly with unit revenue falling at almost 8%, year on year.

We are conquering these effects of falling yields on the routes to Asia by continuing to focus on the increasing quality of our programs. And we have also cut routes to Asia in the past three years.

As far as on the overall route profiles, we expect the aforementioned regional trends to persist. Based on what we have seen in this first quarter and up to today, the forecast for the key operating performance figures for the airline have not changed.

We will see growth, in particular, on the long-haul routes during this summer. As in past years, this performance was driven by larger aircraft while the number of flights continued to drop.

We continue to expect the significant decline in yields which is predicted to be offset by constantly higher foreign exchange effects. Despite the growth in the first quarter, we also expect unit costs to fall slightly on constant currency basis.

Lufthansa Cargo capacity will remain stable, due to the ongoing excess capacity management in the freighter fleet. The changes in fuel price are playing a central role this year.

For this reason, we have provided a more in-depth fuel cost forecast for you, as you see on this slide. We now expect full fuel costs totaling to €6.2 billion for the full year, which is still significantly below previous year but €200 million more than we expected two months ago.

At the current forward rate, the savings are generated primarily from the lower kerosene price and are offset in price by the strong US dollar. We continue to expect a higher negative hedging result as in the previous year.

As you can see, we have increased the extent of our hedging in recent months. Our hedges now cover larger shares of our fuel needs for the coming months and have also been concluded for a longer period than usual in the past.

It is important to mention that our activities in hedging still fall within our tried and tested good hedging strategy, and that we had choosing options, meaning that we will continue to benefit from lower prices should oil prices fall. In conclusion, let me now summarize and come to our forecast for the full 2015 year.

We continue to expect an adjusted EBIT of more than €1.5 billion before strike costs. Due to recent events, I must add, however, that we consider the likelihood of significantly beating the minimum value stated in this forecast to be lower than a number of weeks ago.

The oil price, exchange rate and the development of yields continue to be volatile will, in turn, give drive to a general uncertainty surrounding this forecast. We see the Lufthansa Group, however, steadily remaining on course this year to reach the goal we have set ourselves.

And that, ladies and gentlemen, brings me to the end of my speech. Thank you so much for your attention.

Now we are happy to answer your questions.

Thank you very much, Simone, and we are happy to enter immediately into the Q&A session. Operator, do we already have someone on the line?

The first one was just back to Asia Pacific revenue; it's fallen about 5% through the winter driven by the 7% to 8% unit revenue declines. Just interested, should this trend continue through the summer and how worrying is that as you continue to lose revenue before you introduce the new wings concept?

And the second question, working capital; obviously very impressive performance in the first quarter. Simone, you mentioned higher payables but what impact has Easter had on the first quarter and how much of that should unwind in the second quarter?

And then the final one, the pension deficit. Obviously, you've now proposed arbitration to labor but as the pension deficit continues to rise, is there much of a concern at your end?

Would this prove as more of a sticking point for the pilots? It's obviously -- pension has obviously been a sticking point so far but I guess a higher deficit might prompt some concerns from the pilots about a top-up.

Let's start with Asia Pacific. Asia Pacific is a concern, obviously since last year and it continues to be a concern because of the high capacity in that market.

On the other hand, as I mentioned, we did do several things in this region regarding the product enhancement and by cutting some routes and we also cut Abu Dhabi now. And it is obviously some time until we have big impact from the wings concept in Asia Pacific but, on the other hand, the routes we have still there are quite okay, in our opinion, so that we see that we do not see further decreases.

Working capital second quarter very difficult to foresee. The liabilities and it's also a question of forward booking, it seems that in the first quarter there has been a longer period of booking but it's very difficult to see how the behavior of passengers will change in the second quarter.

Me personally I would expect it a little bit weaker than the second because that was extremely strong. Pension deficit, it is an issue for the pilots yes and for all other employees.

On the other hand you know that we have terminated our defined pension scheme already. So all new employees, which since last year, 2014, entered into contracts with Lufthansa do not have a defined pension scheme anymore.

So it is very much also in the interests of the unions to enter into agreement for the pension scheme. And, yes, we offered arbitration to the pilots for all opened tariff items.

And we would assume that especially in an arbitration for pension it is in the interests of the pilots to negotiate a positive result here.

Three questions please, two on the premium economy cabin I'm interested to know what the performance of that cabin has been like. I think it's been getting on for another three/four months since you introduced that and it seems to be coming on a lot more routes now.

So how has that been selling and versus your expectations. And linked to that how much will you say is the effective cabin mix on your year performance?

Is that something that we should be aware of when we look at the RASK trends for this year? And my final question is just on the progress of the labor negotiations.

Obviously you have now offered mediation across a wide range of issues to the pilots. Any initial signs there on whether you're having fruitful discussions there?

Or indeed whether in the wake of the Germanwings incident the pilots and the management have been brought closer together on some of those issues. Thank you.

Premium economy very, very positive first results, so we see that the passengers really like it and that the bookings are great. And the business case was a good one anyhow because it -- regarding the ratio for the square meters in the cabin it is a very good ratio with yield and the space we need.

So that is very positive. And for the cabin mix when you look at that you should see a minor impact I would say 1 to 2 percentage points could be a minus.

And then the last one, pilots signs, well we did not get an official answer yes. On the other hand there were in the media the pilots mentioned that this is an approach that they seriously will evaluate.

Honestly, it's -- I think it's very difficult for them to not accept an arbitration in the tariff items and continue to strike. So, I'm not aware of a further strategy.

But they are still discussing.

Could I ask what the latest expectation is with regard to the rating agency decisions and how you imagine that their considerations might interlink with the launch of the hybrid and obviously the impact on the equity ratio. And then I'm surprised by the strength of SWISS, can you just try and explain what is driving that please?

Yes, thank you Andrew. Rating, obviously all companies are impacted by the development of the interest rate.

And the rating agencies we discuss as industry, a German industry with the rating agencies how they act regarding the development of the interest rate. In general, for Lufthansa obviously yes the hybrid will have an impact.

And at the moment I'm quite positive that there will be a positive statement from the rating agency. Regarding SWISS this is mainly currency, but the currency in a positive way saying that we were cautious at the beginning that the currency may have a very bad impact on the Swiss economy.

This is not happening. And the translation then for the Swiss into the Euro this obviously is very positive result into our books.

So that is the main reason, very good continuation of the business and very good currency.

Most of mine have been answered but one thing outstanding I just wanted to clarify. Could you give us an update on where you are on US dollar hedge versus your CapEx commitments?

And secondly you mentioned the €2.9 billion for this year, but for future years particularly where you're commitments to more flexible, has there been any movement in your thinking or indeed any desire to age the fleet a little bit longer or maybe even replace faster. Thank you.

So the US dollar hedge is around 50%. And we continue with the same hedging policy, so there will be no major changes in our ideas to hedge.

For future years and the fleet quality we continue to just monitor the development which is not only the US dollar and the order book but also the development of the fuel. So we are flexible.

And as you have seen we did do some things for the next two years already, and we continue just to monitor. But we don't expect something dramatically changing.

Okay, just to be clear that the expectation for the CapEx are not just for 2015 but 2016 and probably the first part of 2017 are unchanged where we sit today.

Three for me as well please, the first one is just on the timing structure of arbitration talks if they happen. So they are basically -- if they do start can you just let me know how long you'd expect it to take from start to finish?

And also if they do start do both sides have to accept the outcome of the arbitrator? The second one was on -- just on the 2 percentage points staff cost increase that's just due to pensions.

Is that something that we should be thinking about for the full year moving a 2 percentage points rise because of the reduced interest rates, or perhaps give some guidance on that. And the final one is perhaps not something you're ready to talk about yet, but have there been any real changes to the Germanwings Eurowings strategy post the tragic incident?

Or, if it is too early to say perhaps let us know how you would communicate any changes or as and when. Thank you.

Timing of arbitration very difficult to predict, and first the parties have to accept a common arbitrator. Or, as we do with the cabin we have two arbitrators, so one representing more the employee side, one representing the employer's side.

Then the arbitrators develop together with the parties solutions. And these solutions don't have to be accepted.

So it is possible for both parties to say no we cannot follow that recommendation. Obviously then you start then from square one again but it's not a duty to accept any results of an arbitration.

The staff costs 2% yes that is mainly coming from the pension, the higher pension -- sorry, lower interest rate therefore higher amount to pay into the pension scheme. This will continue.

We should not, because we only do that yearly, expect that this will increase a lot during this year but it will be stable on the same side. But also remember that a little bit from the, or not a little bit, half of the increase in the staff costs also comes from currencies because we pay -- sorry, we have currency impacts also on the staff costs.

Changes in the policy or the strategy regarding the Germanwings and Eurowings, I can talk about it and there are no changes. There is no change in the competition scene.

Therefore our strategy is as good as it has been before the accident. And we don't see that there is anything to reconsider, so we continue with our plans in rolling out the Eurowings concept.

Okay, so if I can just come back to the arbitration talks, if both sides don't have to accept recommendations, should I be thinking this is not really much progress or does it actually make it more likely that an outcome will come that those parties can recommend.

I think it's more likely that there will be a positive result, because when the parties was out in arbitrator talks then you have, let's say, very much of arguments and back and forth. An arbitrator, as the name says, is looking for a common solution.

And it's his only target. And so both parties obviously going into arbitration want to have a solution.

So as soon as an arbitration is accepted the likelihood of a solution is a lot higher.

Also a few questions from my side, firstly on currency effects. Could you remind us of the net currency effect on operating earnings or adjusted EBIT please?

And then secondly on pension provisions and the interest rate assumption, I think you capped your discount rate from 2.6% to 1.7%. Could you provide is with a sensitivity analysis on what interest rate changes, let's say 10bps or so, results on the balance sheet number.

And then one on the passenger segment and on yields, could you provide us with a split of Latin America versus North America please?

The currency impact on the adjusted EBIT there is the bolivar obviously €60 million and we have the general impact of €56 million. For the pension development €2.6 million to €1.7 million that is the normal calculation which you have to do according to the IFRS rules, so there is a sensitivity but at the moment no further news.

The yields for Latin America and North America, so we see South America with stable volumes but continued pressure on pricing and the North Atlantic, as mentioned, performing very, very well. Was that okay?

That was okay. And maybe on the discount rate, so as of now it's pretty much still the level that we've seen as of this quarter end?

Yes, but you can make the calculation yourself, depending on the future development of the Central Bank. So at the moment there is no further news but we do that quarterly.

And as we mentioned before already last year regarding the sensitivity 0.5 percentage points will have a 10% impact on the defined benefit obligations, so around about €2 billion.

Three questions from me. Firstly on cargo, I think perhaps more generally, what's happening on fuel surcharges?

Are you under pressure to remove them or cut them? And secondly I suppose specifically on the passenger business I see that RASK is up 4.1% CASK up 6.0%, so costs up faster than revenue and yet adjusted EBIT improved.

I'm just trying to reconcile that and also noticed that other operating income was up sharply and whether that was the reason why EBIT did improve. What was the driver of that please?

Yes, Gerald. Regarding cargo we have seen some changes from competitors in the charges structure but it seems that they are not really well taken from customers.

We did not yet change anything. And as you know in cargo fuel surcharges are a lot more direct than in the passenger business.

But I think the whole market is considering the charges structure. So it could be that during the year we will see a change in the structure of cargo charges in general in the market.

Regarding the RASK and the CASK development, so we have for the RASK you have only traffic revenues and for the CASK we include also other operating expenses. So that is a slight structural different.

And therefore, the impact, as you have rightly seen on the EBIT, is still positive.

So in terms of other revenue items what was the main driver of that to make -- to drive the improvement in adjusted EBIT?

What I meant was other operating income excluding FX rate. So that is -- that would have the impact.

I wasn't clear okay. So in the RASK we only look at traffic revenues and not at other operating revenues.

Yes, so in terms of the other operating income what was the main driver of the improvements?

Well there are general -- could be a lot of minor items, so there is not a huge one-off item which we see here.

Can I just ask on your guidance, obviously you have €200 million less fuel benefits guidance for the full year, still you have kept your full year EBIT guidance unchanged. I was just wondering where you compensate for the €200 million less fuel benefits.

Are the unit costs or better unit revenues? And then also I read some press reports that United is disliking your low-cost, long-haul, low-cost strategy be it [indiscernible] or be it wings, obviously because its competition for them as well.

I was just wondering how you deal with this criticism from you JV partner. And then lastly just do you see any positive benefits from the Deutsche Bank strike or is it just too early?

The guidance, well we are careful with the guidance in the beginning because we said more than 1.5. And we can keep that with the impact of the fuel and the strikes at that guidance.

But as I mentioned we see that it will be more difficult to -- that the more is more, more. So the target is -- the guidance is still there and we were able and are confident to keep that.

United, well no there is no discussion with United that they don't like it. I think they understand then well what's happening in Europe and how we have to react.

And also direct traffic on low-cost level may also come to the long-haul. The discussions with United are the same as always regarding capacity growth in the North American markets where we have to look at all our companies including then the low-cost concept.

Impact on Deutsche Bank strike, too early, I did not see any positive impact here.

Just one on cash flow, two bits to the question, firstly -- so you've done the JetBlue stuff are there any other big chunky things you could do to raise cash if and when you needed to? And on what kind of scale are we talking about?

Secondly, if you were in a situation where you had to converge -- or you had to conserve cash sorry, what measures would you look to first to do that? Would it be CapEx or is there anything else you can do?

Thank you.

Yes, Anand, well are there any further ideas to create cash flow. First of all JetBlue has not -- didn't create cash flow.

Yes, sorry.

But should we need cash which is not the case, because our liquidity is great, then there are several means we could do. But when we consider these impacts we always start with our CapEx plans as we did, we immediately reacted with reducing CapEx.

And that is always the first priority we look into.

Yes, just one to two follow ups please. First of all I wondered if you could drill down a little bit more into your Asia performance and in particular if you're able to say a little bit more about how much the Japanese yen weakness contributed to the unit revenue performance.

And in contrast whether there is any initial effect there from the deepening relationship with Air China on your Chinese services. And then as a second question just following up on the other points, obviously we are seeing United very significant upgrading of capacity into Europe this winter replacing narrow-bodied 757s with 767s.

Is that any indication that in order to keep the balance of the JV sort of balanced Lufthansa will also refocus growth this winter onto the Atlantic or is that will work in progress?

Yes, Damian, so Asia there is price pressure and growing over-capacity. So that is the general and South East Asia in particular.

We have lower fuel surcharges which burdens on the flights to China and Japan. The Japanese yen year by year comparison no further impact, because it was already last year quite weak the market as such pretty well.

China developing good but not because we have further progress of the -- in the JV, we are continuing to develop that. It's not an easy task but we are continuing and developing positively with Air China.

United, well we did updating before and United also had to refurbish their fleet. And we in common talks are always talking about the overall capacity on the North Atlantic coming from all three companies, meaning Air Canada, Lufthansa and United so there is.

When we see that they will grow there will be discussions, but we grew in the past. And as you see we could sell all our increase in capacity and have stable yields so the market is performing also in the future we assume quite well.

Just a quick point of clarification, I think, on an earlier answer. Can you just confirm that any long distance wings flight would be covered by JV negotiations if they were to fly to North America please?

Yes, we have to look at our whole group, so when we do capacity increase with a JV, with United, we include also long-haul Eurowings.

Just two questions from me, the cargo business seems to be a bit better. Maybe its currency adjusted for the yield, but you might just talk about why you see that market being a bit better is it just capacity adjustment or the performance of that division.

And secondly just on the pension and the -- I guess the equity ratio and the debt repayment ratios which are lower than what you'd normally have, is it just a question of doing it and convert maybe helps with the labor negotiations and just maybe just muddling along in terms of adding and hoping that the discount rate change or what do you see? Are you just comfortable with accounting -- it's important but that's just the way it is, or do you have any kind of medium term view on this that would be great.

Thank you.

Yes, Stephen, cargo it is currency and fuel surcharge because the impact of fuel is more direct because it's -- or daily actually converted into the fuel shipment surcharges. As such, the market is not bad because the economy is doing well.

But it's more currency and fuel than just totally different business. On the other hand, as I mentioned, very well steered capacity by taking out fleet -- freighter flights and having more, because we have more valuable now with the new aircraft, taking more [indiscernible].

For the pension the discount rate well we all have to see that this discount rate will have an impact on obligations where in average are due in 22 years. So I think the whole industry is looking at the development of the interest rate, and are not happy about the pension obligations.

On the other hand we all know that it is not coming out of the operating business and we all know that in 22 years interest rates may change. So you have to watch it, you have to monitor it, you have to obviously have measures to work with that, and that is why we changed the defined benefit scheme.

But on the other hand it is not a direct impact which needs us to pay into the obligations. So it's not alarming I would say.

From what we can see there are no further questions available, so that means that ends the call. Thank you all very much for your interest, for your questions and looking forward to catching up during the next road show.

Thank you very much.

Thank you so much. Bye.