Lufthansa – First choice Annual Report 2014
Lufthansa First choice
Annual Report 2014
Kennzahlen Lufthansa Group 2014 2013 Vernderung
in % Umsatz und Ergebnis
Umsatzerlse Mio. 30011 30027 0,1
davon Verkehrserlse Mio. 24388 24568 0,7
Operatives Ergebnis Mio. 954 699 36,5
EBIT Mio. 459 892 48,5
EBITDA Mio. 1990 2670 25,5
Konzernergebnis Mio. 55 313 82,4
Kennzahlen zu Bilanz und Kapitalflussrechnung
Bilanzsumme Mio. 30474 29108 4,7
Eigenkapitalquote % 13,2 21,0 7,8P.
Nettokreditverschuldung Mio. 3418 1695 101,7
OperativerCashflow Mio. 1977 3290 39,9
Investitionen (brutto) Mio. 2777 2499 11,1
Rentabilitts- und Wertschaffungskennzahlen
Vergleichbare operative Marge1) % 3,7 3,0 0,7P.
EBITDA-Marge % 6,6 8,9 2,3P.
CVA Mio. 90 3133 97,1
Lufthansa Aktie
Jahresschlusskurs 13,83 15,42 10,3
Ergebnis pro Aktie 0,12 0,68 82,4
Dividendenvorschlag 0,45 100,0
Leistungsdaten 2)
Fluggste Tsd. 105988 104593 1,3
FrachtundPost Tsd. t 1 924 1965 2,1
Sitzladefaktor % 80,1 79,8 0,3P.
Fracht-Nutzladefaktor % 69,9 69,1 0,8P.
Flge Anzahl 1001975 1028260 2,6
Mitarbeiter
Mitarbeiter im Jahresdurchschnitt Anzahl 118973 117414 1,3
Mitarbeiter zum Stichtag Anzahl 118781 118285 0,4
1) Kennzahl zur Vergleichbarkeit mit anderen Fluggesellschaften: (operatives Ergebnis + Rckstellungsauflsung) / Umsatz.2) Vorjahreszahlen angepasst.
Verffentlichungstag:12.Mrz2015.
Key figures Lufthansa Group 2014 2013 3) Change
in % Revenue and result
Total revenue m 30,011 30,027 0.1
ofwhichtrafficrevenue m 24,388 24,568 0.7
Operating result m 954 699 36.5
EBIT m 459 892 48.5
EBITDA m 1,990 2,670 25.5
Netprofit/loss m 55 313 82.4
Key balance sheet and cash flow statement figures
Total assets m 30,474 29,108 4.7
Equity ratio % 13.2 21.0 7.8pts
Net indebtedness m 3,418 1,695 101.7
Cashflowfromoperatingactivities m 1,977 3,290 39.9
Capital expenditure (gross) m 2,777 2,499 11.1
Key profitability and value creation figures
Adjusted operating margin1) % 3.7 3.0 0.7pts
EBITDA margin % 6.6 8.9 2.3 pts
CVA m 90 3,133 97.1
Lufthansa share
Share price at year-end 13.83 15.42 10.3
Earnings per share 0.12 0.68 82.4
Suggested dividend per share 0.45 100.0
Traffic figures 2)
Passengers thousands 105,988 104,593 1.3
Freight and mail thousand tonnes 1,924 1,965 2.1
Passengerloadfactor % 80.1 79.8 0.3 pts
Cargo load factor % 69.9 69.1 0.8pts
Flights number 1,001,975 1,028,260 2.6
Employees
Average number of employees number 118,973 117,414 1.3
Employees as of 31.12. number 118,781 118,285 0.4
1) Performanceindicatortoenablecomparisonwithotherairlines:(operatingresult+write-backsofprovisions)/revenue.2) Previousyearsfigureshavebeenadjusted.3) PreviousyearsfigureshavebeenadjustedduetoIFRS11.
Dateofpublication:12March2015.
Lufthansa Group
TheLufthansaGroupistheworldsleadingaviationgroup.Itsport-folioofcompaniesconsistsofnetworkairlines,low-costcarriersandaviation service companies. Its combination of business segments makestheLufthansaGroupagloballyuniqueaviationgroupwhoseintegratedvaluechainnotonlyoffersfinancialsynergiesbutalsogivesitanedgeoveritscompetitorsintermsofknow-how.
Business segments 2014figures
30.0Revenue inEURbn
954Operatingresult in EUR m
1,977Operatingcashflowin EUR m
2,777Capital expenditurein EUR m
90 CashValueAdded in EUR m
7.4 Total Shareholder Return in per cent
Keyfigures
LufthansaGroup overview
Passenger Airline GroupThenetworkcarriersLufthansaPassengerAirlines,SWISSandAustrianAirlinesoperateaglobalroutenetworkbasedonamarketstrategyofprovidinghighquality,safety,punctuality,reliabilityandpro-fessionalservice.Theportfolioalsoincludesthelow-costairlineGermanwingsandtheequityinvest-mentsinthecarriersBrusselsAirlines,JetBlueandSunExpress.
LogisticsLufthansaCargoisthelogisticsspecialistwithintheLufthansaGroupandEuropesleadingcargoairline.AswellasmarketingthefreightcapacitiesofLufthansaPassengerAirlinesandAustrianAirlinespassengeraircraft,thecompanyoperatesitsownfleetofcargoaircraft,comprising16BoeingMD11FsandfourB777Fs.
MROLufthansaTechnikistheworldsleadingindepend-ent provider of maintenance, repair and overhaul services(MRO)forciviliancommercialaircraft.Theportfolioconsistsofavarietyofdifferentproductstructuresandcombinations,fromtherepairofindi-vidualcomponentstoconsultancyservicesandthefullyintegratedsupplyofentirefleets.
Catering TheLSGSkyChefsgroupistheglobalmarketleaderinairlinecateringandinallupstreamanddownstreamin-flightserviceprocesses.Itsportfoliocoversairlinecatering,on-boardserviceequip-mentandlogistics,in-flightservicemanagement,in-flightsalesandservicesatairports.Thecompanyalsooperatesinadjacentmarkets,suchasservicesfortrainsandsupplyingtheretailsector.
IT Services LufthansaSystemsoffersconsultancyandITser-vicesforselectedindustriesandisagloballeaderintheaviationsector.Itsportfolioincludesadvisingon,developingandimplementingbespokeindustrysolutionsalongwithoperatingbothsystemsandapplicationsatitsowndatacentres.FollowingthesaleofitsITInfrastructureunit,thisbusinessseg-mentistobedissolvedinthe2015financialyear.
Passenger Airline Group 2014 Change
in %
Revenue m 23,320 0.8 ofwhichtrafficrevenue m 21,564 0.8Operatingresult m 553 7.8Adjustedoperatingmargin % 2.9 0.2ptsSegmentresult m 726 12.2EBITDA* m 1,697 20.9CVA m 37 78.9Segmentcapitalexpenditure m 2,248 22.1Employeesasof31.12. number 54,960 0.6
Logistics
2014 Change
in %
Revenue m 2,435 0.3 ofwhichtrafficrevenue m 2,364 0.6Operatingresult m 100 26.6Adjustedoperatingmargin % 4.3 0.7ptsSegmentresult m 120 34.8EBITDA* m 187 39.6CVA m 49 Segmentcapitalexpenditure m 214 32.7Employeesasof31.12. number 4,663 0.1
MRO
2014 Change
in %
Revenue m 4,337 3.8 of which external revenue m 2,673 3.0Operatingresult m 392 3.0Adjustedoperatingmargin % 9.4 1.5ptsSegmentresult m 429 6.1EBITDA* m 438 26.3CVA m 245 35.0Segmentcapitalexpenditure m 118 13.2Employeesasof31.12. number 20,079 0.8
Catering
2014 Change
in %
Revenue m 2,633 4.7 of which external revenue m 2,022 5.9Operatingresult m 100 4.8Adjustedoperatingmargin % 3.8 0.5ptsSegmentresult m 95 22.8EBITDA* m 148 12.9CVA m 7 Segmentcapitalexpenditure m 140 27.3Employeesasof31.12. number 32,843 1.7
IT Services
2014 Change
in %
Revenue m 646 0.9 of which external revenue m 270 1.9Operatingresult m 37 2.8Adjustedoperatingmargin % 6.0 0.4ptsSegmentresult m 12 EBITDA* m 85 CVA m 170 Segmentcapitalexpenditure m 18 10.0Employeesasof31.12. number 2,721 0.1
* WithoutGroup-internalprofitandlosstransfer/investmentincome.
Contents
1 Lufthansa First choice 2 Letter from the Executive Board 5 Thefieldsofaction 6 Successfulmeasures2014 8 Interview with the CEO 11 Plannedmeasures2015
12 To our shareholders 12 ReportoftheSupervisoryBoard 15 Lufthansashare 18 Annual review
20 Combined management report 22 Principles of the Group
22 BusinessactivitiesandGroupstructure 24 Goalsandstrategies 29 Managementsystemandsupervision 33 Legalandregulatoryfactors 35 Researchanddevelopment
36 Economic report 36 Macroeconomicsituation 38 Sectordevelopments 40 Courseofbusiness 46 Earningsposition 52 Assetsandfinancialposition 59 OverallstatementbytheExecutiveBoard
60 Business segment Passenger Airline Group
72 Business segment Logistics
77 Business segment MRO
81 Business segment Catering
85 Business segment IT Services
89 Other
91 Employees
96 Corporate responsibility
99 Supplementary report
100 Risk and opportunities report
120 Forecast
127 Corporate Governance
142 Notestotheindividualfinancialstatements for Deutsche Lufthansa AG (HGB)
147 Consolidatedfinancialstatements
234 Further information 234 Ten-year overview238 Glossary240 Cedits/contact Financial calendar 2015/2016 and Disclaimer
Lufthansa First choice
TheLufthansaGroupistheworldsleadingaviationgroup. Weoperateoneofthebiggestaircraftfleetsintheworld,andaremarketleaderwithourservicecompaniesintheirrespectiveindustries.Thisset-upisunique. Itprovidesuswithbothaknowledge-basedadvantageinmanyaspectsofourbusinessaswellasareassuringfinancialstabilitythatenablesustoactentre-preneuriallyandtocreatevaluethrougheconomiccycles.However,reinventingourselvesregularlyisnotonlyanabilitybutalsoanecessityinordertodevelopourbusinesssuccessfully.Wedosobyfocusingonsevenfieldsofactioninourstrategicprogramme7to1OurWayForward:
Customercentricityandqualityfocus Newconceptsforgrowth Innovationanddigitalisation Effectiveandleanorganisation Cultureandleadership Value-basedsteering Constantlyimprovingefficiency
Sevenfieldsofaction,onegoal: Lufthansa First choice for customers, employees, shareholders and partners.
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Dr Bettina Volkens Executive Board member Chief Officer Corporate Human Resources and Legal Affairs
Born in 1963, lawyer, Executive Board member since 1 July 2013, at Lufthansa since 2012
Harry Hohmeister Executive Board member Chief Officer Group Airlines, Logistics and IT
Born in 1964, diploma in commercial air transport, Executive Board member since 1July 2013, at Lufthansa since 1985
Karl Ulrich Garnadt Executive Board member Chief Executive Officer Lufthansa German Airlines
Born in 1957, diploma in commercial air transport, Executive Board member since 1 May 2014, at Lufthansa since 1979
Simone Menne Executive Board member Chief Officer Finances and Aviation Services
Born in 1960, business administration graduate, Executive Board member since 1 July 2012, at Lufthansa since 1989
Carsten Spohr Chairman of the Executive Board and CEO
Born in 1966, industrial engineer, Chairman of the Executive Board and CEO since 1 May 2014, Executive Board member since 1 January 2011, at Lufthansa since 1994
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Ladies and gentlemen,
2014wasaneventfulyearfortheLufthansaGroup.AmongthemajorchallengesfortheentireindustrywerethepoliticalcrisesinUkraineandtheMiddleEast,aswellastheadverseeffectsonglobalaviation oftheEbolaepidemicinWestAfrica.Inadditiontothis,wefacedenormouscompetitivepressurefromlow-costcarriersinEuropeaswellasfromstate-ownedGulfairlinesonroutestoAsia.Andfinally,the large-scalestrikesbyourownpilotshadasignificantimpactonourbusinessperformancelastyear.
Wearethereforeverypleasedthatwestillmanagedtoend2014withanewrecord:neverbeforeasmanypassengershaveflownwithourairlines;106millionpassengersplacedtheirtrustinuslastyear.Ourqualityoffensiveattheairlinesisalreadypayingoff.Ourotherbusinesssegmentsalsoincreasedtheircustomernumbers.LufthansaTechnik,forexample,servedatotalof3,290aircraftonanexclusivebasisforalmost800customersworldwide,whichwasanimpressive17percentincreaseonthepreviousyear.
Overall,thepastfinancialyearthereforefeaturedsomepositivedevelopmentsdespitethemajorchallenges.Amongthelesspositiveeventswereundoubtedlythestrikes.Alreadyinspring,theGroupwassignificantlyaffectedbytheindustrialactiontakenbystaffoutsideofourCompany,beforethepilotsatLufthansaPassen-gerAirlines,GermanwingsandLufthansaCargowentonstrikeforthreefulldaysinApril.Atthispoint,ourairlineswerealsofacedwithanincreasinglyseveredownturnindemand.ThistrendwasexacerbatedbythestrikesbythepilotsunionVereinigungCockpit.ByJune,thesharpfallinyieldsforcedustoadjustourprofitforecastforthefullyear.Intotal,therewere15daysofstrikesandmorethan8,600flightcancellationsin2014,whichhadanegativeimpactbothonourcustomersconfidenceinourreliabilityaswellasonourearnings,particularlythoseofLufthansaPassengerAirlines.Althoughthelatterstillendedtheyearwithapositiveoperatingresult,thefigurewasnonethelessdownonthepreviousyeardespitethestrongtailwindfrom the new depreciation method for aircraft.
Ourotherairlinesreportedabetterperformance.SWISSwasabletoincreaseitsearningsfurtherinachallengingenvironment.AustrianAirlinesrecordedanotherpositiveoperatingresult.However,ofevengreaterimportanceforthefutureofthiscompanywasthepivotalagreementwithitslabourunionpartnersconcerningsustainableandmorecompetitivestructuresamajorsuccessforallsides.LufthansaCargoincreaseditsearningsdespiteadditionalburdens.Asinthepreviousyears,LufthansaTechniksearningswereexcellentandonceagainmadeasubstantialcontributiontowardsstabilisingtheGroupsresultfor theperiod.EarningsatLSGSkyChefswereonlyslightlylowerthaninthepreviousyearandwereclearlypositive.LufthansaSystemswasabletokeepitsearningsstable.
Intheend,theLufthansaGrouprecordedanoperatingresultofEUR954m,anincreaseofaround36percentonthepreviousyear.However,theaccountingeffectsoftheaforementionedchangetothedepreciationmethodforaircraftandreserveengineswerealsoincludedhere.Withouttheseeffects,ouroperatingresultwouldhavebeendownonthepreviousyear.Wethereforecannotbesatisfiedwiththisfinancialresult,althoughwecertainlycanwiththewayinwhichweachievedit,givenalltheadversitywefaced.Inthemeantimewehavelaidthefoundationsforsustainableimprovementsinourearnings.Inourstrategicpro-gramme7to1OurWayForward,wehavedefinedsevenfieldsofactionthatshouldenableustoliveuptoourclaimtobeLufthansaFirstchoice,thesloganofthisyearsannualreport.ThisisthebasisforthesuccessfulfurtherdevelopmentoftheLufthansaGroup.Overthecourseoftheyear,wehavealreadylaidessentialfoundationsandachievedthefirstinterimobjectives,suchassellingtheInfrastructureunitofourITServicesbusinesssegmentandcarving-outMiles&Moreintoaseparatelegalentity.
Lufthansa First choice Letter from the Executive Board
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Setting-upthenewEurowingsasaEuropeanlow-costairlineandourpartnershipwiththeChinesecarrier AirChinaalsorepresentmajorstepsonthejourneytowardsourgoalofsafeguardingthefutureofourCompanyandmakingLufthansathebenchmarkintheaviationsectoronceagain.
Withtheintroductionofnewfinancialperformanceindicatorsforthe2015financialyearwehavealsoincreasedtransparencyintheinternalandexternalassessmentoftheCompanysperformance.Starting inthenewfinancialyear,wewillbereportingtoyou,ourshareholders,onthecommercialperformance oftheLufthansaGroupusingthekeyperformanceindicatorsEACC(EarningsAfterCostofCapital)andAdjustedEBIT(adjustedearningsbeforeinterestandtaxes).Inconjunctionwiththeintroductionofthenew performanceindicators,wehavealsomodernisedourdividendpolicy.Itallowsforconsistentlyhighdividendamounts.ToavoidpayingoutdividendsfromthesubstanceoftheCompany,however,wewillcontinuetoproposeadividendonlyifitiscoveredbyasufficientnetresultfortheyearintheindividualfinancialstate-mentsforDeutscheLufthansaAGpreparedinaccordancewiththeGermanCommercialCode(HGB).
Unfortunately,thiswasnotthecaseinthe2014financialyear.ThenegativechangeinmarketvaluesofourfuelhedgeshadanadverseimpactontheindividualfinancialstatementsinaccordancewithHGB,asdidincreasingpensionliabilitiesduetofallinginterestratesandnegativeeffectsfromtheoutsourcingofLufthansaSystemsInfrastructureunit.Asaresult,andinlinewithourdividendpolicy,nodividendwillbepaidforthe2014financialyear.
Withtheyearoflayingfoundationsbehindus,wenowhavetheyearofimplementationaheadofus,sothatwecanachievetheimprovementinearningsthatissourgentlyneeded.Wewant,forinstance,tosuccess-fullytakethedecisivefinalstepwithLufthansaPassengerAirlinesonourjourneytowardsbecomingthefirst,privatefive-starairlineinthewesternhemisphere.Thiswillunderscoreourclaimtobeapremiumairlineandallowustoofferourcustomersthebestandlatestproductsinallbookingclasses.Inparallel,wewillconcentrateonfurtherexpandingEurowingsandcreatetheconditionsforfurtherprofitablegrowthforourcommerciallysuccessfulbusinesssegments.Inourothercompanies,wewillincreaseprofitabilityandmakethechangesnecessarytodothis.Wewillalsopushaheadwiththefurtherorganisationaldevel-opmentoftheLufthansaGroupbymodernisingstructuresandsystematicallyutilisingsynergieswherever itmakesoperationalandstrategicsensetodoso.
Forthe2015financialyear,weareforecastinganAdjustedEBITofmorethanEUR1,5bn.However,ourearningswillalsodependonthedevelopmentoftheoilprice,theeuroexchangerateagainsttheUSdollarandtheSwissfranc,andtheperformanceofthePassengerAirlineGroupsaverageyields.ThefurthercourseofthewagenegotiationsatLufthansaPassengerAirlineswillalsoplayarolehere.
Dearshareholders,on1May2014ItookoverfromChristophFranzasChairmanoftheExecutiveBoard andCEOofDeutscheLufthansaAG.TogetherwithmycolleaguesontheExecutiveBoard,KarlUlrichGarnadt,HarryHohmeister,SimoneMenneandDrBettinaVolkens,weareworkingonleadingyour Companytowardsafuturecharacterisedbysustainablesuccess:LufthansaFirstchoiceforcustomers,employees,shareholdersandbusinesspartners:thatisoursharedobjective.
Wearewellpositionedandopentochange,andwehavethebestemployeeswhowanttoachievethisobjectivetogetherwithus.Thankyouforyourcontinuedtrustandyoursupport.
Frankfurt, March 2015
CarstenSpohrChairmanoftheExecutiveBoardandCEOofDeutscheLufthansaAG
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02 / Newconcepts forgrowth
WearefocusedonthecontinuousprofitabledevelopmentofourGroupandourcompanies.
03 / Innovation and digitalization
Withnewsolutionsandbusinessmodels,wearemakingtheCompanyviableforthefuture,bothinternallyandexternally.
07 / Constantly improvingefficiency
Apermanentfocusondevelopingandimplementingearningimprovement potentialsisacontinuousmanagementtaskforus.
06 / Value-based steering
Withtherightchoiceoffinancialperformanceindicators,wearemakingsurethatourfinancialresourcesareallocatedinthebestway.
05 / Culture and leadership
Motivationandpassionforaviationarewhatsetsusapart.
04 / Effective and lean organisation
Wearemanagingactivelyandlean ourdiversegroupofcompanies.
01 / Customer centricity and quality focus
Onbehalfofourcustomers,wearereachingforthestarsonboardandontheground.
Whatwehavealreadyachievedin2014...
Lufthansa First choice Thefieldsofactionofourstrategicprogramme 7to1OurWayForward
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Ageoffleet
Financial stability
Market position
Customer
Shareholder Employee
03 / Innovation and digitalization
TheLufthansaGroupfostersitsactivitiesintheareaofinnovation.Aninnovationfundtosupportinnovativesolutionsandtechnologiesislaunched,andaninnova-tionhubisestablishedinBerlintostrengthenlinkswithrelevantstart-upcompanies.
InnovatorAwardsaregiventoemployeesfordevelop-ingandimplementinginnovativeideasandprojectsforthefirsttime.
04 / Effective and lean organisation
Theoptimisationofadministrativeareasmakesprogress.TheplannedtransferofvariousadministrativefunctionstothenewlyestablishedLufthansaGlobalBusinessServicesisimplementedsuccessfully.Administrativeprocessescontinuetoconsistofthesamehighquality,butarenowalsostandardisedandconductedefficientlyandcost- effectivelyfromasinglesourcefortheentireLufthansaGroup.Thismakestheindividualbusinesssegmentsleaner in the future.
AustrianAirlinesandemployeerepresentativesagreeonnewstructuresthatareviableforthefuture.
01 / Customer centricity and quality focus
ThenewFirstandBusinessClassisintroducedonmorethan100LufthansaPassengerAirlineslong-haulaircraft.Thismeansthattheentirelong-haulfleetofthePassengerAirlineGroupwillsoonhavefullyflatbedsinBusinessClass.TheinstallationofPremiumEconomyClassstartsatLufthansaPassengerAirlines.
AcrossalloftheGroupsairlinesandcompanies,initiativestoimprovequalitymakegoodprogress.
02 /Newconceptsforgrowth
LufthansaPassengerAirlinestransfersitsconnectionsoutsideoftheFrankfurtandMunichhubstoGerman-wingsasplanned.ThedecisiontoestablishthenewEurowingspavesthewayforthesystematicfurtherexpansionofthisbusiness.
Infuture,LufthansaTechnikwillalsocarryoutmaintenanceworkonaircraftatamaintenancefacilityinPuertoRico,theconstructionofwhichbeganin2014.LSGSkyChefsdrivesitsgrowthbymeansofpartnershipsinairlinecater-ingaswellasinadjacentmarkets.Miles&Moreissuc-cessfullycarvedoutinordertoutiliseupgrowthpotential.
Lufthansa First choice SuccessfulmeasuresonourOurWayForwardin2014
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07 / Constantly improvingefficiency
TheSCOREprogrammeseestheimplementationofmorethan2,700projects,withagrossearningscontri-butionofEUR974min2014,thussuccessfullyhelpingtostabiliseearnings.Forthecomingyears,too,thereareplentyoffurthermeasurestoimproveearningsinthepipeline.
AnagreementtooutsourcetheITInfrastructureunit oftheITServicessegmentissigned.
05 / Culture and leadership
ManagersattheLufthansaGroupuseuniformprinciplesthroughouttheentireCompanytomanagetheirstaffandareas.ThenewlydevelopedLeadershipPrinciplesDrivingBusiness,LeadingChange,CreatingSpirit,Fostering TalentandMasteringComplexityareputinevenmorefocusacrossalloftheGroupscompanies.
06 / Valued-based steering
TheLufthansaGroupadoptsanewsystemoffinancialkeyperformanceindicatorstomanagetheCompany. TheintroductionofEACCandEBITaskeyperformanceindicatorsreducesthecomplexityofreportingsystemsandmakesinternalandexternalreportingmorecloselyinterconnected.Thenewkeyperformanceindicatorsaremoretransparentandeasiertouse,whichshouldhelp toembedvalue-basedmanagementevenmorefirmlywithintheCompany.
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Our most important priority, apart from safety, is our future viability.
Carsten Spohr, Chairman of the Executive Board and CEO
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Lufthansa First choiceCEO in interview
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Mr Spohr, Lufthansa First choice is the slogan ofthisannualreportforthe2014financialyear.What makes the Lufthansa Group the company of choice?
Beingthefirstchoiceprimarilymeansenjoyingahighleveloftrust.Iamverygratefulthatwehavenotlostthistrustamongourcustomers,ouremployeesandourshareholders,inspiteofalltheturbulenceoverthepastyear.
OuremployeesthroughouttheCompanyputeveryeffortintoimpressingourcustomerseverysingledayanddemonstratingthattheLufthansaGroupistherightchoiceonthegroundandonboardouraircraft,atourairlinesandatourservicecompanies.However,wedonotjustwanttobethefirstchoiceforourcustomers.Ouraimisalsotoremainthefirstchoiceforouremployeesand,lastbutnotleast,inthecapitalmarketforourshareholders.
Trustisavaluableasset.HowcantheLufthansaGroup succeed in maintaining this trust despite the challenging operating environment?
Byactinginasustainablemanner.Itismydutyandmyunderstandingofmanagingthecompanysuccess-fullylong-termtobalancetheinterestsofstakeholdersandtodosowithsustainableprospectsandviablestructuresforeveryone.Itisnocoincidencethatthetrianglewhichrepresentsthebalancebetweentheseinterestsservesasanimportantbasisforhowweact.
What do you consider to be the key tothisdifficulttask?
Weareaservicecompany.Ourfocusisonservingtheneedsofour106millionpassengersandourcustomersinourservicecompaniesasbestwecan.Toachievethis,wehavetomeetthehighestqualitystandardsinourindustryandofferthebestproductsandexcellentservicesineachsector.
That means the customer is the priority for you? Yes.Evenifthisisnotanendinitself.Wecanonlygen-
erateadequatereturnsforourshareholdersandensurethatouremployeeshavejobswithprospectsifwehavesatisfiedandloyalcustomers.Howweactisthereforeguidedbythequestion:whatisthecustomerwillingtopayforandhowdoweproducethisattherequiredqualityeverysingleday?
Whatisyouranswertothisquestion? Wealwaysstartbyfocusingonthemostimportant
thing:thesafetyofourpassengersandcrews.Beyondthis,ouraimistoachievethehighestlevelofproductqualityinallareasoftheCompany.TheLufthansaGroupisanetworkofpremiumserviceprovidersintheirrespec-tivesectors.Thisiswhywehavealsodeclared2015tobetheyearofthenewLufthansapremiumquality.
What does that mean exactly? WewillhavethelatestproductinFirst,Businessand
EconomyClassinallofLufthansaPassengerAirlineslong-haulaircraft.Bytheendoftheyear,thiswillalso betrueforthenewPremiumEconomyClass.We wanttobethefirstEuropeanairlinetoreachthehighlyregardedfive-starlevel.ItgoeswithoutsayingthatwealsoofferoutstandingserviceandconsistentproductsatSWISSandAustrianAirlines,aswellasnewlounges atourZurichandViennahubs.Ourhighlevelofinvest-mentisnowdeliveringclearbenefitsforourcustomersand,asaresultofmorestablerevenue,forourshare-holders,too.
The Lufthansa Group is not just made up of airlines, however,butalsoincludesservicecompaniessuchas Lufthansa Technik and LSG Sky Chefs.
Thatiscorrect.AlloftheservicecompaniesintheLufthansaGroupareeconomicallysuccessfulmarketleadersintheirrespectiveindustries.
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Forthisveryreason,Ibelievethatthetwobiggestofthesecompanies,LufthansaTechnikandLSGSkyChefs,haveexcellentopportunitiestoincreasetheirmarketpresenceandexpandtheirproductrange.However,othersuccessfulcompanieslikeAirPlusandMiles&Morealsohaveenormouspotentialtobuildontheirsuccesses.
Are the service companies in the Lufthansa Group doing better than the airlines?
Inrecentyears,wehaveseenthatatleastthefinancialperformanceofourservicecompanieshasbeenmorestablethanthatofourairlines.Thisisalsobecausetheyhaveexpandedintoothercountriesasmarketshavedeveloped.Ourservicecompaniesarethereforesome-timesabletooperatemorecost-effectivelythanourair-lines,whicharetiedtotheirhomemarkets.
Why is that so? Germany,AustriaandSwitzerlandarenolow-wage
countries,aseveryoneknows.Fortheairlinesinparti-cular,itisthereforeespeciallyimportanttoprovideout-standingqualityandtocounteractcostdisadvantages.However,itgoeswithoutsayingthatourgoalistoprovidethebestpossiblequalityinalloftheLufthansaGroupscompaniesatalltimes.
Taking all of that into consideration, howdoyouviewtheLufthansaGroup?
Itcannotbestressedenough:theLufthansaGroupistheworldsleadingaviationgrouptoday.Weareveryproudofthisparticularlyinouranniversaryyearof2015whenwelookbackatourmodestrelaunch60yearsago.Today,weoperateoneofthebiggestaircraftfleetsintheworld,andourservicecompaniesaremarketlead-ersintheirrespectiveindustries.Thisset-upisuniqueandgivesusarealcompetitiveadvantage.Itprovidesuswithbothaknowledge-basedadvantageinmanyaspectsofourbusinessaswellasaleveloffinancialstabilitythatenablesustoactentrepreneurallyandtocreatevalue,irrespectiveofeconomiccycles.However,wecanandwehavetoregularlyquestionthisstrategy.
Whatarethespecificchallengesfacingyou? Whilewearebuildingonthestrengthsofourservice
companies,weneedtoopenlyidentifyandaddresspotentialsforimprovementinourpassengerbusiness.Thatisthecoreofourprogramme7to1OurWayForward.Ourexcessivelyhighcostsareamajorweak-
ness.Gettingahandleonthemisabigchallengeandhasthepotentialtocauseconflictasweexperienced inthepastfinancialyear,particularlyinournegotiationswiththepilotsunionVereinigungCockpit.Atthesametime,wemustincreaseourrevenuethroughourqualityoffensiveandmakeourairlinesroutenetworksevenmoreattractivethroughnewpartnerships,forexample,suchasmostrecentlywithAirChina.
InEuropeand,indeed,worldwide,point-to-pointtrafficisgrowing.However,thebusinessmodelsoftheLufthansaGroupsairlinesarefocused primarily on hubs.
OurgrowingbusinessindirecttrafficoutsideourhubswillplayacentralandindispensableroleinthefuturedevelopmentoftheLufthansaGroup.TrafficvolumesindirecttrafficwithinEuropearealreadytodayseveraltimesgreaterthantravelviathehubs.Thismarketoffersusattractiveopportunities,andthatiswhywewanttofurtherbuildonthesuccessofourWingsairlines.
Someninemonthsago,yououtlinedsevennewstrategicfieldsofaction.Arethesestrategicfieldsalready being implemented?
Overthelastfewmonths,wehavelaidsomeessentialfoundationsforourfurtherdevelopment.Now,weareconcentratingonimplementation.Thisalsoappliestothefirst-timeapplicationofthenewvalue-basedmanage-mentindicatorsthatweoutlinedinDecember2014.OuraimnowistodeterminewhichstructureswillenabletheLufthansaGrouptobesuccessfulinthefuture.
Will SCORE be part of these structures? WithSCORE,wehavebeenimplementingavery
successfulearningsimprovementprogrammeforthreeyears.Withouttheresultingsuccesses,wewouldnothavebeenabletoovercomethechallengesofthemarketaseffectively.Theprocessimprovementsthatwedevelopedarenowgraduallybecomingpartofourroutine.YoucouldsaythatSCOREwillneverfinish. OurfocusnowisincreasinglyontheorganisationalstructureoftheGroup.Iamcertainthatthisareain particularwillseeanumberofexcitingdevelopments inthecourseoftheyear.
Lookingahead,howdoyoumeasure your success in the future?
Byeveryyearbeingbetterthantheyearbefore.Ourmostimportantpriority,apartfromsafety,isourfutureviability.
10
Measures 2015
Lufthansa First choice Nextsteps
01 / Customer centricity and quality focus
Five-starquality:LufthansaPassengerAirlinesfinalisestheintroductionofthenewFirst,BusinessandPremium EconomyClasswithadditionalservicesonboardand ontheground.
02/Newconceptsforgrowth
ThenewEurowings:profitablegrowthindirecttraffic within Europe and all over the world.
03 / Innovation and digitalization
Lookingtothefuture:implementingofinitialinnovation potentialwithexternalpartners.
04 / Effective and lean organisation
Leaner,moreagile,moreefficient:theLufthansaGroup exploitsitssynergypotentialandpoolsitsorganisationalstrengths.
05 / Culture and leadership
Structuresforquickerdecision-makingandconsent implementation:cultureisakeyelementofsuccess.
06 / Value-based steering
Newkeyperformanceindicators:value-basedmanagement oftheCompanyusingEACCandEBITforthefirsttime.
07/Constantlyimprovingefficiency
Continuousimprovement:changeremainsalong-termactivityoftheCompanyevenaftertheSCOREprogrammeends.
11
Ladies and gentlemen,
Inthefinancialyear2014,theSupervisoryBoardagaincarriedoutthedutiesconferredonitbylaw,theCompanysArticlesofAssociationanditsinternalregulations:toappointthemembersoftheExecutiveBoard,tosupervisetheirworkandtoadvisethem.TheExecutiveBoardsreportingobligationsandthelistoftransac-tionsrequiringauthorisationaredefinedbylawandarespecifiedininternalregulations.
TheExecutiveBoardprovideduswithfull,timelyinformationonthecompetitiveenvironment,plannedCompanypolicyaswellasallsignificantstrategicandoperatingdecisions.
LargeritemsofprojectedcapitalexpenditureandequityinvestmentsaswellasplannedGroupfinancingactivitieswerecoordinatedwithus.AsChairmanoftheSupervisoryBoardIreadtheminutesoftheExecutiveBoardmeetingsanddiscussedthecurrentcourseofbusinesswiththeChiefExecutiveOfficeronanongoingbasis.
In2014,theSupervisoryBoardheldfivemeetings,on7February,12March,28April,17Septemberand3December.InDecemberwecarriedouttheregularreviewoftheefficiencyofourworkingpracticesandtogetherwiththeExecutiveBoardissuedanupdateddeclarationofcompliancewiththeGermanCorporateGovernanceCode,whichcanbefoundontheLufthansaGroupwebsiteatwww.lufthansagroup.com/declaration-of-compliance. There were no
conflictsofinterestrequiringdisclosurein2014.NomemberoftheSupervisoryBoardwaspresentatfewerthanhalfthemeetingsoftheSupervisoryBoardortheSupervisoryBoardcommittees.
OurmeetingsfocusedontheeconomicdevelopmentofDeutscheLufthansaAGanditsassociatedcompanies.SpecialattentionwaspaidtotheconsiderabledisruptioncausedbymultiplepilotsstrikesatLufthansaPassengerAirlines,LufthansaCargoandGermanwings,theprogressmadeontheSCOREprogrammeandthelegalandcollectivebargainingeffectsoftransferringflightoper-ationsfromAustrianAirlinestoTyroleanAirwaysTirolerLuftfahrtGmbHinthefinancialyear2012.InSeptemberweheldintensivetalkswiththeExecutiveBoardonthepackageofstrategicmeasuresdubbed7to1OurWayForward,whichisintendedtocreatemorecompetitivestructuresinatotalofsevenactionareasinordertoensurethefutureviabilityoftheLufthansaGroupandenablefurthergrowthintheairlineindustry.
Weapprovedthepurchaseofatotalof25aircraftfromtheAirbusA320familyfortheGroupsairlinesandthewetleasesforuptosevenlong-haulaircraftfromtheA330familyforthenewEurowings.Wealsogaveourapprovaltothecarve-outoftheMiles&MoredivisionfromDeutscheLufthansaAGintoMiles&MoreInterna-tionalGmbHandtheplannedbreak-upofLufthansaSystemsAGandsubsequentsaleofitsITInfrastructureunittotheIBMGroup.
WolfgangMayrhuber,ChairmanoftheSupervisoryBoard
12 Lufthansa Annual Report 2014
http://www.lufthansagroup.com/en/responsibility.html
TheExecutiveBoardinformedusregularlyofchangesintheshareholderstructure,theperformanceoftheLufthansashare,transactionswithderivativefinancialinstruments,andallocationstoandreturnsfromtheLufthansapensionfund.ThedisclosuresrequiredbytakeoverlawmadeinthecombinedmanagementreportbytheExecutiveBoardinaccordancewithSections289Paragraph4and315Paragraph4oftheGermanCommercialCoderequirenofurthercomment.
On7February2014andattherecommendationoftheSteeringCommittee,whichmetfivetimesin2014,theSupervisoryBoardappointedMrCarstenSpohrtosucceedDrChristophFranzasChairmanoftheExecutiveBoardandCEOwitheffectfrom1May2014.AsmentionedintheSupervisoryBoardsreportforthepreviousyear,DrFranzendedhisworkfortheExecutiveBoard inagreementwiththeCompanyon30April2014.Atthemeetingheldon12March2014,theSupervisoryBoardfollowedanotherrecommendationfromtheSteeringCommitteeandappointedMrKarlUlrichGarnadt,previouslyChairmanoftheExecutiveBoardandCEOofLufthansaCargoAG,totakeMrSpohrsseatontheExecutiveBoardofDeutscheLufthansaAG,withresponsibilityforLufthansaPassengerAirlines.Theappointmentwasmade fortheperiodfrom1May2014to30April2017.
On17September2014,againfollowingtherecommendationoftheSteeringCommittee,theSupervisoryBoardappointedMsSimoneMenneasamemberoftheExecutiveBoardofDeutscheLufthansaAGwithresponsibilityforFinancesandAviationServicesuntil30June2020.
TheArbitrationCommitteeandtheNominationCommitteewerenotconvenedinthereportingyear.
TheAuditCommitteemetfivetimesin2014,fourofthemeetingsinthepresenceoftheauditors.TheAuditCommitteediscussedtheinterimreportswiththeCFObeforetheirpublication.Thecom-mitteealsodealtwiththesupervisionofaccountingprocessesandtheeffectivenessoftheinternalcontrolsystem,riskmanage-mentandinternalauditingsystems.Themembersreceivedregularreportsonriskmanagement,complianceandtheworkoftheGroupsinternalauditdepartment.Theylookedindetailatthenewconceptforvalue-basedmanagementtobeestablishedin2015andthechangestotheLufthansaGroupsdividendpolicy.
InformationonthecommitteesworkwasprovidedatthebeginningofthesubsequentSupervisoryBoardmeeting.
DrJrgenHambrechtlefttheSupervisoryBoardatthecloseoftheAnnualGeneralMeetingon29April2014.HewasamemberoftheSupervisoryBoardforsixyearsandwascloselyinvolvedinpreparingimportantstaffdecisionsasamemberofboththeSteeringCommitteeandtheNominationCommittee.TheSuper-visoryBoardthankshimforhissenseofresponsibility,hispragma-tismandthegreatcommitmenthebroughttohiswork.
MsMonikaRibarwaselectedtotheSupervisoryBoardtosucceedDrHambrechtattheAnnualGeneralMeetingon29April2014.Onthesameday,theSupervisoryBoardelectedMsRibarasamemberoftheAuditCommittee,whereshesucceedsDrKarl-LudwigKley,whotookoverthepostsontheSteeringCommittee,ArbitrationCommitteeandNominationCommitteeleftvacantbythedepartureofDrHambrecht.DrWernerBrandtwaselectedasChair of the Audit Committee.
MsIlonaRitterlefttheSupervisoryBoardasof31December2014.Shewasreplacedasof1January2015bythesubstitutememberMrJan-WillemMarquardt,whowaselectedbythestaffoftheLufthansaGroup.TheSupervisoryBoardthanksMsRitterforherresponsiblecontributiontoitswork.MrJan-WillemMarquardtwaselectedtosucceedherontheAuditCommitteewitheffectfrom 11 March 2015.
WeappointedPricewaterhouseCoopersAktiengesellschaftWirt-schaftsprfungsgesellschaft,Dusseldorf,whowereelectedasauditorsforDeutscheLufthansaAGandtheGroupattheAnnualGeneralMeeting2014,toauditthefinancialstatementsandtheconsolidatedfinancialstatements,thecombinedmanagementreportandthesystemfortheearlyidentificationofrisks.TheAuditCommitteeacknowledgedthedeclarationofindependencepro-videdbyPricewaterhouseCoopersanddiscussedthemaintopicsoftheaudit.Nopotentialgroundsfordisqualifyingtheauditors ordoubtingtheirimpartialitycametolightduringthecourseof the audit.
13Lufthansa Annual Report 2014
To our shareholders
ReportoftheSupervisoryBoard
TheconsolidatedfinancialstatementshavebeenpreparedinaccordancewiththeInternationalFinancialReportingStandards(IFRS)issuedbytheInternationalAccountingStandardsBoard(IASB),takingaccountofinterpretationsbytheIFRSInterpretationsCommitteeasapplicableintheEuropeanUnion(EU).TheauditorsauditedtheannualfinancialstatementsandconsolidatedfinancialstatementsofDeutscheLufthansaAGandthecombinedmanage-mentreportasof31December2014inaccordancewiththelegalrequirements,andhadnoreservationstomake.Theyfurthercon-firmedthatthesystemfortheearlyidentificationofrisksestablishedbytheExecutiveBoardissuitablefortheearlyidentificationofdevelopmentswhichcouldendangertheCompanyscontinuedexistence.Duringtheiraudittheauditorsdidnotcomeacrossanyfactsincontradictionwiththedeclarationofcompliance.
InearlyMarch2015,theAuditCommitteediscussedtheauditreportsindetailwiththeCFOinthepresenceofthetwoauditorswhohadsignedthefinancialstatements.AttheSupervisoryBoardaccountsmeetingtheauditorsreportedontheirauditfindingsandansweredquestions.WeexaminedindetailthefinancialstatementsandtheconsolidatedfinancialstatementsofDeutscheLufthansaAGaswellasthecombinedmanagementreportandhadnoobjectionstomake.WeagreewiththeExecutiveBoardsproposalnottopayadividendandtobalancethenetlossaccordingtoHGBforthefinancialyear2014bymeansofatransferfromthecapitalreserve.Thefinancialstatementsandtheconsolidatedfinancialstatementswereapproved.The2014annualfinancialstatementsofDeutscheLufthansaAGaspreparedbytheExecutiveBoardhavetherebybeenadopted.
InJanuary2015,DrBernhardWalter,theformerChairmanoftheExecutiveBoardofDresdnerBank,passedawayattheageof72,asdidMrJanStenberg,theformerCEOofSASScandinavian
Airlines,attheageof75.DrWalterwasamemberofourSupervi-soryBoardfrom1998to2000andwascloselyinvolvedinthetimelyandfar-sightedappointmentofExecutiveBoardmembersasamemberoftheSteeringCommittee.MrStenbergwasamemberofourSupervisoryBoardfrom1998to2003andcon-tributedhisinternationalexperienceasCEOofoneoftheStarAlliancesfivefoundingmemberstotheworkoftheBoard.Wewillalwaysrememberbothgentlemenwithrespect.
Theyear2014wasmarkedbyvariousfactorsthataffectedtheresultsoftheLufthansaGroup.Performancewasseverelyhin-deredbystrikesthroughouttheyear.Theywereaccompaniedbyintensecompetitionandtheensuingdeclineinaverageyieldsfromthepassengerbusiness.TheExecutiveBoardhadtoaltertheoriginalforecastfortheoperatingresultasearlyasJunefromEUR1.3to1.5bntoaroundEUR1bn.Fuelpricemovementsinthelastquarterhadapositiveimpactonearnings,althoughpoliti-calinstabilityalsoaffecteddemand.Underthesecircumstancestheresultfinallyreportedforthefinancialyear2014canbeconsid-eredacceptable.
TheSupervisoryBoardexpresslythankstheExecutiveBoardandtheemployeesoftheLufthansaGroupfortheirworkunderverydifficultconditionsandtheirgreatpersonalcommitment.
Cologne,11March2015
FortheSupervisoryBoardWolfgangMayrhuber,Chairman
14 Lufthansa Annual Report 2014
Lufthansa share
Totalshareholderreturnof7.4percentin2014./ Nodividendforthefinancial
year2014./ Majorityofanalystsrecommendholdingtheshare./ Shareholderstructure
changesslightly./ Comprehensive,transparentcommunicationwithcapitalmarketsto
continue. / TheLufthansashareispartofmajorshareindices.
Lufthansa share loses value in 2014ThepriceoftheLufthansasharefellby10.3percentinfinancialyear2014.IncludingthedividendpaymentofEUR0.45,theshare-holdersoftheLufthansaGroupreceivedatotalreturnof7.4percentin2014.Thesharepricewasveryvolatileoverthecourseoftheyear.Inthefirstquarterthesharepriceroseby23.3percentbeforefallingby17.5percentinthesecondquarterfollowingtheadjustmenttotheearningsforecastfor2014and2015.Asaresult,atthemiddleoftheyearthesharewasonlytradingat1.7percentaboveitsopeningpricefortheyear.Inthethirdquarter,theLufthansasharedeclinedby20.2percentduetouncertaintysur-roundingthedevelopmentofpricecompetitionandthestrikesbythepilotsunionVereinigungCockpit.Theselosseswerepartlyrecoupedinthefourthquarter(+10.6percent)supportedbytheconsiderablefallintheoilprice.
Thesharereacheditshighpricefortheyearon4April2014atEUR20.26,followedbythelowfortheyearon10October2014atEUR10.88.TheshareclosedtheyearatEUR13.83.ThismeantthattheshareunderperformedincomparisontotheDAXindex(+2.7percent).
On11December2014,theLufthansaGrouppresenteditsnewconceptforvalue-basedmanagement.Asofthefinancialyear2015,theCVAistobereplacedasthekeymanagementmetricbyEarningsAfterCostofCapital(EACC).
TheLufthansaGroupalsopresentedanewdividendpolicytoitsshareholdersonthesameday.Changesinthedepreciationpolicyforaircraftandengines,alongwiththeswitchinfinancialmanagementindicatorsinthenewfinancialyear,madeitneces-sarytorevisethepolicy.Inlinewiththenewdividendpolicy,adividendpaymentof10to25percentofEBITshouldbemadefromfinancialyear2015(payoutin2016),ifandinsofarasapositiveHGBresultallowsforthis.Thismeansthattheabsoluteamountofthedividendwillbeinthesamerangeasunderthepreviouspolicy.ShareholderswillcontinuetoparticipatedirectlyintheCompanyssuccess.
TheLufthansashare:keyfigures
2014 2013 2012 2011 2010 Year-endshareprice 13.83 15.42 14.24 9.19 16.36
Highestshareprice 20.26 17.10 14.47 17.39 17.77
Lowestshareprice 10.88 12.93 8.02 8.35 10.34
Numberofshares millions 462.8 461.1 459.9 457.9 457.9
Marketcapitalisation(atyear-end) bn 6.4 7.1 6.5 4.2 7.5
Earningspershare 0.12 0.68 2.68 0.03 2.47
Cashflowfromoperatingactivitiespershare 4.27 7.15 6.20 5.14 6.71
Dividendpershare 0.45 0.25 0.6
Dividendyield(gross) % 2.9 2.7 3.7
Dividend m 207.5 114.5 274.8
Totalshareholderreturn % 7.4 8.3 57.7 40.2 39.2
15Lufthansa Annual Report 2014
To our shareholders
Lufthansashare
DuetoDeutscheLufthansaAGsconsiderablynegativeHGBresult,nodividendispaidforthe2014financialyear.ApayouttotheshareholderswoulddirectlyreducetheCompanysequity.Inacaselikethis,theusualdividendpolicystipulatesthatnopaymentbemade,inordernottoerodetheCompanysfinancialsubstance.
Furtherinformationontheperformanceindicatorsforvalue-basedmanagementandonthenewdividendpolicyisprovidedinthechapter Financial strategy on p.28.
Analysts give Lufthansa share a balanced valuationAmajorityofanalystsrecommendholdingtheLufthansashare.Outof27equitiesanalysts,14recommendedtheshareasaholdatyear-end2014.Sevenconsideredtheshareasabuyandsixasasell.
Slightchangesinforeignshareownership and structure of major shareholdersInordertoprotectinternationalairtrafficrightsanditsoperatinglicence,theGermanAviationComplianceDocumentationAct(LuftNaSiG)requiresLufthansatoprovideevidencethatamajorityofitssharesareheldbyGermanshareholders.Forthisreason,allLufthansasharesareregisteredshareswithtransferrestrictions.
Accordingtotheshareholdersregister,attheendof2014,Germaninvestorsheld65.5percentoftheshares(previousyear:62.4percent).Thesecondlargestgroupwith10.5percentwassharehold-ersfromtheUSA(previousyear:11.5percent).InvestorsfromtheUKaccountedfor5.2percentofsharecapital(previousyear:3.6percent),followedbySaudiArabiawith3.5percent(previousyear:2.2percent)andtheCaymanIslandswith3.3percent(previousyear:3.9percent).TheshareholderstructurethereforeeasilycomplieswiththerelevantprovisionsoftheGermanAviationComplianceDocumentationAct(LuftNaSiG).
Analystsrecommendations*asof31.12.2014
7 14 6
* Targetprice:EUR13.97,averageof27analysts. Range:fromEUR9.60uptoEUR22.20.
Buy Hold Sell
Shareholder structure by nationalityasof31.12.2014in%
Other 9.0Luxembourg 3.0
USA 10.5
UnitedKingdom 5.2
SaudiArabia 3.5
Germany 65.5
CaymanIslands 3.3
Freefloat:100%
Performance of the Lufthansa share, indexedasof31.12.2013,comparedwiththeDAXandcompetitors,in%
Jan2014
Dec2014
Aug Sept NovOctFeb Mar Apr May Jun Jul60708090
100110120130140150160 160
150
140
130
120
110
100
90
80
70
60
DAX Lufthansa InternationalAirlinesGroup Air France-KLM easyJet Ryanair Air Berlin
16 Lufthansa Annual Report 2014
ThefreefloatforLufthansasharesis100.0percent,asperthedefinitionofDeutscheBrse.Asofthereportingdate60.3percent(previousyear:63.5percent)oftheshareswereheldbyinstitutionalinvestorsand39.7percentbyprivateindividuals(previousyear:36.5percent).
ThestructureofthemaininstitutionalshareholdersintheLufthansaGroupchangedoverthecourseoftheyear.BlackRock,Inc.reduceditsstaketo2.96percent(previousyear:5.43percent).TempletonGlobalAdvisorsremainedthelargestshareholderintheLufthansaGroupatyear-end2014,itsholdingunchangedat5.00percent.InthirdplaceisTheCapitalGroupCompanies,amajorinvestorsince2012,with2.95percent(previousyear:4.75percent).
Allthetransactionsrequiringdisclosureandpublishedduringthefinancialyear2014,aswellasthequarterlyupdatesontheshare-holderstructure,areshownonthewebsite www.lufthansagroup.com/investor-relations.
LufthansaGrouppursuesintensivedialoguewithinvestorsAsinprioryears,theLufthansaGroupagainprovidedallitsshare-holderswithtimely,comprehensiveandobjectiveinformationin2014.ContinuousdialoguewithinvestorsisavitalconditionfortheirconfidenceintheCompany.In2014andinadditiontothequarterlymeetings,theExecutiveBoardandtheInvestorRelationsteamheld26roadshowsand13investorconferencestoinforminstitutionalinvestorsaboutcurrentdevelopmentsattheLufthansaGroup.Thisinvolvedmorethan300one-on-oneandgroupmeet-ings.SpecialattentionwasalsopaidtoGermanprivateinvestors.Ourinvestorrelationsrepresentativeswereavailabletoanswerquestionsatsixspecialforumsorganisedforprivateinvestors.Thiscommunicationsplatformistobeextendedin2015.Theser-viceforprivateshareholdersalsoincludestheshareholderinfor-mationletter,whichwasagainpublishedtwicein2014andcanbeviewedontheInvestorRelationswebsite.ThesitealsocontainsthefinancialcalendarandthedatesofalltheconferencesandshareholdereventsthattheLufthansaGroupwillbeattending.
Inadditiontotheannualandinterimreports,themonthlyInvestorInfoprovidesthecapitalmarketswiththelatesttrafficfiguresfortheairbornecompaniesandothercurrentnewsfromtheLufthansaGroup.Onrequest,creditorsandbondholdersarealsosentourCreditorInfoseveraltimesayear,whichcontainsinformationofrelevancetothem.Allthepublications,financialreports,presenta-tions,backgroundinformation,speechesandthelatestnewsarealsoavailableat www.lufthansagroup.com/investor-relations.
Included in the DAX and other important indices AsamemberoftheDAX,theLufthansaGroupisoneofthe30largestpubliclylistedcompaniesinGermany.Atyear-endthesharehadaweightingof0.79percentintheleadingGermanindex.WithamarketcapitalisationofEUR6.4bntheLufthansaGroupcamein32ndplace(previousyear:28th)intherankingofpubliclylistedcompaniesinGermanybymarketcapitalisation.IntermsofstockmarketturnovertheLufthansasharemovedupthreeplacestonumber19.Tradingvolumefortheshareamountedto1,289,605,341sharesin2014;thisrepresentsatransactionvolumeofEUR19.3bn(previousyear:EUR12.7bn).
TheLufthansashareisincludedinmanyinternationalshareindi-ces.Furthermore,itfeaturesintheFTSE4Good,EthibelandECPIsustainabilityindices.
InadditiontoitsstockmarketlistingsinGermany,investorsrestrictedtoassetsdenominatedinUSdollarscangainexposuretotheLufthansaGroupviatheSponsoredAmericanDepositoryReceiptProgram(ADR).Since2011,theLufthansaADRshavealsobeenregisteredonthestandardisedtradingandinformationplatformOTCQX.
TheLufthansashare:data
ISIN International SecurityIdentificationNumber
DE0008232125
Securityidentificationnumber 823212
Germanstockexchangecode LHA
Stockexchanges Frankfurt,Stuttgart,Munich,Hannover,Dusseldorf,Berlin,Hamburg,Xetra
Primesector Transport&Logistics
Industry Airlines
Indices (Selection)
DAX,DivDAXPriceIndex,EUROSTOXXIndex,BloombergWorldAirlinesIndex,S&PEurope350Index,FTSEEurofirstSupersectorIndex
17Lufthansa Annual Report 2014
To our shareholders
Lufthansashare
http://investor-relations.lufthansagroup.com/en.htmlhttp://investor-relations.lufthansagroup.com/en.htmlhttp://investor-relations.lufthansagroup.com/en.html
Annualreview Keyeventsin2014
MarchThenewPremiumEconomyClassfromLufthansaPassengerAirlinesispresentedtotradevisitorsattheITBon5March2014.IthasbeenbookablesinceMay2014andhasbeeninitiallyavailableontheBoeing747-8sinceNovember2014.Thenewseats,whichgivecustomersupto50percentmoreroomthanintheEconomyClass,aretobeinstalledsuccessivelyintheentirelong-haulfleetbyautumn2015.
AprilStrikesbythepilotsunionVereinigungCockpitatLufthansaPassengerAirlines,GermanwingsandLufthansaCargodepresstheoperatingresultfor2014byatotalofEUR222m.Thefirststriketakesplacefrom 2to4April2014.Itwasprecededbylong,intensetalksandnegotiationsaboutpayandthefutureshapeofthepilotstransitionalretirementbenefits.Overthecourseoftheyear,thereareatotalof15strikedaysand morethan8,600flightcancellations.
MayCarsten SpohrbecomesChairman of the Executive Board and CEO of Deutsche Lufthansa AGasof1May2014.KarlUlrichGarnadtissimultaneouslyappointedtotheExecutiveBoardtosucceedCarstenSpohrasChiefOfficerLufthansaGermanAirlines.
JuneOn 11 June 2014, the Lufthansa Groupadjustsitsearnings forecastduetothenon-recurringeffectsofstrikes,thedepreciationoftheVenezuelanbolivarandrevenuebelowexpectationsinthepassengerandcargobusinesses.TheExecutiveBoardforecastsareportedoperatingresultofEUR1.0bnforthefinancialyear2014.ThisdoesnotincludethecostsofstrikeactionfromJuly2014onwards.
JulyInJuly2014,theLufthansa Group and Air Chinasignamemorandumtoprepareacommercial joint ven-turebetweenthetwocompaniesforthePassengerAirlineGroup.Thefirstphaseofthisnewpartnershipagree-mentcomesintoeffectwiththewinterflighttimetableattheendofOctober2014.
On9July2014,theChairmanoftheExecutiveBoardandCEOofDeutscheLufthansaAG,CarstenSpohr,givesapublicpresentationofthestrategicprogramme7to1OurWayForward on the planned development of theLufthansaGroup.
On15July2014,theFanhansaSiegerfliegeraircraftlandsatBerlin-TegelairportwiththeGermanfootballworldchampions.TheBoeing747-8onflightnumberLH2014firstcompletesaflypastforthefansassembledinthecentreofBerlin,whogivetheworldchampionsagreatreception.
18 Lufthansa Annual Report 2014
SeptemberAllNipponAirways(ANA),Japansbiggestairline,andLufthansa Cargostartastrategic joint venture inSeptember2014onroutesbetweenJapanandEurope.Thisisthefirstjointventureofitskindintheglobalairfreightindustry.Customersbenefitfromawiderrangeofservicesandmoreflightconnections.
InSeptember2014,theMiles & More bonus businessiscarvedoutintoanindependent unit,thewhollyownedLufthansaGermanAirlinessubsidiaryMiles&MoreGmbH.Throughgreaterindependence,Europesleadingcustomerloyaltyprogrammeisintendedtobecomeevenmoresuccessfulandattractiveinthisnew legalstructure.
OctoberInOctober,SWISSannouncesitsintentiontomakecomprehensiveinvestmentsintheyearsaheadinmodernaircraft,attractivedestinationsandproductaspartofitsNextGenerationAirlineofSwitzerlandstrategy.AnewcabinlayoutisintroducedontheEuropeanAirbusfleetinlateNovember2014andnew,freshin-flightcateringproductsfromSwitzerlandareofferedinEconomyClass.
Austrian AirlinesanditssubsidiaryTyroleanAirwayssignonacompletelynewcollectiveagreement with the labourunionpartnerson31October2014.ThisnewGroupcollectiveagreementcoverssome900pilotsand2,300flightattendantsatthecompanyfrom1December2014.Itgovernsthefuturesalariesandpensions,work-inghoursandcareerdevelopmentforcockpitandcabincrews.
TheLufthansaGroupandLufthansaSystemsAGtakeajointdecisiontoalter the strategic direction of Lufthansa Systems,tosplitthecompanyintothreepartsandtodissolvethestrategicITServicessegment. TheITInfrastructureunitisacquiredbyIBMin2015aspartofalong-termoutsourcingagreement.
NovemberInmid-November2014,thegroundbreakingceremonytakesplaceforthenewLufthansaTechnikoverhaulcentre in Puerto Rico.ItsignalsafurtherboosttoLufthansaTechnikspresenceontheAmericancontinentandaddstothecompanysmaintenancecapacitiesforaircraftintheAirbusA320family.
WiththeopeningofanewsiteinSofia,LSGSkyChefsisnowalsopresentinBulgaria.ThejointventurewithBulgariaAirGroupandAlphaGroup/dnataisoneofsixnewsitesandthreenewjointventuresenteredintobyLSGSkyChefsin2014.
DecemberTheLufthansaGroupsetsanewpassenger recordinthe2014financialyear.TheairlinesinthePassengerAirlineGroupcarried106 millionpassengers,thehighestfigureinthehistoryoftheLufthansaGroup.Revenueseat-kilometresalsoreachanewhighof214.6billion.
InDecember2014,theSupervisoryBoardgivesitsapprovaltofurtherelementsoftheWingsconceptadoptedbytheExecutiveBoard.UnderthebrandnameofEurowings,from2015theEurowingsairlineandotherairlinesinEuropeareplanningtowinnewcustomerswitharangeofshort-andlong-hauldirectflightsofferingqualityatlowcost.
19Lufthansa Annual Report 2014
To our shareholders
Annual review
Combined management report
60 Business segment Passenger Airline Group72 Business segment Logistics77 Business segment MRO81 Business segment Catering85 Business segment IT Services89 Other
91 Employees96 Corporate responsibility
99 Supplementary report
100 Risk and opportunities report
100 Riskmanagementsystem 103 Risksandopportunitiesatanindividuallevel 117 Overallassessmentofopportunitiesandrisks
bythemanagement 118 Descriptionoftheaccounting-related
internalcontrolandriskmanagement systeminaccordancewithSection289 Paragraph5andSection315Paragraph2 No.5HGB
120 Forecast
120 Macroeconomic outlook 121 Sector outlook 122 Changesinbusinessandorganisation 122 OutlookfortheLufthansaGroup 126 Overallstatementontheexpected
developmentoftheLufthansaGroup
127 Corporate Governance
127SupervisoryBoardandExecutiveBoard 128SupervisoryBoardCommittees 129Mandates 130Corporategovernancereport 132 Remuneration report 140Disclosuresinaccordancewith
Section289Paragraph4HGBand Section315Paragraph4HGB
142 Notestotheindividualfinancialstatements forDeutscheLufthansaAG(HGB)
21 Standards applied and changes in the group of consolidated companies
22 Principles of the Group
22 Business activities and Group structure 24 Goals and strategies
24 Groupstrategy 28 Financialstrategy
29 Management system and supervision 33 Legal and regulatory factors 35 Research and development
36 Economic report
36 Macroeconomic situation 38 Sector developments 40 Course of business
40 Overviewofthecourseofbusiness 40 Significantevents 42 SCOREprogramme 43 Targetachievement
46 Earnings position
46 Revenue and income 47 Expenses 49 Earningsdevelopment 51 NetresultfortheyearaccordingtoHGB
52 Assetsandfinancialposition
52 Capital expenditure 53 Cashflow 54 Assets 57 Fleet 57 Financing
59 Overall statement by the Executive Board
Totheextentthatthecombinedmanagementreportreferstosourcesotherthanthecombinedmanagementreportortheconsolidatedfinancialstatements (e.g.internetsites),thecontentsofthesesourcesarenotpartofthecombinedmanagementreportandaresolelyforinformationalpurposes.
Standards applied and changes in the group of consolidated companies
Theconsolidatedfinancialstatementsfor2014andthequarterlyreportsareprepared
inaccordancewiththeInternationalFinancialReportingStandards(IFRS)andthe
interpretationsoftheIFRSInterpretationsCommitteeasapplicableintheEuropean
Union(EU).ThecommerciallawprovisionsofSection315aParagraph1ofthe
GermanCommercialCode(HGB)havealsobeenapplied.Allmandatorystandards
andinterpretationsforthe2014financialyearwererespected.Changesinthe
reportingstandardresultedfromIFRS11JointArrangements,whichwasobliga-
toryforthefirsttimeasof1January2014.Inaccordancewiththisstandard,the
equityinvestmentinAerologicGmbHisnolongeraccountedforusingtheequity
method.Instead,theincomeandexpenses,andassetsandliabilitiesofthiscompany
arenowrecognisedintheconsolidatedfinancialstatementsonaproratabasis.
Thefiguresforthepreviousyearhavebeenadjustedaccordingly.Thischangehad
nomaterialeffectin2014orthepreviousyear.Theotherstandardsandinterpreta-
tionsmandatoryforthefirsttimeasof1January2014alsohadnosignificanteffect
ontheGroupsnetassets,financialandearningspositionasshowninthepresent
annualreport.MoreinformationcanbefoundintheNotestotheconsolidatedfinan-
cialstatementson p.154.
Therehavebeennosignificantchangestothegroupofconsolidatedcompanies
sincethistimelastyear.Theindividualchangescomparedwithyear-end2013
areshowninNote 1totheconsolidatedfinancialstatementson p.159.Thesechanges
hadnosignificanteffectontheconsolidatedbalancesheetandtheconsolidated
incomestatementincomparisonwiththesameperiodlastyear.
21Lufthansa Annual Report 2014
Combined management report
Principles of the GroupBusiness activities and Group structure
TheLufthansaGroupismadeupoffivebusinesssegments,whicheachhold
leadingmarketpositions./ ThepassengerairlinesformtheLufthansaGroupsbiggest
businesssegment./ LufthansaCargoisoneoftheworldsleadingfreightairlines.
/ Theservicesegmentsprovideawiderangeofservicesfortheairlineindustry.
/ TheITInfrastructureunitistobesoldtoIBMandtheITServicesbusinesssegment
isdissolved./ ThecompositionoftheExecutiveBoardchangedduringtheyear.
Portfolio of business segments reorganisedTheLufthansaGroupisaglobalaviationgroupwithatotalofaround540subsidiariesandequityinvestments,whichinthefinancialyear2014wereorganisedintofivebusinesssegments:PassengerAirlineGroup,Logistics,MRO,Cateringand,uptotheendof2014,ITServices.Allthesegmentsoccupyaleadingpositionintheirrespectivemarkets.In2014,theLufthansaGroupgeneratedrevenueofEUR30.0bnandemployedan averageof118,973staff.
ThebiggestbusinesssegmentintheLufthansaGroupisthePassengerAirlineGroup.LufthansaPassengerAirlines,SWISSandAustrianAirlinesarenetworkcarriersservingtheglobalmar-ketandallpassengersegments.GermanwingsoperatesdirectflightswithinEurope.InvestmentsintheBelgiannetworkcarrier
BrusselsAirlinesandtheGerman-TurkishcharterairlineSunExpresscompletetheairlineportfolio.TheairlinegroupdefendeditsEuro-peanmarketleadershipinthereportingperiod,againrecordingthegreatestnumberofpassengersandthehighestrevenueofanyEuropean airline.
TheLogisticssegmentwithitsfreightairlineLufthansaCargoisoneoftheworldsleadingprovidersofstandard,expressandspecialcargo.
TheservicesegmentsMRO,CateringandITServices,offerawiderangeofservicesforcustomersbothinsideandoutsidetheGroup.LufthansaTechnikistheworldsleadingproviderofmaintenance,repairandoverhaulservicesforcivilaircraft.Itsrangeofproductsextendsfromone-offjobstotheservicingofentirefleets.
Lufthansa Group structure
Supervisory Board
Chairman of the Executive Board
ChiefOfficer Group Airlines, Logistics and IT
ChiefOfficer Lufthansa Passenger Airlines
ChiefOfficer Finances and Aviation Services
ChiefOfficer Corporate HR and Legal Affairs
PassengerAirlineGroup
LufthansaPassengerAirlines
(Including Germanwings)
SWISS
AustrianAirlines
BrusselsAirlines
Sun- Express
MRO
LufthansaTechnik
Other
Service and Financial
Companies
Catering
LSGSkyChefs
ITServices
LufthansaSystems
Logistics
LufthansaCargo
22 Lufthansa Annual Report 2014
TheCateringsegmentistheglobalmarketleaderinairlinecateringandsuppliesregional,nationalandinternationalcarriers.TheLSGSkyChefsgroupisalsoincreasinglypresentinadjacentmarkets,whereitoffersbothcateringproductsandservicesinconnectionwithin-flightarticles.
TheITServicessegmentwasoneoftheleadingglobalITservicesproviderstotheairlineindustry.Giventhelong-terminvestmentsrequiredintheITinfrastructurearea,theLufthansaGroupissplit-tingLufthansaSystemsAGintoitsthreesegments.TheITInfra-structureunitwassoldtotheITservicesproviderIBMaspartofanoutsourcingagreement.Thedealisduetobecompletedinthefirsthalf-yearof2015.Followingthisfundamentalchange,theITServicessegmentwasdissolvedatthebeginningofthe2015financialyear.Itsremainingsegments,AirlineSolutionsandIndus-trySolutions,willremainintheLufthansaGroupasindependentcompanieswithintheOtherbusinesssegment.
TheLufthansaGroupsstrategicformationisreviewedandadjustedcontinuouslyinordertolaythebasisforastablebusinessperfor-mancewithadiversifiedportfolioofbusinesssegmentsthatoffseteconomicfluctuations.
No change in Group structure, changes to membership of the Executive Board DeutscheLufthansaAGhasthemanagementandsupervisorystructurestypicalforcompaniesinGermany.TheExecutiveBoardisresponsibleformanagingtheCompanyanddefiningitsstrategicdirection.Indoingso,theaimistoincreaseCompanyvaluesus-tainably.TheSupervisoryBoardappoints,advisesandsupervisesthe Executive Board.
DeutscheLufthansaAGismanagedbyanExecutiveBoardcom-prisingfivemembers.ChairmanoftheExecutiveBoardandCEOsince1May2014isMrCarstenSpohr.InthisrolehesucceedsDrChristophFranz,wholefttheCompanyathisownrequest.MrSpohrwaspreviouslyinchargeofLufthansaPassengerAir-lines.HissuccessorinthisfunctionisMrKarlUlrichGarnadt,whowasappointedbytheSupervisoryBoardon12March2014asamemberoftheExecutiveBoardandasCEOLufthansaGermanAirlines.MsSimoneMenneisChiefOfficerFinancesandAviationServices.On17September2014,theSupervisoryBoardrenewedMsMennesappointmentuntil30June2020.DrBettinaVolkens isChiefOfficerHumanResourcesandLegal.Inadditiontoherpreviousresponsibilities,DrBettinaVolkensalsoassumedtheroleofChiefHumanResourcesOfficeratLufthansaPassengerAirlinesasof1May2014.MrHarryHohmeisterisChiefOfficerGroup Airlines,LogisticsandIT.
DeutscheLufthansaAGistheparentcompanyandthelargestsingleoperatingcompanyintheLufthansaGroup.TheindividualbusinesssegmentsarerunasseparateGroupcompanies,withtheexceptionofLufthansaPassengerAirlines.Theyhavetheirownprofitandoperatingresponsibilityandaremonitoredbytheirrespectivesupervisoryboards,inwhichmembersofDeutscheLufthansaAGsExecutiveBoardarealsorepresented.FurtherinformationcanbefoundinthemanagementreportchapterCoporate Governance starting on p.127andintheNotestothe consolidatedfinancialstatements,Note 44 on p.219.
Combined management report
Principles of the GroupBusinessactivitiesandGroupstructure
23Lufthansa Annual Report 2014
Goals and strategies
Increasingcompanyvalue,profitablegrowthandcustomersatisfactionarethe
strategicpillarsoftheLufthansaGroup./ TheoveralltargetistobeLufthansa
Firstchoice./ 7to1OurWayForwardstrategicprogrammedefinessevenfields
ofactionforthedevelopmentoftheCompany./ Financialstabilityprovidesroom
formanoeuvre.
Group strategy
Main pillars of the strategy are confirmed andwillbeexpanded:SincenewmembershavejoinedtheExecutiveBoardanditsresponsibilitieshavebeenreorganised,theLufthansaGrouphasreviewedandrefineditsstrategy.Thepreviouspillarsofthestrategyhavebeenconfirmed:
Increasecompanyvalue
Profitablegrowthandactiveroleinshapingtheaviationindustry
Continuouslyincreasecustomersatisfaction
TheLufthansaGroupsobjectiveistobethefirstchoiceforcustomers,employees,shareholdersandpartners.
Sevenfieldsofactionhavebeendefinedtoreachthesegoals,inwhichstrategicstepsaretobeimplementedacrossallsegmentsintheyearsahead,underthetitle7to1OurWayForward.TheyensurethefutureviabilityoftheLufthansaGroup,takingintoaccountthekeysuccessfactorsoffinancialstability,marketposi-tionandfleetage.ThesevenareasofactionandtheirindividualactivitiesaredirectedattheoverarchingobjectiveofensuringthatLufthansaremainsthefirstchoiceandareasfollows:
Customercentricityandqualityfocus
Newconceptsforgrowth
Innovationanddigitalization
Effectiveandleanorganisation
Cultureandleadership
Value-basedsteering
Constantlyimprovingefficiency
Customer satisfaction and a focus on quality secure customer loyaltyIntheyearsahead,theLufthansaGroupwillfocusevenmoresharplyoncustomerorientationinallofitsoperatingsegments.Keybuildingblocksforthisdevelopmentarecontinuousinvest-mentinquality,aswellasproductsandservicestailoredevenmorecloselytoindividualcustomers.
Investmentsinproductqualityinclude,aboveall,the263aircraftwithalistvalueofEUR37bnthatwereontheorderlistofthePas-sengerAirlineGroupatthebeginningof2015.Theywillbedeliv-eredby2025tocoverfuturereplacementandgrowthneeds.MoreinformationisavailableintheFleet chapter on p.57. In 2014, the LufthansaGroupordered25newAirbusA320aircraftatatotallistpriceofEUR2.5bn.Continuingthefleetrenewalprogrammenotonlyincreasestravelcomfortforcustomersandbooststheenvi-ronmentalefficiencyofthefleet,butitalsoreducesthenumberofdifferentaircrafttypesandthusthecomplexityofthefleetfortheLufthansaGroup.
Passengersin-flightexperienceisalsoundergoingimprovementsonboardthestate-of-theartaircraftfleet.Theseextensiveinvest-mentsintheairlinesin-flightproductsenabletheLufthansaGrouptodifferentiateitselfbetterfromthecompetition.AtLufthansaPassengerAirlines,allaircraftshouldbeequippedwiththelatestgenerationofproductsbythethirdquarterof2015.Allaircraftflyinglong-haulrouteswillthenbefittedwiththenewFirstClass,BusinessClass,PremiumEconomyandEconomyClass,aswellaswithFlyNetinternetaccess.
Continuousimprovementsarealsobeingmadetothein-flightservice.LufthansaPassengerAirlinesaimstobethefirstwesternairlinewithafive-starqualitystandard,whichonlyafewcarriersintheworldcanclaim.LufthansaPassengerAirlinesandSWISSwillalsotailortheirproducts,servicesandcommunicationonboardmoretopassengersindividualneeds.AtLufthansaPassen-gerAirlines,therangeoffoodanddrinksinBusinessClassisalsotobeupgraded.
PositivefeedbackfromcustomersatalltheGroupsnetworkcarriersisanindicationthattheongoingqualityoffensivehasalreadywonthepassengersapproval.
24 Lufthansa Annual Report 2014
Theotherbusinesssegmentsarealsopursuingtheirqualitylead-ershipinitiatives.IntheLogisticssegment,LufthansaCargotookdeliveryofitsthirdandfourthBoeing777freightersin2014,outofatotaloffiveonorder.TheITenvironmentforfreighthandlingatLufthansaCargoisalsotobefurthermodernised.Thekeybenefitshereareimproveddataquality,increasedsecurity,paperlessdatacommunicationandconsistentprocessmanagement.Theflexibilityofthenewsystemmakeseverydayworkeasierandtherebysavestimeandmoneyforthecompanyaswellasforitscustomers.
LufthansaTechnikhasreorganiseditssalesstructuretoenableittoofferitsglobalcustomersmoreindividualservicesacrossdiffer-entproductsinfuture,andtokeepgrowinginthehighlycompeti-tive MRO market.
LSGSkyChefsisincreasingitsproximitytothemarketandbroad-eningitscustomerfocustomeetincreasinglydifferentiatedcusto-merneedsforspecificin-flightserviceprogrammesandin-flightsalesmodels.Today,LSGSkyChefsisalreadyabletocovertheentire value chain, from procurement and the development of innovativeproductstologisticsandfulfilment.Infuture,LSGSkyChefsplanstoincreaseitsservicequalityevenfurther,todevelopnewproductsandconceptsbasedonmoderntechnologiesandcommunicationplatforms,andtogainanextensiveknowledgeofconsumertrendsandneeds.
WhentheobjectiveofqualityleadershipinallmarketsandbusinesssegmentswasdefinedfortheLufthansaGroup,aGroup-wideQualityCirclewassetuptoestablishandadvancethisgoalinallcompanies.ItischairedbytheChairmanoftheExecutiveBoardandCEOoftheLufthansaGroupandincludestheChairsoftheExecutiveBoardandCEOsofallthesegments.
NewconceptscreateprofitablegrowthThestrategicdevelopmentoftheLufthansaGroup,andofeachindividualoperatingsegment,rangefromorganicgrowthtostrate-gicacquisitions,andfromtheexpansionofexistingpartnershipstotheestablishmentofnewones.Aspartoftheongoingglobaltrendtowardsconsolidation,allpossibleacquisitionswhichhavethepotentialtosignificantlyincreasethecompetitivenessoftheLufthansaGroupandcreatevalueforitsshareholderswillbeexam-ined.Toexploitopportunitiesfromcooperationsandpartnerships,theLufthansaGroupstrivestobethefirst-choicepartnerforallstakeholdersfromafinancial,culturalandstrategicperspective.
InEurope,theprogressofconsolidationintheairlineindustrystillhasalongwaytogotoreachthelevelachievedinNorthAmerica,forinstance.Existingpartnershipsaretobeexpandedinthecaseofthepassengerbusiness,theNorthAtlanticjointventureA++,theJapanesejointventureJ+and,infuture,theChinesejointventurewithAirChina,forinstancewhilenewpartnershipsandcooperationagreementswillbeexaminedwherevertheyservethestrategicdevelopmentoftheLufthansaGroupandsupportitssustainablyprofitablecourseofgrowth.Thisapproachisfollowedbothinthepassengerbusinessbyreviewingfurtherjointventureswitharegionalfocus,aswellasinourservicecompaniesbylookingatpossiblepartnershipsintheareasoflogistics,MROandcatering.
By2020,theLufthansaGroupintendstogenerate40percentofitsrevenuefromsegmentsotherthanthenetworkairlines.Inthissegment,thefocusisinitiallyonboostingprofitabilitybeforegener-atingfurthergrowthwiththelargernumberofaircraft.
7to1OurWayForward
Ageoffleet
Financialstability
Marketposition
#Shareholder Employee
Customer
New concepts for growth
Effective and lean
organisation
Culture and leadership
Value-based steering
Constantly improvingefficiency
Customer centricity and quality focus Innovation and
digitalization
Combined management report
Principles of the GroupGoalsandstrategies
25Lufthansa Annual Report 2014
Withitsnewshort-andlong-haulconceptforthenewEurowings,theLufthansaGrouphasdeliveredacustomer-orientedresponsetoprice-sensitivedemandfordirectflights.Infuture,theLufthansaGroupintendstogenerateasignificantshareofrevenuewithpoint-to-pointtraffic.
Theaviationservicecompanies,particularlyLufthansaTechnikandLSGSkyChefs,areaddressinggrowthopportunitiesidentifiedinAmericaandAsiaandinadjacentproductmarkets.Othersegments,suchasMiles&MoreandAirPlus,arewinningnewmarketsbyexpandingtheirserviceportfolios.Furthermore,theLufthansaGroupcontinuouslyreviewsopportunitiesfromnewfieldsofbusi-nessalongtheentiretravelandtransportvaluechain.
TherangeofinvestmentintheMROsegmentstretchesfromnewstationsforhighlyefficientandinnovativeenginewashestothemaintenanceofthelatestaircraftcomponents.Anewfacilityforoverhaulingshort-andmedium-haulaircraftisbeingbuiltinPuertoRico.AnewwheelandbrakeshopfloorisunderconstructioninFrankfurtandisduetogointooperationinearly2017.
IntheCateringsegment,acquisitionsofvariousoperationsandextensivecapitalexpenditureinnewproductionfacilitiesingrowthregionsnotonlyenablethecompanytoenternewmarkets,butalsotofurtherincreasethequalityofserviceforairlinecustomers.
IncludingmorepartnersfromoutsidethetravelsectorintheMiles&Moreprogrammewillmakeitmoreattractive,notonlyforstatuspassengers,butalso,andinparticular,forthegroupofoccasionalflyers,whichinturnwillenabletheplatformtogrow.
Innovationanddigitalisationdrivenew developments and reinforce the culture of changeGreatimportanceisdrawnonthemanagementofinnovationanddigitalisationintheLufthansaGroup.AGroup-wideinnovationunithasbeenestablishedtostrengthenthecultureofchangethrough outtheLufthansaGroup.Itsroleistosystematicallypromoteexist-ingideasandprojectsandgetthemtomarketfaster.AninnovationbudgethasbeensetupforthispurposeandconcreteinnovationtargetsdefinedacrosstheGroup.AnannualinternalInnovatorAwardhasbeencreatedtoembedacultureofchangeatanemotionallevelandtoboostinnovation,andworkhasbegun toimplementtechnologicalinfrastructuresfortheinnovation managementprocess.
TogivetheLufthansaGroupadditionalimpetusfromoutside,anInnovationHubwasfoundedinBerlinin2014.Theteamworkingthere,whichconsistsofinternalandexternalstaffwithstart-up
experience,willworkwithpartnerstodevelopdigitalcontentforproducts,servicesandprocessesalongtheairtravelchain,frombookingtoarrivalatthefinaldestination,therebycontributingtowardsanticipatingandshapingfuturecustomerneeds.
LufthansaTechnikinparticularalreadyholdsimportantpatentsandisworkingonnewcutting-edgetechnologiesandmodernproductsthatmeetmarketneeds.Theyincludeinnovativerepairmethodsfornewaircraftmodelsandprocedurestocutkeroseneconsumptionandnoiselevelsasaserviceforairlinecustomers.
StrategicinnovationsintheareaofpartnershipsarevitaltokeepdevelopingtheglobalmarketpositionoftheLufthansaGroup.AsinthepastsuchaswiththeestablishmentoftheStarAllianceandthefirstcommercialjointventuresintheairlineindustrytheLufthansaGroupintendstocontinueplayingamajorroleinshap-ingtheongoingdevelopmentoftheentireaviationindustrybymeansofstrategicinnovations.
Newgovernancestructuresupportsaneffectiveandefficientorganisation and accelerates decision-making processesFurtherimprovementsinthecooperationbetweenoperatingseg-mentsareplanned,alsointermsofprocesses.Afocusonstand-ardisedprocessesisintendedtofacilitatecooperationwithintheLufthansaGroup.TheaimofthisorganisationalprogrammeistoidentifybestpracticesbycomparingsimilarprocessesindifferentbusinessentitiesandtoestablishtheseprocessesasabenchmarkstandardfortheLufthansaGroup.Atthesametime,theSharedServicesunitsandthecentresofexcellencearetobedeveloped.Theseinitiativesareintendedtodeliverfasterdecision-makingprocesses,morestreamlinedhierarchies,fewerpointsofcontactandlowercosts,aswellasboostingproductivityandagility.TheywillenabletheLufthansaGrouptodeployitscollectivestrengthstothefullandstaycompetitiveinavolatileanddynamicmarket.
Activities to support and assist employees aimtoingrainthenewcultureThecommitmentofitsstaffandmanagershasmadetheLufthansaGroupaleadingaviationgroup.OnekeysuccessfactorwasandistheemployeesdesiretoleadtheLufthansaGroupsuccessfullyintothefutureandtocontributetothesuccessoftheircompany.Andjustaswiththeinvestmentinitsfleet,productsandservices,theLufthansaGroupalsoinvestsinitsemployees,whosediscerningservicedelightscustomersaroundtheworldonthegroundandintheaireveryday.Inthiscontext,theaimistotransferresponsibilitytoindividuals,measuretheirperformancemoreaccuratelyandencouragetherotationofstaffandmanagersbetweenthedifferentoperatingsegments.
26 Lufthansa Annual Report 2014
Theleadershipprinciplesadoptedinlate2013applytoallthemanagersintheLufthansaGroupandareintendedtoreinforcethisculture.Theyareappliedaccordinglytotheselection,incentiv-isationanddevelopmentoftalentedstaffandmanagers.Achangemanagementprogrammehasbeensetuptoaccompanythischangeprocess.
Altogether,theseactivitiesaremeanttohelpallemployeesandmanagersintheLufthansaGrouptothinkandactinanetworked,open-mindedwayandtoincreasethelevelofmutualtrust.
Increasing enterprise value is the basis for successful developmentTheabilitytocreatesustainablevalueisthefundamentalconditionfortheLufthansaGrouptokeepinvestingsuccessfullyforthebenefitofitscustomersinitsbusinesssegments,fleets,productsandservices,aswellasinitsstaff.Itisalsorequiredforthepur-poseofmeetingtheLufthansaGroupsobligationtogiveitsshare-holdersanadequatefinancialreturnandforkeepingtheproductandservicepromisegiventocustomers.IncreasingcompanyvalueisthereforethefoundationforthesuccessfuldevelopmentoftheLufthansaGroup.
TooptimisecapitalallocationwithintheGroupandtoestablishvaluecreationasaguidingprincipleatalllevels,theLufthansaGrouphasintroducednewparametersforvalue-basedmanage-ment.Thepreviousmanagementmetricsoperatingresultandcashvalueadded(CVA)arebeingreplacedbyamoretranspar-entandlesscomplexsystemthatmakesitpossibleinternallyandexternallytosetincentivesforfurthervaluecreation.Detailscanbefound in the chapter Management system and supervision on p.29.
Oneimportantgoalistomaintaintheinvestmentgraderating.Asanexpressionoffinancialstrength,itenablestheLufthansaGrouptoobtainfinancingonfavourabletermsinthefuture.For furtherdetailsseethenextchapter,Financial strategy on p.28.
Moving SCORE into routine operations contributes to continuous efficiency gainsInanindustryascompetitiveastheairlinebusiness,efficiencygainsmustalwaysbeontheagendainallareas.Forthisreason,theSCOREprogramme,itsmeasurementlogicandthemonitoringofefficiencyinitiativesaretobeincorporatedintoroutineprocessesatallcompanies.
TheSCOREprogrammewaslaunchedintheLufthansaGroupin2012;itrunsuntil2015andaimsforlastingincreasesinprofitability.AlloftheGroupcompaniescontinuetoworkattopprioritytoimple-mentaround5,600individualsegment-specificandcross-segmentmeasures.Thesustainableearningsimprovementisintendedtomakeakeycontributiontosafeguardingtheongoingprogrammeofinvestment.Anoverviewofthemainactivitiesin2014canbefoundinthesectionSCORE programme onp.42.
SCORE,alongwiththeculturalchangeitinspiresinbothourmanagersandouremployees,isthereforelayingthefoundationsforlong-termagilityandadaptabilitybeyond2015.
ToensurethatcontinuousefficiencygainsremainontheagendafortheLufthansaGroupevenaftertheprogrammecomestoanend,stepshavebeentakentoembedSCOREprocessesintotheorganisationalstructure.Theyconsistofdefininganannualminimumprofitabilityincreasetocompensateforcostinflationandincomedeflation,bothattheleveloftheLufthansaGroupandinderivedformfortheindividualoperatingsegments.Thissetsthestageforrespondingmoreflexiblytochangingmarketconditionsandcustomerdemandsinfutureandforearningadequatereturnsoncapital.Itthereforeenablesgrowthandsustainablevaluecreationandensureslong-termjobsecurity.
7to1OurWayForwardwillsetthe Lufthansa Group up for the challenges of the future ThefuturedevelopmentoftheLufthansaGroupisdeterminedbythepillarsoftheCompanystrategy,toincreasecompanyvalue,generateprofitablegrowth,playanactiveroleinshapingtheavia-tionindustryandtoachieveeverhigherlevelsofcustomersatis-faction.ItscombinationofoperatingsegmentsmakestheLufthansaGroupagloballyuniqueaviationgroupwhoseintegratedvaluechainnotonlyoffersfinancialsynergiesbutalsogivesitanedgeoveritscompetitorsintermsofknow-how.
ThenetworkairlinesremainthecoreoftheLufthansaGroup,butthecompaniesoutsidethenetworkairlineswillcontributeagrowingshareofrevenueandearnings.ThenewEurowingsiscreatinganadditionalplayerinthelow-costsegment,bothforshort-haulroutesinEuropeandlong-haulleisuretravelroutes.Theservicecom-paniesremainastrategiccompetitiveadvantagefortheLufthansaGroup,andiftheirmarginsstaystable,theywillcontinuetogrow.Theirstrongmarketpositionprovidesanaturalhedgeagainstthepressuresexertedonthenetworkandpoint-to-pointairlinesbythegrowthoftheircompetitors.
Combined management report
Principles of the GroupGoalsandstrategies
27Lufthansa Annual Report 2014
Financial strategy
Financial strength creates sustainable competitive advantages and trustThecoreofthefinancialstrategyistosafeguardthestrongfinan-cialprofile,creditratingandthusthefinancialstabilityoftheLufthansaGroup.ItsystematicallyaimstosupportandpromotethestrategicandoperatingperformanceoftheCompany.Itsobjectiveistoensureaccesstocapitalonfavourabletermsatalltimes.
ItsfinancialstabilitygivestheLufthansaGrouproomformanoeuvre,whichrepresentsasignificantadvantageincompetitionwithotherairlines.StrictapplicationofthefinancialstrategyisthereforeaprerequisitefortheLufthansaGrouptorespondflexiblytoperma-nentchangesintheunderlyingconditionsandtoplayanactivepartinshapingtheenvironmentinwhichitoperates.ItsfinancialprofilemakestheLufthansaGroupatrustedandvaluedpartnerforcustomersandbusinesspartnersalike.
Financial strategy is the basis for all main planning and decision-making processesTomaintainitsfinancialstability,theGroupsystematicallystrivestomeetthefollowingstrategictargets:
Maintainagoodcreditratingfromthepointofviewoftheinvestorsandlendinginstitutions:Theaimistomaintainandfurtherstrengthentheexistinginvestmentgraderating.
Ensureadequateliquidity:Theaimistohaveminimumliquid-ityofEUR2.3bnatalltimes.Intimesofvolatilityindemandandfinancialmarkets,thisreducesliquidityandrefinancingrisks.
Managenetdebt:Theaimisadebtrepaymentratioof45percent,butnolessthan35percent.ThedebtrepaymentratiomeasurestheGroupsabilitytoserviceitsdebt.Itisanadjustedmeasureofcashflowfromoperatingactivitiesinrelationtonetdebt,includingpensionobligations.Withthesetargets,theGroupwouldeasilymeetthecorrespondingcriteriasetbytheratingcompaniesforaninvestmentgraderating.
Maintainastablecapitalstructure:Theaimistooptimisethecostofcapitalbymeansofanappropriatecapitalstructure.Inthemediumterm,thegoalisanequityratioof25percent.Theplanistoachievethistargetbyretainingsufficientprofitsandcontinuingthesuccessivefundingofpensionobligations.However,thisratioissubjecttoexternalfactors(interestrate)andtogreatvolatility,becauseIFRSrequiresthatpensionobli-gationsaremeasuredasofthereportingdate.
Maintainalargelyunencumberedfleet:TheaimistoensureahighdegreeoffinancialandoperatingflexibilityfortheLufthansaGroup.ThebulkoftheaircraftfleetisunencumberedandwhollyownedbytheGroup.
Hedgeagainstexternalfinancialrisks:Theaimistoman-agetheLufthansaGroupsfinancialrisksbysmoothingpricefluctuationsusingrule-basedandintegratedriskmanagementprocedures,inparticularbyhedgingfuel,exchangerateandinterestraterisks.
ShareholdersparticipateintheCompanyssuccessLettingshareholdersparticipateintheCompanyssuccessisacentraltenetoftheLufthansaGroup.WhentheCompanyskeyperformanceindicatorswerealteredinDecember2014,changeswerealsomadetothedividendpolicyoftheLufthansaGroup.
ThedividendproposalisnowprimarilybasedonEBIT,whichisthemainearningsindicatorfortheGroupunderIFRS.Aregulardivi-dendratioof10to25percentofEBITistheaim.ThisdividendproposalrequiressufficientnetprofitfortheyearintheindividualfinancialstatementsforDeutscheLufthansaAGpreparedinaccordancewiththeGermanCommercialCode;seefrom p.142.
Development of earnings and dividends
2014 2013 2012 2011 2010 Operatingresult in m 954 6991) 839 820 1020
Netprofit/loss(Group) in m 55 313 1228 13 1131
Netprofit/loss(HGB) in m 732 407 592 116 483
Dividendpershare in 0.45 0.25 0.60
Dividendratio(basedonoperatingresult) in % 29.8 14.0 26.9 2)
Dividendyield(gross) in % 2.9 2.7 3.7
1) Previousyear'sfigurehavebeenadjustedduetoIFRS11.2) 31.4%basedontheoperatingresultof876mreportedfor2010.
Inadditiontotheregulardividendpayment,thedividendpolicyalsoallowsforshareholderstoparticipateinaparticularlypositiveperformancebytheCompanybymeansofaspecialdividendorsharebuy-back.
Informationonperformanceagainstthestrategictargetsfor2014andthedividendproposalbytheExecutiveBoardandSupervisoryBoardofDeutscheLufthansaAGforthefinancialyearcanbefoundintheeconomicreportinthesectionTarget achievement on p.43 and in the Earnings position chapter on p.51.Asummaryofthestrategicgoalsforthefinancialyear2015canbefoundinthesectionOutlook for the Lufthansa Group from p.122.
28 Lufthansa Annual Report 2014
Management system and supervision
Value-basedmanagementsystemaimsforsustainableincreaseinthevalueof
theLufthansaGroup./ ValuecontributioninthefinancialyearisapositiveCVAof
EUR90m./ From2015,EACCwillreplaceCVAasthemainperformanceindicator
forvaluecontribution./ Variableremunerationformanagerslargelydependenton
Companysperformance.
Sustainable increase in company value remains the ultimate objectiveSince1999,theleadershipandmanagementoftheLufthansaGrouphaveaimedtoincreasecompanyvaluesustainably,i.e.acrossindustrycycles.
Thisapproachisanintegralpartofallplanning,management andcontrollingprocesses.ThedemandsmadeoftheCompanybyshareholdersintermsofanappropriatereturnoncapitalandsustainablecapitalappreciationarefirmlyembeddedinthewholesystemofcorporatemanagement.Theachievementofvaluecreationtargetsisreviewedonaregularbasisandtheresultsareincorporatedintointernalandexternalreporting.Thevalue-basedmanagementsystemisalsolinkedtoperformance-relatedpay.DetailscanbefoundinthesectionVariable remuneration for managers is linked to the Companys performance starting on p.31.
Value contribution has been measured by CVA since 1999Sincevalue-basedmanagementwasintroduced,themainperfor-manceindicatorfortheLufthansaGrouphasbeencashvalueadded(CVA).CVAisbasedonthereturnexpectationsofallinves-torsandlendersandmeasuresthevaluecontributiongeneratedinthereportingperiodbyeachindividualbusinesssegmentandbytheGroupasawhole.
TheCVAisanabsoluteresidualamount,whichiscalculatedasthedifferencebetweenthecashflowgeneratedinagivenyearandtheminimumcashflowrequiredtoincreasethevalueoftheCompany.Ifthecashflowgeneratedishigherthantheminimumrequiredcashflow,thevaluecreationisexpressedbyapositiveCVA.Theindividualparametersarecalculatedasfollows:
Theminimumrequiredcashflowisthesumoftherequiredreturnoncapitalemployed,thecapitalrecoveryrateandtheflattaxrate.Thecapitalbaseisdefinedasthetotalofnon-currentandcurrentassetslessinterest-freeliabilities.Itismeasuredathistoriccost.
Thepaceofdepreciationandamortisationthereforehasnoeffectonthecalculationandevolutionofthecapitalbase.TherequiredreturnoncapitaliscalculatedusingtheweightedaveragecostsofdebtandequityfortheLufthansaGroupandfortheindividualoperatingsegments(WeightedAverageCostofCapitalWACC).
In2014,theWACCwasderivedfromthefollowingparameters:
Return on capital 2014
in % Risk-freemarketinterestrate 2.6
Marketriskpremium 5.2
Beta factor 1.1
Proportionofequity 50.0
Proportionofdebt 50.0
Cost of equity 8.4
Cost of debt 3.4
Theseparametersarereviewedeveryyearandupdatedasneces-saryforthefollowingyearscorporateplanningandperformancemeasurement.Short-termfluctuationsaresmoothedinordertoensurethelong-termcharacteroftheconcept.InthecourseoftheregularreviewoftheindividualparametersofCVA,itbecameapparentthat,givenconsistentlylowinterestratesandfurtherfallsintheriskpremiumforshareholdersequity,itwasnecessarytoadjusttheWACC.Inthefinancialyear2014,aWACCof5.9percentwasusedfortheLufthansaGroup.
Onthebasisofthefinancialstrategy,atargetcapitalstructureof50percentequityatmarketvalueand50percentdebtisusedtocalculatetheWACCforboththeGroupandthebusinesssegments.Thedifferentsegmentrisksarefactoredinbymeansofindividualcostsofequity,andthereforetotalcostsofcapital.Inthisway,theLufthansaGroupensuresthattheallocationofcapitaltoprojectsinthebusinesssegmentsisadjustedforrisk.ThefollowingtableillustratestherequiredreturnoncapitalfortheLufthansaGroupanditsindividualbusinesssegments:
Combined management report
Principles of the GroupManagementsystemandsupervision
29Lufthansa Annual Report 2014
Costofcapital(WACC)fortheGroupandthebusinesssegments
in % 2014 2013 2012 2011 2010 Group 5.9 6.2 7.0 7.0 7.9
PassengerAirlineGroup 5.9 6.2 7.0 7.0 7.9
Logistics 6.2 6.5 7.2 7.2 8.2
MRO 5.6 6.0 6.7 6.7 7.6
Catering 5.9 6.2 7.0 7.0 7.9
ITServices 5.6 6.0 6.7 6.7 7.6
Theminimumrequiredcashflowincludeswhatisknownascapi-talrecovery,inordertoreflectthedepletionoftheCompanysnon-currentassetsintheproductionprocess.Thisisderivedfromtotaldepreciablenon-currentassetsandrepresentstheamountthatneedstobeputbyeveryyearandinvestedatarateequivalenttotheWACCinordertorecouptheamountofthepurchasecostsbytheendoftheassetsusefullife.TherelevantusefullifeforCVAisthatusedfordepreciationandamortisationpurposes.
Finally,theexpectedtaxpaymentisaddedbyapplyingasur-chargeofcurrently0.6percentofthecapitalbase.Theminimumrequiredcashflowfor2014,takingthenewusefullifeofaircraftandreserveenginesandtherelatedchangesintoaccount,amountedtoEUR2.9bn(previousyear:EUR2.9bn).
IntheLufthansaGroup,thecashfloweffectivelygeneratedisrepresentedbytheperformanceindicatorEBITDAplus,whichismadeupofanoperatingandafinancialcomponent.Theoperat-ingcomponentofEBITDAplusisderivedfromtheoperatingresultbyadjustingitfornon-cashitems.
Reconciliation EBITDAplus
in m 2014 2013* Operating result 954 697
Depreciationandamortisation 1,413 1,697
Resultfromdisposalofproperty, plantandequipment 11 3
Incomefromreversalofprovisions 168 191
Impairmentlossesonintangible assetsandproperty,plantandequipment 63 137
Changeinpensionprovisionsbeforeinterests 159 242
Operating EBITDAplus 2,642 2,693
Proratapre-taxresultsof non-consolidatedequityinvestments 259 210
Interestincome 163 120
Resultfromdisposaloffinancialassets 128 15
Impairmentcharges/additionof financialcapitalbase 53
FinancialcashflowEBITDAplus 347 345
Non-recurring effects 3,002
CashflowEBITDAplus 2,989 6,040
* Asreportedinpreviousyear.
Theseareprincipallydepreciationandamortisation,incomefromthewrite-backofprovisionsandnetchangesinpensionprovisions.ThenthefinancialcomponentofEBITDAplusisadded,comprisingproratapre-taxearningsofnon-consolidatedequityinvestments,netinterestincomeandearningscontributionsfromthedisposaloffinancialinvestments.ThisensuresthatEBITDAplusincludesallsig-nificantcash-relevantitems.Inthereportingyear,theLufthansaGroupsEBITDApluscametoEUR3.0bn(previousyear:EUR6.0bn).
InordertoobtaintheCVA,theminimumrequiredcashflowisthendeducted from EBITDAplus.
Lufthansa Group generates value contribution of EUR 90bn in 2014Inthefinancialyear2014,theLufthansaGroupgeneratedapositiveCVAofEUR90m.
Valuecreation(CVA)oftheLufthansaGroup and the business