Deutsche Lufthansa AG

Good morning ladies and gentlemen and welcome to our conference call today. Let me briefly outline the format of today's call, which we have set up as a joint call for analysts and investors again.

Our CEO, Carsten Spohr will present your third quarter results and our outlook for the remainder of the year. I'd also like to introduce Wilken Bormann, Senior Vice President Group Finance will participate in the Q&A session later on.

The presentation slides which Carsten Spohr will refer to are available in the Investor Relations section of our lufthansagroup.com website. Management presentation will be followed by two separate Q&A sessions, one for our analysts in English language and the second one for journalists in German language.

And we ask all participants to stick to this order. Thank you very much.

I'd now like to hand over to Carsten Spohr. Please go ahead.

Yeah, thank you, Dennis. And ladies and gentlemen, welcome, also from my side of the table, to this conference call.

First of all, I hope that in these crazy times, you and your families are well and healthy because it's obvious the corona pandemic continues to have a significant impact on all of us but surely on the Lufthansa Group, which is what we are discussing here today. The worldwide number of COVID-19 infections has been rising again dramatically for several weeks now, especially in our home markets here in Europe, and it goes on.

Just earlier this week, a month long lockdown has come into force in Germany as well as in Austria. Other European countries are also increasing the corona measures.

And important long-haul markets, such as the U.S. seem not to open up anytime soon.

This will make the winter months which are challenging for our industry in general even harder. However, we are confident that the Lufthansa Group will master the coming months in a way that will further even strengthen our leading position in the industry.

And I will explain the reasons for this in detail today. First, we limited our operating loss and cash flow -- a cash outflow in Q3 through a very disciplined cost and cash management.

Secondly, our logistic business Lufthansa Cargo goes from unknown strength-to-strength. Third, for the fourth quarter of 2020, we will continue our very disciplined capacity management only operating flights which contribute cash to the group.

Fourth, our strong proven hub strategy shows its advantages in this crisis. Because demand on low levels is bundled by hubs, while many direct point-to-point services disappear.

And last but not least number five overall our solid liquidity position equips the group for tough winter season ahead. When we presented our half year results in early August, we were confident that our business would gradually recover in the second half of the year.

And indeed, performance in July and early August was even better than we initially expected. Good leisure demand let’s load factors in European short-haul of almost 70% in July and more than 65% in August.

This was significantly above the levels in long-haul. Since then, however, the recovery has stalled.

The leisure travel has come to an end due to new limitations. New infections starting -- started rising causing travel restrictions to increase further and further, and our corporate customers have not yet returned.

In light of this market backdrop, the decline of load factors at the network airlines does not come as a surprise. Nonetheless, we still ensured that virtually all flights we operated in the third quarter covered their cost.

This includes a positive contribution from cargo load in the Belize. The strength of cargo meant that we operated with passenger breakeven load factors of sometimes zero, at least on some of our long-haul routes.

And yields increased as a result of the higher share of short-haul in the traffic mix. And because of the higher relative share of short notice bookings, while yields were down on short-haul compared to the prior year level, the increase in the Intercontinental business.

In some the expansion over summer, and better leverage of our cost base resulted in operating loss smaller than in Q2 amounting to slightly more than €1.2 billion. Operating expenses were reduced by remarkable 60% in the network airlines.

Let's talk about Eurowings. The performance of Eurowings for the trends I just outlined for the network airlines.

However, the capacity decline is a third quarter was less pronounced there because of the airline's larger exposure to the touristic segment and its relatively higher share of domestic routes, which are less affected by travel restrictions. Nonetheless, adjusted EBIT amounted to a negative €108 million.

The cargo segment continued to be the bright spot in our business also in the third quarter. The industry wide capacity reduction and the grounding of the majority of long-haul aircraft caused years to increase significantly.

Against this market backdrop, we played other strengths or freighter fleet, which normally accounts for just around half of total revenues. We benefit from operating one of the largest and most modern freighter fleets of the world, while total capacity was down 42% due to missing value capacities, loads increased and yields were up by almost 50%.

As a result, revenues almost reached the prior year level. Based on its nine months profit of €446 million Lufthansa Cargo is on course for a new record year.

In contrast, the adjusted EBIT of the MRO segment declined to negative €86 million in the third quarter and a negative €208 million in the first nine months. Some improvements in markets with significant domestic travel flows such as China continue to be offset by weak demand for aircraft maintenance elsewhere in the world.

In addition, write-down of receivables and spare parts burdens the segment's results, accounting for the largest part of the year-to-date loss. Profits in the catering segment continued to be under significant pressure as well.

The effects from global capacity reductions and corona related service restrictions on board was only partly offset by a further step up of cost savings. Finally, the adjusted EBIT in the other business and group function segments improved to negative €77 million in the first nine months.

Last year, this figure amounted to minus €169 million. The reason for this significant improvement was a strict cost discipline in our central administrative functions.

In summary, the average monthly operating cash drain in the third quarter amounted to €200 million. This note that the definition is based on our operating cash flow, excluding changes in working capital, tax payments and other non-operational items.

Let me also highlight some larger effects below the adjusted EBIT line. Adjustments that means the difference between EBIT and adjusted EBIT amounted to almost €1.7 billion in the first nine months.

€1.4 billion of adjustments alone relate to aircraft impairments. Since the beginning of the crisis, we decided to retire 110 aircraft earlier than planned.

This includes the entire Airbus A380, and Airbus A340-600 fleets. Although some of these aircraft could be removed from long-term storage should market conditions improve much quicker than currently anybody expects.

In addition, we booked €764 million of losses related to fuel over hedging in the first nine months slightly less compared to the half year figure. €141 million of losses were cash effectors in the third quarter.

We expect further cash-outs in the fourth quarter given that fuel consumption will continue to be very low compared to our original plans. The effect will fade out though in the first quarter next year, because we stopped hedging at the beginning of the crisis.

Let me now turn to free cash flow. Our performance in the third quarter highlights that cash preservation has become the absolute focus of the group financial’ management.

In the past three months, the operating cash drain was offset by the following three factors. First, new bookings especially related to the uptick in leisure demand over the summer, contributed to a net €252 million.

Second, we manage working capital very successfully by putting a lot of focus on receivables collection, as well as the extension of payment terms with suppliers. This created a positive contribution of €175 million.

Third, we agreed on the deferral of import turnover tax at Lufthansa Technik resulting in a positive cash effect of €339 million in the quarter. As a result, almost the entire free cash flow decline of €2.1 billion was related to the payout of €2 billion of customer refunds as shown on the chart.

This means that we have largely worked through the queue caused by the exceptional large number of flight cancellations in the early phase of the crisis. Refunds hence will be significantly lower in the fourth quarter.

My comments should have made clear that we are pulling all levers to ensure that we minimize cash outflow as fast as strong as far as possible, especially in light of the again more challenging industry outlook for the winter. We're very quick in reducing fixed cash costs at the airlines by more than a third.

Short-term work continues to play an important role in this regard. However, around half of the decline in personal costs is driven by another factor, including the reduction of the workforce and less overtime and bonus payments.

Out of our long list of measures to protect liquidity, let me also highlight the deferral of aircraft deliveries and related payments. We expect investments to amount to just around €1.3 billion in both 2020 and ‘21.

Although we still expect to take delivery of around 45 new aircraft in these two years. Many of them will be financed by the reallocation of pre-payments made for other aircraft, which deliveries will be delayed or postponed.

In individual cases, we will also take advantage of sale and leaseback to reduce cash outs in the short-term. For example, returned one outright purchase of an Airbus A350 into an operating lease in the third quarter and also leased one new Boeing 777 freighter for Lufthansa Cargo.

As a result of all these measures, adjusted free cash flow declined far less than the adjusted EBIT in the first nine months. This limited the debt increase since year end 2019 to around €2.3 billion only.

At the end of September, net financial debt amounted to €8.9 billion pension provisions amounted to €8.1 billion affected by the negative performance of plan assets. In the German, our quarterly results showcased our success when it comes to reducing costs and preserving liquidity in this unique situation the industry is in.

This gives me confidence that we can also master the challenges ahead. We will enter the winter periods with liquidity of €10.1 billion in addition to €3.8 billion of cash at hand, €6.3 billion of the stabilization package in our home market continued to be undrawn in the end of the first -- sorry the third quarter.

This includes the full €4.5 billion silent participation one of the German package, which will be accounted for as equity. Draw downs of €2.7 billion included the €1 billion KfW loan and the €1 billion silent participation to in Germany as well as €350 million of stabilization measures in Austria.

Finally, the capital increase through which the German economic stabilization FUND build its 20% stake contributed €300 million of equity. Ladies and gentleman, giving a reliable outlook regarding the future development of this unique crisis is more difficult today than it was ever before.

No one can predict how long travel warnings, entry bans and lockdowns will last. No one can predict how air travel picks up again and when we see a sustainable recovery.

From the limited visibility we have, we just know one thing for sure already. The upcoming winter months will be an immense charge not only for us at Lufthansa but for the whole aviation and travel industry.

We expected demand for air travel to remain low due to the rapid increase in the number of new COVID-19 infections, resulting in further lockdowns and travel restrictions. We revised our capacity plans for the fourth quarter based on our approach to just operate cash positive flights.

Our airlines will offer a maximum of a quarter of 2019 capacity. The number of guests on these slides is expected to be less than a fifth of the previous year's figure.

In this historic crisis, we believe that our business model offers strategic benefits. One of them is our hub setup.

Its advantages a more evident than ever. As fewer people travel by air serving point-to-point connections in too many destinations in an economic way becomes impossible.

Many domestic and European point-to-point offers were already canceled in the light of this logic. To our hubs, however, we bundled traffic flows for many different origins.

But this creates an opportunity to absorb passengers from O&Ds, where demand has become too low to support the point-to-point connection. It is the mathematical certainties now industry, that less demand leads to more bundling over hubs.

Despite this strategic advantage, we know that we have a lot of work to do to ensure our group will emerge stronger than other from this crisis. Our short-term focus is on protecting liquidity.

At the same time, though, we are not losing sight of the need to adjust our business to the changes brought about by the corona crisis. We have therefore initiated restructuring measures across all business units and functions.

And we are determined to create a significant positive impact on all areas of the business at the necessary speed. The program will focus on identifying additional measures to reduce costs further in the long-term.

And it will make the Lufthansa Group sustainably more efficient in all areas. The Corona crisis is fundamentally changing our markets and the Lufthansa Group has to adapt, we will become smaller, we will become less complex, and we will become more efficient.

We have already made substantial progress in adjusting our size to the new conditions. Over the course of the last month around 14,000 people have already left the group.

This alone will result in a sustainable reduction of personnel costs by €900 million per year. And we will continue on this path consistently.

We reduced the number of top management positions at Lufthansa by 20%. In Germany, we agreed on a crisis package with the union's UFO and for Vereinigung Cockpit representing our cabin and cockpit crews respectively.

The agreement with UFO covers the whole period until 2023. The one was defined on cockpit dates until the end of the year with negotiations of a follow up agreement ongoing.

We're determined to save as many jobs as possible in the Lufthansa Group. But to do so, we need the cooperation of the collective bargaining partners.

Therefore, we are negotiating crisis measures with all employees groups to stabilize the company. Just earlier this week, we have resumed negotiations with ver.di to reach an agreement on crisis contributions for the more than 24,000 collectively bargaining ground workers.

Now I can only repeat what I've already said in August, and we presented the Q2 figures. Unfortunately, the pace of negotiations is slower than I had hoped, clearly too slow, and for sure slower than this crisis actually requires.

And this is why we have also started negotiations with our various workers councils in Germany on a so called reconciliation of interest process. Together, we will talk about reorganization plans and the necessary reductions of 2,800 ground and administrative jobs in Germany.

And we'll also talk about the reduction of 1,100 cockpit crew members in the main airlines Lufthansa. The situation is of course completely new for both sides after [the] case of growth, we're now talking about shrinking the business and eliminations of 10s of thousands of jobs.

But this pandemic will not be over in a few months. We cannot simply wait this crisis out.

It will burden our business, our industry for years to come. And it shifts scale makes a significant contribution from all employee groups inevitable.

Ladies and gentleman as I mentioned before, giving you a reliable outlook is not easy in these challenging times. Nevertheless, we wanted to share some of our short-term financial expectations with you today.

Based on our restructuring initiatives, pending the potential closure of labor agreements in the next few months, we expect a negative impact on adjusted EBIT in Q4 from these restructuring expenses and others crisis related one-time effect. Excluding these effects, we expect the operating cash drain to be limited to around €350 million per month in the fourth quarter.

The overall adjusted free cash flow, which also captures working capital investments and other non-operational items will be less negative in the fourth compared to the third quarter. First and foremost because of significantly lower customer refunds.

Looking ahead, we continue to stand-by our previously communicated goal. During the course of ‘21, we want to return to a positive operating cash flow.

This depends on operations of minimum of around 50% of our 2019 capacity. Ladies and gentleman, not all airlines will master these historic crises equally well.

But I'm convinced that the Lufthansa group not only can get through this crisis, but can also defend its positions as Europe's leading airline group. We are working consequently on the restructuring of the group.

Our solid liquidity position equips us for the upcoming winter months, and we have a significant advantage due to our hub strategy. In addition to this, we will still strive to provide our customers with the best airlines product and the best travel experience, premium made in Europe.

And this includes a consistent and industry leading approach regarding hygiene measures. We believe that health protection and freedom of travel can go hand-in-hand for example, through comprehensive rapid testing.

The best airline product includes providing a maximum of flexibility to our customers regarding the rebooking of flights. And it of course takes sustainability into account.

We are determined to use this crisis to further reduce our climate impact and to strive for sustainable and value oriented growth rather than blind growth. The global society and a modern world economy cannot exist without transport in the air for long.

Flying has enormous value for societies, culture, education, economies, and the international understanding. The connection between continents makes the world more stable and more peaceful.

Tourism is essential, especially for structurally weak regions. And private experiences such as studying abroad, friendships across the globe can only be made possible and maintained by flying.

And we firmly believe then the long-term, this will not change despite the corona crisis. The core of our business will remain the same during the crisis and shortly afterwards.

It's us who are connecting people, cultures and economies. Thanks for your attention.

We now look forward to your questions.

Good morning. Good morning, gentlemen.

If I kind of do a back of the envelope calculation, €4 billion in cash €6 billion undrawn burning something between €2 billion and €3 billion until Q2 and €3 billion maturities next year that depletes liquidity kind of back down to levels that may become uncomfortable as you head into summer. Can you talk about the scenario range you have in mind for the next couple of months, and what -- how that relates to the need for additional financing?

You previously said that you had enough time to wait for markets to improve and financing conditions improved to do aircraft sales and other financing activities. Is that still true?

And in that context, thirdly, can you talk about your progress on potential financing sources within the near-term, let's say within the next six months on, more fleet sales, renegotiating any of the maturity dates, maybe going back to the government for more support, the kind of three questions all centered around, is there enough cash to get through next summer and to an end -- through next winter?

Sorry, I don't support the first part of your question with €10.1 billion or let's say €10 billion of liquidity and burning so €350 million in the worst part of the year, the winter to come. We have a lot more room to breathe and you are indicating with your question and of course there is as we all know, additional measures to raise the debt in the market if required.

So we stick with our statements that there is no need for fire sales in our portfolio, and there is no need for sale and leaseback in unfavorable terms, like we have seen them in the industry over the last weeks. And we feel in a strong liquidity position not just for the winter but for the whole year of ‘21 whenever it will bring, and if necessary fund other winter between ‘21 and ‘22.

The answer is yes. We do stick with our statement.

And maybe I'll ask, what level of cash liquidity is kind of the comfortable minimum you would, want to avoid breaching as we go through ‘21?

Let me give you an answer, which reflects to the situation we had this spring, as you know, we were close to a difficult situation with €2.8 billion cash remaining out of more than €2 billion belong to our customers, which we have, as you all know, have paid out by now. So if you do a rough calculation, you obviously know that we don't need to be anywhere close that number we had to be near few months ago.

And we also still comfortable that we will be cash positive in ‘21 once the market picks up to 50% capacity being allowed to be used for us. So again, my answer I think it's much more positive than your question is implying.

Okay, understood. Thanks.

Good morning. Three questions, please.

First, you gave an average cash burn of €350 million a month for Q4. Was this a cash burn in October or is this [indiscernible] relying on a tragic recovery during the Christmas season?

I'm asking particularly because from previous statements, my understanding is that July and August were strong but in September, the cash burn was higher than you guys as an average for Q4. So did you see the improvement in cash burn from September to October?

And if yes, what was the driver for this? Second, you were one of the first airlines to address rapid test -- testing.

Could you please talk about your experience so far with this test and from discussions with politicians, producers, airports? How confident are you that rapid test will be extensively used at the airport in your home markets next summer?

And third, what is your view on the airport landscape in Germany going forward? Most airports in Germany were generated -- were generating for many years losses before this crisis.

And you mentioned that point-to-point connectivity is likely to suffer in the future. So do you expect the government and local politicians to continue to support airports they did not prove a viable business model already before the crisis.

I think it is quite relevant for you because if the airports are artificially kept alive and allowed to attract the airlines by offering tariffs that do not cover their costs, it impacts your originating catchment area? Thank you.

Yeah, thank you very much for these comprehensive questions. Our €350 million cash burn guidance for Q4 is an average number.

And to be honest, this can only be done for more than a month because you have things which happen at the end of the month as payments, which you don't do every week. So there's no upside on doing this on a weekly or daily logic.

Why are we so optimistic the refunds will be significantly less in Q4 than in Q3? Remember that number €2 billion refunds in Q3 basically, the whole negative cash burn of the whole what are we reporting on today.

And at this point, of course, I can tell you that September was worse than July and August, as we pointed out, but it's too early to give you an indication on individual month for Q4. Testing, as you probably know, we have started some testing in [indiscernible] cases between Vienna and Berlin also between Munich and Hamburg with our own staff in that regard.

So we just think it’s important now to gather information on testing to eventually be ready to use this to re-launch global air travel. And we are in talks to our partner United that we will be starting something between Germany and the U.S.

they -- between the U.K. and U.S.

but saying there's various things in course happening, that we all gain experiences. I mean, the close contact with the CEOs of the big pharmaceutical companies, how they are progressing on their testing policies.

So I think this will be, even before vaccination comes into play, testing will have an impact on our industry. Airports, I do believe there is a political will in a country like Germany, which is very distributed wealth who also supports smaller aircraft as far as that is legal.

And we all know there is new restriction on this. So what you are being afraid of that there will be similar support of small airports to point-to-point airlines like in the past, I think that is legally impossible, will be limited.

But generally, I do believe if you read the papers in Germany today, the government has understood how important aviation is? How important aviation is for the German economy, which as we all know, is both export oriented economy in the world.

And therefore, the [industry] Airlines airports, they will receive certain support from the government in the legal framework, which is the law.

Thank you.

Good morning Carsten and good morning Dennis. Just in your comments I mean I know it's kind of a scenario where you would see positive operating cash flow is dependent on around 50% of the capacity of 2019.

In terms of the mix of the business maybe next or just crystal ball going forward, you think it's going to be more short-haul and long-haul or vice versa, more investments or growth in certain hubs are let's say, the passenger airline rather than, say Eurowings or taking things like say, by-product, the likes of premium economy. So I'm just interested in your view in general, maybe next year, but more longer charts, because certainly the mix of the business, not just for Lufthansa but for everyone is going to change to some extent.

Thank you.

Hello, Steve. I think what we are seeing and we did see, for example, in the summer is that short-haul comes back faster than long-haul not surprisingly, also less capital restrictions.

Not right now to be honest, but we speak but for the summer. And of course also the short-haul helps us even more based on our hub strategy, where we are seeing traffic flows via our hubs, which we have not seen in the last years because they were all served point-to-point.

And now these point-to-point volumes are too low to fill a flight. We all know point-to-point airlines tend to have only fairly large aircraft, suddenly those volumes go by our hubs where we can bundle traffic.

So I see that positive element we saw in the summer, coming back to us when we see a recovery of traffic. And the second thing, I can say is that obviously leisure comes back faster than corporate.

You saw it also in the summer. It's also understandable.

But let's not forget this, whenever I talk to corporate customers, there's such a backlog of travel needs. So once restrictions will fall testing destinations, other things come into play, we will also see a stronger comeback of corporate than we have seen that short window this summer, I'm convinced.

But again short-haul faster than long-haul leisure faster than corporate, and products correlate to that to a certain degree. We all know this business class there is more corporate first class, by the way is nowadays more leisure than corporate, wealthy French, Germans, Swiss people, but as a small segment.

So they basically, I think the first two statements are important one.

Thank you.

Thank you and good morning, everyone. There were some comments from Fairport you know, kind of talking a little bit about 2021.

And, saying maybe 35% to 45% traffic guidance. So I just want to get an idea, is that also in the context of them, having conversations with you and you know, your views on traffic recovery.

Secondly, you spoke a bit about German airports and support there. Obviously, there's this challenge from Ryanair about the financial aid.

So just any thoughts from your side, how you see things going in that respect? And then just lastly, where are we now in terms of asset write-downs and, potential disposals within the group?

Thank you.

I will take the first two and Wilken Bormann will answer the third one. I think the Fairport comments are not out of line with our comments, we are going to be starting with a very slow first quarter, I think the max 25, which I indicated is also the 25 for the first quarter and, of course, Fairport and us in intensive talks because one of the upsides of this crisis is that we will see probably more focus on intermodal traffic, people approaching the airport by train and then moving on to a new flight, which we have been pushing for a long time.

But we now see new energy behind that both from us from the German Railway, from the Swiss Railway, the Austrian Railway, and also the government itself. So there is a link between the airports and us, obviously and when I talk about reaching 50% next year, of course, that's not necessarily an average is that we were hoping to be cash positive once we break through that 50% line.

Financial aid, I think to be honest, a lot of PR is done on that one. I think every global airline has received financial aid at least all three players in Europe, all three players in the U.S., all three players in China and surely our friends from the Gulf, Istanbul government on anyway.

And even the carriers you're quoting, were only doing short-haul whether it’s much less financial impact have all received financial aid sometimes in percentage of the turnover more than Lufthansa. So I think we should all separate between the PR done around financial aids and running to courts and the truth of the facts.

And I think once this crisis gets stronger and longer, you see a lot less press conferences also for my competitors on this than in the first week.

Okay, Jarrod, thanks for your question with regard to the impairments. So we have done first and foremost, our fleet impairments in Q2 and Q3, which amounts to €1.4 billion and this is mainly located for the A380 long-term storage and for the A340-600.

So €1.2 billion out of this €1.4 billion are arising from that. And in addition to that, we have some impairments with regard to our receivables in the amount of roughly €200 million.

For the remainder of the year, we can't rule out of course, first impairments but to be honest, so we have done the impairments for our fleet. And that was by far the biggest chunk.

And so there is no planning for additional impairments in this section of our fleet. So therefore, we cannot rule out that.

But we have seen by far the biggest chunk in Q3.

Okay. Thank you very much.

Yeah. Good morning.

First of all, on staff reductions, I think you, you previously talked about 22,000. But I think you indicated, maybe a month ago that that number needs to go higher as on if you put a number on it or at least a rough one.

Secondly, the VC union negotiations looks like the deal ends, obviously fairly soon as wondering how the relationship is going and whether we should expect a longer term deal with the all important pilots? A final one, just following up on Fraport.

You don't normally talk about how you're working well with them. I was just wondering how we're thinking about negotiations on tariffs for 2021?

Thank you.

James, hello. On staff, the 22,000 in ways note number because we increase the number of aircraft to be permanently taken out.

And that number resulted in basically, somewhere around 27,000 FTEs, or the way we put it is that it would be great. I keep telling the unions, if they pull together with us in a way that we can maintain at least 100,000 jobs in Lufthansa which I think would be almost a psychological targets for the unions for the staff for all of us, maybe even for the German public and German politics to make this a company of that size also in the future.

So starting from 130,000 kind of gives you the same indication. Of course, it’s short time quotas in that so talking about FTEs and staff is not the same thing as we know.

But this is moving targets and to be honest, the more unions will allow us to lower our cost. The more people can stay in Lufthansa, the more they don't and I come to that now was a pilot and more have to go.

And I think it's important especially for those of you are not from Germany to understand that in Germany, we have a two tier system. First you talk to the unions, about cost -- lowering costs, allowing part time models and all these things.

And then you also talk to the workers councils about forced leases. And the less we reach agreements with the unions on the first element, the more people will be forced out by the second module when you talk to the workers council and which in Germany takes almost up to a year.

So we're probably talking sometimes mid ‘21, when even without the agreement with the unions, we are legally allowed to fire people in the amount required. And therefore I am positive that the unions have a strong interest come to solutions with us before we come to that second step, sometimes in ‘21.

So I think that's a German specialty for those of you living abroad, maybe it's important to understand. And that's why, we always in time, usually, we reach agreements with the corporate union, obviously, we have an agreement to the end of the year, I promise you, we'll get one for next year, because otherwise the impact on the staff will be much worse than if they have an agreement with us.

The staff knows that every time I fly, I get the same question. So I think it's the joint interest of the unions and us to have more innovative solutions agreed in the first module.

Before we move to the second one, we're with a workers council in the more legal process. You talk about forced dismissals.

On Fairport, it's still the same, we had talk about quality and cost. In Fairport I'm not happy when I talk about the location of Fairport, its connections to the German Railway system to the German Freeway system, it's an airport where we are bundling our hub activities right now.

But there is no agreement yet with Fairport on tariffs in ‘21. But you have seen that numbers.

So I'm quite positive that there will be room to maneuver with them.

Thank you.

Good morning, gentlemen, two from me. First, it's helpful to get that guidance on the expected operating cash burns in Q4 at €350 million per month.

In addition to that, it feels like the maybe a number of smaller amounts that could potentially add up to a larger figure. Things like deferred taxes, deferred supplier payments, in addition to some further refunds and a bit more cash-outs on the fuel over hedging.

Is it possible to give a rough idea as to how much you think those items in some might weigh further on the liquidity in Q4? And then second question, what's the level of flexibility available to you in terms of calling on the €4.5 billion of silent participation one?

Presumably you can take it in tranches and if so, is there a minimum amount for those tranches? Thanks very much.

I talk on the second one and the handover to Wilken for the cash-out in Q4. No, we have full flexibility agreed with the German government and also the Swiss government and also the Austrian government by the way to somewhat lesser degree, but your question is on the silent participation, which we only have in Germany, we have full flexibility on that when we do we take it in which sizes, slices trenches or not in everything required.

And Jamie -- hello, Jamie and to your first question, I mean, we have to differentiate between free cash flow and our cash flow in definition. So the free cash flow will be less negative in Q4 than in Q3.

And this is mainly driven by the refunds by the lower refunds we are expecting to pay. And the €350 million cash drain you were mentioning is something like an adjusted KPI because we want to exactly not including all these volatile elements like tax payments or refunds or early booking.

So therefore, we did that excluding the working cash -- the working capital elements. So therefore, the €350 cash drain is more or less related to our operations.

So where can our operation, save money and bring the cash drain down? And so as you mentioned, so we are confident to reaching €350.

But these volatile elements are excluded.

Could I just follow up with one example? So it looks like Lufthansa Technik for example, deferred €240 million of tax in Q3.

I mean, is that something that probably now gets paid in Q4 or is it a longer deferral perhaps on that particular one, you could add something?

Yeah, now this tax deferral goes into ‘21. So if you ask there will be no further next payments of that nature, being revised from what we achieved in Q2 and Q3, this will happen in ‘21.

Okay, thanks.

Yeah. Yes, hi.

Thanks for taking my questions. Firstly, again, on the free cash flow and cash burn, you kind of mentioned it already in the previous question.

But overall, can you quantify how much of let's say cash-outs have been pushed into 2021 within your good working capital and cash management this year. Then secondly, I think you recently signed an agreement with Munich Airport regarding long-haul capacities and fees.

Can you quantify the savings here? And then lastly, just on the union talks, it's my understanding that all three major German unions are opposing the ocean platform.

So how do we stand this with ocean please?

I start with question two and three and Wilken will take the first question. With Munich Airport, we indeed have signed an MoU which includes cost savings and efficiency gains, but the number of savings, the volume will very much depend on the volume of flying.

This is a long-term agreement. So I cannot give you an [indiscernible] at all, as long as we don't know what will happen.

On the union talks, our activities on the Eurowings long-haul, I mean, there is obviously politics being played. I've said numerous times we will take the -- Eurowings, intercontinental aircrafts, which we had before crisis, we are forced to put them into a new AOC.

We use them in SunExpress and as in Brussels before, we want to bring that together, including that no more long distance flying in city line will take place into a new AOC. And that will just be not just the bundling, it also will reduce the number of airplanes in this element to allow as many people as possible to find jobs, who now are losing their jobs, we will offer part time work.

That reduces the monthly paid, but it's based only on the fact that we are putting more people in there by forcing them into part time or [allowing] part time, rather than sending too many people into unemployment. So that I think is the whole secret behind the story, the brand will be Eurowings it will be less than these 14 aircrafts long-haul.

And we had 8 aircraft short-haul last year so 22 total. And we'll be operating 3 aircraft in the winter schedule and ‘21 summer probably go up to 7 aircraft coming from 14 before.

So this is nothing like whatever undermining our restructuring efforts in the main airline or whatever. Sometimes you read this is part of the let's say PR around our negotiating, so difficult --- not as difficult as in other countries.

But still, it's going to be a smaller Eurowings intercontinental fleet for the next years. And we pay the same salaries as before, but [on the part of it].

Okay. Can I just quickly follow up to what extent, do the unions have to say in the ocean platform strategy?

This is why they are using PR work to give us a difficult time because it don't have to say on where we allocate our aircraft. Remember, we had that big fight with our unions for three years when I took the job.

In that three years, we broke every rule that we can now of every limitation that we can now put the aircraft where we want to one exception was the minimum number of aircraft pre-COVID that we had agreed on with the main airline pilots but everything else, there's no need for us to agree with the union's on that and that is gone it’s history.

Okay, then we are moving to your question Johannes with regard to pushing the cash-out to ‘21. And of course, our major target is to move our cash-out in future because we want to bring that into consideration with our booking development that we have this in parallel.

In the amount of money we are talking about -- it's by far less than €1 billion in topic wise we have just discussed the deferral of the tax payments and we have monetized some [indiscernible] hedges but overall it's a triple digit million number.

Just one follow up on that one please, the -- I think on Slide 10 you show net CapEx in Q3 only at some €23 million so almost nothing can you -- I mean how much of the CapEx will then fall into Q4 and also again in 2021.

With regard to the CapEx, that number was that low because we have a 100% stoppage of all projects. And we as -- Carsten Spohr already mentioned, we could use pre-payments within Boeing for getting our 777 aircraft.

And that was the reason why the net CapEx was so low on one hand, and on the other hand, we are starting to sell some spare parts, especially in the Technik where we were able to reduce our net CapEx overall. For the upcoming year, we are expecting roughly €100 million to €200 million additional CapEx.

Johannes -- and that our external guidance for CapEx is on gross CapEx. By then what do you see on Slide number 10 that's net CapEx.

All right. Understood, thank you.

Hi, good morning, everybody. Just two for me please.

The first one, Carsten, you mentioned earlier working with United on testing and airports. Just thinking about long-haul capacity restoration, I mean and how you eventually make decisions?

Just interested to what extent will this be agreed with JV partners, whether it's on the Transatlantic or Eastwards producing maybe a more cautious capacity at back then otherwise? As you can serve the same demands more efficiently or might you be in a greater hurry to restore a full schedule possible then that question might suggest?

And then the second question just on management replacement, we've obviously had some Executive Board departures this year. Thomas with Swiss is obviously leaving at the end of the year.

Just interested how higher the priority list is a new CFO and his replacement for [Dawson] for example. And how do you think of finding and looking internally versus externally, can you shed the color on that?

Neil could you mute. Thanks.

I got your first question, right, I mean, the speed of recovery, the speed of introduction of testing, I mean, all that mainly depends on the government's, we have been talking to the White House and the Homeland security guys in Washington, and, of course, our German counterparts for months now to open up that bubble between the U.S. and Germany.

It was obvious nothing will happen before the election. But I think there's a strong interest on both sides of the Atlantic to reopen that channel.

And let's not forget, without leaving the subject, this Transatlantic relationship, which one way or another, whatever happens in the next hours thing needs to be reassignment needs people to travel back and forth. So I think whatever will come now from the U.S.

in the next days or hours, I think the Transatlantic cannot be frozen as it has been up for months if we want to revitalize this relationship to the rest. And let's hope that is another push for especially in that market pushing testing into opening up.

Is that was your question, good, if not please come back, because I wasn't quite sure if I got that right. On the management changes, yes, there is a few about if you have interest in looking for a job, I need to tell you that major decisions are already made or about to be made and will be communicated soon.

And also, I think happy to say that this is my last Q3 of my last Q not Q3 my last quarterly results conferences without full time CFO on my side. So I expect the person to be on Board for the next call, which we all got to be having with you next year.

The locking position of having maybe worked through this period and the skies are open again, or at least semi open as you actually plan capacity. And I assume to your point earlier, you'll clearly be focused on the cash flow generation, I assume rather than just racing to restore a full of long-haul schedule if possible.

Just interested in your thoughts how you work with your partners to perhaps manage capacity restoration more cautiously to maximize cash flow rather than making decisions on a standalone basis to simply get all your planes flying again?

Well, there is no push for us to get all planes flying again. As you know, we have taken many, many airplanes out the largest airplane out of the fleet 380s, 346s, 744s [indiscernible] going out.

So this is not a company pushing through restore the whole network as quickly as possible, all about cash optimization. This includes those markets where we are allowed to talk to our partners, we're in a lucky position or not lucky because we worked hard for it.

But in the good position then in all major intercontinental markets, we have joint venture partners and are allowed to talk capacity, both U.S., Canada, China, and Singapore, and Japan. So it's basically five markets if you want to split Canada and the U.S.

So we are in talks with all these partners and -- we're looking for similar optimization of cash contribution, and we slowly bring up the capacity. But don't forget, on long-range lot is now driven by cargo.

Our long-range network is to a certain degree driven by the belly revenues, where we have flights, where we even don't open up for passengers like Swiss is doing, or in the case of Lufthansa, we sometimes it's only 30 to 40 passengers on board, but breakeven is zero to make that flight cash positive because of the cargo contribution. So if that answers your question, now we are cash optimizing our ramp up on the long-range very carefully.

Very helpful. Thank you.

Hi, Carsten. Hi, Dennis.

I wanted to ask about the difficulty of getting the unions to engage. Because, you commented today that it was going slower than you'd hoped, which was the case at Q2?

And how does that interrelate with basically the answer that you gave to Daniel’s first question, which was, exuding confidence about the liquidity. So I mean, just how do you get union to engage with a sense of urgency, when you're extolling the liquidity security of the business?

And then as a second question, can you talk about the potential opportunity for the cargo business around vaccines? Is that a great potential or is that too complicated and specialized in business to be relevant?

Yeah, Andrew, on that first question on the union. So that probably is another surprising answer or not another but surprising there is no such thing as urgency because of the – you talk about Germany.

What's true in a certain way for Austria and Switzerland, by the way and Belgium, so we are luckily operating in four home markets, but let's talk about Germany more focused, where we have a short-term system by the government, which basically takes away the urgency. That's the exact political world behind this system.

This short-term work scheme is intended to take urgency away from both sides from the unions and from the employers in a crisis like this. So the government is paying the majority of the salaries of our un-required people at the time pilots, check-in staff, mechanics, flight attendants and this was extended by the German government to the end of ‘21.

So basically, whatever we do between now and the end of ‘21 is with the unions is not that great an impact because it's not needed. And the impact is already there.

The bigger question comes after that short-term scheme, which will be beginning of ‘22. And that of course, is after these agreements and legal procedures I just explained which we are enforcing with a workers council.

So within ‘21, either with an agreement with the union, or if we don't have one, which I don't think we'll have this legal proceeding, we are preparing with a workers council, that we can still no dismiss people, even without an agreement with the union. Of course, unions know that just as well as I do.

So there is a joint interest to find solutions especially after December ‘21. But the urgency in terms of liquidity is not really there, because the liquidity we are optimizing right now with our short-term schemes is much higher than anything you could ever get from a union and who would not take the government money in any country if you have it for your availability.

It's complicated I know both the two tier systems explained and the German scheme on short-term, but the thing that drives our negotiations and basically it's also the reasons why we are not that in an urgency and surely the unions are not some people we outside probably expect. On the pharma business in cargo indeed, since many years, the so called cooling business, which is mainly pharmaceuticals is a big high use business for cargo and there's only a few airlines in the world who have a network to provide to door-to-door cooling of cargo products and Lufthansa Cargo is leading in that.

So as said as it is this crisis and of course the need for destination once it's there, this will be a [indiscernible] business for Lufthansa Cargo because not even all cargo airlines in the world cargo hubs can participate. We have now I think 35 destinations around the world already equipped for cooling products.

Munich just added because it was initially only Frankfurt in Germany. And this probably will be done by only a few carriers to a large degree and we are one of them.

And actually, the other big one in the world is Swiss for cargo.

Lovely. Thank you.

Hi, good morning. Thanks for taking my questions.

I have three, one on your employee expenses, how much have you benefited from furlough, meaning how much employee expenses would have been higher if you weren't using this government programs? My second question is in regards to the pension funds liabilities, which I appreciate is going up because of the decline in interest rates.

But with the restructuring of the business and we did see a reduction of employees should we expect a increasing the cash-out coming from the liabilities and by how much? And my final question is when you expect to and I appreciate it, but when you say by 50% of capacity, you're going to be free cash flow neutral.

What is the assumption on evolution of yields and on the slot rules or the waiver of the slot rules for next year? Thank you very much.

Yeah, Carolina on the first question on the German or not the German on the European schemes on short-term support, 50% of our savings on personal costs are coming from these short-term schemes and the other 50% are coming from reduced over time, and no bonus payments, whatever. So things we have in the contract already.

And again, the other half comes from the European in our case German, Swiss, Austria and Belgium short-term schemes from the government. And when it comes to restructurings, we're going to be seeing provisions in the fourth quarter as we announced today of ‘20, but the cash-out will only happen in ‘21.

And the third question is on the wave-off was it travel routes or slots.

I think that was assumptions on yields and potential prolongation of the current slot waiver.

Yeah, slot waiver. I've been answering this question the same way now for a year and with all my contacts in Brussels in Berlin and [Bern] and Vienna.

We all know that huge environmental discussion out there, how can governments not give us a slot waiver and force us to do go flights? I don't think that will happen.

So I'm clearly expecting the slot waiver to be extended. And that I think is the right thing for the industry for airports, for airlines, surely for the environment.

So I expect that to be going on until we see somewhat of a normal in aviation volumes returning.

I think it does otherwise. Carl just give us a shout after the call.

This was actually the last question as part of the Analysts Q&A. We will now turn the call to German language and we invite the press to ask their questions.

I'll hand over to Andrea [Schätz].