Lufthansa : Sustainability Document (investor relations.lufthansagroup.financial annual LH AR 2023 e

Annual Report 2023

CONNECTING

PEOPLE, CULTURES AND ECONOMIES IN A SUSTAINABLE WAY

lufthansagroup.com

investor-relations.lufthansagroup.com

Company

Combined management report

Consolidated financial statements

Remuneration report

Further information

LUFTHANSA GROUP ANNUAL REPORT 2023

002

TABLE OF CONTENTS

3	Company	160	Consolidated financial statements
4	Key figures	161	Consolidated income statement
5	The Executive Board	161	Consolidated statement of comprehensive income
7	Letter from the Executive Board	162	Consolidated statement of financial position
9	Report of the Supervisory Board	163	Consolidated statement of changes in
14	Lufthansa share		shareholders' equity
		164	Consolidated cash flow statement
17	Combined management report	165	Notes to the consolidated financial statements
18	Principles of the Group
34	Economic report	267	Declaration by the legal representatives
52	Business segments
73	Combined non-financial declaration	268	Independent auditor's report
125	Opportunities and risk report
143	Forecast	278	Remuneration report
148	Corporate Governance
155	Notes to the individual financial statements of	299	Further information
	Deutsche Lufthansa AG (HGB)

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LUFTHANSA GROUP ANNUAL REPORT 2023

003

The Lufthansa Group

COMPANY

KEY FIGURES LUFTHANSA GROUP

• The Lufthansa Group is an aviation group with operations worldwide.
• It consists of the business segments Passenger Airlines, Logistics and MRO, as well as
  Additional­ Businesses and Group Functions.

Key performance indicators for 2023

35.4	2.7	7.6
Revenue	Adjusted EBIT	Adjusted
in € bn	in € bn	EBIT margin
		in %
+15%	+ 76%	+ 2.7
pts

T001 KEY FIGURES LUFTHANSA GROUP

				2023
Revenue and result 1)
Total revenue	€m	35,442
of which traffic revenue	€m	29,926
Total operating income	€m	38,429
Operating expenses	€m	35,960
Adjusted EBITDA 2)	€m	4,910
Adjusted EBIT 2)	€m	2,682
EBIT	€m	2,669
Net profit/loss	€m	1,673
Key balance sheet and cash
flow statement figures
Total assets	€m	45,321
Equity ratio	%	21.4
Net indebtedness	€m	5,682
Net pension obligations	€m	2,676
Ratio of net indebted-
ness + net pension
obligations to equity	Ratio	46:54
Operating cash flow	€m	4,945
Capital expenditure	€m	3,576
(gross) 3)
Capital expenditure (net)	€m	2,811
Adjusted free cash flow 2)	€m	1,846
Key profitability and value
creation figures 1)
Adjusted EBITDA margin 2)	%	13.9
Adjusted EBIT margin 2)	%	7.6
EBIT margin	%	7.5
Adjusted ROCE 2)	%	13.1

2022

30,895

25,864

33,268

31,771

3,719

1,520

1,419

791

43,335

19.6

6,871

 1,993

51:49

5,168

2,379

2,286

2,526

12.0

4.9

4.6

7.6

Change in %

15

16

16

13

32

76

88

112

5

1.8 pts.

- 17

34

- 4

50

23

- 27

1. pts

1. pts

1. pts

1. pts

			2023	2022		Change
								in %
Lufthansa share
Share price at year-end		€	8.05	7.77	4
Earnings per share		€	1.40	0.66	112
Suggested dividend per
share		€	0.30		-
Traffic figures and
environmental data 4)
Number of flights		number	946,132	826,603	14
Passengers		thou-
		sands	122,535	101,775	20
Available Seat-kilometres		millions	300,582	259,428	16
Revenue Seat-kilometres		millions	249,269	207,030	20
Passenger load factor	%	82.9	79.8		3.1 pts
Available cargo
tonne-kilometres		millions	15,497	14,194	9
Revenue cargo
tonne-kilometres		millions	8,735	8,562	2
Cargo load factor	%	56.4	60.3		- 3.9 pts
Specific CO₂ emissions		grammes	88.4	90.0		- 2
Employees
Employees as of 31 Dec		number	96,677	109,509		- 12
Average number of
employees		number	110,264	106,889	3

1. Previous year's figures adjusted due to sale of LSG group.
   Financial performance, p. 40, Notes to the consolidated financial state- ments, p. 165.
2. Derivation Financial strategy and value-based management, p. 23,
   Financial performance, p. 40.
3. Without acquisition of equity investments.
4. Previous year's figures adjusted.

Date of publication: 7 March 2024.

Company

Combined management report

Consolidated financial statements

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Further information

LUFTHANSA GROUP ANNUAL REPORT 2023

004

Key figures

KEY FIGURES BUSINESS SEGMENTS

PASSENGER AIRLINES

LOGISTICS

MRO

T002 KEY FIGURES PASSENGER AIRLINES

		2023
Revenue	€m	28,337
of which traffic revenue	€m	26,701
Adjusted EBIT	€m	2,033
Adjusted EBIT margin	%	7.2
Adjusted ROCE	%	19.4
Segment capital expenditure	€m	3,095
Employees as of 31 Dec	number	60,924

Change in %

25

29

8.5 pts

22.2 pts

52

7

T003 KEY FIGURES LOGISTICS

Revenue	€m
of which traffic revenue	€m
Adjusted EBIT	€m
Adjusted EBIT margin	%
Adjusted ROCE	%
Segment capital expenditure	€m
Employees as of 31 Dec	number

2023

2,977

2,775

219

7.4

7.3

191

4,152

Change in %

- 36

- 37

- 86

- 27.2 pts

- 46.9 pts

- 25

2

T004 KEY FIGURES MRO

Revenue	€m
of which external revenue	€m
Adjusted EBIT	€m
Adjusted EBIT margin	%
Adjusted ROCE	%
Segment capital expenditure	€m
Employees as of 31 Dec	number

2023

6,547

4,389

628

9.6

12.0

137

22,870

Change in %

18

10

13

- 0.4 pts

0.6 pts

38

12

The Passenger Airlines segment comprises the network airlines Lufthansa Airlines, SWISS, Austrian Airlines and Brussels ­Airlines - which offer their customers a premium experience, with high-quality products and services - as well as Eurowings, which is positioned as a value carrier focusing exclusively on point-to-point traffic on European short- and medium-haul routes.

In addition to Lufthansa Cargo AG, the Logistics segment includes the airfreight container management specialist Jettainer group, the time:matters Group, which specialises in particularly urgent shipments, the subsidiary Heyworld, which specialises in tailored solutions for the e-commerce sector, CB Customs Broker, the customs and customs clearance specialist, and the Lufthansa Group's 50% stake in the cargo airline AeroLogic.

Lufthansa Technik is the world's leading manufacturer-independent provider of maintenance, repair and overhaul services (MRO) for civilian commercial aircraft. Lufthansa Technik AG serves more than 800 customers worldwide, including OEMs, aircraft leasing companies, operators of VIP jets, governments and armed forces, as well as airlines.

Company

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Consolidated financial statements

Remuneration report

Further information

LUFTHANSA GROUP ANNUAL REPORT 2023

005

The Executive Board

Deutsche Lufthansa AG

THE EXECUTIVE BOARD

Carsten Spohr

Chairman of the Executive Board Born in 1966, industrial engineer,

Chairman of the Executive Board since 1 May 2014, Executive Board member since 2011,

with the Lufthansa Group since 1994

Christina Foerster

Brand & Sustainability

Born in 1971, MBA,

Executive Board member since 2020, with the Lufthansa Group since 2002

Harry Hohmeister

Global Markets & Network

Born in 1964, diploma in commercial air transport, Executive Board member since 2013,

with the Lufthansa Group since 1985

Company

Combined management report

Consolidated financial statements

Remuneration report

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LUFTHANSA GROUP ANNUAL REPORT 2023

006

The Executive Board

Detlef Kayser

Fleet & Technology

Born in 1965, aerospace engineer, Executive Board member since 2019, with the Lufthansa Group since 2016

Michael Niggemann

Human Resources & Infrastructure, Labor Director

Born in 1974, lawyer,

Executive Board member since 2020, with the Lufthansa Group since 2007

Remco Steenbergen

Finance

Born in 1968, MBA, RegisterAccountant, Executive Board member since 2021, with the Lufthansa Group since 2021

Company

Combined management report

Consolidated financial statements

Remuneration report

Further information

LUFTHANSA GROUP ANNUAL REPORT 2023

007

Letter from the

Executive Board

Letter from the Executive Board

Ladies and gentlemen, dear shareholders,

2023 was one of the best years for the Lufthansa Group in economic terms. The recovery in demand for flights after the coronavirus pandemic continued. Tourist travel was in great demand, particularly in the summer months, and we expanded our capacities again, especially to leisure travel destinations. Overall, in the past year we once again welcomed more than 120 million passengers on board our aircraft and flew them safely to their destinations.

For the first time, all our airlines were profitable. SWISS, ­Austrian Airlines, Brussels Airlines and Eurowings reported record results. The increase in the number of flights across the industry resulted in significantly higher demand for maintenance and repair services and so enabled Lufthansa Technik to post record earnings. Only the Logistics business segment saw a decline in earnings due to normalisation across the industry following the coronavirus-related economic upswing.

Overall, the Lufthansa Group's earnings improved significantly compared with a year ago. Adjusted EBIT increased to around EUR 2.7bn. This means we have achieved the third-best result in the company's history. With an Adjusted ROCE of more than 13%, we were able to exceed the target of a return on capital of over 10%. We want to enable our shareholders to participate in this success and will table a proposal at the Annual General Meeting to pay a dividend of EUR 0.30 per share.

Strengthening our balance sheet was an important condition for this. We were able to reduce our debt significantly again in

Company

Combined management report

Consolidated financial statements

Remuneration report

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LUFTHANSA GROUP ANNUAL REPORT 2023

008

Letter from the

Executive Board

the financial year 2023. It is now around EUR 1bn below the pre-crisis level of the year 2019 at EUR 5.7bn. Available ­liquidity is significantly higher. We are therefore in a much more stable position to tackle future challenges. Our positive ­performance has been acknowledged by the capital markets: All the leading rating agencies now give the Lufthansa Group an investment grade rating.

We continued to pursue our transition from an aviation group to a global airline group at high speed in 2023. We sold the catering business at the end of October. The sale of AirPlus, our payment specialist, is expected to close in summer 2024. This will enable us to focus even more sharply on our core business: our airlines. Our newly founded Lufthansa City ­Airlines will enable us to increase the profitability of our ­short-haul route network and seize growth opportunities.

In addition, we agreed with Italy's Ministry of Economy and Finance on the acquisition of a non-controlling interest in the country's national airline ITA Airways. We are in intensive discussions, particularly with the European Commission, to get the transaction approved in the current year.

Looking at the performance we delivered to our customers, the assessment of the year 2023 is not wholly positive. We were able to improve operational stability significantly compared with the previous year. However, especially in the summer months, we did not always attain the level of quality and punctuality that we strive for and that our passengers rightly expect from us.

So for the financial year 2024 it is our declared goal to live up to our premium standards across our business and to fulfil our quality promise to our passengers. We have launched a product and service offensive to this end, and as part of the biggest fleet modernisation programme in our history we are expecting the delivery of at least 30 new aircraft in 2024.

With our new cabin products, Allegris at Lufthansa Airlines and SWISS Senses at SWISS, we are again setting premium ­standards in the industry. We are expecting our first long-haul aircraft with the new Allegris cabin on board in time for the summer of 2024. We will be welcoming a new aircraft into our fleet every ten days on average in 2024. In the financial year 2023, we ordered a further 22 long-haul aircraft, as well as 80 short- and medium-haul aircraft. This means our

order book now comprises­ firm orders for some 250 of the ­latest-generation aircraft - for more comfort for our passengers and lower emissions.

Our ambitious climate goals call for net-zero carbon emissions by 2050; by 2030, we intend to already halve our net carbon emissions relative to their 2019 level. In addition to our fleet renewal, we are increasingly making use of sustainable aviation fuels and working closely with partners in research and industry to drive their developments. We are also continuously optimising our existing fleets. Fifteen Boeing 777 aircraft with the ­AeroSHARK foil developed by Lufthansa Technik and BASF are already in service. This innovative surface technology reduces air resistance and carbon emissions as a result.

Despite all the necessary change, there is one thing we stand by:

CONNECTING PEOPLE, CULTURES AND ­ECONOMIES IN A SUSTAINABLE WAY.

That is our purpose and also the title of this year's annual report.

Our airlines operate 4,000 flights every day to more than 300 destinations in around 100 countries. We connect ­families, friends and business partners, contribute to social interactions, prosperity and international understanding, and secure production and supply chains. Every day we bring the world a little closer together, create opportunities for dialogue and cross-border cooperation.

Cultural exchanges and corporate culture are a vital element of both our commercial success and the engagement and well-being of our employees. Our cultural programme promotes the individual identities of our companies and strengthens our cultural understanding of ourselves as a group at the same time - with diversity in all its dimensions as a central pillar of our cultural identity.

Together we intend to continue the Company's positive

­development - for the benefit of our passengers, employees and shareholders. Despite the challenging environment, which is dominated by geopolitical uncertainties, economic volatility and persistently high inflation, our aim is to maintain last year's earnings level. We are pleased that you are accompanying us on our journey.

Frankfurt, February 2024

Carsten Spohr

Chairman of the Executive Board

Company

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Remuneration report

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LUFTHANSA GROUP ANNUAL REPORT 2023

009

Report of the

Supervisory Board

Report of the Supervisory Board

Ladies and gentlemen, dear shareholders,

2023 represented an upturn for the Lufthansa Group in many respects. Right from the start of the year our bookings showed that our customers had rediscovered their need to travel. It was gratifying that this trend continued over the course of the year. In the summer, it enabled the Lufthansa Group to generate the most revenue in its history. In 2023 we were able to take a great stride towards our target of an Adjusted EBIT margin of at least 8%. At the same time, Adjusted free cash flow was again significantly positive. We continued to implement our strategy of focusing even more on the core airline business with the sale of the LSG Group and the agreed sale of Lufthansa AirPlus Servicekarten GmbH. The agreement to acquire shares in ITA Airways was also in the spirit of this strategic focus.

In the 2023 financial year, the Supervisory Board once again oversaw the work of the Executive Board members and advised them. It carried out the duties conferred on it by ­statute, the Company's Articles of Association and its internal regulations. The Executive Board regularly provided the Supervisory Board with full information on the course of

business,­ the competitive environment, planned Company policy and significant strategic and operational decisions. In particular, it provided reports on the Company's economic position and on the operational challenges. Throughout the year, the Executive Board provided the Supervisory Board with reports on the current course of business. As Chairman of the ­Supervisory Board, I read the minutes of the Executive Board

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LUFTHANSA GROUP ANNUAL REPORT 2023

010

Report of the

Supervisory Board

meetings and discussed the current situation and the course of business with the Chairman of the Executive Board and other members of the Executive Board on an ongoing basis.

In 2023, the Supervisory Board held a total of six meetings; four ordinary and two extraordinary meetings. At its plenary sessions and committee meetings, the Supervisory Board had sufficient opportunity to discuss the reports and proposals for resolutions from the Executive Board. When doing so, the Supervisory Board and its committees also met without the members of the Executive Board.

Key topics discussed by the Supervisory Board

Our meetings focused on the economic development of ­Deutsche Lufthansa AG and its associated companies.

Regular­ agenda items in particular included the ongoing operational challenges and the general competitive environment. In addition, the Supervisory Board dealt with the Lufthansa Group's various M&A activities. In this context the Supervisory Board approved by circulation of documents the sale of all the remaining LSG Group businesses to the private equity investor Aurelius in early April 2023. At an extraordinary ­meeting on 22 May 2023, the Supervisory Board also approved the acquisition of 41% of the shares in ITA Airways and options to purchase the remaining shares in ITA Airways. In June 2023, the Supervisory Board also approved by circular resolution the sale of all the shares in Lufthansa AirPlus Servicekarten GmbH to SEB Kort Bank AG from Stockholm, Sweden.

At its meeting on 2 March 2023 the Supervisory Board approved the purchase of up to 30 of the latest generation of wide-bodied aircraft from manufacturers Airbus and Boeing. At the same meeting, the Supervisory Board also approved new leases for up to four and lease extensions for two Airbus A350-900wide-bodied aircraft.

The Supervisory Board also approved capital expenditure in non-current assets as part of the modernisation of the Lufthansa Cargo Center in Frankfurt at its meeting on 9 May 2023.

The meeting on 22 September 2023, which took place in Vienna, was dedicated to the Group's ongoing strategic development, which was discussed in detail with the Executive Board. The corporate strategy was updated on this basis and approved at the Supervisory Board meeting on 5 December 2023.

The Supervisory Board also noted the planning status of the budget for 2024 and approved the medium-term financial planning for 2025 to 2027 at its meeting held on 5 December 2023. At this meeting, the Supervisory Board also discussed reports on risk management including internal control systems, cybersecurity and compliance. The Supervisory Board also reviewed the Executive Board's remuneration at this meeting and found it to be appropriate.

At this meeting the Supervisory Board also noted the

­Executive Board's decision to abandon the negotiations for a partial disposal of Lufthansa Technik AG and discussed the implications for future M&A processes and for the future development of Lufthansa Technik AG.

At the end of the year, the Supervisory Board approved by circular resolution on 19 December 2023 the purchase in particular of 40 Airbus A220-300s and 40 Boeing 737-8 MAXs.

Changes in the Executive Board

At its meeting held on 2 March 2023, the Supervisory Board reappointed Carsten Spohr as CEO and Chair of the Executive Board of Deutsche Lufthansa AG, as well as Remco Steenbergen as CFO and member of the Executive Board, in each case as of

1 January 2024 for a five-year term expiring 31 December 2028.

Wide-ranging reorganisation of the Executive Board decided from July 2024

At its meeting on 22 February 2024, the Supervisory Board of Deutsche Lufthansa AG followed a recommendation of its Steering Committee and voted to carry out a wide-ranging ­reorganisation of the Executive Board. It approved the

corresponding­changes to the division of responsibilities for the Executive Board with effect from 1 July 2024. These ­consisted mainly of reducing the Executive Board from six members to five and reorganising responsibilities.

As part of this reorganisation, Christina Foerster, Harry Hohmeister and Detlef Kayser will leave the Executive Board as of 30 June 2024, and Remco Steenbergen will leave the ­Executive Board at the close of 7 May 2024, the date of the 2024 Annual General Meeting. The Supervisory Board thanks the departing Executive Board members for their commitment, their performance and their outstanding loyalty.

At the recommendation of the Steering Committee, the Supervisory Board appointed Grazia Vittadini and Dieter Vranckx to the Executive Board with effect from 1 July 2024 for a term of three years, ending on 30 June 2027. Grazia Vittadini will be responsible for the MRO & IT function and Dieter Vranckx for Global Markets and Commercial Hub Management.

A new candidate is to be found for the position of Chief Financial Officer in the course of 2024. After the departure of Remco Steenbergen until a new appointment is made, Michael ­Niggemann will lead the Finance function in addition to his other responsibilities.

Changes in the Supervisory Board

The mandates of all the Supervisory Board members elected by the employees expired at the close of the Annual General Meeting on 9 May 2023. The employee representatives on the Supervisory Board up to this point were ­reappointed by resolution of Cologne District Court of 10 May 2023 until completion of the elections by employees on 29 July 2023. Alexander Behrens, Jörg Cebulla, Jürgen Jennerke, Ilja Schulz,