Deutsche Lufthansa AG

Yes. Good afternoon, everybody, from Frankfurt.

Ladies and gentlemen, yeah, a warm welcome, first of all. We need to have time for this even on a very extraordinary time of this company.

You all know we had planned this day quite a little bit different, but things are where they are. So, as a matter of fact, since also the top management in the meantime is practicing social distancing, this will be also the first time where I'll be talking to you here from Frankfurt, and our CFO, Ulrik Svensson, will talk to you later from Stockholm.

And of course, we'll be answering your questions according to who they address to. Let's talk with the sentence or start with the sentence which probably I wouldn't have used the same way two weeks ago, but I'm really convinced it's the right sentence now.

This company, this industry, and maybe soon the global economy is in a state of emergency. And our analyst conference, therefore, to a large extent, basically has become a corona crisis conference.

That's quite sad to be honest because we are losing sight of our achievements in the last year where we generated an adjusted EBITDA of €2 billion despite all these significant headwinds. But today, of course, the corona crisis is overshadowing everything.

The crisis is hitting us hard. And during the next few months, business will be everything, but normal.

Bookings have basically almost decreased to zero. We were yesterday about to decide to suspend the flight operations for Air Dolomiti for the first time in history.

This is still being decided now. But what is decided is that Austrian Airlines will no longer offer scheduled services.

Brussels Airlines will have to suspend their flight operations for four weeks at least, starting Saturday. And next week, even Lufthansa will close its mainline operation in Munich, with only some city line flights, our regional carrier, remaining.

The cancellations in our network trace the exceptional course of the corona crisis. And by mid-March, this figure had already reached 50% and we currently offer only 20% of our claimed short and medium haul flights and even only 10% of long haul.

However, given the latest travel restrictions, we must continue to reduce and we will now almost completely discontinue intercontinental flights. Compared to the originally planned forum, this will leave us with only around 5% of scheduled capacity.

We have launched a wide range of measures to help cushion the impact of this crisis. We have not only reduced capacities very, very swiftly, but also quickly introduced stringent cost-cutting measures.

Our focus is on protecting cash flow and liquidity in times like this. We have, for weeks now, imposed a hiring freeze, and we're offering unpaid or early vacations, as well as various part time working models.

We have agreed with the unions to introduce short-term work, or kurzarbeit, as we say in Germany, in all companies where it is possible and where it makes sense. In order to safeguard the company's liquidity, the Executive Board has also proposed to our AGM not to pay a dividend for the successful year 2019.

At the same time, we are in intensive negotiations with policymakers on how we can mitigate the consequences of the crisis. These discussions include the following: Potential legislative measures to support liquidity.

For example, the deferral of taxes or other fees. The potential use of loans and guarantees, if necessary, which government has made available to those companies most affected by the corona crisis.

The implementation of short-term work, which is already on the way. The waiving of the 80/20 slot regulation, very important.

And the EU passenger rights regulation, so called EU261, which also needs to be made more flexible at this stage. We cannot compensate for corona-induced flight cancellations.

These must be seen as exceptional circumstances. If this is not exceptional, ladies and gentlemen, what else is?

Furthermore, we are implementing structural crisis management tools where we look beyond the next days and weeks to make sure that we get through the crisis with sufficient liquidity and also to set the right long-term costs for the group for the days and years to come after the crisis. Ladies and gentlemen, this company, this group, this management has mastered numerous challenges, and it's in these situations when Lufthansa shows its full strength.

We must and we will, I promise you, use this crisis to seize also strategic opportunities because there will be no back to normal. Lufthansa will not be in business as usual after this crisis, neither will the industry, and we will not hesitate to address also continuous issues.

For example, if our operational structures are still appropriate and so on. I think we have to rethink the entire group whenever this is over, or while this is happening and we're waiting for this to be over.

And that's why I'm confident that we will eventually emerge from this crisis – however long it lasts – as an even stronger company. And with that, I'd like to hand over to my colleague, Ulrik Svensson, our CFO in Stockholm.

Thanks right now for listening. We look forward to your questions after Ulrik's presentation.

Thanks, Carsten. It goes without saying that the corona crisis is the absolute focus of group management at the moment.

Nevertheless, let me briefly present you our 2019 financial results before discussing the financial implication of the current crisis in more detail. 2019 was by no means a lost year.

We made significant strategic progress in various parts of our business. Eurowings was clearly a bright spot.

We presented the turnaround plan in June in the Capital Markets Day and they had already good progress in Q3 and, most importantly, in Q4. Nonetheless, financial results were lower in 2019 compared with the year before.

We were unable to pass on higher fuel costs because of the lower economic growth in our home markets, which affected customer demand, especially in the premium segment. In addition, the Logistics business suffered from the sharp decline of the global air cargo market.

On the positive side, we continued to reduce costs for the fourth year in a row with a cost reduction. Performance at the network airlines reflect the challenges we face in terms of lower economic growth, especially in our home markets, and weakening corporate demand which led to high levels of price sensitivity.

In the full year of 2019, unit revenues at the network airlines declined by 3.1%. Unit costs declined for the fourth consecutive year in 2019.

They were 1% below the prior-year level, primarily because of productivity improvements and lower irregularity cost. Taking a normal €600 million fuel cost increase into consideration, adjusted EBIT at the network airlines declined 26% to reach €1.8 billion.

At Eurowings, the turnaround gained further momentum, especially the optimization of the network, a cornerstone of the turnaround plan presented in June. Has yielded good initial results, performance improved in short haul and long haul.

As a result, Eurowings narrowed its operating loss in the full year to a negative €166 million compared to a negative €231 million in the previous year. Turning to the non-passenger business, Lufthansa Cargo recorded just a very small operating profit in the full year of 2019 as the global air cargo market remained weak in the seasonally very important fourth quarter as well.

Lufthansa Technik, however, showed its resilience and grew its profit at double-digit rates. Profits in the Catering business did increase at a double-digit rate, primarily driven by good performance in North America.

Turning to the balance sheet and cash flow, investment declined to €3.6 billion because of less aircraft deliveries. Adjusted free cash flow amounted to €203 million.

The increase of net debt level was largely related to the first time application of IFRS 16, resulting in an increase of €2.4 billion from the capitalization of operating leases. Excluding this effect, net debt amounted to €4.2 billion.

Pension provisions reached €6.7 billion at the end of 2019. The 14% increase compared to the prior year was largely due to the decrease of the discount rate to 1.4% from 2% in the previous year.

The pension liabilities and the increase has no impact on P&L or cash flow. Let me now turn to the corona problem and the corona crisis, which is posing an unprecedented challenge for us and the airline industry.

As Carsten alluded to earlier, we are experiencing significant booking declines, especially since the corona breakout in Italy at the end of February. The implementation of travel bans in the US and in many European countries have resulted in a further deterioration in the past seven days.

At the same time, cancellations are increasing. In response, we have expanded rebooking options and usage vouchers for customers to allow them more flexibility and to limit cash-out related to refunds.

Our response to the crisis has been fast and determined. We have kept our flight schedules quicker and more comprehensive than most other airlines.

At this stage, capacity is around 70% below prior levels. This figure will increase further in the coming days due to the implementation of further measures, which Carsten discussed in his part.

Our swift response to the crisis has meant that we have been able to successfully safeguard the load factors for weeks in which the crisis had already started to affect demand. However, already since several weeks, we had focused financial management entirely on cash and the preservation of liquidity.

Taking out capacity in time is a key action in that respect. When it comes to minimizing cash-outs, we are benefiting from our fleet strategy and the fact that we own the vast majority of our aircraft.

This saves us lease costs, which would otherwise burden cash flows and limit operational flexibility. As a consequence, our share of variable cost, amounting to around 60% at the group airlines, is very high by industry standards.

These costs primarily related to fuel and fees and charges are eliminated immediately when canceling a flight. However, it is clear that the scale down of operations will not be enough in the current crisis.

We will leave no stone unturned to save all possible costs. Non-variable costs, which we consider just semi-fixed from now on, account for around 30% of the airline cost base, leaving aside depreciation as a non-cash item.

We target to reduce them by one-third. This starts with personnel costs, which amount to around €9 billion euro per annum for the whole group.

We are in the final stages of implementing so-called kurzarbeit – German for short-time work – in various part of the group. And this concept allows us to shorten the work time of employees who are on the scope of kurzarbeit by up to 100%.

For a maximum of 12 months, the government compensate employees for a large part of the resulting wage loss. At Lufthansa, we have already signed the application for the cabin personnel.

Preparations for other working groups, in particular ground staff, are ongoing. Other group airlines, such as Austrian and Brussel airlines, are in the midst of implementing the same or similar concepts.

Many other personnel measures have been taken. This includes the reduction of considerable overtime hours, which have been built up during the expansion of the business in the past few years.

We're also enforcing unpaid temporary leaves and mandatory holidays. A hiring freeze is in place too.

All non-safety, irrelevant trainings will also be canceled or are already canceled. We have also stopped all marketing activities.

Project in all areas have been radically postponed or canceled unless they are critical to operations and safety. The same applies to aircraft and engine overhauls and maintenance, which really shifted to a later date wherever possible.

Wet leases are canceled following the overall cut of capacities. We have also started to negotiate the postponement of planned investments.

The majority of these investments, originally forecasted to slightly exceed €3 billion in 2020, relate to the acquisition of aircraft and engines. We are aiming for a drastic reduction.

Please understand that our discussion with the manufacturer is confidential at this stage. We will update you on the outcome once talks have progressed further.

Current liquidity of around €4.3 billion, plus an unutilized credit lines of another €800 million, offer us good protection in the coming weeks and months, even in the scenario where our fleet is largely grounded and new bookings come to an almost complete stop. However, more will be needed in case of a prolonged factory shutdown of the global aviation system.

Having raised around €600 million in the last few weeks already, we are currently in the process of issuing additional stocks. Our high level of fleet ownership put us in an almost unique position when it comes to tapping the credit market.

We own 87% of our fleet, of which almost 90% is unencumbered. This corresponds to a book value of around €10 billion, which we can pledge to creditors if necessary.

In light of the exceptional crisis, we propose to suspend the dividend payout for 2019. The decision is just another reflection of our absolute focus on preserving liquidity.

It ties in with my comments at the Capital Markets Day in June, when I said that our policy of paying out between 20% to 40% of net income would not apply in times of extreme external shocks. It is our intention to return to attractive payouts as soon as our financial situation allows.

In the current situation, it is impossible to give a more detailed financial outlook than the expectation of a significant adjusted EBIT decline in 2020. The extent of the decline will largely depend on the future spread of the coronavirus and how customers and government authorities will respond to it.

We will do our utmost to limit cash cost to the absolute minimum, to protect our balance sheet and to assure sufficient funding. And allow me a little personal note here.

As many of you know, I was the CFO at SWISS at its darkest moments in 2003 in the middle of the SARS crisis. And in those days, we took very drastic measures.

And when we came out of the crisis, since then, SWISS has always been one of the most profitable airlines in Europe. Of course, also very much benefiting from the large network synergies within the Lufthansa Group.

Thank you very much. And over to Frankfurt.

So, we will now be happy to answer your questions.

Good morning or good afternoon, everybody. Hopefully you can hear me.

If I could ask three quick questions, please. The first one with respect to current liabilities.

Excluding forward bookings, which I think are – at the risk of self-explanatory, I think you have over €9 billion of current liabilities as at December at least. Just interested how much of these are payable in the next three months and how much of them are deferrable?

The second question on the €10 billion of unencumbered aircraft. How much do you see of this value as utilizable to raise funds?

Is it all utilizable? And any insight in terms of when we can expect, for example, sale and leasebacks to be announced would be very welcome.

And then the third question. Carsten, you mentioned rethinking the entire group.

And again, that's an obvious task for many airlines at the moment. But with respect to Lufthansa Technik, does Lufthansa Technik potentially play a role in terms of you raising liquidity now or in the future?

And how do you think about that as a useful asset at this juncture? Thank you.

Yeah. So, maybe I start with the financial questions.

In terms of the current liabilities, it's basically only the accounts payable which is a bit more than €3 billion, which is something to consider in the next three months. When it comes to the €10 billion unencumbered assets, it is indeed our intention to continue on our successful path to use them as pledges with different banks.

So, we are not thinking about a sale and leaseback. I think it will be the wrong time to do that.

We are still, as of this week, having good discussions with the bank. Everybody knows that this will not last forever.

So, you'll get good values, so to say, in terms of collateral values for the aircraft and we get fairly good interest rates. So, this will be absolutely the wrong moment to do a sale and leaseback.

And I guess the last question, are you doing that question, Carsten, or should I do it?

Go ahead, Ulrik. Go ahead.

Just it's easier to keep going. We have the same opinion anyway.

Yeah. So, Lufthansa Technik IPO.

Well, at this stage, of course, there are no discussions at all on any IPO things. As has been written in the press, there has been some rumors about Lufthansa Technik is going as an IPO.

If we sit here five years later, I'm convinced the majority of the ownership of Lufthansa Technik would still be within the Lufthansa Group. But this is nothing we are discussing at all for the moment.

Thank you.

Hi, gentlemen. Wish you all the best.

Two questions. One is kind of on the line of Neil's, but just for Ulrik, first of all, just delving into a little bit more detail about the current contract liabilities.

I think it's on page 192 of the annual report. So, there's about €4 billion from unused flight documents and then there's €2.2 billion from customer loyalty programs.

I just want to know how that kind of unwinds? Do you give credit for customers to fly again in the future in terms of cash?

And then, the second question is more for Carsten. I think you might have said something on the press conference earlier on about maybe the industry, obviously, changing post this crisis, but also that maybe Lufthansa could be – I don't know you meant a smaller, tighter, efficient operation than it already is.

Maybe just might kind of amplify or clarify if I got it wrong. Thank you.

Yeah. So, I start then on the financials.

It's a combination of what you said that it's like more mileages than unused flying documents, which of course is a combination of actually tickets which no one can redeem even if they wanted because they are, so to say, unredeemable tickets in themselves. We have, as I mentioned in my speech, done a lot of flexibility for our customers when it comes to rebookings.

We have issued vouchers. So, I don't see this as a large problem short term, that those billions are existing there.

So, with that, I hope you are having answered and I leave it all to Carsten.

Yes, thanks. Well, I think there's two messages I was trying to get across in the press conference.

I think the global economy will shrink. I didn't want to be too explicit on that on a public conference because there's citizens listening, politicians, people like you probably share my view anyway.

And at least you would know where I'm coming from. So, I think anybody who bears some public responsibility right now needs to be a little bit careful of how we make people even more nervous in this crisis.

I don't want to be part of that. But in this group of people listening now, I think we all know this will have a serious impact on global economy.

I would assume that maybe the German output in these days is maximum 50% of the usual GDP output. So, you have that for one month, means you are missing basically 4% of national GDP, times 24, it's more or less 100.

So, there will be a smaller global economy, and that means smaller airlines in total because we all know we're hypersensitive to GDP growth or shrinkage. In that smaller economy, in that smaller aviation world, I think Lufthansa will come out as a winner.

No doubt. Ulrik and I gave indications there will be other airlines who bankrupt, airlines who want to be part of a group which are not part of a group now, some will completely disappear.

So, in relative terms, I am very optimistic we'll come out as a winner. In absolute terms, number of passengers to be flown after this crisis around the world, since the number will be lower, we better prepare this airline now with the talks with the unions and all that to come out of this crisis as it is now with Lufthansa and SWISS and Austrian to be rather smaller than anything else.

So, that was a little bit more to what I was trying to get across at the press conference without making the German public even more nervous.

Understood, Carsten. Thanks.

And thanks, Ulrik. And thanks, Dennis.

Thanks. And three for me.

And I reiterate what Stephen said. Good luck.

And, I guess, a lot of people depending on you. One thing, firstly, we've got to a situation which is obviously extreme.

What happens if you don't fly to your hedging losses now? Can you quantify a quarter of not flying, what that means for hedging losses, which just fall all the way through now and what cash cost would come through?

Secondly, you spoke a little bit about MRO, but you did have plans to sell the rest of the world Catering business. Is that on hold?

Or is that – are you trying to speed that up? And then, just thinking a little further ahead, are you looking at potential write-downs?

I'm talking about bands or slots or other items on the balance sheet, which, as you're saying at the moment, the economy is going to be very different at the moment, unfortunately. So, cost and how would you think about it, Ulrik?

Thanks.

Yeah. So, starting from the bottom, we do not create have any large assets on our balance sheet compared with some others, so there is no real huge slot assets and so on.

So, there is probably not so much on that side. When it comes to the rest of the world, LSG, yes, indeed, that we are pausing.

It doesn't make sense to continue that process where we are today. And it will have to be restarted when the corona crisis is over.

What I can say, however, there was a lot of interest in the process before we now paused it. If we do not fly, what does it mean for our hedging?

Well, there will be a certain, as you say, loss going through the P&L every month, which will then be classified into financial costs since there will be no flying. Of course, there is no oil being bought.

This, however, will not be a huge amount from a cash point of view, the way the hedges have been set up. So, that is not a concern from that aspect.

Okay, thanks very much. And good luck.

Thank you.

Hello. Two questions, please.

First, which employee groups are eligible for short-time work in Germany and do you plan to introduce short time work in the MRO division as well as? And as of when do you expect the short time work program to work?

And second, how has the performance of the MRO business been in Q1? And what do you expect for this business over the next month?

Thank you.

Maybe I start with the MRO business in Q1 and maybe, Carsten, you could speak about the short time work. So, clearly, the MRO business is holding up very well.

There is full activities going on within Lufthansa Technik so far. But if this is going to continue as the way we are looking at from the present moment, it is, of course, impossible to assess.

So, at some stage, of course, they will also get issues if their customers are going to pay or not. So, therefore, I think Q1 will be fairly normal, but then the question is what is going to be going forward.

In terms of short time, do you take that one, Carsten?

Absolutely. To be honest, that question is changing every hour almost, every day.

Right now, we have applied for short term for the holding company, for the mother company and for the airline which is legally the same. That's 31,000 people.

This is being done while we speak more or less. And everything else will depend on how the situation will look in a few days.

Right now, MRO is busy. But let's see, a week from now, how many planes there are left owned by airlines which can afford to do MRO, including our own aircraft, which of course will be left to be maintained when they don't fly.

There, I'm sure will also be kurzarbeit eventually for MRO, but I cannot tell you now how many days this will be. In the end, this industry will be on the ground one way or another in Europe and every staff member of this industry will be more or less not be needed, with very, very few exceptions of maintaining aircraft, maybe maintaining minimum operations.

So, we shouldn't underestimate what we're heading for. As a matter of fact also, Lufthansa Technik CEO is – and his team – in the preparation for the kurzarbeit and will just be a few days behind us in the end.

Thank you.

Hi. Good afternoon.

Three from me, please. Just on this €10 billion of potential drawdown against your own fleet.

I was wondering, A, how quickly you can draw down, and secondly, what sort of quantum you could do, whether you're going to do it in stages of €1 billion or several billion to start with? Any sort of detail will be useful.

Second one is on what sort of progress you're making with German regulators and airports on things like aviation taxes, general environmental taxes, as well as airport parking fees. And then thirdly, I know you don't want to talk about numbers on Airbus or Boeing, but perhaps just give us an indication of what sort of flexibility you're seeing which you may not have seen before in terms of delaying aircraft without financial penalties?

Are you planning to actually take near-term deliveries that are committed? Thanks.

Yeah. So, maybe I start with Airbus aircraft and the €10 billion.

And maybe, Carsten, you could take the regulator question. So, speaking about the €10 billion we have in unencumbered assets, we are having quite a number of discussions which we started before this got as difficult as it is now.

Started with a number of bilateral bank relations we have on aircraft financing. We also have our JOLCOs, the Japanese operating leases, which was started already in January, February.

So, I think a big portion of them can be effectuated over the next couple of weeks and months. But, of course, not in the tune of €10 billion.

That will be needed a much larger transaction than we're speaking about for the moment. When it comes to aircraft, I think it will be the same for most airlines.

So, there will be very little deliveries going forward. It is as practical that you cannot really send down teams to the individual suppliers and actually get the aircraft home.

So, I think you can count on a very large reduction of aircraft deliveries and CapEx going forward. Regulators, maybe, Carsten?

Yes. On talking to the government, it's obviously the German government, but it's also the Austrian government, the Swiss government, the Belgian government and the Italian government since this is the countries we are operating airlines in, leaving SunExpress in Turkey out for a moment.

But it's even beyond our home governments because, when it comes to 261, I think we're all aligned in airlines for Europe with the EU regulators that this, of course, is extraordinary circumstances. So, I couldn't list you all the government talks we have been having since a few days here.

When it comes specifically more to Germany – of course, the focus is right now to defer payments, tax payments, whatever. And the same time, change regulation where it has to be changed.

Slot regulation and 261. Now, the next level, you know the statement of the German government, whatever it takes.

So, if there was a need of Lufthansa to get extra liquidity, obviously, the German government would be ready to extend it to us. But as Ulrik said, with more than five something liquidity left or €5.1 billion, including the unused credit line, that's not our concern on the next days.

I'm much more concerned for all us European players, how do we make sure that we come out as a winner in this global competition which will arise during this crisis than on only how we're going to now access government funds to get over the next months. I think that will be fairly – not easy, but will be strongly supported by various – maybe all governments.

But not to lose our global competitiveness, I think it's a much more challenging question to answer.

Right. Thanks a lot.

Good morning. Few from my side.

Firstly, on the cost savings plan and one-third of savings on the fixed cost side. Do we have already attached some numbers to the various elements?

So, short-time work and the other things you're planning. Just to have a rough idea where the savings are scheduled to come from.

And then, secondly, we spoke about delays of aircraft deliveries. Is it possible to give any rough number on CapEx spending?

Maybe your bandwidth what could be possible this year. And then, last, not least, I'm sure you're doing plenty of scenario analysis at the moment.

What do you think is realistically possible when flight operations can gradually be relaunched? And what are yourself preparing for?

Thank you.

Maybe I start with the financial ones. In terms of delay of aircraft and the delay of the CapEx spend, not really giving any ranges, but I think it's going to be a very small number.

In terms of the fixed cost and the fixed cost savings, you have to bear in mind, and it's easy to sometimes forget, that we only started in this scenario where we are now kind of two weeks ago. So, we're clearly – there are a lot of things which we are doing.

But when exactly it will bear fruit is a little bit too early to say. But there is no doubt that ordinary project costs you have in a large group like ours, they are going to be really minimized to nearly nothing.

And the other large item, of course, is the personnel costs, where in different jurisdictions, of course, the personnel cost is nearly variable in some parts of the world, while here in the middle of Europe, it's more difficult and it's all due to how quick we get in place the kurzarbeit, as Carsten mentioned already earlier. Carsten, you take the third one maybe?

Absolutely. For the first part of your question, I think at this point, nobody can answer.

The governments around the world, I think, are learning day by day. We had an IATA call 10 days ago.

And when some of the European players – since I was chairing it, I was trying to take a little bit of a more conservative role, suggesting talks about this in future. Some of the people around the world thought we have smoked the wrong pot.

And then, 10 days later, you know what happened last night in New Zealand. New Zealand closed down.

Australia closed down. So, I think this is a very dynamic situation.

None of us, none of the politicians have ever been through. Your second question, though, because we are, of course, pilots here and engineers and we have a reputation to lose.

So, of course, we have plans. The ones we have is 3 months on the ground, 6 months on the ground, 12 months on the ground.

Those three scenarios we'll be working on the next days and weeks.

Thank you very much.

Hi, Carsten. Hi, Ulrik.

Hi, Dennis. Can I ask you about the press release out of IATA and A4E yesterday, lambasting the EU proposal that would require you to pay refund to canceled flights rather than vouchers?

And equally, there's the duty of care issue around the EU261? How confident are you that you can get the commission to see sense there?

I appreciate that they took some time to get there on the slots. But can we get that changed?

And then otherwise, whilst you say that – it's clearly positive that the German government is ready to stand behind Lufthansa. Around Europe, around the world, states are also standing behind airlines which are perhaps less solid, and so we'll have less consolidation potentially through this process.

Do you see that as a concern that the weak carriers will not exit because of the level of aid coming? Thanks.

Well, Andrew, let me start with the first question on 261. You might have even referred this.

Two weeks ago, we were all on stage in Brussels, Airlines for Europe. And mainly, it was a thing really I myself who said we need to get rid of this 80/20 rule because this is so obvious.

This industry needs it. It can only be a question of days.

And then, some in the room, including airports, oh, no, let's wait, maybe things will get better in April, we cannot do this for the whole summer, blah, blah, blah. One week later, it not only happened, but everybody has been – everyone woken up.

261, how confident am I you ask me. If I had to put my money on it tonight, maybe I'm only 60% confident.

What will happen in the next three, four or five days in your home country, in my own, in northern Italy, in the US, we'll be looking at ourselves a week from now and saying, you've got to be kidding that this corona is not extraordinary circumstances. So, I think some of these issues, the daily news and the daily effects play in our hands.

So, it gets more obvious where we are even for those who initially don't want to support that view. So, I think it's obvious if this is not extraordinary, what else in the world is.

The consolidation question. Again, I'm very early in my strategic thinking here.

But here's my little logic. If this would only last a few weeks, it might accelerate consolidation because the strong ones will somehow get through and the weak ones will not get enough support to really come over the disadvantages of such a crisis.

But this will not last a few weeks. If it lasts half a year, that probably slows down consolidation because every country in the world will then have and take the time to safeguard their airline one way or another.

If this lasts a year, this will get so expensive that many airlines in the world, even with government support, probably couldn't come out of this in a healthy way. So, maybe it accelerates consolidation again.

Now, don't force me to put that on the slide. But my thinking I think, as you can understand, long term, this will not stop consolidation because the pressure of the industry will be higher.

And the healthy ones as always will take more advantage of the health and the unhealthy ones are able to fix it. And usually government support is just a short-term drug.

But this could be so big that it's really difficult to answer your question in more detail, but my thinking I wanted to bring across as an answer.

Carsten, can I just come back? What about the process of allowing – or the EU requiring refunds?

Do you think they'll roll back on that as well?

Again, this is a little arrogant if I look what it means to us to refund everybody.

Yeah.

How could somebody with a let's call it different balance sheet be able to do it? That's billions going out right away.

So, I don't see how this industry – the US carriers even, who are all much healthier than most of us Europeans, they announced they don't refund. I understand.

I need to do some research on that. So, also there, Andrew, a few more days.

I think we all know more.

Yes. Good luck, guys.

Good luck.

Hi. Hello, good afternoon.

I have two questions. One, you talked about the liabilities, but what about the €2.8 billion of receivables that you had at least as of 31st of December?

How likely it is that you can cash that in and how soon can you collect it? My second question is, can you talk a bit about cargo?

How much of your capacity can you keep just with the cargo fleet? And how much of the remaining capacity that used to be barely cargo is economic for you to still have it through the crisis?

Yeah, so starting on the receivables sides, which is of course more for our non-airline businesses, Lufthansa Technik, it is Cargo, LSG and so on. As speaking about it only three, four days ago, indeed, the customers are still paying those receivables.

So, as we speak, cash is indeed coming in. But it's a bit like Carsten say, if you look two weeks later, of course, it might be a different situation.

Will you take the cargo question and [indiscernible], Carsten?

Oh, yeah. Cargo, rough calculation, in normal times, we have 50% of our cargo in freighters and 50% in the bellies of the passenger, mainly wide body fleet.

So, assume you will take it to an extreme and we would fly every single wide body aircraft only for cargo, and that will not happen. But to answer your question, we would bring up the cargo capacity to exactly the same level as we had it before.

No way that would be profitable and it will not happen probably for other operational reasons, but the capacity of Lufthansa, again 50% on the freighters which are all being used now and probably making great money while we speak, and could be up to another 150 wide bodies who could be used, but I don't see that happening, but we are preparing 330s and 748 to be ready when the need arises. Well, that's the math behind your question.

Hi. I just wanted to follow-up on the fuel question.

What sort of instruments do you have that the impact would be limited in terms of the financial impact on the hedges? And then, secondly, a follow-up on the cargo.

If you could give a bit more color as to what you're seeing in the air cargo market since rates have spiked quite a bit recently. And do you expect that to continue over the next few weeks?

Yeah. So, starting with the fuel thing, it typically is a combination of freeways and options, which means that we do not really have so much benefit of the fuel price going down.

But other hand, if you're not flying at all, of course, that benefit is only theoretical. But there is no commitment to buy any fuel, anything like that, just to make myself clear on that.

Again, cargo. Is that something for you, Carsten?

I probably should have stayed in cargo eight years ago. This is very ad hoc.

We get a call just a couple hours ago from a government agency. There's certain medicine in Czechoslovakia, which cannot be trucked because there's huge truck delays.

80 cases of stuck up traffic. So, they now want us to send an airplane to bring the medicine into Germany.

So, in my view, the logistical change will be drying out over the next weeks when the pandemic hits more and more people. There will be pandemics in harbors, in train stations, making it difficult for ground logistics to continue.

So, I definitely think the need will go up and we are preparing again whatever number of airplane is needed from the passenger fleet to be used for cargo. It's [indiscernible] anything because the logistical change, which are high in sync usually, but they are now falling apart initially from China, but the last ships have arrived which were loaded before the crisis.

Now there is no more ships for weeks because China was down. But also within Europe even, we see that road traffic and train traffic is slowing down.

Thank you.

Hi. Also, three questions from me.

Maybe one clarification of something you already touched on it, but as of now, as the rules are now, if you cancel a flight, you will have to refund the full ticket price and customers don't have to accept the voucher. That's correct?

And the second question would be also on cargo. Do you have any ability to reuse also some already retired freighters?

Are there still some MD-11s you could reactivate? And maybe the last question would be on a kind of – to give us an idea.

As soon as lifts would be lifted – sorry, as soon as the bans would be lifted, how long do you actually need to ramp up your operation?

Well, I just start with this canceling of flights. It is much more, what do you call it in English, multi-nuanced.

It's not as simple as there are refunds if it's canceled our flights. It is as you've heard already about the Americans.

Basically, we are trying to push as many vouchers as possible and not allow for cancellations just to be refunded immediately. We have put in certain incentives for that as well.

So, you get something for it when we do it through a voucher. So, that's actually quite a large uptake of that.

And again, cargo, I leave for you.

There's no yes or no to this question. There's probably a few freighters around the world which are just retired a few days ago, weeks ago and you can easily bring them back.

Others, once you have fully retired an aircraft, it's on the way to the scrap yard, it is gone. So, I don't think that's, at least in these days, my focus.

Don't forget, the MD-11, which is an aircraft we retired, has 90 tons of cargo capacity. Our 747-8 has 60 tons.

So, two-thirds. So, rather than giving life back to freighters, I probably rather use the grounded 747 fleet, but it's in the making while we speak.

But don't expect too many cargo airplanes to be able to be brought back. Ramp up.

Well, there will be no digital ramp up. There will be a scale up.

We'll be starting probably the other way around as we scale down. First, the big routes via the hubs, hub to hub.

Then you bring up your frequency on hub to hub. Then you start hub to spoke.

Then you start spoke to hub. Then you do spoke-spoke.

So, this will be a long process if you don't want to get it done too expensive. But, unfortunately, I don't think this is the first priority right now.

This will take time. But we have enough people who know how to do this kind of stuff.

So, we'll have a nice multi-hub ramp up where we connect Northern Italy first to Zurich and then we connect Northeastern Europe to Frankfurt. Both are connected to New York.

Then you bring the Los Angeles back, but for that you need Italy. So, also, Italy needs to be connected to Frankfurt.

So, this is going to be in the wonderful puzzle and I can't wait for the day we start playing it. Right now, my worries are on other topics.

Hi, gents. Just one question from me, which comes back to this point around cash burn.

Obviously, slides 14 and 15 today are very helpful, allowing us to think about the operating costs that you might still have in April and May when you're not really running any flights, allowing us to think about an operating loss. But beyond that, in addition to cash interest, cash tax, we've talked a bit about cash costs associated with hedges, we've talked about working capital outflows linked to refunds and prepayments.

When you bring all that together, what sort of monthly cash burn will the Lufthansa Group have in April and May? Or put another way, if you didn't get extra liquidity on top of the €5.1 billion, how many Aprils and Mays would it take to burn through the €5.1 billion?

Thanks,

Ulrik, we can't hear you.

Sorry, I'm not used to this muting all the time. Yeah, so I was just saying, there will be a number of different Aprils and Mays to use your expression there.

There is no more taxes being paid because, obviously, we will make a loss this year. So, then it will not be any taxes.

And the ones for last year's is already paid. Interest, as we all know, with our taxes – sorry, with our interest-bearing loans, at the moment, they are with very, very small amounts.

So, that is not a big item either. It's more the question how long this crisis is going to last.

And as I come back to, those are the operating costs we are showing there. These are the important ones in reducing the overhead cost and reducing the kurzarbeit.

That's really where the matter sits. And then, secondly, it is how we utilize that €10 billion unencumbered assets.

And finally, if none of all that would work, I think that very strong statement for the government that they will make sure that none of the large German corporates will run into liquidity problems is the ultimate backstop. So, from that point of view, I think the question is very difficult to answer because I think it is actually infinity.

Gentlemen, good afternoon. First of all, [Foreign Language] to you and the team.

And maybe, since we've talked about the smaller details already, Carsten, a broader question to you again on strategy. During the Capital Markets Day last year, you kind of alluded that you were looking to make the group a little bit more airline centric and concentrating on the airline.

And kind of how do you think about this choice between more airline centricity and more kind of adjacent businesses today? Maybe on the airline part, how are you thinking about decentralization and centralization, a perennial discussion within Lufthansa Group, kind of which is the more relevant one, kind of which strategy changes or group changes would you be thinking about?

Not saying that you're going in that direction, but just what's popped into your mind in the few months you have to think about the longer-term game after the crisis? Thanks.

Now, to be honest, on these two questions, I think the crisis even though has changed everything, on these two questions, it hasn't changed anything, in my view. We still believe it's right to focus the airline group on airlines rather than a broad aviation group.

But we still think we are very glad to have Lufthansa Technik in the portfolio. And this was true a year ago and I think it's true now and it will be true a year from now.

With centralization versus decentralization compared to the times when you worked for us, we have gotten so much faster in optimizing our hub. Not because you left, but because we worked on the processes.

So, we are in the meantime able, as I described, to attach certain parts of the world to certain hubs to optimize hub flows once the traffic was dropping was over the last days. Instead of having two flights to whatever Viga [ph], we make sure there's only flight per Viga, but the make sure the important OMBs are protected.

So, definitely, centralization helped in managing this crisis. And our view on that hasn't changed.

Great, thanks. Best of luck.

Yes, thank you. Thanks for taking my question.

I only have one left, hopefully, that's in the focus currently. But, obviously, the talks with the captain crew union, UFO and also the [indiscernible] are still open.

I was just wondering, do these talks continue currently? Do you expect these talk affected by the crisis?

Will there be different arguments in those talks with [indiscernible], especially given the headwinds that you now have with the crisis? Thank you.

Well, this crisis is the biggest thing in the industry since '45, including for our unions. So, indeed, we are talking to all unions, not only in Germany, [indiscernible] and there's whatever number of unions in other countries.

And so, we have talked to everybody. And the issues we were discussing with UFO, I cannot tell you if they are put on pause or if they are basically put aside till after the crisis.

I'm far away from these talks. So, don't forget, this is always made bigger than it is by UFO and the media.

But in the end, there's much more important priorities now.

Understood. And all the best.

Yeah, thank you everybody for the discipline because indeed I need to run now for a government phone conference. I maybe try to summarize one more time what is in our minds.

And believe me, our minds are quite busy now. So, this is also changing everyday.

But I think it was and is important in a crisis like this to react fast and drastically, not the small things. And some of my competitors were laughing at us for being too radical.

I haven't seen them laughing for some time now. And I think this management team knows how to handle crises from all kind of crises we have been facing in the last years.

This one is new. I repeat that.

But we also manage with the same tools and people this crisis. Now, our focus is on protecting liquidity, basically cutting capacity fast, cutting cost and, of course, reducing CapEx to zero or close to it.

And then, of course, these things, some of you even criticized us for a few weeks ago, until a few weeks ago, for having such large owned fleet, unencumbered. None of you has criticized us in the last days.

You know what I'm trying to get to? In the end, this is good old German boring thinking.

Owning your assets is a wonderful buffer for really bad times. And you might go back in history why the Germans sometimes are so boring.

And this probably plays out now here that this is an absolute buffer, hardly any airline in the world has. I know your concerns and we have discussed that with some of you that there's downsides, but right now it is only upsides of that strategy.

And last, but not least, I cannot tell you how this industry will turn out. I cannot even tell you how this group will turn out.

But I would be very surprised if we don't manage based on this, what I just told you to come out as a winner. Even though a winner in this might be smaller than a winner in the industry of ours has been in the last whatever 10 years of just growth.

But then, so it is. In the end, it's the relative positioning in the industry, which drives the profitability of the future.

And our relative positioning, I think, we can improve. Thanks for your interest and your support.

And those of you who own shares, thanks for your trust. And we'll be talking soon, I'm sure.

Maybe not even in three months only. If this dynamic situation arises, I will try to convince my CFO and Head of Investor Relations maybe to have something in between to have a discussion.