lufthansa technik â€“ accelerate and brake

Dr. Peter JansenChief Executive FinanceLufthansa Technik AG

Lufthansa Technik –Accelerate and Brake

Lufthansa Training & ConferenceCenter Seeheim June 25, 2009

Lufthansa Group2

Agenda

Lufthansa Technik Group at a glance

Lufthansa Technik Group figures

Measures of Lufthansa Technik

Crisis of airline industry has reached MRO-business

Lufthansa Group3

Agenda





Lufthansa Group4

• About 670 customers worldwide

• More than 450 jetliners in Total Technical Support TTS® program, about 1,980 aircraft under exclusive contracts

• More than 1,700 aircraft inspections per day;60 line maintenance stations with Lufthansa Technik staff worldwide

• Global network of 56 subsidiaries and affiliates

• About 19,784 employees worldwide

• 3.7 billion euros in revenue

• Product-oriented management approach

Key facts about Lufthansa Technik Group:„More than an independent MRO-provider“

Lufthansa Group5

Lufthansa Technik AG:Global presence for 670 customers

Selected customers, March 2009

Lufthansa Group6

864

959 980

1,070

1,279

1,5511,616

1,646

1,776

1,985

Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Mar 08 Jun 08 Dec 08 Apr 09

LHT AG: Supported fleet increased by 12% year to date 2009 and has more than doubled since 2002

Number of AC supported by LH Technik Group

Lufthansa Group7

Support includes services for two new fleets: A380 und Q400

235

238

96

46

36

160

19

22

66

786

205

28

18

3

B737CL

B737NG

B747

B757

B767

CRJ

B777

MD11

A300/310

A320Fam.

A330/340

ERJ

Q400

A380

Status: Apr. 2009

Number of AC supported by LH Technik Group

Lufthansa Group8

Lufthansa Technik Group (56 legal entities)

Germany: America: Europe:Aviation Power STARS GmbH LTAIH LTNALTIV STARS KG LTVH BelacLTOV SAEMS GmbH LTAIL LTLAHGF SAEMS KG LTAS LLTTTrainico N3 GmbH Hawker UK Asia:LTLS Jasen LRTT LTIN

LTTH

Status: May 2009

Lufthansa Group9

Aircraft Maintenance

Services

Aircraft Component

Services

Engine Services

Aircraft Base

Maintenance

VIP & Executive Jet

Solutions

Landing Gear Services

68 m€

3 Locations983 LDG2

SVs pa

178 m€

3 Locations94 Complet. since 1980

964 m€

6 Locations1,057 Engine 1

SVs pa

382 m€

9 Locations50 Heavy

Checks pa

734 m€

70 Stations110,000 Line Checks pa

818 m€

12 Locations300,000

Events pa

1 Incl. minor events2 Landing gears inhouse

Technical services of 6 product divisions –global services around the clock – 24/7/365

LHT AG revenue 2008

Lufthansa Group10

Product portfolio of Lufthansa Technik Group

Special Services

Aircraft Services

Component Services

Engine Services

Landing Gear Services

VIP & ExecutiveJet Services

TOS®

TAS®TTS®

TMO®

TLS™TES® TCS®

Inflight Entertainment

Patient Transport Solutions

Communication

Cabin EquipmentARC® - Services

EPAR

Total Support Services

Manufactured ProductsSingle Services

AOG-Services

Supplementary Services

Dedicated Customer Segment Services

Tools

TOS®: Total Operational Support

TTS®: Total Technical Support

TAS®: Total Asset Support

TMO®: Total Material Operations

TES®: Total Engine Support

TCS®: Total Component Support

TLS™: Total Landing Gear Support

EPAR: Engine Parts & AccessoriesRepair

ARC®: Airframe Related ComponentServices

Lufthansa Group11

Lufthansa Technik – more than an independent MRO-provider

More than 50 years of technical support of aircraft, engines and components – for theLufthansa Airlines and 670 customers worldwide.

*Authority approvals

ProductionOrganisation*

DesignOrganisation*

Customer

Maintenance, Repair and OverhaulOrganisation*

Lufthansa Group12

• Design Organisation (DO) in accordance with EASA Part-21 J:

• is approved • to design in accordance with the

applicable specifications and environmental protection requirements

- changes on aeroplanes related to cabin, avionics, electric/electronic/mechanical systems or airframe/structures and repairs

- changes on engines and repairs to engines

• showing and verifying the compliances with the applicable certification specifications and environmental requirements, and

• demonstrating to the agency (EASA) this compliance.*Authority approvals

Lufthansa Technik – more than an independent MRO-Provider

DesignOrganisation*

Customer

Back-up

Lufthansa Group13

• Production Organisation (PO) in accordance with EASA Part-21 G:

• is approved

• to manufacture aircraft components listed in the approval and

• to issue related certificates of release to service

• using the approval reference number or certificates of conformity prior to the approval of the design of a product by using EASA Form 1.

*Authority approvals

Lufthansa Technik – more than an independent MRO-Provider

ProductionOrganisation*

Customer

Back-up

Lufthansa Group14

Agenda





Lufthansa Group15

Key figures and ratios of LHT Group show profitable growth and value creation

+ 903

+ 45.0%

- 48.8%

- 2.2PP

- 14.1%

+ 19.7%

% Chg. PY

19,784

29

22

5.6%

61

1,093

Q1 2009

- 37.1%122Segment capital expenditure

- 8.3%188Cash Value Added (CVA)

+ 46619,199 Employees (year average)

+ 0.1PP8.8% Adjusted* operating margin

+ 2.0%299 Operating result

+ 4.1%3,717 Revenue

% Chg. PY2008Key figures and ratios( in million €)

* Ratio for comparability with other airlines: (operating result + reversals of provisions) / revenue

Lufthansa Group16

Revenue increase of 146 mio € in 2008 (+ 4.1 %) in spite of $-ratio due to new customers and additional contracts

m €

2,8082,835 2,8523,060 3,121

3,4153,571

3,717

2,000

2,200

2,400

2,600

2,800

3,000

3,200

3,400

3,600

3,800

2001 2002 2003 2004 2005 2006 2007 2008

Lufthansa Group17

Long-term increase of third party revenue ratio of LHT Group reflects success of 1995’s strategy

59.661.260.058.055.255.657.854.4

5.67.0 7.3 7.3 5.6 5.6 6.56.0

33.932.834.436.437.537.135.240.1

2001 2002 2003 2004 2005 2006 2007 2008

Lufthansa PassengerAirlines

Other GroupCustomers

Third Party

Lufthansa Group18

298.6259.3

206.5176.4

130.3

292.8248.3

157.5

0

40

80

120

160

200

240

280

320

2001 2002 2003 2004 2005 2006 2007 2008

Operating result LHT-Group: Continuous and steady profit contributions for Lufthansa Group

m €

Lufthansa Group19

Agenda





Lufthansa Group20

Preparing for “Strong and Icy Winter”

Lufthansa Group21

Airlines suffer from high losses: drop in passengers/cargo and yields; capacity- and cost-cutting measures as well as financial problems of customer airlines are hitting all MRO-suppliers

• Internal staff reduction and inhouse cost cutting initiatives

• Reduction of capacities :- Fleet- and flight hours (Fh)-reductions- Deferred aircraft deliveries and payments to OEM

• Cost reduction through re-negotiations of all contracts, especially MRO-conditions- formal re-negotiations of product, pricing and payment-conditions- outstanding payment volumes without willingness of paying interests- disputing invoice strategies- forcing price reductions by freezing payments- “letters from purchasing”

Lufthansa Group22

About 130 deferrals of deliveries have been announcedin 2009 after 330 in 2008

Source: Ascend 06/2009, ATI, Speednews

Remarks: Reliable data on deferrals is difficult to obtain as neither the aircraft manufacturers nor airlines (with a very few exceptions) are willing to disclose details of their deferral agreements. The above listed deferrals represent the officially announced deferrals.

Deferrals announced January – May 2009

*) no definite agreement yet

**) in negotiations with manufacturers to defer deliveries of further new aircrafts

***) Air France: up to 6 ACThe Chinese 787 customers are working to renegotiate delivery of their share of the first 20 production aircraft "officially for payload reasons".

Customer AircraftType Deferred ACAlaska Airlines 737 (NG) 4Horizon Air* Q400 7-8FedEx 777 3Interjet A320 2JetBlue Airways 190 3Southwest Airlines 737 (NG) 9Volaris A319 3Aircastle Advisor LLC A330 1Gol 737 20In total 52

Customer AircraftType Deferred ACAir France*** 777 3Air France A380 2easyJet A319 2British Airways 737 19In total 26

Customer AircraftType Deferred ACBangkok Airways A319 1Cathay Pacific** 747 2Cathay Pacific** 777 2China Southern Airlines 777 2China Southern Airlines A380 5Shandong Airlines ARJ21 10Kingfisher Airlines A380 4LoadAir Cargo 747 2Qantas 737 (NG) 12Qantas A380 4V Australia 777 2Thai Airways* A330 unknownJet Airways* 787 10In total 56

Lufthansa Group23

0

500

1,000

1,500

2,000

2,500

3,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

Jan 0

9Feb

09Mrz

09Apr

09

May 09

Num

ber

of p

arke

d A

C

The number of parked aircrafts (AC) increased at the end of 2008by almost 600 – slight decrease during the last two months

Source: Ascend 06/2009

12-2007: 1,820 AC

12-2008: 2,400 AC

05-2009: 2,511 AC

Lufthansa Group24

Various crisis scenarios exist – LHT prepares itself for a “Strong and Icy Winter” in MRO-industry

„Frost“reduction of capacity 2009

vs. 2008:-PAX: -5% (-817 a/c)-Cargo: -10% (-130a/c)

- = 5.2% of portfolio fleetadditionally parked in 2009(technology of 70‘s)

- slow recovery of aviation in 2010, back to standard in 2011

„Ice Age“reduction of capacity 2009 vs. 2008:

-PAX: -20% (-3,264 a/c)-Cargo: -30% (-390 a/c )

- = 27.5% of portfolio fleetadditionally parked in 2009(technology of 70‘s + 80‘s)

- recovery of aviation not before 2012

„Strong Winter“reduction of capacity 2009vs. 2008:

- PAX: -20% (-3,264 a/c)- Cargo: -20% (-260 a/c)

- = 19.2% of portfolio fleetadditionally parked in 2009(technology of 70‘s + 80‘s)

- slow recovery of aviation in 2011, back to standard in 2012

Lufthansa Group25

MRO-revenue development: scenario ‘Strong Winter’

40.5

32.634.5

38.737.436.7

47.3

43.941.4

37.4

33.9

51.7

32.8

31.229.6

0

5

10

15

20

25

30

35

40

45

50

55

2008 2009 2010 2011 2012 2013 2014

Bill

ion

US

D

NEW FC AS LHT Portfolio Feb '09 NEW FC LHT Portfolio (with price escalation) "Strong Winter" escalated

Source: AeroStrategyCAMRO NEW 2009 –2018

Lufthansa Group26

62 Airlines are in insolvency-process up to now –14 have been our customers

Source: TS/M

Maestro

Peace Air

Customer LHT AG

Aerolinas de Baleares

Interavia Airlines

East Star Airlines

Lufthansa Group27

Early warning: MRO-market indicator of LHT

Traffic Development (SKO + FTKO)

Aircraft

�� Active fleet ��

�� Parked aircraft ��

�� Average fleet age ��

�� Fight hour development ��

Market Indicator LHT

Compression with market forecast (Index)

Feb 09:95

Mar 09:96

Apr 09:93

tendency May 09:slightly falling

Last AeroStrategy Market Forecast

41 bnUS$(Total)

33 bnUS$

(LHT Portf.)29,6 bn

US$(LHT Portf.

“Strong Winter escaleted”)

Lufthansa Group28

Crisis has reached LHT MRO-segments:maintenance and components

+ 24%

∆ vs. 07 ∆ vs. 08

Flight hours of LHT Flatrate Customers

+ 1%*+ 4%

+ 8%

+ 8%

* preliminary

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Jan Feb Mrz Apr Mai Jun Jul Aug Sep Okt Nov Dez

2007 2008 2009

Lufthansa Group29

Crisis has effects on LHT business segments’ MRO-demand

• Phase-out, parking of customers’ fleets and Fh-reductions are reducing workload in our worldwide segments of:- maintenance- engines- components

• Customers’ efforts to minimize cash-out reduces workload significantly:- airframe related components:

on condition maintained reversers postponed- overhaul airframe and landing gear: layovers

have been cancelled because of reduced fleets

• Still high demand for widebody completions but economical turbulences have reached business segment, too

Lufthansa Group30

LHT forecast instruments: monthly induction „fever curve“(100% = budget)

Revenue 2008 I. Qtr. 09 II. Qtr. 09 III. Qtr. 09 IV. Qtr. 09 FC 2009New contracts

Revenue generated current year103.8% 82.5% 115.8% 100.0% 100.0% 92.9%

Product DivisionEngines Services(Engines in shop)

95.9% 96.5% 92.9% 95.4% 95.2%

Component Services(Units in shop)

103.5% 99.7% 102.2% 102.9% 102.1%

Landing Gear(Landing Gear Legs in shop)

99.0% 82.5% 100.5% 111.1% 98.3%

Airframe Related Components(Reverser in shop)

85.1% 86.9% 75.4% 92.2% 84.9%

Aircraft Overhaul(Man hours: actual vs. plan)

97.4% 106.0% 79.0% 75.0% 88.0% 87.0%

Maintenance(Fleet development Lufthansa)

99.0% 97.7% 98.0% 96.8% 97.7% 97.5%

Long term perspectiveNew contracts

Revenue of whole term152.4% 160.8% 54.6% 92.3% 92.3% 100.0%

Revenue 2008 I. Qtr. 09 II. Qtr. 09 III. Qtr. 09 IV. Qtr. 09 FC 2009New contracts

Revenue generated current year103.8% 82.5% 115.8% 100.0% 100.0% 92.9%

Product DivisionEngines Services(Engines in shop)

95.9% 96.5% 92.9% 95.4% 95.2%

Component Services(Units in shop)

103.5% 99.7% 102.2% 102.9% 102.1%

Landing Gear(Landing Gear Legs in shop)

99.0% 82.5% 100.5% 111.1% 98.3%

Airframe Related Components(Reverser in shop)

85.1% 86.9% 75.4% 92.2% 84.9%

Aircraft Overhaul(Man hours: actual vs. plan)

97.4% 106.0% 79.0% 75.0% 88.0% 87.0%

Maintenance(Fleet development Lufthansa)

99.0% 97.7% 98.0% 96.8% 97.7% 97.5%

Long term perspectiveNew contracts

Revenue of whole term152.4% 160.8% 54.6% 92.3% 92.3% 100.0%

Lufthansa Group31

LHT forecast instruments: supply and demand of man hours in each Product Division for the next 3 months

120

145

170

195

Jun 09 Jul 09 Aug 09

in T

Ah

Demand

Supply

Demand

Supply

ENGINES

- 7.6 - 12.3 - 14.6

625

675

725


in T

Ah

Demand

Supply

Demand

Supply

LHT

- 7.3 - 11.2- 13.5

120

125

130

135


in T

Ah

Demand

Supply

COMPONENTS

60

80

100


in T

Ah

Demand

Supply

Demand

Supply

OVERHAUL

+ 1.1

+ 0.0- 1.3

50

60

70

80


in T

Ah

Demand

Supply

Demand

Supply

VIP

+ 2.7 + 2.0+ 1.3

200

220

240


in T

Ah

Demand

Supply

Demand

Supply

MAINTENANCE

- 0.3- 0.3 - 0.5

-0.8 - 0.6 - 0.8

Lufthansa Group32

Outlook 2009: measures safeguarding profit and liquidity –“accelerating and braking at the same time”

• Engagement of new staff only for business units and companies with revenue and profit forecast in line with budget (quarterly tranches)

• Fresh engagements only with limited duration(2 years)

• Pyramid of measures for personnel flexibility prepared in all business units

• Investments: approval only for 78% of planned projects for 2009

• Consistent revenue and liquidity management

Lufthansa Group33

Capacity development in close loop to business development:Moderate decrease compared to budget – external recruitment only as an exception

As of March 2009

-- budget

-- approved

-- actual

4th slice3rd slice2nd slice1st slice+114 BM

LHT AG

10,680

10,780

10,880

10,980

11,080

11,180

11,280

Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Dec 10

Lufthansa Group34

Compared to previous crises LHT has significantly increased flexibility potential

379

786

9,657

10,822

possible reduction

of capacitywithout layoffs

build-up of negative time

credits

reduction oftime credits

reduced capacity

"permanent effect"

intermit/cancel40h/week

temporaryemployment

184

893

additionalcapacity

249

Total capacityper 01.06.09

12,148

-10%

-11%

Within 3 monthsgradually

Reaction time:

- immediate - Within 3 months

permanent one time

Effect:

Lufthansa Group35

% = Percentage active A/C in 2009 to max. population(Basic data: AM Feb 2009, AeroStrategy)

100% 100% 50% 0%0% 50%

767

A320Fam

CRJ

We are well-positioned with our modern product portfolio…

A330

A340-2/300

737NG

ERJ

777

MD80/90

Avro

MD11

737-35

A300A306

A310

747-13

737-12

727

DC8

DC9

DC10

707

L1011

- Types in LHT-Portfolio

- Not covered in LHT-Portfolio

- Volume = number of active Aircraft in 2009

2009

A340-5/600

A380

747-4

ARJSuperjet

757

F100

2010: 7872011: 747-8 2013: MRJ, CSeries, A3502016: newB737NG2018: newA320Fam

Q400

Lufthansa Group36

… and we are investing in our future - in spite of the crisis…

• New products and capabilities- A380- Embraer 190 and Q 400- B747-8

• Modern machinery and equipment- engine overhaul center- new test stand for IDG- new ARC facility

• Innovation- new cabin innovation center with test laboratories- new repair procedures

• In our processes and employees- LHT Lean Academy- “More Leadership” training for foremen and lower

management

Lufthansa Group37

… striving for cost and industry leadership!

• More productivity through more flexibility in resource management

• More efficiency by reducing waste in time consumption → TAT(lean management)

• Economies of scale (production and assets) due to growth

• Innovation in repair procedures, products …..

Upgradeto Industry Leadership

Upgradeto Industry Leadership

Cost leadership is a part of competitive strategy and industry leadership!

Lufthansa Group38

Therefore, we feel well prepared:stable during the crisis and run up very fast afterwards!

Icy Winter Spring

Lufthansa Group39

Thank you for following theMRO-industry development so deeply …

Lufthansa Group40

Information published in this presentation with regard to the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of definitive historical facts. These forward-looking

statements are based on all discernible information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication. Since forward-looking statements are by their very nature subject to

uncertainties and imponderable risk factors – such as changes in underlying economic conditions – and rest on assumptions that may not or divergently occur, it is possible that the Group's actual results and development may differ materially

from those implied by the forecasts. Lufthansa makes a point of checking and updating the information it publishes. It cannot, however, assume any obligation to adapt forward-looking statements to accommodate events or developments that

may occur at some later date. It neither expressly nor conclusively accepts liability, nor gives any guarantee, for the actuality, accuracy and completeness of this data

and information.

Disclaimer in respect of forward-looking statements

lufthansa technik â€“ accelerate and brake

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