Deutsche Lufthansa AG

Andreas Hagenbring - Head, IR Simone Menne - CFO

Jarrod Castle - UBS Oliver Sleath - Barclays Stephen Furlong - Davy Damian Brewer - RBC Capital Markets Neil Glynn - Credit Suisse Ruxandra Haradau-Doser - Kepler Cheuvreux Michael Kuhn - Societe Generale Andrew Lobbenberg - HSBC Jack Diskin - Goodbody Stockbrokers Anand Date - Deutsche Bank Suzanne Todd - Morgan Stanley

Thanks, Emma. Good morning, ladies and gentlemen; welcome to the presentation of our first quarter results.

I've got with me as usual, Simone Menne, the CFO of our Lufthansa Group. Simone will take you through the figures and developments of the first quarter.

As usual, there will be an opportunity for you to ask questions, afterwards. Simone, please.

Thank you Andreas. Well, good morning, ladies and gentlemen; welcome also from my side.

Let me start by giving you an overview of the most important developments in the first quarter of this year. Compared with the last year, we improved the adjust EBIT, our key forecasting indicator, by €114 million, to minus €53 million.

This performance is primarily driven by Lufthansa Passenger Airline which increased its earnings, by €244 million and Austrian Airlines which made a positive contribution of €23 million. As expected, unit revenues declined, partly due to the growth of Eurowings and partly due to yield pressure in all regions.

But it is important, in our most important traffic regions, Europe and North America, the yields were less negative. Our unit cost declined significantly and that applies to nearly all cost positions.

We have reduced our planned capacity growth from 6.6% to 6%. Our passenger airlines will grow by 2.7%, in the second quarter and by 4.5% in the third.

We confirm our forecast of an adjusted EBIT slightly above previous year. The forecast of fuel cost and the key operating performance indicators remain unchanged.

Let us now look into the figures in more detail. Compared to the previous year's period, revenue in the first quarter was slightly down.

Driver for this was the negative yield development and, as consequence, significantly lower traffic revenue. As in the previous quarters, the airlines benefited from cheaper fuel.

The resulting cost savings amount to €237 million. Adjusted EBIT last year was adversely affected by strikes and write-downs on the Venezuelan bolivar, of some €100 million in total.

Partly due to these one-off effect last year, but also thanks to underlying improvements in our operating cost, unit costs at the airlines are 13% lower than last year. This more than offset the decline of 7.5%, in unit revenues.

Pressure on EBIT from exchange rate movements was significantly lower than in the same quarter last year. The net effect of currency effects on EBIT was only minus €6 million.

Last year, the early redemption of JetBlue convertible bond made a positive contribution to the net result, of €503 million. After adjusting for this effect, the net result was €70 million higher than a year ago.

The decline in cash flow from operating activities, is mainly caused by shorter term bookings which we reported already a few weeks ago. Our passengers are currently buying their tickets closer to the departure date.

So we received the cash later, but as net capital expenditure also fell by more than €300 million in the first quarter, free cash flow was up by 8.6%. For the full year, we're still planning with a total capital expenditure of €2.7 billion.

In the coming quarters, we therefore expect investments to be higher than in the first quarter. In turn, operating cash flow should improve when the summer bookings are made in the second and third quarters.

The equity ratio was down by 3.5 percentage points, to 14.5% at the end of the quarter. The decline was caused almost exclusively, by higher pension provision which increased by €1.5 billion, due to the reduction in the discount rate, to 2.4%, that is 40 base points less than at yearend 2015.

This volatility shows again how important a restructuring of the pension system is, for long term stable equity ratio. Last year, we achieved this restructuring of our pension system with our largest group of employees in Germany, the ground staff.

The restructuring of the retirement and transitional benefits remains a high priority for us in the discussions with the flight attendants' union and the pilots' union. In the segment overview you can see that the Group earnings improvement was driven by the positive performance of Lufthansa Passenger Airlines, Austrian Airlines and the others.

All of the other operating companies reported lower earnings. Except for Lufthansa Cargo the performance of the segment was in line with our forecast at the beginning of the year.

We're pleased that Lufthansa Passenger Airlines achieved a positive result in the traditionally weak first quarter. The drivers of this earnings improvement were the lower fuel cost and a fall in constant currency unit costs excluding fuel of 5.6%.

Even after adjusting for the support provided by last year's one-off mentioned earlier, that is still a good performance. SWISS also reported a positive result which was, however, €28 million lower compared with a very good quarter last year.

The fall in income is mainly due to the economic effect of the strong Swiss franc. On the one hand, competitors have cut their fares in Swiss francs significantly.

And, on the other hand, the weaker economic performance in the country itself, due to the exchange rate, means that our business customers are travelling less. In addition, tourist demand for travel in Switzerland is suffering from the strong franc.

Austrian Airlines increased its earnings year on year by €23 million. The airline benefited from cheaper fuel and a positive one-off effect.

By restructuring a long term lease agreement with Vienna Airport, we recognized a mid-double-digit million euro amount as extraordinary income. Without this effect, earnings would have been negative.

As of this year we're reporting the figures of Eurowings separately. In the first quarter the airline's earnings fell by €33 million.

Startup costs on long-haul routes and project costs for setting up the new company structure weighted heavily on earnings. We're seeing more competition in Europe, but the fall in earnings was primarily driven by the non-recurring expenses and the problems with operational stability in January.

We can say the new Eurowings has got off to a successful start. It's load factor on long-haul routes came to a very good 94.2% in the first quarter; and we have received excellent customer feedback on our product.

In operational terms we have been very stable since February. Our freight airline, Lufthansa Cargo, reported a significant fall in earnings of €71 million on a massive decline in traffic revenues.

This was driven by significant over capacity from additional value capacity in the market, especially on routes to and from North America. Furthermore, demand is weak and we're seeing strong pressure on cargo yields.

In the first quarter, yields at a constant currency in the cargo business fell by some 15% year on year. The figure is particularly high in this quarter because a year ago we were benefiting from the strike by port workers in U.S.

West Coast. At the moment, the market is showing no signs of recovery and Lufthansa Cargo is preparing for a very difficult financial year.

The Company initiated another cost saving program to counteract the recent developments. It includes, for example, a hiring and investment freeze.

Unfortunately, we already have to reduce these initially optimistic forecast for Lufthansa Cargo for the full year and are now expecting the adjusted EBIT to be significantly lower than last year. Earnings from the MRO and catering segment together are €20 million down year on year.

Increased revenue at both companies is being eaten up by higher expenses. Lufthansa Technik faces a very dynamic market; next generation aircraft models and engines, with new technologies, materials and components are going into service.

The resulting opportunities for growth are coming together with increased competition and pressure on prices. New contracts are, ultimately, granted on best production cost.

Therefore, Lufthansa Technik focuses on investment in new technology and on increasing efficiencies in operational procedures and working with new partners to secure and strengthen its market position. LSG has already made good progress on integrating and restructuring the business of its retail in motion subsidiary which was acquired last year.

Restructuring is also going to plan with regards to the medium term changes expected in the market environment. The other segment reported an earnings improvement of €56 million compared with the previous year.

This was driven by significantly lower exchange rate losses. Looking at the operational KPI of the Passenger Airline Group, we see, as expected, capacity grew by 6.6% in the first quarter.

Of this growth, 2 percentage points came from the expansion of the new Eurowings and 1 percentage point from a base line effect due to last year's strikes. Growth in the summer months will be slower than that.

Our load factor fell by 0.9 percentage points in the first quarter. As a result, the currency adjusted unit revenues contracted more than yields.

They were down by 6.6%. Another factor is the structural effect of growth on long-haul routes at Eurowings.

Also relevant is the massive yield erosion of almost one quarter on routes to and from South America, due to the poor economic performance in this region. In the Asia traffic region, the lower booking volumes, especially from Chinese and Japanese travel groups, are now clearly visible.

We're also seeing a similar effect with Americas group bookings. These developments are, although, in line with our expectation, even though the trends are more pronounced than we had expected them a few weeks ago.

Europe and North America, our two largest and most important traffic regions, reported a more stable performance in the first quarter. This was despite the fact that we had increased our capacity across the North Atlantic by 10.3%.

This was based on the reconfiguration of some aircraft towards more economy seats, as well as the less pronounced seasonality on routes to North America. Capacity reductions on routes to the Middle East and Africa had a positive effect on the load factor.

But pricing pressure in this region remains high, driven by the relatively large overlap of our traffic flows of those of the Gulf carriers. Going forward, we expect the regional trends from the past few months to continue into the second quarter.

Advanced bookings are still being made at short notice which limits our visibility into the month ahead. We expect April will be more stable than March which was weak because of the Easter period.

May is expected to be weaker again, mainly due to the higher number of public holidays in our home markets. For June, the first of the important summer months, the outlook looks more stable again, but still with limited visibility due to short term bookings.

Although the comparable figures for the second quarter last year were relatively weak, we're not anticipating an improvement in unit revenues, due to ongoing pricing pressure in the market. By contrast, we're expecting continued reduction in constant currency unit costs, excluding fuel.

Without the non-recurring effect in the first quarter of last year, the unit cost would have fallen by around 2%. All of the cost position that we have been working on since the launch of our SCORE program, have made a positive contribution to this development.

And, of course, the growth of Eurowings is also making a valuable contribution here. You know that the sustainability of unit cost reductions is particularly important to us.

So, in the upcoming quarters, we want to show that we can keep this trend going. Our forecast to the full year remains unchanged.

We're still expecting adjusted EBIT to be slightly above the previous year. The fuel costs projection is unchanged at €4.8 billion which is €1 billion less than last year.

With the exception of lower capacity growth, the forecast for the operating performance indicators is unchanged. However, we may consider further reducing our capacity plans for the winter.

We still expect unit revenues to decline significantly. At present, the magnitude of the reduction is still highly dependent on macroeconomic and political developments in the individual traffic regions.

For the coming months, we do not expect pricing pressure to ease. For the unit cost, we expect the full-year improvement to be less strong than in the first quarter, due to the positive factors I already talked about.

Nevertheless, we will reduce our ex-fuel unit cost this year. Among the segments, apart from the airlines, Lufthansa cargo is under severe pressure.

We only expect earnings to improve again in the fourth quarter which was hit hard by strikes last year. Lufthansa Technik and LSG are performing in line with our expectations.

This forecast still includes restructuring cost of €100 million which we expect to materialize, to a large extent, in the second half of the year. As in the past, this forecast does not include the earnings impact of possible strikes.

Before I finish my presentation, ladies and gentlemen, I would like to remind you of our forthcoming expert session on Eurowings. On June 10, my fellow Executive Board member, Karl Ulrich Garnadt and the management team of Eurowings will give you an overview of the airline's strategy and medium term developments.

With that announcement, I thank you for your attention and now await any questions you may have.

Firstly, can you maybe just give a bit of color where - the capacity reductions, where they'll be coming and the makeup of the 6% in terms of long haul/short haul and within the different airline groups? Secondly, the €100 million restructuring costs, sorry, I might have missed it, but can you give some color in terms of what this relates to and how it splits up?

And then just quickly, looking at the Passenger Airline Group, in the results you talk about prices being down 6.1% constant currency. But in the presentation, it's 5.4% constant currency.

So just why there's that difference; that's on page 5 of the business segments review of the full release. Thanks.

Thank you, Jarrod, I missed the second question, sorry. Could you repeat that?

Just the €100 million restructuring charge.

Okay, yes. Well, I tart with that because that's the very easiest.

We have it in LSG which is the main part, so restructuring in some regions from the full kitchen into the buy onboard switch in some airline customers. We also see part of it in the Lufthansa Group and in the central functions.

So that's, as we said, mainly in the second half of the year. Capacity reduction, we have seen reduction in nearly all areas, more in frequencies than in routes.

For the future, we also, again, look into all regions. For the fourth quarter, we may reduce further also routes, but there nothing is yet decided.

For the page 5 difference of the 6.1% to the 5.4%, I honestly do not have the answer here.

Okay. It was 6.1% constant currency decline on page 5 and then it just looks like 5.4% in the presentation.

But maybe Andreas can come back to me then.

Yes, I think we will come back to you. Because, at the moment, we do not have an immediate answer, because we're sitting with not all single pages with figures here.

We'll come back to you.

Just three questions, please. Firstly, on M&A I know there have been some headlines recently around some potential acquisitions.

I think Brussels Airlines has, obviously, been mentioned and Condor, even SAS in the press. I was just wondering if you could comment at all on any of those.

And, given your ambitions to expand the scale of Eurowings, how easy would it be to integrate separate airlines into the Eurowings platform without risking some cost issues? The second question, sticking with Eurowings, I'm aware that you said that the idea is that you get about a 30% lower unit cost than the mainline airline.

I just wondered if you could comment at all on the yield side, how you're seeing that matching up. Are you seeing similarly around a 30% lower unit revenue?

Or is it a little bit steeper at the start, with the discounting? How's that trending?

And finally just thinking about margins, as you head a bit further out and looking, if I could, just into 2017, I assume you'd like to hold on to your margin. But, obviously, the benefits from fuel do slow down towards the back end of this year.

So when you're talking about capacity cuts, are you thinking that you do need to get back towards more of a flattish unit revenue trend towards the end of the year? Or are there ex-fuel costs?

And if it is, as well, that you think has helped you maintain stable margins, even as the fuel benefits reduce.

Okay, Oliver, well, let's start with the M&A. So, of course, as every year, we did look into Brussels and we're still looking into Brussels if we shall make a call, yes or no.

This decision will take place in the second half of the year. It's depending really on what kind of figures do we see, what is the development in Brussels and to shall we integrate them into Eurowings or should they better be staying as a legacy model.

That brings us to your question how easy it is to integrate other companies. It very much depends on the company to integrate.

The more they are a legacy carrier, the more difficult it will become. Therefore, we would be very careful to integrate - to be restructured, a legacy airline, into a Eurowings model.

For the names you mentioned, I can say that these are media speculations. But, as we said, we would like to have a consolidation in this market and we look if there are opportunities.

So for the lower unit cost, Eurowings has only non-premium traffic since the yields are lower which is expected. On comparable routes, in non-premium area, they are, however, not so much worse.

If you look at the prices of our competitors on the non-premium areas here I think you can also see that on special routes, yields are not so much lower than of legacy carriers. So I think the yield is, the difference in yield is not as high as the 30% lower unit cost you mentioned.

Looking into the margin, of course we would like to sustain the margin or even improve it. That is the target.

We cannot rely, as you rightly say, on the fuel development. Therefore, we have an action area in all companies, still continue cost efficiency.

We're still working with the methodology of SCORE. We have a pipeline.

We're controlling that. So everybody is paying in to also improve the unit cost beyond fuel and beyond what we have achieved up 'til now.

Okay, thank you. So it sounds like you're saying that you could use some of the unit cost measures to offset even if potentially there was some further unit revenue weakness once fuel goes away.

Yes. So in midterm unit revenues did, of course, stabilize.

But on short term we're constantly working on the cost to achieve that via the cost area.

Two questions, please. Just might talk about the North Atlantic market.

It seems to me it was okay in Q1; yield down 2.8%. And maybe just going forward just particularly in terms of the supply in that market.

And I'm talking about the passenger end of course and with Brussels and the event there as well, how the inbound from the U.S. is doing.

And the second thing, I just was wondering because at the AGM Carsten said, made a comment, that setting as a goal for the conclusion of the competitive collect labor agreements for this year, at least as a goal. I'm just wondering with arbitration with the cabin crew, etc., do you think this year is the more palatable year to get something over the line with the cabin crew and also the pilots?

Just your thoughts on that please.

Yes, of course, Stephen. So let's start with that.

We're in constructive talks with both of these unions, a little bit further ahead in the arbitration process with the cabin crew. You know they agreed to not have strikes until summer.

We want to achieve an agreement in this period. You never can forecast developments, but we're positive that we're in a good way here.

For the pilots, as Carsten mentioned, we have constructive talks and, well, I'm careful. But, as he said, the target is definitely to have an agreement this year.

For the North Atlantic, yes, the first quarter was more stable. So it was a good development I would say.

What we see is that non-premium group bookings are suffering from geo-political uncertainties; so what you referring to, Brussels. But we do not have a Brussels impact in general.

So I cannot say and give you a number that we have a negative impact on Brussels. For the North Atlantic, some group bookings, forward bookings, we do not see.

But that doesn't mean that people will not come.

Two questions, please. First of all, just want to return to the unit cost developments.

I think, Simone, you mentioned that underlying, ex the strikes, they were down about 2% in Q1. Could you give us a little bit more detail or elaborate a little bit more, on how much of that 2% decline was due to Eurowings in the mix?

And if we took Eurowings out, what the core network carriers would have looked like on that basis? And how that might look going into the summer?

And then the second question, just returning to the logistics business, given that business now seems to have, not just for you but for the entire industry, structural issues, could you elaborate a little bit more on what your cost saving plans are? How many of the MD11s are now fully depreciated?

And how you think about flexing that business to match what is a very challenging environment? Thank you.

Yes, Damian, okay. Let's start with the unit costs.

You are right. So the underlying, taking out everything like fuel and one-offs of last year, it's minus 2% in the first quarter.

Looking into the Eurowings impact, it would be roughly 1 percentage point. But the passenger on its own, Lufthansa passenger on its own, is minus 2% on a clean basis.

That is obviously the area we really have to focus on. On the logistics side, well, we had already introduced a cost saving program which more goes onto the mid-term area last year.

So we introduced that when we see that the cargo was softening last year. We're now in a cost-saving mode where we look into every single cost item and also into projects going on.

So the usual things you do to really safeguard the results, meaning looking into consultancy, looking into projects, looking into running costs. When we look into the freighters I think they have four MD11 not yet fully depreciated, but nearly fully depreciated.

We introduced the 777. We will look into the strategy of for the cargo during the year, including what we will do with the fleet.

I just wanted to focus on one topic, please, just on your forward-booking visibility and the limited visibility you've touched on. Is it possible to give us a flavor for what proportion of third quarter bookings are booked for this year at this point relative to how that would have looked last year?

Just trying to get some understanding as to how you manage the business as you progress into the summer.

Yes, Neil. Honestly, very, very, difficult.

To give you any figure here I wouldn't feel comfortable. Because of the less visibility and the extraordinary character of the Q3 last year.

So every comparison here will bring us on to [indiscernible]. We, of course, do as much as we can to steer and have the visibility, but we have to be prepared also for short term reactions.

At the moment, yes, we would only forecast the second quarter with a very good feeling.

Maybe to follow-on then, to ask a slightly different way. As you look out within the market are you - we've clearly seen a capacity moderation from IAG last week.

You're, obviously, talking today and we'll hear more as the month develops. But are you seeing competitors cutting capacity and is that having any immediate impact on pricing at this point?

Well, we obviously saw the announcement of IAG. What we see is that competitors are behaving rational, but I do not yet see cuttings in a way that this has an impact on fuel.

I don't expect that amount of cutting. So in the second quarter, less visibility on forward bookings, but as I mentioned, that doesn't mean that passengers are not coming.

I have several questions on SWISS. The performance of SWISS started to deteriorate particularly as of December 2015.

It currently seems that SWISS is losing market shares in Zurich. Lufthansa Airline Austrian seem not to be affected by the GDS fee, but do you see SWISS traffic reacting most to the GDS fee?

And then, so far this year SWISS capacities have not increased significantly, I believe they received only two of the six 777s expected for this year; and, as of summer, they will start to receive the Bombardier aircraft. How shall we think about load factors of SWISS for the remaining of the year?

And do you still expect nine Bombardier CS100 aircraft for this year? And finally, in case performance of SWISS will remain weak, do you have flexibility to postpone some of the aircraft?

And do you have flexibility in the Group to move aircraft of SWISS to other airlines? Thank you.

Quite a lot. So, SWISS losing market share, I cannot confirm that.

SWISS is obviously in a strong position and had quite high margin. What we see - although and as I mentioned is, they have to produce in Swiss francs, mainly and others are producing in other currencies and, therefore, the price pressure is there.

So I would say that is the bigger concern than just losing the market share. The GDS, as far as we see, has no impact and SWISS neither than on the other airlines.

So we do not see that impact here in Switzerland. So, the capacity increase and the load factors, we have to watch.

At the moment, we do not see a major decline and don't plan for a major decline. Therefore, we expect that the CSeries will be delivered as planned.

What we hear is that they have a very good performance and I would even expect some passengers going onto this aircraft, because it's so exceptional well.

Does that answer your questions, Ruxandra?

Yes. Maybe about flexibility to postpone some aircraft and to move some aircraft of SWISS to other airlines in the Group?

Well, in general it's possible to move aircraft within the Group. We just did it from Lufthansa to Austria.

At the moment, I think we don't see that it is needed. I don't see that it is necessary, but theoretically it would be possible.

Also, a few from my side. One focus on Austrian where you mentioned a mid-double digit positive one-off and, well, that means an underlying deterioration of the result.

You're still guiding for a significant improvement of the result at Austrian Airlines. So, my question would be, is that including the one-off or will we see an underlying improvement over the rest of the year?

And a little more general question. Austrian, it has gone through significant restructuring over the past years, weight, conditions, etc.

and still it seems, at the moment, that the result pressure continues. Is there more you can do about Austrian?

And what is the general competitive positioning right now? And maybe one follow-up on Cargo, as the question was already asked.

You continue to operate a large fleet in the business. Is there any fixed date later this year where we get an update on fleet planning there?

And, yes, what are your thoughts on the business, because right now it looks like it is likely turning into a loss maker here? Thank you.

Yes, Michael. Okay, yes.

The significant improvement guidance is including this one-off effect. Without that effect we see there is an improvement in Austria and they made huge progress in the last year, but the - without the one-off, we expect them at the previous year or slightly below previous year.

So in general, we can confirm that this year is - the Austrian is on track but this year is burdened with MRO costs. So we have some additional cost which is, again, putting a burden, despite all the restructuring areas.

I think they make further progress; they are on a good track. There may be some routes, as you know we introduced Eurowings also to Vienna which we may decide to go with Eurowings, but there is no decision yet.

I'm still very confident into the SWISS efforts. For the cargo, there is no fixed date where I will make an announcement.

I do not want to put myself or our team under pressure, so that you phone me all on this day, but during the year we will look into the strategy and we will have considerations about the size of the freighter fleet, as well as further measures with the cargo business model.

I was curious just to have a little discussion on the airport strikes that we saw last week from there. Obviously, it's airport workers not your own.

But to what extent are we concerned that this might drag on and impact your trading? And equally, does that interact with the industrial relations challenges that you face yourself?

I would like to ask about the Singapore partnership and how far advanced you are on moving towards some form of joint business model there? And how do you regard the news coming out of France that Singapore are in talks with Air France about doing some form of joint business model as well?

And then just finally, over on Eurowings, you spoke about the weakness in profitability coming from setup costs of the organization and the operational problems of earlier in the year. How is the underlying, more traditional short-haul business that Eurowings is trading, given that obviously you've got a reasonable cost base but you've got a fairly lively competitive base?

Okay Andrew. First one, the strike for the public workers and Verdi is solved.

They signed on Friday night, so we do not expect any further strikes here. Obviously, we're always concerned that we're also suffering from strikes of totally different businesses.

Therefore, we're also looking into political means to solve these kind of strikes at airports. But this one is solved, so we don't expect any further, Singapore is signed.

So there, no further negotiations, so we're on a good track. As we do in the other joint ventures we're looking into possible further progress into co-operation.

Air France, actually, I have to admit I do not know. I didn't hear about that and, therefore, I cannot comment it.

Eurowings. So we have seen mainly the setup cost for the long haul and the beginning and the operational costs of the long-haul which has an impact.

On short haul, it is Vienna that has an impact. So there is to some extent also a lower profitability in the underlying business but, at the moment, I cannot give you a figure for that.

Okay, can I just come back on Singapore? Have you got regulatory approval to do all the collaboration that you want or are we still pending some regulatory approvals to be fully implemented?

Yes, we're under way, so we gave it to the authorities and we expect an answer in short notice.

Two from me. Firstly, in relation to the DCC, I appreciate you mentioned that the impact at SWISS has been quite muted.

But I'm just wondering that whether across the hub airlines the softness that you're seeing in terms of non-local bookings and group bookings whether any of that's been attributed to the impact of the GDS levy? I guess by extension, are you recovering those bookings on your direct channels?

And then the second question is just in relation to ex-fuel unit costs. You mentioned that underlying, excluding the strike impact it was minus 2% in Q1.

Can you just clarify what the momentums like at the hub airlines, in particular? And also, could you maybe give some flavor in terms of how much of that was impacted by the premium economy initiative?

Thanks.

Okay Jack. So for the DCC, we have to continue to say it is neutral.

So we do not see any negative impact when we look into all our sources. Yes, of course, there are some channels which do not go by that, but we see an increase in the online bookings and we have to pay additional costs, yes, but we also have additional fees out of the fees we're asking for when you use the channel.

So in this regard I just continue no impact financially neutral and important for us this strategic move, so that we have direct access to our passenger and to see the opportunity for higher ancillary revenues. So for passenger airline, the fuel development, you said the minus 2%.

We regard this as a sustainable development. So in this regard I think we can be proud to say after we had the concerns and your concerns in the fourth quarter about this development that we have made a turn around here and we have a minus here and I expect to see that minus during the whole year.

When we look into the premium economy impact, itself has had only little impact on the unit cost. The mixture of the premium economy seeing the revenues we get per square meters although has a very good impact.

Just a couple from me as well. On the catering side, can you talk about any expectations you have around how the behavior of Gategroup could potentially change after its takeover and anything you're thinking there?

And secondly, on the management tier that you guys are removing from the business, can you talk about any of the impacts there? Whether that's helping with this return on capital message that we've heard for a couple of years?

Whether that's filtering down quicker or whether there's been any other impact from that? And then finally, just on demand by segment, if possible.

So I'm thinking some of your competitors try and help us by splitting out what they're seeing from big corporates, what they're seeing from SMEs and what they're seeing from leisure within the whole picture, obviously. Is there any color you can give there?

Thank you.

Okay, Anand. So let's start with catering.

I do not expect so many changes from Gategroup, just because they were bought by HNA. So that is normally a holding company.

I do not expect that they will totally change now their policy or their strategy. So I would expect no changes.

For the management reduction, we're on the way in our commercial area to make the new structure with the management, as well as the line functions and the process owners. One very important impact we see is faster decisions and, of course, take out redundant work.

We have, also with the management, of course, not just the possibility to just reduce 15% of the management without negotiation or restructuring payments. Therefore, some restructuring payments are in our plans to go through that.

When we see the demand by segment, it is in line in what we said regarding this result in mid-March. So the non-premium is weaker, especially the Group bookings from Asia and the U.S.

I mentioned; and all is more short term or the leisure is more short term. In corporates, at the moment, we have no concerns and no changes in booking behavior.

Can I come back to the question about the underlying earnings at Eurowings? Can you quantify the project costs, in particular, in the first quarter and how they're going to phase out in the remainder of this year?

And secondly, with regard to Fraport on the tariff. Is there any change of a multi-year agreement with Fraport and what do you think its range of tariff change that you would like to see on the table in your negotiation?

So for Eurowings, we see that the project and the ramp-up cost is a low two-digit million euro amount. So yes, that's it.

For Fraport, well, we hope that we can come into good negotiations on a midterm, but you know that the negotiations are difficult. We're prepared to question, as we did in Zurich, the formula Fraport is using.

But, at the moment, it seems that we're on a constructive negotiation work.

Can I just check on that low two-digit-million euro? Was that just for the first quarter?

And is there an expectation for project costs in the next quarter?

Yes, it was for the first quarter. It should be going down during the year, but I cannot guide you every second or the second and third quarter.

But the check should be lowered down during the year.

And what exactly is the project cost for?

Well, for example, the foundation of Eurowings Europe in Austria, ramp-up, training of pilots for the new A320 model, so all this kind of stuff.

Royal Bank of Canada. I just wanted to come back to the yields if I could, since it hasn't been a question that's been asked yet that I could see.

I just wonder if you could tell us a little bit more about how the yield outlook changed by cabin in Q1, i.e., first in business versus economy? And also, alternatively maybe, via the sort of how much of your route structure in Q1 was mature rather than had been started within the last 18 months?

Thank you.

Well, for the yield, we can say that in the outlook, the premium is more stable than the non-premium. That's all we can give you at the moment.

We don't guide further here. So the premium economy, of course, helps and we see that we have some premium yields on some routes for also premium products, but I cannot say that generally.

So we really can prove it on some routes. But, in general, we cannot say, okay, it's this and this premium on all routes.

Is that answering your question?

But just to be clear, because it sounds like in the summer, you've got more growth in the non-premium, the mix effect would be slightly adverse for the summer period. Would that be fair and then, hopefully, improve in winter?

Or is that extrapolating too far?

No, I think that we can confirm.

That was the last questions that we had on our list. So thank you very much for attending the call.

Looking forward to catching up later. Thanks and bye, bye.

Thank you. Thanks.

Bye.