Deutsche Lufthansa AG — Earnings Release 2008

Nov 4, 2008

18.6bn

3

EUR revenue

984m

EUR operating result

551m

EUR net profit for the period

Lufthansa Group overview

1) Key figures
		Jan. – Sept. 2008	Jan. – Sept. 2007	Change in %	July  –  Sept. 2008	July  –  Sept. 2007	Change in %
Revenue and result
Revenue	€m	18,596	16,367	13.6	6,540	6,308	3.7
- of which traffic revenue	€m	15,018	12,739	17.9	5,297	5,000	5.9
Operating result	€m	984	1,085	–  9.3	279	599	–  53.4
EBIT	€m	814	1,420	–  42.7	222	587	–  62.2
EBITDA	€m	1,868	2,274	–  17.9	551	893	–  38.3
Net profit for the period	€m	551	1,578	–  65.1	149	586	–  74.6
Key balance sheet and cash flow statement figures
Total assets	€m	22,821	23,209	–  1.7	–	–	–
Equity ratio	%	30.4	28.7	1.7 pts.	–	–	–
2) Net liquidity	€m	357	1,552	–  77.0	–	–	–
Cash flow from operating activities	€m	2,142	1,975	8.5	389	901	–  56.8
Capital expenditure	€m	1,660	925	79.5	429	73	487.7
Key profitability and value creation figures
3) Adjusted operating margin	%	5.5	7.0	–1.5 pts.	–	–	–
EBITDA margin	%	10.0	13.9	–  3.8 pts.	–	–	–
The Lufthansa share
Share price at half year end	€	13.80	20.17	–  46.2	–	–	–
Earnings per share	€	1.20	3.45	–  65.2	0.32	1.28	–  75.0
4) Traffic figures
Passengers	thousands	53,758	45,799	17.4	18,913	18,851	0.3
Freight/mail	thousand tonnes	1,459	1,384	5.4	476	507	–  6.0
Passenger load factor	%	79.5	80.2	–  0.7 pts.	81.6	82.8	–  1.2 pts.
Cargo load factor	%	63.7	67.2	–  3.5 pts.	60.7	65.2	–  4.5 pts.
Available tonne-kilometres	millions	26,376	21,976	20.0	9,210	8,595	7.2
Revenue tonne-kilometres	millions	19,055	16,443	15.9	6,659	6,485	2.7
Overall load factor	%	72.2	74.8	–  2.6 pts.	72.3	75.4	–  3.1 pts.
Number of flights	number	627,264	546,357	14.8	213,942	209,155	2.3
Employees
Employees as of 30.9.	number	109,401	105,199	4.0	109,401	105,199	4.0

1) Due to changes in the group of consolidated companies the comparability of the figures with those of the previous year is limited.

2) Long-term securities serving as liquidity reserves and cashable at short notice have been included in the calculation of net liquidity.

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

40 Credits

4) Since 1 January 2008 revenue passenger figures have been calculated in the LufthansaGroup on the basis of the ICAO standard. The figures from the previous year have been adjusted accordingly.

The interim report at 30 September 2008 was prepared in accordance with the rules of IAS 34, taking into account the standards applicable since 1 January 2008. Date of disclosure: 29 October 2008

Contents

• 1 To our shareholders
• 34 Notes to the financial statements
• 3 Interim management report
• 29 Interim financial statements
• Financial calendar 2008/2009

Dear Shareholders,

Despite an increasingly difficult environment marked by economic slowdown, Lufthansa has reconfirmed its position as one of Europe's leading airlines and earned an operating result of EUR 984m. In this environment, however, it has been impossible to fully offset the drastic fuel price rises, with the result that we have been unable to reach last year's excellent result.

The high price of oil in the reporting period led once more to record fuel costs. In the third quarter they accounted for about 25 per cent of revenue. This effect was accompanied by a slowdown in economic activity that was accentuated by the financial market crisis. This environment, as well as the strike actions last summer, have not been without effect on demand in our core business segment Passenger Transportation.

Logistics in contrast was able to more than double its operating result. It has done so as a result of clear revenue growth accompanied by a sharper focus on costs. The MRO and IT Services business segments also succeeded in balancing out revenue weaknesses through strict cost management, thereby improving their operating results. In the Catering business segment, however, higher cost of materials as well as negative currency and one-off effects have led to a result that falls short of the previous year's figure.

Current sentiment continues to be characterised by the uncertainty relating to the financial market crisis and its consequences for the real economy. That is why share indices all over the world have seen price fluctuations in double percentage figures in recent weeks. In view of the dramatically faltering economic dynamism, worldwide growth forecasts for 2009 have been adjusted downwards several times. In Germany growth expectations are as low as 0.2 per cent. The risks on which our profit forecasts for the current year were linked have unfortunately become apparent. Against this background and still existing uncertainties we now expect an operating result of around EUR 1.1bn.

Lufthansa is well positioned in this environment and will continue to be so. For the winter flight schedule the growth thrust has deliberately been reduced and we are

currently flying in "kerosene-saving mode" at cruising altitude. The management has the preset course on the radar and is attentively following the progress of the existing areas of severe weather. Thanks to our broad customer base, our flexible fleet structure and our sound financial profile we are in a position to respond to possible market changes and avoid major turbulences. As soon as we have flown round the areas of bad weather we will have the capacity to add power again and reach maximum cruising speed.

In the meantime, we are directing our efforts at maintaining our leading position, even in the current climate. Our business model, aimed at sustained value creation, will come into its own, and we are convinced of the air traffic market's long-term growth. That is why we check in this environment every growth opportunity that comes our way most carefully. We are delighted to welcome Brussels Airlines to the Lufthansa airline group. With the Lufthansa network and the EU capital as the base of Brussels Airlines as well as its strong presence in Africa we are convinced that we have laid the foundations for an outstanding partnership that will generate value for both sides. We are also making use of opportunities to develop the Group organically. From February 2009 Lufthansa will offer a new and significantly expanded range of direct flights from Milan Malpensa to European destinations.

In spite of adverse conditions Lufthansa is always determined to make constant service and product improvements for its customers. That is why we are thrilled with our steady rise in customer satisfaction and more than happy that in the 2008 World Airline Awards Lufthansa was voted the best airline in Europe out of 59 airline entries.

We remain true to our performance and quality promises – in our business segments and towards the capital market. We aim in all that we do to create sustainable added value for our shareholders, customers and employees.

Thank you very much for your confidence.

Wolfgang Mayrhuber Chairman and CEO

Stephan Gemkow Member of the Executive Board Chief Financial Officer

Stefan Lauer Member of the Executive Board Chief Officer Aviation Services and Human Resources

Share

The stock market year 2008 up to September was shaped by the spikes in commodity prices and, to a growing extent, by the financial market crisis and its repercussions. In the third quarter of 2008 the liquidity position of many financial companies took a turn for the worse. Coupled with short-term speculation in the stock markets, rescue bids and emergency sales of well-known financial institutes became necessary. These were accompanied by a further downturn in global economic expectations. A sharp short-term fall in oil prices brightened up the scenario for a brief period. Towards the end of September, however, the leading indices of all stock markets ushered in a clear downturn across the globe, resulting in the DAX index ending the quarter at a temporary low of 5,831 points – down 28 per cent on the end of 2007.

Lufthansa's share price trend (Index: 31 December 2007 = 100) compared with the DAX and competitors in %

After a weak half-year performance the Lufthansa share first moved sideways in the third quarter. While the good first-half result and the clear recovery of oil prices helped the share price, the strike actions and the slowdown in economic growth had a negative impact. Although the price fell by a total of 24 per cent to EUR 13.80 in the reporting period, the Lufthansa share performed better

than both its main competitors and the DAX index. All in all, there were no major changes in analysts' estimates. 63 per cent of them recommend buying the share. Their average target price is EUR 19.

The company's responsible attitude towards the environment, its employees and society was again acknowledged during the third quarter. Its listings in the FTSE4Good Index and the Dow Jones Sustainability World Index were reconfirmed.

31.12. 2007 31.01. 2008 29.02. 31.03. 30.04. 31.05. 30.06. 31.07. 31.08. 30.09. 40 60 80 100 120 At the end of the third quarter 77.4 per cent of Lufthansa's share capital was held by German investors. US shareholders were the next-largest group with 9.8 per cent, followed by Luxembourg with 6.0 per cent and the UK with 1.9 per cent. French and Japanese investors each held 1.3 per cent of the share capital. The largest shareholder by far continues to be the AXA Group with 10.56 per cent. Directly and indirectly, Dr Lutz Helmig holds 3.11 per cent of Lufthansa shares. Barclays Global Investors held 3,08 per cent, followed by Allianz SE with a further 3.06 per cent via its subsidiary Süddeutsche-Industrie-Beteiligungs-GmbH. In all, nearly 74 per cent of the share capital is held by institutional investors and around 26 per cent by private shareholders. The shareholder structure is published quarterly on the internet at www.lufthansa-financials.com.

Economic environment and industry developments

Interim management report

Economic environment and industry developments

After a good start to the year 2008, world economic growth has slowed down significantly. Ongoing turbulences on international financial markets combined with high commodity prices and the subprime crisis weigh heavily on the world economy. They have been joined by inflationary pressure generated by higher commodity and food prices.

In September the situation in the international financial markets took a marked turn for the worse. Many American banks had to be sold in distress. Lehman Brothers filed for bankruptcy. European banks were not safe from this crisis and ran into difficulties. Both at national and on a wider basis rescue programmes each totalling several hundred billion euros were subsequently required.

In the United States economic growth has already slowed down perceptibly. The trend was triggered by ongoing corrections in the residential real estate market, by stricter credit terms and conditions as well as by higher energy prices. Economic activity has also slowed down in recent months in the Asian emerging markets. In the Euro area, including Germany, the decline has been much more marked. It is due to lower exports, weaker domestic demand and a slowdown in capital expenditure.

GDP growth compared with previous year
in %	Q1 2008	Q2 2008	Q3 2008 *	Q4 2008  *	Full year 2008  *
World	3.7	3.2	2.4	2.1	2.8
Europe	2.5	1.8	1.1	0.7	1.5
- Germany	2.6	1.7	0.9	0.6	1.5
North America	2.4	1.9	0.8	0.4	1.4
South America	4.8	5.1	3.7	3.2	4.1
Asia/Pacific	5.4	4.9	4.4	3.9	4.7
- China	10.6	10.1	9.5	8.8	9.8
Middle East	6.6	6.7	6.4	6.0	6.5
Africa	5.8	5.9	5.9	5.8	5.9

Source: Global Insight World Overview as of 14 October 2008. * Forecast.

After record exchange rates of around 1.60 US dollar per EUR in April and July the euro was devalued substantially in August and September. In September it reached its lowest rate so far for the year of less than 1.40 US dollar per EUR. Its average dollar exchange rate for the first three quarters was 1.52 US dollar per EUR, or 13.2 per cent higher than the previous year's average for the period. These strong exchange rate fluctuations continue to have an impact on different items in the company's income statements. Over all, however, their effect on the Lufthansa Group is limited. Lufthansa pursues a rule-based continuous hedging policy that is essentially independent of exchange rate trend assessments. This policy is outlined in greater detail in the annual report on pages 107 and 166.

Source: Lufthansa based on market data.

800 1000 0 300 600 900 1200 1500 Oil prices first stayed up in July, reaching an all-time high of USD 146.08 per barrel of IPE Brent on 3 July. They then plummeted to USD 98.17 per barrel by the end of September. The average price of Brent crude in the first nine months of 2008 was about USD 112 per barrel, or 67 per cent higher than in the first nine months of the previous year. The difference between the price of crude and the price of kerosene has grown much wider compared with the previous year. Refineries cut back their production because of the mild winter and lower demand. A little later the reduced supply led to massive price spurts that were intensified by speculation. The average price of jet fuel in the reporting period – USD 1,124 per tonne – was 71 per cent higher than in the first nine months of 2007.

Lufthansa also hedges fuel prices on a rule-based logic with a view to reducing the volatility (see page 105 et seq. of the annual report for 2007). Through this, price spikes in either direction in the fuel markets have only a limited, time-delayed effect on Lufthansa's cost base.

As a result of the subdued economic development the aviation industry also grew at a slower rate in the third quarter. Passenger demand in the first nine months of the year was 3.3 per cent higher than the previous year, according to IATA. Whilst August contributed a growth of 1.3 per cent demand reduced in September by 2.9 per cent. Freight volumes developed in much the same way. Cumulative growth was down to –0.1 per cent by September. A 2.2 per cent decline was reported in August, followed by a 7.7 per cent year-on-year drop in September.

Regional trends remain varied. In the North American market passenger traffic growth is reported to have been 4.9 per cent in the first nine months and airfreight growth to have been 3.0 per cent. In Europe passenger traffic grew by 2.5 per cent and airfreight by 1.2 per cent. In the Asia/Pacific region the passenger growth rate fell to 1.2 per cent, while airfreight demand was down on the year (–2.3 per cent).

In view of falling demand many airlines have reduced their services in the 2008/09 winter flight schedule and adjusted their earnings expectations at the same time. The consolidation process – influenced by the financial market crisis – is progressing very cautiously.

The closer cooperation announced in spring between British Airways, Iberia and American Airlines led in August to the signing of a commercial agreement on the North Atlantic routes. In July British Airways and Iberia stated their intention of merging their two companies. In view of the current environment, however, the possibility of a delay has been acknowledged. The merger of US airlines Delta and Northwest, in contrast, is to go ahead before the year's end. In September the Spanish charter airline Futura, operating 38 Boeing 737s, became the next company to file for insolvency. The planned takeover of Condor by Air Berlin was called off in July in view of the change in economic framework conditions. In the current environment the jointly considered merger of Germanwings and Tuifly also looks unlikely to happen.

The legal framework conditions have not changed in the past nine months. The comments in the annual report 2007 thus continue to be applicable.

Course of business

In the third quarter Lufthansa was unable to continue the successful development of results in the first half. Volume and revenue continued to develop positively, but the burdens imposed by the hefty oil price rise and the consequences of the strike in the summer were very much in evidence and weighed heavily on the Group's result. Cost reduction programmes already in place in all business segments were intensified further and are supporting operating results. Nevertheless, the financial market crisis is affecting the Group's course of business because demand has grown weaker. The Passenger Transportation and Catering business segments have been unable to reach their previous year's operating results. In view of the current course of business the Executive Board has initiated further measures to support results.

Significant events On 22 January 2008 Lufthansa acquired a minority stake in JetBlue Airways Corporation. It paid USD 310m (EUR 214m) for around 42 million new shares. In view of a significant decline in the share price, impairment losses have been recognised in the first half and are reflected in the financial result. A share price recovery for JetBlue in the third quarter was recognised directly in equity in accordance with IAS 39. Stephan Gemkow was appointed a member of JetBlue's Board of Directors on 18 August 2008. Along with SWISS CEO Dr. Christoph Franz, he is now the second Lufthansa nominee on the US airline's 11-member board.

The earn-out for former major shareholders of SWISS in exchange for their SWISS shares was paid on 20 March 2008. A total of CHF 339m (about EUR 217m) has now been paid to the SWISS shareholders. Since 1 July 2007 SWISS has been fully consolidated.

Economic environment and industry developments Course of business

On 25 September 2008 Lufthansa's Supervisory Board approved the purchase of a strategic stake in SN Airholding SA/NV, the parent company of Brussels Airlines. In a first step Lufthansa will acquire 45 per cent of SN Airholding for EUR 65m, and from 2011, after securing Brussels Airlines' air traffic rights, it will hold an option to purchase the remaining 55 per cent, the price of which will be measured according to the economic success of the company. The agreement is subject to anti trust approval.

Lufthansa, Albrecht Knauf Industriebeteiligung GmbH and TUI Travel PLC had in recent months looked into the possibility of merging their subsidiaries Germanwings GmbH, Eurowings Luftverkehrs AG, Hapag-Lloyd Fluggesellschaft mbH and Hapag-Lloyd Express GmbH under a joint holding company. This project seems unlikely to be realised in the next 12 months, so the assets classified as "held for sale" at the beginning of the year had to be reclassified to the regular balance sheet. This means that depreciation of these assets, which had been called to a halt since the beginning of the year, were adjusted in the third quarter.

Changes in the group of consolidated companies

The group of consolidated companies has undergone fundamental changes since the same period last year. Swiss International Air Lines and its subsidiaries were first included in the consolidated financial statements of Deutsche Lufthansa AG as of 1 July 2007, so the previous year's figures are only comparable for the third quarter. Compared with the end of 2007 and with 30 September 2007 the group of consolidated companies also underwent the additions and disposals of consolidated companies shown in the table on page 34. The effects on the consolidated balance sheet and income statement compared with the previous year are outlined in the following comments and the note on page 34 et seq.

Employees and management At the end of September the Lufthansa Group employed 109,401 employees, or 4.0 per cent more than a year earlier. Adjusted for changes in the group of consolidated companies, the increase was 3.1 per cent. It mainly took place in the Passenger Transportation business segment. After new jobs have been created in operational areas at Lufthansa Passenger Airlines, now no new hirings are to be made as measure to secure results are implemented.

Employees by business segment (as of 30 September 2008)

2008 was also a year in which essential wage agreements were negotiated.

For members of the airline pilots' union Cockpit at Lufthansa and Lufthansa Cargo salaries were increased by the terms of an agreement reached on 29 January 2008 retroactively by 2.5 per cent from 1 October 2007 and by a further 3.0 per cent from 1 January 2008. The wage agreement runs until 31 March 2009.

After intensive negotiations accompanied by strike actions a new wage agreement was also concluded with the trade union ver.di. The salaries of the 34,000 ground staff were increased by 5.1 per cent from 1 July 2008, with a further 2.3 per cent increase from 1 July 2009. They also recieved a one-off payment including a performance-related component of up to 2.4 per cent of their annual basic salary depending on the business segment. The wage agreement runs for 21 months and expires on 28 February 2010. On a 12-month basis the individual wage of an employee will increase to 4.2 per cent.

Lufthansa's Supervisory Board renewed Stephan Gemkow's contract for a five-year term ending on 31 May 2014. This decision sets the course for continuity on the Executive Board. Stephan Gemkow has been a member of Deutsche Lufthansa AG's Executive Board and Chief Financial Officer since 1 June 2006.

Earnings position

The Lufthansa Group improved its traffic figures considerably in the first nine months. Its airlines carried around 53.8m passengers (+17.4 per cent) and about 1.5m tonnes of freight and mail (+5.4 per cent). Total sales, measured in revenue tonne-kilometres, rose by 15.9 per cent but were unable to keep pace with the overall capacity increase (+20.0 per cent). That is why the overall load factor fell by 2.6 percentage points to 72.2 per cent.

For Lufthansa, traffic figures are an essential control quantity for the Group's flying companies. Individual performance data and other key performance indicators of the business segment, such as order entry and order backlog, are analysed in detail in their respective chapters.

Higher traffic figures in the first nine months are reflected in higher traffic revenue. These rose by 17.9 per cent in the reporting period to EUR 15.0bn. Of this change, 11.8 per cent is due to the full consolidation of SWISS in the first half of 2008. Volume growth at 4.5 per cent and the price at 5.9 per cent both had a positive effect. The currency had a countervailing effect of 4.4 per cent. Of the traffic revenue earned in the reporting period (January to September) the Passenger Transportation business segment accounted for EUR 12.7bn and the Logistics business segment for EUR 2.1bn.

In the reporting period other revenue was down slightly on the year at EUR 3.6bn (–1.4 per cent). MRO earned EUR 1.6bn (–2.2 per cent), IT Services EUR 207m (–0.5 per cent) and Catering EUR 1.3bn (–4.8 per cent). The flying business segments Passenger Transportation and Logistics contributed EUR 705m (+58.8 per cent) towards other revenue.

Group revenue rose by 13.6 per cent to EUR 18.6bn as a result of the higher traffic revenue. Full consolidation of SWISS in the first half of 2008 accounted for 9.4 per cent of this total. Passenger Transportation's share of total revenue rose to 71.4 per cent (+5.3 percentage points). Viewed separately, revenue rose by

4.2 per cent in the third quarter to EUR 6.5bn. Revenue development over the past five years is shown in the chart on page 8. Regional distribution of revenue is to be found in segment reporting on page 39.

Other operating income rose by EUR 58m to EUR 1.1bn, including especially currency gains totalling EUR 84m. Reversal of provisions at EUR 48m were, in contrast, EUR 13m lower than in the previous year. The higher currency gains were similarly countervailed by a marked increase in currency losses shown under other operating expenses. Total operating income amounted to EUR 19.8bn (+13.4 per cent); adjusted for changes in the group of consolidated companies the increase was 4.7 per cent.

Operating expenses rose by 15.8 per cent to EUR 18.9bn. Excluding changes in the group of consolidated companies the increase would have been 7.5 per cent. The change was especially apparent in cost of materials and services, up 22.3 per cent to EUR 10.3bn. As in previous quarters, fuel costs were the main burden. They soared to EUR 4.1bn, a EUR 1.3bn (48.9 per cent) additional burden. Full consolidation of SWISS in the first half of 2008 led to a 14.0 per cent rise in fuel costs, with volume growth contributing a further 4.9 per cent. The price of fuel soared by 44.1 per cent, but the currency effect limited the increase by 14.1 per cent. Fuel price hedging led to a clear easement of EUR 605m.

Operating expenses

Jan. – Sept. 2008	Jan.  –  Sept. 2007	Changes	Adjusted for consolidation changes
in €m	in €m	in %	in %
10,281	8,403	22.3	10.7
4,105	2,757	48.9	33.1
2,626	2,317	13.3	0.8
4,225	3,963	6.6	1.1
939	886	6.1	–  2.1
3,426	3,051	12.3	10.0
488	475	2.7	–  9.2
18,871	16,303	15.8	7.5

Staff costs rose by 6.6 per cent, due for one reason to the consolidation of SWISS in the first half (+5.6 per cent) and operative expansion in the Passenger Transportation business segment, and for another to the new wage agreements negotiated in the course of the year. The Logistics, IT Services and Catering business segments were nonetheless able to reduce their staff costs in the reporting period by virtue of their flexible cost structure. On an annual average the Group employed 108,215 staff. That was 8,962 or 9.0 per cent more than the previous year. SWISS alone accounted for 7,370 employees. Adjusted for changes in the group of consolidated companies, the increase in employee numbers would have been 5.6 per cent.

Depreciation, amortisation and impairment rose to EUR 939m (+6.0 per cent), due mainly to the changes in the group of consolidated companies.

Other operating expenses rose by EUR 375m to EUR 3.4bn. They were principally due to higher losses arising from exchange rate differences (EUR +141m), an increase in indirect personnel expenses and external staff (EUR +78m) as well as higher expenditure on advertising and sales promotion (EUR +42m).

Higher expenses were not offset by higher income, with the consequence that performance indicators for the first nine months were down on the previous year.

Profit from operating activities at EUR 966m was EUR 225m lower than the previous year. Adjusted for non-recurring factors, the operating result (see table on page 9) was EUR 984m (–9.3 per cent). The adjusted

operating margin was thereby reduced to 5.5 per cent (previous year: 7.0 per cent).

Result from equity investment fell to EUR 32m (previous year: EUR 357m). The previous year's figure was the result of a EUR 180m at-equity valuation of SWISS and EUR 82m in earnings from equity investments in connection with the share buyback by WAM Acquisition S.A.

Net interest improved by EUR 40m and now amounts to EUR –129m. This was mainly due to reduced interest expenses, which were partly a result of lower accrued interest on pension provisions.

Other financial items were down by EUR 56m to EUR –184m, including a EUR 113m first-half impairment loss on the JetBlue shareholding and the EUR 76m full value adjustment of positive market values arising from fuel price, interest and foreign exchange hedging with the insolvent Lehman Brothers that can no longer be realised.

In contrast expenses in connection with the SWISS earn-out (EUR +57m) and with market value changes of existing interest and currency swaps affecting net income (EUR +24m) were lower year on year.

Earnings before interest and taxes (EBIT) include in addition to the profit from operating activities the result from equity investments and other financial items and amounted to EUR 814m (EUR 606m down on the previous year). Earnings before income taxes (EBT) were down EUR 566m on the year at EUR 685m. Income taxes were EUR 52m higher in the reporting

period than in the previous year at EUR 126m. Due to the effect of results of reduced deferred tax obligations following a tax rate change after the corporation tax reform in July 2007 the amount in the previous year had been significantly lower.

Net profit for the period totalled EUR 551m (previous year: EUR 1.6bn) after deduction of minority interests (EUR –8m). The previous year's figure included the EUR 503m gain from the disposal of the Leisure Travel segment. Adjusted for this factor, net profit for the period was still EUR 524m lower than the previous year due to the lower operating profit and financial result.

Earnings per share developed accordingly and now amount to EUR 1.20 (diluted and undiluted, cf. note on page 36).

The third quarter operating result was EUR 279m (compared with EUR 599m in the previous year). Net profit for the period fell to EUR 149m (previous year: EUR 586m).

The trend in results for the past five years is shown in the chart below.

Cash flow and capital expenditure

In the the first nine months of 2008 cash flow from operating activities of EUR 2.1bn (previous year: EUR 2.0bn) was generated. Despite a year-on-year decline in operating result by EUR 101m, the cash flow increase was due to the cash positive change of working capital.

Free cash flow (cash flow from operating activities less net cash used for investing activities) amounted to EUR 689m. See page 33 for a detailed cash flow statement.

20000 Gross capital expenditure totalled EUR 1.7bn, including EUR 1.1bn in final payments for three Airbus A340s, four Airbus A330s, five Airbus A321s, five Airbus A319s and two Cessna Citations, as well as aircraft overhauls and initial payments for new aircraft. A total of EUR 296m were invested in long-term financial assets, including EUR 214m paid for the January 2008 acquisition of a minority stake in JetBlue Airways Corporation. Moreover, EUR 575m were spent on short-term securities and funds and a further EUR 96m were invested in repairable spare parts for aircraft. The gross cash requirement was covered partly by interest and dividend income (EUR 202m) and partly by proceeds from asset disposals (EUR 101m), so that net cash used in investing activities and cash investments amounted to EUR 2.0bn (previous year: EUR 353m).

0 5000 10000 15000 The net cash used in financing activities (raising new borrowing, scheduled repayment of existing debt, dividend payments to shareholders and minority interests as well as current interest payments) totalled EUR 661m. Taking into account EUR 33m in exchange rate-related higher valuation of cash and cash equivalents, cash and cash equivalents held were reduced by EUR 514m to EUR 1.6bn (previous year: EUR 2.4bn).

1500 The internal financing ratio was 129.0 per cent (previous year: 213.5 per cent). In all, cash and cash equivalents held, including securities, amounted to EUR 3.4bn (previous year: EUR 4.4bn).

Earnings position Cash flow and capital expenditure Assets and financial position

Capital expenditure breaks down as follows:

Assets and financial position

The consolidated balance sheet total as of 30 September 2008 was EUR 22.8bn, or EUR 501m more than total assets at the end of 2007. Non-current assets increased by EUR 427m to EUR 14.5bn and current assets rose by EUR 74m to EUR 8.3bn.

On 28 January 2008 Lufthansa, Albrecht Knauf Industriebeteiligung GmbH and TUI Travel signed a letter of intent on a possible merger of their subsidiaries Germanwings GmbH, Eurowings Luftverkehrs AG, Hapag-Lloyd Fluggesellschaft mbH and Hapag Lloyd Express GmbH under the umbrella of a joint, independent holding company. As currently assessed an implementation of the projects within the next 12 months is no longer likely. That being so, assets and liabilities held by these companies will no longer be classifed as "Assets held for sale" or "Liabilities included in disposal groups held for sale" but will be reclassified in the regular balance sheet again.

		Jan. – Sept. 2008		Jan.  –  Sept. 2007
		Recon ciliation with		Recon ciliation with
in €m 2000	Income statement	operating result	Income statement	operating result
Revenue 1500	18,596		16,367
Changes in stocks	128		72
1000 Other operating income	1,113		1,055
500 - of which book gains from financial investments 0		–  38		–  46
- of which income from reversal of provisions		–  48		–  61
- of which write-ups on capital assets		–  2		–  5
- of which period-end valuation of ­non-current financial liabilities		12		–  60
Total operating income	19,837	– 76	17,494	– 172
Cost of materials and services	–  10,281		–  8,403
Staff costs	–  4,225		–  3,963
Depreciation	–  939		–  886
- of which impairment charge				43
Other operating expenses	–  3,426		–  3,051
- of which expenses incurred from book losses and current financial ­investments		90		9
- of which period-end valuation of non-current financial liabilities		4		14
Total operating expenses	–  18,871	94	–  16,303	66
Profit from operating activities	966		1,191
Total from reconciliation with operating result		18		–  106
Operating result		984		1,085
Income from subsidiaries, joint ­ventures and associates	32		357
Other financial items	–  184		–  128
EBIT	814		1,420
Write-downs (on profit from operating activities)	939		843
Write-downs on financial investments (incl. at equity)	115		11
EBITDA	1,868		2,274

Among non-current assets the value of aircraft and reserve engines rose by EUR 313m to EUR 8.7bn.

Current assets remained at their 2007 year-end level, or just 0.9 per cent above it. For seasonal and billing reasons, receivables increased by EUR 496m and securities by EUR 265m. Conversely, cash and cash equivalents were down by EUR 514m and current derivatives (mainly from fuel hedging) by EUR 201m. The non-current asset share of total assets rose to 63.6 per cent from 63.1 per cent at the end of 2007.

On the liabilities side, equity capital, including minority interests, was on 2007 year-end level after a EUR 572m dividend payout and a consolidated result of EUR 551m and is almost unchanged at EUR 6.9bn. The equity ratio fell slightly as a result of the higher balance sheet total to 30.4 per cent compared with 30.9 per cent at the end of financial year 2007.

While non-current liabilities and provisions were down by EUR 381m to EUR 6.8bn, current borrowing rose by EUR 855m to EUR 9.1bn. The decline in non-current borrowing is attributable to the further funding of EUR 283m in pension liabilities and the EUR 231m reduction in negative market values of financial derivatives (mainly from foreign exchange hedging).

The rise in current liabilities was due mainly to the EUR 623m seasonal increase in liabilities for flight documents that had yet to be flown out and to a EUR 142m increase in financial borrowing.

As of 30 September 2008 net liquidity, including EUR 488m in non-current liquidity reserves, amounted to EUR 357m compared with EUR 768m at the end of 2007. Gearing, including pension provisions, amounted to 28.5 per cent (year-end 2007: 24.5 per cent).

Group fleet

Number of commercial aircraft of LufthansaAG (LH), SWISS (LX), LufthansaCargo (LCAG), LufthansaCityLine (CLH), Air Dolomiti (EN), Eurowings (EW) and Germanwings (4U) as of 30 September 2008

Manufacturer/type	Number							Group fleet	of which finance lease	of which operating lease	Change as of 31.12.07	Change as 3) 30.9.07
	LH	LX	LCAG	CLH	EN	EW	4U
Airbus A300	13	–	–	–	–	–	–	13	–	–	–  1	–  1
5) Airbus A310	4	–	–	–	–	–	–	4	–	–	–	–
Airbus A319	1) 24	7	–	–	–	–	25	57	1	14	+  5	+  5
Airbus A320	36	19	–	–	–	–	–	55	–	10	–  3	–  1
Airbus A321	33	6	–	–	–	–	–	39	–	4	+  5	+  7
Airbus A330	14	11	–	–	–	–	–	25	–	9	+  4	+  4
Airbus A340	48	15	–	–	–	–	–	63	1	5	+  6	+  7
Airbus A380	–	–	–	–	–	–	–	0	–	–	–	–
Boeing 737	63	–	–	–	–	–	–	63	–	–	–	–
Boeing 747	30	–	–	–	–	–	–	30	–	–	–	–
Boeing MD11F	–	–	19	–	–	–	–	19	–	–	–	–
Canadair Regional Jet	2) 9	–	–	55	–	10	–	76	–	10	–	–
ATR	–	–	–	–	14	12	–	26	6	12	–	–  2
Avro RJ	–	20	–	18	–	–	–	38	–	19	–	–  1
BAe 146	5 3)	–	–	–	–	15	–	23	–	19	–	–
5) Embraer	–	4	–	–	–	–	–	4	–	4	–	–
Cessna Citation	4) 2	–	–	–	–	–	–	6	–	–	+  2	+  2
Total aircraft	281	82	19	73	14	37	25	541	8	106	18	20

1) Four of the aircraft are leased out to Germanwings.

2) Leased out to Eurowings.

3) Leased out to Air Dolomiti.

4) Leased out to Swiss. 5) Leased out to companies outside the Group.

Passenger Transportation business segment

Passenger Transportation business segment

Passenger Transportation					SWISS1)	Passenger Transportation
		Jan. – Sept. 2008	Jan.  – Sept. 2007	Change in %	Jan. – Sept. 2008	July  – Sept. 2008	July  – Sept. 2007	Change in %
Revenue	€m	13,755	11,556	19.0	2,420	4,857	4,602	5.5
- of which with companies of the Lufthansa Group	€m	477	439	8.7	26	167	152	9.9
Operating result	€m	461	744	–  38.0	237	112	466	–  76.0
Segment result	€m	471	995	–  52.7	-	123	513	–  76.0
EBITDA2)	€m	1,096	1,606	–  31.8	321	228	718	–  68.2
Segment capital expenditure	€m	1,079	952	13.3	185	376	388	–  3.1
Employees as of 30.9.	number	49,205	46,643	5.5	7,541	49,205	46,643	5.5
3) Passengers	thousands	53,758	45,799	17.4	10,128	18,913	18,851	0.3
3) Available seat-kilometres	millions	147,823	123,226	20.0	26,098	52,001	48,659	6.9
Revenue passenger- 3) 4) ­kilometres	millions	117,539	98,829	18.9	21,117	42,452	40,302	5.3
3) 4) Passenger load factor	%	79.5	80.2	–  0.7 pts.	80.9	81.6	82.8	–  1.2 pts.

1) For informational purposes, given the first-time full consolidation.

2) Before profit/loss assumed from other companies.

3) Without Germanwings.

4) Since 1 January 2008 revenue passenger figures have been calculated in the LufthansaGroup on the basis of the ICAO standard. The figures from the previous year have been adjusted accordingly.

Course of business The Passenger Transportation business segment was particularly burdened by the higher price of crude oil in the first months of 2008. In the third quarter operating development was further hampered by the results of the strike activities and the economic slowdown. While traffic remained very stable in the first half, the load factor suffered seriously in the third quarter. Average yields were also affected and developed unevenly. The Passenger Transportation business segment reported a significant year-on-year operating result decline in spite of higher revenue and the consolidation of SWISS.

Business segment structure In addition to Lufthansa Passenger Airlines and SWISS, Germanwings and the stakes in British Midland (bmi), SunExpress and Jet Blue form part of the Passenger Transportation business segment. As of 18 July 2008 SWISS also took over Zurichbased Servair Private Charter. Servair will operate under the name Swiss Private Aviation as a wholly owned subsidiary of Swiss International Air Lines and is to serve from March 2009 as a platform for the Lufthansa Private Jet fleet operations.

As a realisation of the jointly considered merger of Eurowings, Germanwings and Tuifly no longer seems likely within the next twelve months, the Eurowings Luftverkehrs AG and Germanwings GmbH assets classified at the beginning of the year as held for sale have been returned to their previous balance sheet items. That is why the depreciation of these assets that had not been undertaken since the beginning of the year was made good on a one-off basis in the third quarter with an effect on results.

Products and route network Lufthansa invests in both its product range and the extension of its route network. In the reporting period the terminal area in Frankfurt was modernised and expanded. In addition, a number of airport lounges were upgraded all over the world. Since the end of June all Airbus A330s and A340-600s have been outfitted with an individual entertainment programme in economy class. A third of the long-haul fleet has thereby already been converted. On short-haul routes the Airbus A300-600 fleet was outfitted with comfortable new seats in Business Class.

The route network has been extended in Europe and on long-haul routes. New destinations are Seattle and Calgary in North America and Malabo and Luanda in Africa. In the Asia/Pacific region Nanjing and Zhenyang in China and Pune in India are new destinations. Additional long-haul services from Düsseldorf have got off to a good start. In addition, services to South America are being increased by means of a code-sharing agreement with TAM of Brazil. Since 18 August 2008 all connections served by the two airlines between Frankfurt or Munich and São Paulo are being offered by both airlines on a code-sharing basis. In addition, TAM offers connecting flights to Brazilian domestic destinations.

SWISS has also continued its quality and product offensive. Among other things, its entire European fleet has now been fitted out with new seats. Passengers benefit from more comfort; at the same time the seats' construction has reduced their weight significantly and thereby further reduced fuel consumption. The strong fleet and network expansion process of the last two years was concluded this summer.

Sales and customers The mobile Internet portal mobile.lufthansa.com was launched to improve electronic services and expand sales channels. Customers can book tickets, check in and choose a seat by mobile phone. Since September on all flights from Germany to European destinations passengers have been able to use mobile boarding cards that are sent to Internet-enabled mobile phones by e-mail or text link. Check-in and billing are made even easier as a result. The mobile Internet portal mobile.lufthansa.com won a Medienforum NRW award for its successful navigation. The new online booking platform www.lufthansa.com has also won an award and a TÜV Rheinland quality certificate for its transparent pricing. The fact that the expected, advertised and actual end price were the same at Lufthansa received special mention.

The high level of commitment to constantly improving service and the route network is paying off. Despite recent industrial action, the satisfaction of Lufthansa customers has reached a record level. In particular the flight schedule and reduced waiting times at check-in are noted positively. Customers also appreciate the improved entertainment offered in Economy Class on long-haul routes. The customer loyalty programme Miles & More,

which celebrated its fifteenth birthday at the beginning of the year, continues to grow and now has over 15 million members. Lufthansa Group airlines are acknowledged by impartial observers to provide top-class services. In the 2008 World Airline Awards customers named Lufthansa as Europe's best airline. It received top marks for its check-in options, its luggage handling, its service personnel and its comfort on board. SWISS also fared well with fourth place in Europe. In Capital magazine's 2008 Airline of the Year survey Lufthansa and SWISS were voted first in the classic segment on European routes. In a survey by the Deutsches Institut für Service-Qualität, Hamburg, Lufthansa came first out of 11 airlines tested for the best terms and conditions and availability.

Operating performance The business segment further boosted both passenger numbers and sales in the first nine months of 2008. In all, 53.8 million passengers were welcomed on board Lufthansa and SWISS aircraft – 17.4 per cent more than in the previous year. Of these, ten million passengers flew with SWISS. Both airlines increased their market capacities. Lufthansa increased its capacity by 5.7 per cent and was able to raise sales by 4.7 per cent. Its passenger load factor fell to 79.2 per cent (–0.8 percentage points) accordingly. SWISS increased its capacity by double-digit figures (+12.8 per cent) and sold these extra seats in full (+13.4 per cent). Its passenger load factor improved slightly to 80.9 per cent (+0.4 percentage points) accordingly. The two airlines' overall passenger load factor was 79.5 per cent (–0.7 percentage points). In all, traffic revenue was further increased. Average yields were down slightly (–0.5 per cent), whereas the effects of exchange rate changes (–3.6 per cent) and fuel surcharges (+3.3 per cent) more or less cancelled each other out.

Individual traffic regions developed differently. In the Group's home market Europe the capacity increase was for the most part sold successfully. The passenger load factor fell by a mere 0.5 percentage points to 70.5 per cent, while average yields rose by 1.5 per cent. Traffic revenue also developed positively. In the Americas traffic region capacities were increased significantly and sold successfully. The passenger load factor was an excellent 85.0 per cent (–0.4 percentage points). Average yields were 2.0 per cent down on the previous year. Traffic revenue nonetheless improved significantly.

Capacities were also increased on services to Asia, and especially to China. These extra seats were not fully sold, with the result that the passenger load factor fell to 83.3 per cent (–1.7 percentage points). Average yields declined by 1.9 per cent. Traffic revenue rose, due primarily to the consolidation effect. Middle East/Africa, the smallest traffic region, reported growth due especially to the new Lufthansa routes to Luanda and Malabo. The passenger load factor fell slightly by 0.5 percentage points to 77.6 per cent. Average yields fell by 1.2 per cent. Traffic revenue, in contrast, rose sharply.

Germanwings carried 5.9m passengers, 1.9 per cent fewer than the previous year. Its passenger load factor was 82.3 per cent. Germanwings is adjusting its capacities to market conditions and is grounding four Airbus A319s from the fourth quarter.

In view of the price changes for crude oil and kerosene Lufthansa and SWISS have adjusted their fuel surcharges in several stages over the period under review. Lufthansa increased its surcharge for domestic and European flights to EUR 27 and for long-haul flights to EUR 97 per segment. SWISS increased its surcharge to CHF 45 for European flights and CHF 170 per segment for long-haul flights. Germanwings makes a EUR 8.10 fuel surcharge on domestic routes. For European flights that take less than two hours its charges EUR 12.75 and for flights that take longer than two hours EUR 15.75.

As a result of the prices of crude oil and kerosene falling in the course of the third quarter, Lufthansa reduced its fuel surcharges from 20 October 2008 to EUR 24 for European flights and to EUR 92 per section for long-haul flights. From 22 October SWISS reduced its surcharges to CHF 36 for European flights and to CHF 144 for longhaul flights.

Revenue and earnings development Traffic revenue rose on the lines of traffic figures in the first nine months of 2008 by 17.7 per cent to EUR 12.7bn of which SWISS earned EUR 2.1bn and Germanwings contributed EUR 484m. The full consolidation of SWISS in the first half accounted for much of the growth (12.3 per cent). Sales rose by 5.2 per cent, prices by 4.3 per cent. Currency influences, in contrast, reduced traffic revenue by 4.1 per cent. Other operating income rose by 9.0 per cent to EUR 729m. Special mention must above all be made of the significantly higher exchange rate gains compared with the previous year. Total operating revenue rose by 18.5 per cent as a result to EUR 14.5bn. Adjusted for changes in the group of consolidated companies the increase was 5.8 per cent.

Operating expenses were 22.1 per cent up on the previous year at EUR 14.0bn. The main driver of this sharp increase was the cost of materials and services, which rose by 29.3 per cent to EUR 8.7bn. Fuel costs

Trends in traffic regions  *

LufthansaPassenger Airlines and Swiss International Air Lines  **

		Number of passengers in thousands		Available seat-kilometres in millions		Revenue passenger- ­kilometres in millions		Passenger load factor in %
	Jan. – Sept. 2008	Change in %	Jan. – Sept. 2008	Change in %	Jan. – Sept. 2008	Change in %	Jan. – Sept. 2008	Change in %
Europe	41,434	16.5	45,507	17.8	32,066	16.9	70.5	–  0.5 pts.
America	6,213	19.9	53,726	21.1	45,684	20.6	85.0	–  0.4 pts.
Asia/Pacific	3,858	15.9	36,000	17.0	29,982	14.7	83.3	–  1.7 pts.
Middle East/Africa	2,231	31.8	12,590	34.0	9,773	33.2	77.6	–  0.5 pts.
Total scheduled services	53,736	17.4	147,823	20.0	117,505	19.0	79.5	– 0.7 pts.
Charter	22	8.4	49	–  25.3	34	–  23.3	69.0	1.8 pts.
Total	53,758	17.4	147,872	20.0	117,539	18.9	79.5	– 0.7 pts.

** Since 1 January 2008 revenue passenger figures have been calculated in the LufthansaGroup on the basis of the ICAO standard. The figures from the previous year have been adjusted accordingly.

** SWISS included since 1 July 2007.

alone, up by 51.7 per cent (EUR +1.3bn) accounted for EUR 3.7bn. The full consolidation of SWISS in the first half of 2008 accounted for 16.0 per cent. Fees, adjusted for quantities and consolidation, rose by 15.6 per cent to EUR 2.4bn. Staff costs rose by 14.4 per cent to EUR 2.4bn, of which the full consolidation of SWISS in the first half of 2008 accounted for 10.7 per cent. Wage agreements negotiated in the course of the year stepped up the costs considerably. Annual average staff numbers rose by 7,015 to 48,725 employees, of whom 7,370 work for SWISS. At present there is a hiring freeze for all areas of Lufthansa Passenger Airlines and central Group functions. Depreciation rose to EUR 694m, a 17.0 per cent increase. In addition to changes in the group of consolidated companies this reflects the reclassification of the Eurowings Group assets with a depreciation share of EUR 17m.

The operating result fell by 38.0 per cent to EUR 461m. Without changes in the group of consolidated companies this decline would have amounted to 42.8 per cent. Other segment income fell by 20.4 per cent to EUR 43m. This was due to fewer proceeds from the write-back of provisions than in the previous year. Other segment expenses were EUR 3m (previous year: nil) in extraordinary write-down of an aircraft that was up for sale. The result of investments accounted for using the equity method was negative at EUR –30m (previous year: EUR 197m). The figure for the first half of 2007 included a EUR 180m earnings contribution from the then not yet fully consolidated SWISS. The segment result was thereby down by 52.7 per cent to EUR 471m.

Segment capital expenditure was 13.3 per cent up on the previous year at EUR 1.1bn due to aircraft deliveries. In the first nine months of the year Lufthansa Passenger Airlines took five Airbus A321s, four Airbus A330s and three Airbus A340-600s into service. At Germanwings three Airbus A320s were replaced by five Airbus A319s. In addition, Lufthansa Private Jet took delivery of two Cessna Citations.

Outlook In the course of the third quarter the financial crisis took on new dimensions that have seriously impaired the prospects for the world economy and for passenger air traffic. In the long term demand is expected to continue to develop positively, but in the short term uncertainty about economic effects has risen considerably. In its latest forecast IATA expects international airlines to make combined world losses of USD 5.2bn in 2008. For 2009 IATA, which represents 230 airlines, so far anticipates a combined loss of USD 4.1bn.

In view of the overall economic trend Lufthansa also expects demand to be subdued. It is using its flexibility in capacity and revenue management and fleet structure to respond to fluctuations in demand. Against this background the capacity expansion planned for the winter season was reduced. In response to the latest developments Lufthansa has undertaken further capacity adjustments with the result that full-year growth in 2008 is now reduced from 7.1 per cent to 5.2 per cent (6.3 per cent incl. SWISS). For 2009 it decreases to 0.8 per cent, including SWISS to 1.2 per cent. It includes the additional capacity in Milan, from where the Italian Lufthansa subsidiary Air Dolomiti will from February 2009 offer many more direct flights to European destination with six Airbus A319s, will be offset by reductions in the regular Lufthansa route network. Lufthansa will also continue to keep a close eye on how the market and demand develop and act accordingly. Due to its flexible fleet structure Lufthansa is in a position to respond appropriately at short notice to fluctuations in demand. In doing so it benefits from a high proportion of unencumbered aircraft and the forthcoming delivery of modern, fuelsaving aircraft. In addition, tried and tested risk management and strict cost management will be deployed to offset fluctuations in demand and to counteract high fuel costs. For this purpose a package of measures totalling EUR 250m has been approved to stabilise results. Measures adopted in this connection include a reduction in administrative costs, a review of the project portfolio and a freeze on new hirings and staff replacements. In spite of these measures and the planned revenue growth, an operating result is anticipated for the full year 2008 that will be well below the previous year's.

Logistics business segment

Logistics
		Jan. – Sept. 2008	Jan.  – Sept. 2007	Change in %	July  – Sept. 2008	July  – Sept. 2007	Change in %
Revenue	€m	2,179	2,000	9.0	758	690	9.9
- of which with companies of the Lufthansa Group	€m	20	13	46.2	7	5	40.0
Operating result	€m	160	65	146.2	46	36	27.8
Segment result	€m	177	82	115.9	51	42	21.4
EBITDA	€m	269	177	52.0	82	73	12.3
Segment capital expenditure	€m	12	10	20.0	3	4	–  25.0
Employees as of 30.9.	number	4,654	4,616	0.8	4,654	4,616	0.8
Freight/mail	thousand tonnes	1,287	1,333	–3.4	418	456	–  8.3
Available cargo tonne-kilometres	millions	9,461	9,085	4.1	3,263	3,153	3.5
Revenue cargo tonne-kilometres	millions	6,285	6,214	1.2	2,058	2,151	–  4.3
Cargo load factor	%	66.4	68.4	–  2.0 pts.	63.1	68.2	–  5.1 pts.

Course of business Lufthansa Cargo was able in the first nine months to boost revenues significantly in an increasingly difficult business environment and to more than double its operating result. In the process it underscored in many respects its role as an industry leader.

Business segment structure In addition to Lufthansa Cargo AG the Logistics business segment includes Lufthansa Cargo Charter Agency GmbH and Jettainer GmbH, which specialises in airfreight containers, as well as the stake in Jade Cargo. From 2009 Lufthansa Cargo is taking over the business operations of its wholly owned subsidiary cargo counts GmbH. The customers of cargo counts primarily include leisure airlines such as Condor and Sun Express. It also markets the freight capacities of the Italian airline AirOne and of Croatia Airlines. The integration will achieve operating synergy effects and enhance the Lufthansa Cargo Group's operational efficiency.

Products and route network In the course of the year Lufthansa Cargo's presence was extended at locations in both Asia and Europe. In Tianjin, China, the new airfreight terminal was opened, while in Russia

a memorandum of understanding was signed with AiRUnion and Krasnoyarsk Airport to use the Siberian airport as a stop-over point for flights to and from Asia in the future. To strengthen the special segment offering the transportation of living animals, the Frankfurt Animal Lounge, one of the world's most modern animal handling stations, was opened at Frankfurt Airport.

To ensure long-term growth at its second-largest German airfreight hub, Lufthansa Cargo has embarked on the next enlargement phase of its airfreight handling facility at Leipzig Airport. When the new cargo airline AeroLogic gets up and running in spring 2009, Lufthansa Cargo will transfer its freight operations to the World Cargo Center, thereby ensuring efficient handling processes.

The route network has been extended both by Lufthansa Passenger Airlines' increased capacities and by freighter capacities. Lufthansa Cargo underscored its ambitions in the Latin American market by increasing its frequencies from Frankfurt to Curitiba, Brazil, in July using World Airways Boeing 747-400 freighters. The freighter connections with Curitiba are a joint project of Lufthansa Cargo and its subsidiary Lufthansa Cargo Charter Agency.

Sales and customers Lufthansa Cargo has further improved its processes. After playing a leading role in the e-freight project in previous months as the IATA coordinator for Germany, it sent its first paperless airfreight consignment to Seoul in September jointly with its Global Partner DB Schenker. That is to be only the start. In the months ahead Lufthansa Cargo aims to extend its e-freight operations to other German stations and to markets in Asia such as Singapore and Hong Kong. The e-freight project was launched in 2004 as part of IATA's "Simplifying the Business" initiative and marks a significant step toward process simplification for the airfreight industry by means of paperless shipment.

To improve sales and handling of small and medium-sized freight forwarders and partner airlines, the foundation stone for a new freight terminal was laid at CargoCity Süd in Frankfurt. This is where the German and European sales team will be housed in future. The new building is due to be taken into service in autumn 2009.

Various awards based on customer surveys have honoured Lufthansa Cargo's performance. After the US logistics magazine Air Cargo World had named Lufthansa Cargo the world's best freight airline, the airline was also able to outperform well-known competitors in a global survey by the US internet portal Official Airline Guide.

Lufthansa Cargo also continues to be at the cutting edge on environmental issues to which customers attach growing importance. Under the heading "Cargo Climate Care" it began in July to bundle its environmental management. This is where all activities relating to responsible dealings with nature and natural resources are

concentrated. In this connection Lufthansa Cargo is holding its first environmental conference in February 2009. At the conference the airline will present the Lufthansa Cargo Climate Award to young scientists, customers and employees who have either shown exemplary commitment in research into environmental issues in aviation and logistics or have demonstrated a sustained involvement in environmental protection.

Operating performance In the first nine months of the financial year Lufthansa Cargo boosted both capacity and sales. This trend reflects above all the substantial expansion of belly capacities in Lufthansa Passenger Airlines aircraft. At the end of the reporting period, however, the airline's traffic figures were increasingly influenced by the economic downturn. The cargo load factor fell by 2.0 percentage points on the year to 66.4 per cent in the first nine months of 2008.

Regional development varied. In Europe, load factors were improved slightly by reducing capacities through outsourcing of charter services to external providers. The cargo load factor fell, in contrast, in the Americas traffic region. This was due partly to a significant increase in belly capacities to North America from Düsseldorf since May that has yet to be fully utilised. Also, the decline strongly reflected the downturn in commercial activities. In the Asia region the load factor fell slightly, due mainly to high competitive pressure and to restrictions in China during the Beijing Olympics. In the smallest traffic region, Middle East/Africa, higher capacity was, in contrast, fully sold in the market and the load factor improved further as a consequence.

Trends in traffic regions Lufthansa Cargo
	Freight/mail in thousand tonnes			Availble cargo-tonne- ­kilometres in millions		Revenue cargo-tonne- ­kilometres in millions		Cargo load factor in %
	Jan.– Sept. 2008	Change in %	Jan.– Sept. 2008	Change in %	Jan.– Sept. 2008	Change in %	Jan.– Sept. 2008	Change in %
Europe	483,598	–10.3	777	–12.4	344	–10.8	44.3	0.8 pts.
America	367,298	0.1	3,941	11.5	2,587	2.6	65.7	–5.7 pts.
Asia/Pacific	354,282	1.4	4,002	1.5	2,907	0.8	72.6	–0.5 pts.
Middle East/Africa	82,265	5.7	741	2.9	447	6.1	60.3	1.9 pts.
Total	1,287,443	–3.4	9,461	4.1	6,285	1.2	66.4	–2.0 pts.

Revenue and earnings development In the first nine months Lufthansa Cargo's traffic revenue rose by 9.0 per cent to EUR 2.1bn. Income from fuel surcharges contributed significantly to this, compensating for rising fuel costs. Adjusted average yields nevertheless continued to be under pressure.

Currency gains were mainly responsible for the 25.9 per cent rise in other operating income to EUR 68m. Total operating income rose to EUR 2.2bn (+9.4 per cent).

Operating expenses increased by a disproportionately low 4.9 per cent to EUR 2.1bn. This rise was due solely to the cost of materials and services, which increased by 7.9 per cent to EUR 1.5bn. Higher fuel prices were entirely responsible for this development. Fuel costs rose in the reporting period to EUR 433m. Landing and handling fees, in contrast, were down by 4.0 per cent on the year to EUR 216m due to fewer aircraft movements and exchange rate gains. MRO expenses were also reduced by 8.6 per cent to EUR 96m due to fewer engine overhauls. Staff costs were down by 0.8 per cent on the year to EUR 242m. On average, Lufthansa Cargo employed 4,607 staff in the first nine months, 0.6 per cent more than in the previous year. Depreciation and amortisation was down by 3.2 per cent to EUR 92m, due mainly to lower depreciation on aircraft.

Positive revenue development combined with a disproportionately low increase in costs due to strict cost management led to a EUR 95m increase in operating result to EUR 160m.

Other segment income and expenses were almost unchanged. The results of investments accounted for using the equity method rose to EUR 12m (EUR +2m) and mainly reflects the result of the stake in the Shanghai Pudong International Airport Terminal. The overall segment result rose to EUR 177m, an increase of EUR 95m.

Segment capitals expanditure rose by EUR 2m on the year to EUR 12m, mainly as a result of the purchase of new operating and office equipment, such as refrigerated containers and pallets.

Outlook The crisis in the financial markets and its repercussions on the further course of the economy are impairing the outlook for airfreight business. The declines seen in the traffic data of recent months reflect and confirm this trend. In addition, commodity prices much higher than in the previous year will continue to weigh heavily on the industry.

Even though Lufthansa Cargo has so far held its own well in this market environment, the imminent downturn has already affected its operating performance. This trend is expected to intensify in the remaining months of the year. Lufthansa Cargo is responding to the growing challenges by stepping up sales activities and by increasing its focus on cost management. In spite of the increasingly difficult market environment Lufthansa Cargo anticipates a significant year-on-year improvement in revenue and operating result for the current financial year.

MRO business segment

MRO
		Jan. – Sept. 2008	Jan.  – Sept. 2007	Change in %	July  – Sept. 2008	July  – Sept. 2007	Change in %
Revenue	€m	2,687	2,691	–  0.1	875	888	–  1.5
- of which with companies of the Lufthansa Group	€m	1,069	1,037	3.1	345	321	7.5
Operating result	€m	227	197	15.2	69	73	–  5.5
Segment result	€m	236	212	11.3	72	78	–  7.7
EBITDA	€m	311	280	11.1	94	99	–  5.1
Segment capital expenditure	€m	82	141	–  41.8	42	45	–  6.7
Employees as of 30.9.	number	19,213	18,899	1.7	19,213	18,899	1.7

Course of business Lufthansa Technik was able to maintain revenue at the previous year's level despite negative revenue and result effects of the US dollar exchange rate trend and the crisis driven loss of customers. As a result of projects to cut costs and boost efficiency the segment was even able to improve its operating result.

Business segment structure The Lufthansa Technik group includes 29 technical maintenance facilities all over the world and in all, directly or indirectly, shareholdings in 55 companies. The new Lufthansa Technik and Qantas Airways engine maintenance joint venture, Jet Turbine Services in Melbourne, started work on 1 July 2008. The former SWISS maintenance facility at Basel/Mulhouse Airport became Lufthansa Technik Switzerland. From 1 October on its team of nearly 500 technicians and engineers will service and repair regional aircraft for SWISS and other customers and additionally look after larger VIP aircraft in the Boeing 737 and Airbus A320 families. Lufthansa Technik is thereby further expanding its capacity in this sector in the European market.

Products Lufthansa Technik with its MRO (Maintenance, Repair and Overhaul) product range for civil aircraft is the world's leading provider and in recent years has also positioned itself successfully as one of the leading providers for completing VIP aircraft. In the course of the year its range of services has been extended among other things by the opening of the A380 maintenance hanger in Frankfurt and by one of the world's largest hangars in Beijing as well as by the laying of the foundation stone for the new engine hangar in Hamburg. The Lufthansa Technik group has also enlarged its aircraft overhauling capacities in Europe. Before the end of the year the new maintenance facility in Bulgaria will overhaul its first short-haul aircraft. At Lufthansa Technik Malta a new hangar for servicing long-haul Airbus A330/340 aircraft is being taken into service. In addition Lufthansa Technik Component Services Milan is also in business to supply components for the Italian market. At the MRO Europe trade fair Lufthansa Technik exhibited two new products. The new "Aircraft Leasing & Trading Support" service provides a tailor-made portfolio of services specially designed for aircraft leasing companies' requirements. With the aid of "TOM" (Technical Operations Management) Lufthansa Technik offers customers technical handling for flight operations and assumes full responsibility in a strategic partnership for line maintenance at the customer's hub, the maintenance control centre and MRO contract management.

The highly regarded US trade journals Aviation Week and Overhaul & Maintenance awarded Lufthansa Technik their 2008 Best European Airline MRO Operation Award for its continuing market success, its environmental commitments and its investments in research and development.

The Hamburg aviation cluster, of which Lufthansa Technik forms a part, is to receive about EUR 40m in federal government research funding over a five-year period. The money is to fund three lighthouse projects, one of which will be led by Lufthansa Technik.

Sales and customers Over the past nine months Lufthansa Technik has signed up important customers on a long-term basis. They include the largest Australian airline, Qantas Airways Ltd., with which a ten-year contract was signed. The company has also built up a long-term relationship with Croatia Airlines. The Irish airline Aer Lingus has entrusted Lufthansa Technik with supplying the components for its growing Airbus fleet. This ten-year contract covers equipment and component services for at present 34 aircraft in the Airbus A320 family and nine A330s. The contract volume exceeds EUR 90m.

Operating performance New orders have continued to progress well in the reporting period. By September 375 new contracts (previous year: 360) and 26 new customers had been acquired with an anticipated revenue volume of EUR 451m for the full year 2008 (previous year: EUR 386m). The size of the fleet serviced by Lufthansa Technik increased by 17 per cent to a current total of 1,702 aircraft all over the world.

In the course of the year the services provided by subsidiaries have also been further extended. N3, a joint engine maintenance venture with Rolls Royce in Erfurt, has gained certification for further engine models.

The demand for individual completions for shortand long-haul aircraft is also increasing steadily. Contracts have already been signed for up to 2018 to fit out VIP wide-bodied aircraft such as the Boeing 747-8 and the Airbus A340. Long-term contracts have also been concluded with private and government customers in the smaller aircraft segment.

Revenue and earnings development The Lufthansa Technik group revenue at EUR 2.7bn is running at the previous year's level (–0.1 per cent). Income generated in business with Lufthansa Group companies has risen to EUR 1.1bn (+3.1 per cent) as a result of the larger Lufthansa Passenger Airlines fleet and in spite of the lower number of lay days and amount of engine dismantling compared with the previous year. Revenue from external customers is, in contrast, down slightly – by 2.2 per cent to EUR 1.6bn. In addition to generally lower earnings due to the weakness of the US dollar, revenue earned by subsidiaries in the engine segment has been lower than the previous year due to lower capacity utilisation. The crisis-related revenue shortfall amounted to over EUR 20m until the end of September. External revenue fell to 60.2 per cent of the total, 1.3 percentage points less than the previous year.

Other operating income rose by 1.7 per cent to EUR 121m. Total operating income of the MRO business segment was on a par with the previous year at EUR 2.8bn (–0.1 per cent).

Operating expenses were reduced by 1.2 per cent to EUR 2.6bn. The cost of materials fell significantly by 7.6 per cent to EUR 1.3bn. In addition to the relief afforded by the US dollar exchange rate trend, this

reflected the lower outsourcing of aircraft maintenance and the reduced number of engine overhauls. Staff costs rose by 2.0 per cent to EUR 748m as a result of the effect of the new wage agreement and in spite of lower additions to pension provisions. As of September the average number of employees in the MRO business segment was 18,991 (+1.7 per cent). Depreciation and amortisation totalled EUR 61m, or 1.7 per cent more than in the previous year. Other operating expenses rose by 15.0 per cent to EUR 461m, due especially to higher write downs on receivables, to currency valuation on the reporting date and to the increasing use of external staff.

The operating result was boosted by a significant 15.2 per cent to EUR 227m. This also showed the effect of the productivity improvement projects that formed part of the Upgrade to Industry Leadership initiative.

Other segment income and expenses have not changed to any extent worth mentioning. The result for investments accounted for using the equity method fell by EUR 6m to EUR 4m, among other things due to lower earnings contributions from Ameco and Alitalia Maintenance Services.

The segment result was EUR 236m, or 11.3 per cent higher than the previous year.

Segment capital expenditure was down by 41.8 per cent to EUR 82m and consisted mainly of the purchase of new machinery, plant and equipment. The strong decline was due to a very high previous year's figure that included the construction of the A380 hangar and the purchase of additional reserve engines.

Outlook Airline results forecasts have deteriorated significantly all over the world due to the decline in passenger and freight demand, the subdued economic outlook and continued high kerosene prices. Many airlines have already responded by cancelling routes, grounding aircraft and reducing personnel. Over 30 – mainly US – airlines have also had to apply for insolvency or Chapter 11. A number of Lufthansa Technik customers have been and are affected. Further defaults cannot be ruled out. Except for servicing and equipment supplies, capacity declines in the airline industry tend to have a delayed effect on Lufthansa Technik, so that it can adjust accordingly with its flexible cost structure. Even so, the present environment has not been without effect on Lufthansa Technik. For the full year 2008 it still expects a slight increase in revenue and a result that is on a par with the previous year's.

MRO business segment IT Sevices business segment

IT Services business segment

IT Services
		Jan. – Sept. 2008	Jan.  – Sept. 2007	Change in %	July  – Sept. 2008	July  – Sept. 2007	Change in %
Revenue	€m	485	499	–  2.8	170	173	–  1.7
- of which with companies of the Lufthansa Group	€m	278	291	–  4.5	95	101	–  5.9
Operating result	€m	29	11	163.6	11	–  3	–
Segment result	€m	29	–  31	–	12	–  45	–
EBITDA	€m	57	–  4	–	20	–  36	–
Segment capital expenditure	€m	38	41	–  7.3	12	13	–  7.7
Employees as of 30.9.	number	3,014	3,122	–  3.5	3,014	3,122	–  3.5

Course of business In spite of the subdued outlook for the airline industry Lufthansa Systems has been able to improve its operating result significantly on the previous year. Revenue, in contrast, has declined slightly due to a change in the corporate structure.

Business segment structure In addition to its head office in Kelsterbach, Lufthansa Systems operates from several other locations in Germany and in 16 other countries. In all, the company owns equity holdings in 25 companies. Lufthansa Systems Process Management GmbH was sold as of 1 January 2008 to Lufthansa Commercial Holding GmbH. Furthermore parts of the company's data centre operations were transferred to Budapest to optimise costs while maintaining the quality standards.

Products Against the background of financial bottlenecks that affect many airlines, Lufthansa Systems is concentrating on products that achieve immediate benefits for airlines in the form of higher revenue or lower costs so that essential IT investments pay for themselves fast. The Sirax AirFinance revenue billing platform and the LidoOC flight planning system are examples of increasingly important platform solutions that combine individual interlinked applications into an end-to-end solution.

Sales and customers/Operating performance

Lufthansa Systems reports a positive order intake trend and has signed a large number of contracts with important customers from the aviation industry and other sectors. Air France-KLM and Brussels Airlines are further well-known European airlines that have opted for the Sirax AirFinance platform. In recent months with EgyptAir, Croatia Airlines and Air Berlin new customers have been won and important partnerships have been extended. Along with a contract renewal with SunExpress the continuation of the cooperation with Turkish Airlines has been agreed upon for a further three years. The LidoOC flight planning system has improved its market-leading position. Outside the airline industry Lufthansa Systems has signed up The Yachts of Seabourn as a new customer. The Miami-based premium cruise operator is having three of its new cruise liners fitted out by Lufthansa Systems with a fully digital communication and entertainment system. Cooperation with the international freight forwarder Panalpina has also been intensified.

Tour operator Thomas Cook Deutschland has entrusted Lufthansa Systems with the operation of its system platform for a further five years.

Within the Lufthansa Group a contract was signed with Lufthansa Cargo for the CLIC3plus workplace

operator model. Lufthansa Systems is thereby responsible as the main contractor for supplying and implementing software and hardware for both Lufthansa Passenger Airlines and Lufthansa Cargo. A total of 15,000 workplaces at around 500 locations all over the world will be fitted out with new equipment and components.

Revenue and earnings development In the first nine months of 2008 Lufthansa Systems earned EUR 485m in total revenue, including EUR 278m in business with Lufthansa Group companies and EUR 207m in external business. Revenue was 2.8 per cent down on the previous year. Revenue from business with Lufthansa Group companies in particular has declined due to demigration of IT services and to lower prices. External revenue was maintained at the previous year's level due to the change in corporate structure.

Other operating income rose by 38.1 per cent to EUR 29m, the main driver being the capitalisation of development costs in connection with the modernisation and revision of the Lufthansa Systems product portfolio. Total operating income amounted to EUR 514m (–1.2 per cent).

As a result of the restructuring measures completed in 2007, operating expenses were reduced significantly by 4.7 per cent to EUR 485m. In the course of restructuring the share of variable costs rose. The cost of materials and services doubled on the year to EUR 56m due to a larger number of external staff being employed at peak periods, for instance.

The reorganisation undertaken in 2007 is, in contrast, reflected by a significant decline in staff costs. They fell by 4.9 per cent to EUR 173m, partly because fewer numbers of employees and partly because personnel costs were reduced through relocation to less expensive locations. On average, employee numbers declined by 6.5 per cent to 2,989 due to restructuring measures, fluctuation and the disposal of an equity holding. Depreciation and amortisation was on a par with the previous year at EUR 27m. Other operating expenses were down, due mainly to supplier changes, to EUR 229m (previous year: EUR 272m).

The operating result improved substantially by EUR 18m to EUR 29m. Other segment income and expenses had no influence worth mentioning. The segment result was also EUR 29m (previous year: EUR –31m). In the previous year the result was burdened by impairments totalling EUR 43m in connection with the cancellation of one large project.

Segment capital expenditure was carried out mainly to safeguard existing business and amounted to about EUR 38m (–7.3 per cent).

Outlook In principle, demand for IT system modernisation remains high. Due to the tight economic position of many airlines, however, this demand is concentrated largely on solutions that lead directly to lower costs or higher revenues. In these areas Lufthansa Systems is well positioned with its product portfolio, so it can assume that this demand will continue. A slight fall in revenue is nonetheless anticipated for the full year 2008. Due to year-end cost reductions and one-off burdens in the previous year Lufthansa Systems will, however, achieve a significantly higher operating result.

IT Services business segment

Catering business segment

Catering business segment

Catering
		Jan. – Sept. 2008	Jan.  – Sept. 2007	Change in %	July  – Sept. 2008	July  – Sept. 2007	Change in %
Revenue	€m	1,755	1,788	–  1.8	637	645	–  1.2
- of which with companies of the Lufthansa Group	€m	421	387	8.8	143	141	1.4
Operating result	€m	56	83	–  32.5	25	52	–  51.9
Segment result	€m	80	95	–  15.8	37	59	–  37.3
EBITDA	€m	119	157	–  24.2	87	85	2.4
Segment capital expenditure	€m	90	87	3.4	39	37	5.4
Employees as of 30.9.	number	31,897	30,566	4.4	31,897	30,566	4.4

Course of business In view of the financial market crisis and the decline in economic growth all over the world, several airlines have announced their intention of reducing capacities. In the first nine months this has not yet affected demand for in-flight catering and in-flight management from LSG Sky Chefs. While sales rose slightly in volume year on year, revenue declined, due mainly to negative currency effects. The nine-months operating result for 2008 was down on the year, largely as a result of negative currency effects, the higher cost of materials and services and one-off effects in Germany, Denmark and Italy.

Business segment structure The LSG Sky Chefs group comprises around 125 companies and is represented by nearly 200 operations in 50 countries. To take its core business expansion forward, further equity holdings were acquired and new companies founded in the first nine months. Ten subsidiaries joined the group of consolidated companies and all made a positive contribution toward LSG Sky Chefs group revenue and earnings. In addition, the sales of LSG Sky Chefs España S.A. and LSG-Airport Gastronomiegesellschaft mbH were successfully completed. With AviaPit Sochi, a new Russian location was added to the LSG Sky Chefs network. Sochi has above-average passenger growth and will gain in attraction as the host of the 2014 Winter Olympics. In addition, LSG Sky Chefs acquired in Canada a majority holding in the joint venture CLS Catering Services Ltd. with locations in Vancouver and Toronto. New production facilities were taken into service both in the USA (Pittsburgh, PA) and in India (Bangalore and Hyderabad). Additionally, construction work on a catering facility in Chennai was commenced.

Products To meet the rising demand for frozen food, in which airlines are interested for cost reasons, LSG Sky Chefs has started to produce frozen food in Pittsburgh. In addition, the existing production facility in Alzey, Germany, has been enlarged. Penetration of the market with services over and above in-flight catering, such as the procurement and development of in-flight equipment, storage and transport logistics and support for airlines in developing ancillary revenue models, is making increasingly successful progress.

Customers and sales In the first nine months the customer base and the order position were further consolidated. In addition to the renewal of catering contracts with American Airlines and Virgin Atlantic at major US and Latin American locations, major contracts were either concluded or successfully renewed with Brussels Airlines, Qatar Airways, United Airlines, Jet Airways, Dragonair, Thomas Cook and Continental Airlines.

LSG SkyChefs' high quality standards were increased significantly both in audit ratings and in customers' perception. Intensive training activities and learning and problem solving workshops at facilities around the world made a substantial contribution toward this improvement. The sustainability of these activities was rewarded, especially in the UK, by the return of a number of customers to LSG Sky Chefs. Over and above the corporate level, further steps are planned to transform LSG Sky Chefs into a lean enterprise. Measures are anchored in the framework of the Upgrade to Industry Leadership initiative.

Operating performance This financial year LSG Sky Chefs has made further steps forward. At Frankfurt Airport the new catering production facility was taken into service. Using state-of-the-art technologies on a 28,000 square metre site, an average of 77,000 meals are prepared every day.

In March LSG Sky Chefs took on the catering for the first European scheduled A380 services in Heathrow for Singapore Airlines. Fulfilment of catering requirements in the time available was ensured by two of the world's largest catering trucks that are capable of reaching the A380's upper deck.

Revenue and earnings development In the first nine months revenue fell by 1.8 per cent year on year to EUR 1.8bn. This was due mainly to the weakness of the US dollar, the British Pound and the Korean won. In local currency nearly all regions increased their sales. The EUR 1.3bn in external revenue represented a 4.8 per cent decline due to negative currency effects, whereas internal revenue rose by 8.8 per cent to EUR 421m. LSG SkyChefs group companies consolidated for the first time this year made a EUR 55m contribution toward revenue.

In Europe, revenue grew mainly in Germany and Eastern Europe. In the United States, revenue showed above-average growth in local currency. The reasons for this were new customer contracts and higher volumes. Developments in the Asia/Pacific region and in Latin America continued to be positive, although there too revenue in local currency was hit by the weakness of the US dollar. Successful expansion in the Solutions segment led to further pleasing revenue growth.

Other operating income dropped by 37.5 per cent to EUR 30m, due mainly to lower currency gains. Total operating income declined by 2.8 per cent to EUR 1.8bn.

After incorporation in the group-wide Upgrade to Industry Leadership initiative at the beginning of the year, the cost reduction programmes initiated in previous years continued to be fully effective. As a result, operating expenses fell by 1.4 per cent to EUR 1.7bn in the nine month. Positive currency effects also contributed toward this trend. As these exchange rate-related effects only partly offset the worldwide increase in food prices, dramatically higher energy costs and higher volumes, the cost of materials and services nevertheless rose by

2.4 per cent to EUR 799m. The LSG Sky Chefs group employed on average 31,528 employees (+5.8 per cent) in the first nine months, but in spite of this increase and the effects of new wage agreements staff costs fell by 5.9 per cent to EUR 620m. In addition to favourable currency effects that made a major contribution toward this positive trend, higher productivity in operative areas and lower administrative costs helped to curb costs. Depreciation and amortisation amounted to EUR 40m and was 7.0 per cent down on the year. That too was due to the weakness of the US dollar. Other operating expenses were slightly down on the year at EUR 271m.

The EUR 56m operating result is EUR 27m down on the previous year. This mainly reflects negative currency effects on the revenue side and the substantial rise in energy and food costs. The sale of the Spanish subsidiary and of LSG-Airport Gastronomiegesellschaft mbH was the main reason for the EUR 22m increase in other segment earnings to EUR 24m. Other segment expenses rose by EUR 3m to EUR 3m. Overall, the segment result fell by 15.8 per cent to EUR 80m.

Segment capital expenditure totalled EUR 90m and was EUR 3m up on the year. The main reasons for this were the building of the new catering facility at Frankfurt Airport and the expansion of frozen food capacities in Alzey, Germany, Pittsburgh, USA, and Qingdao, China.

Outlook As a result of the negative development in the international financial markets the airline industry is in a downturn after several years of continuous growth. The length and intensity of this downturn are currently still hard to foresee. Insolvencies and consolidations will increase in number, especially in North America and Europe, with an influence on the catering business. In an increasingly aggressive price war it will become steadily more difficult to renew existing contracts and gain new customers with a view to achieving sustainability. In addition, the drastic rise in food prices and energy costs are exerting pressure on profitability.

Measures initiated to cut costs and boost productivity can only partly offset these factors. In addition, risks concerning important contracts are arising, especially in the Mediterranean region and Scandinavia. As a consequence, LSG Sky Chefs will as currently assessed be unable in the financial year 2008 to reach the previous year's revenue and operating result levels.

Service and Financial Companies

Service and Financial Companies

		Jan. – Sept. 2008	Jan.  – Sept. 2007	Change in %	July  – Sept. 2008	July  – Sept. 2007	Change in %
Total operating income	€m	339	291	16.5	120	99	21.2
Operating result	€m	60	37	62.2	19	10	90.0
Segment result	€m	27	178	–  84.8	–  20	17	–
EBITDA	€m	18	161	–  88.8	–  19	20	–
Segment capital expenditure	€m	111	49	126.5	29	16	81.3
Employees as of 30.9.	number	1,418	1,353	4.8	1,418	1,353	4.8

Organisational structure The Service and Financial Companies unite financial and services businesses which support the Lufthansa Group's activities. They include the AirPlus group, Lufthansa Flight Training GmbH and Lufthansa Commercial Holding, which holds Lufthansa's equity investments. On 11 April 2008 Lufthansa sold the stake in the ground handling company GlobeGround Berlin GmbH that it held indirectly via Lufthansa Commercial Holding to the WISAG Group, Frankfurt am Main.

Operating performance AirPlus can look back on nine successful months. In spite of critical economic parameters the positive trend in business travel continues. The billing volume rose on the year due to growth in international markets.

For Lufthansa Flight Training the course of business so far this year has also been very satisfactory. Demand for training services continued to increase. The course of business progressed stably and new long-term contracts were signed. A new flight simulator was taken into service in Vienna and another in Frankfurt. In addition, the new LFT Training Centre opened in Munich in October.

Revenue and earnings development Total operating income rose by 16.5 per cent to EUR 339m, AirPlus making a particularly significant contribution (EUR 205m, +36.7 per cent). Lufthansa Flight Training made a further contribution of EUR 115m (+8.0 per cent). Operating expenses went up by 9.8 per cent to EUR 279m. The operating result increased to EUR 60m and was EUR 23m up on the previous year.

Other segment income consists mainly of profit transfers, income from equity investments and interest income paid to Lufthansa Commercial Holding.

In the first nine months these amounted to EUR 121m, or EUR 62m down on the year. For the same period in the previous year this item included book gains from the WAM Acquisition S.A. share buyback and a special dividend totalling EUR 82m. Other segment expenses rose due to securities write-downs from EUR 42m to EUR 154m. As a consequence, the EUR 27m segment result was EUR 151m down on the previous year (EUR 178m).

Risks

Deutsche Lufthansa AG is an international aviation company that by its nature is exposed to both companyand sector-specific as well as financial risks. The focus is on market and competitive risks that affect capacity and load factors, strategic risks, political risks, operational risks, purchasing risks, collective bargaining risks, IT risks and financial and treasury risks. Lufthansa's risk policy allows the Group to exploit commercial opportunities as they arise as long as a risk-return profile in line with market practice is maintained and the risks are appropriate and acceptable in relation to the value created. With the Group-wide opportunity and risk management system they can be identified and evaluated in advance and thereby be managed efficiently and effectively for the Company's benefit. Information about the Group's opportunity and risk management system, the risk categories and the Group's risk position can be found in the 2007 annual report on pages 101 et seq. and 166 et seq. as well as in the Group's interim reports. Compared with the existing risks outlined in the annual report, the risk situation has changed in the following respects:

The Group's risk situation is shaped by the global financial market crisis and the possible repercussions for world economic development and with them traffic development in international air transport. Overall, the economy is expected to grow less strongly. In a number of economic areas and essential sectors the risk of a fully fledged recession can no longer be ruled out. Lufthansa possesses sufficient flexibility to be able to adjust its capacity to these developments.

The slowdown of economic growth has on the other hand led to a pacification of commodity markets. Compared with their historic peak prices in mid-year, the prices of crude oil and kerosene have fallen considerably. Yet the average price level of the full year 2008 will well be above the previous year's. Due to the fact that the current future prices are being higher than the spot prices, Lufthansa has to provide payments in a limited

amount from hedging. However, the Group will continue to benefit from its fuel hedging overall.

Contracting party risks in the financial market have also increased, as have the risks and costs of borrowing. Lufthansa here has a relatively good starting position by virtue of its investment grade rating and its sound liquidity.

After all known facts and circumstances have been taken into account, however, there are currently no risks that would pose a threat to the Group's continued existence in the foreseeable future.

Supplementary report

The financial market crisis has definitely made cyclical framework conditions much tougher. Its repercussions on the overall economy and the aviation industry and the measures undertaken by Lufthansa are described in the Outlook section.

AK Industriebeteiligung GmbH has accepted an irrevocable offer by Deutsche Lufthansa AG to purchase 368,605 shares (50.9 per cent of the share capital) in Eurowings Luftverkehrs AG. These shares will be transferred as of 31 December 2008 to either Deutsche Lufthansa AG or a third party named by Lufthansa.

On 10 October Sir Michael Bishop on behalf of the BBW Partnership Ltd. exercised an option which requires Lufthansa to purchase 50 per cent plus one share in British Midland PLC (bmi). This represents the entire shareholding in bmi currently owned by the BBW Partnership Ltd. The option is part of the existing shareholders agreement of bmi dated 9 November 1999. The completion of the exercise is expected to take place not before 12 January 2009. It is subject to anti-trust approval and regulatory requirements. Discussions regarding the future structure and options are ongoing between Lufthansa, Sir Michael Bishop and bmi.

Otherwise no events have occured that have a material effect on the Group's earnings, financial and assets position.

Risks Supplementary report Outlook

Outlook

General economy and industry The international financial market crisis has grown more acute since the reporting date, with foreseeable negative consequences for the real economy. All over the world economic growth is expected to slow down considerably. In a number of industrialised countries a recession must been reckoned with.

Further sluggish development is forecast for the US economy. Private consumption will grow weaker in the wake of poor labour market data and falling real earnings. The situation will grow more acute where private consumption is concerned after the economic stimulation programme of tax credits to private households that was adopted last spring ceases to apply.

In Asia, growth will remain relatively robust, but here, too, effects of a global economic slowdown are noticeable. Leading institutes state that the outlook for Asian emerging markets maintains favourable because domestic demand seems set to remain stable. In China economic growth is expected to continue at a high level, but more slowly. The dynamism of exports will diminish, whereas private consumption will continue to grow almost unchanged.

Growth will also slow down in the euro zone. Early economic indicators for Germany, such as business sentiment and consumer confidence, have declined considerably in recent months and indicate that prospects in the months ahead will take a clearer turn for the worse than originally expected. Growth forecasts by region for the fourth quarter are shown in the table on page 03.

In spite of a further reduction in oil prices, the price of oil must be assumed to remain on a historical high level for the remainder of 2008. On 15 October the future price for the end of the year was USD 73.80 per barrel. Among weather-related and geopolitical uncertainties as well as other things the risk of price fluctuation remains high.

Due to revised growth forecasts outside of the United States, in September IATA updated its passenger and airfreight forecasts. Passenger growth is now expected to be 3.2 per cent in the full year 2008, with airfreight growth forecast to be 1.8 per cent. Given the high cost of aviation industry restructuring in North America (about USD 5bn), IATA anticipates net losses of USD 5.2bn for the industry as a whole in 2008. For Europe it forecasts an almost balanced net result of USD 0.3bn only.

Lufthansa Group In view of the industry's fundamental growth orientation coupled with considerable volatility in demand, the Lufthansa Group and its business segments are aiming for sustainable profitable growth. With its postion based on balance and flexibility, adjustments on short notice are to be made possible at all times and an appropriate level of profitability is to be maintained even when underlying economic conditions are difficult.

In the current environment Lufthansa too anticipates subdued demand as a result of the slowdown in overall economic development. It will affect the Group's business segments to different degrees and at different pace. With these factors in mind, the Executive Board has decided to enlarge Lufthansa Passenger Airlines capacities much more modestly and has adopted a package of measures designed to stabilise operating profit. In the Logistics business segment freight capacities will also be controlled very precisely and adjusted at short notice. To prepare for possible demand volatility the MRO and IT Services business segments have incorporated a much higher level of flexibility into their cost base. The Catering segment has reduced its capacities since mid-year in view of falling demand in America. Details of the respective measures are outlined in the commentaries on the business segments.

On the cost side high fuel prices continue to weigh heavily despite the recent price cuts. Fuel costs of EUR 5.4bn are forecast for the full year, a year-on-year

increase of EUR 1.5bn. Now that one counterparty is no longer available hedging cover for the remainder of the year has fallen to 72 per cent, for the year 2009 to 57 per cent. In personnel expenses the latest wage agreement will cost an additional EUR 100m or so per year. In view of the measures undertaken to adjust capacity, employee numbers are unlikely to change much for the remainder of the year. Higher costs are countervailed by measures to enhance efficiency, including measures undertaken as part of the Group's Upgrade to Industry Leadership initiative.

In all, the Executive Board anticipates for the full year 2008 higher revenue than in the previous year. As of today's level of knowledge, the Group will generate around EUR 1.1bn operating profit. It is subject to the opportunities and risks arising from strong fluctuation in overall economic parameters. Net profit and earnings per share will be well below the previous year's figures in view of the factors already outlined in this interim report.

For segment-specific details of economic, product and other developments we refer to the statements in the segment chapters.

In the medium term the Lufthansa Group's strong operational and financial positioning offers opportunities in a weak economic environment. These opportunities will also be assessed and pursued continuously. Anticipated overall investment of about EUR 2.5bn will accompany Lufthansa's growth in 2008, increasing slightly in subsequent years. This investment will mainly be in modern aircraft. To finance growth Lufthansa can revert to its cash flow and surplus liquidity, furthermore the unencumbered fleet and the good corporate credit enable additional financing alternatives.

The development of the Group follows the principles of the value-based management. Details on this concept can be found in the 2007 annual report (pages 36 et. seq.) Lufthansa remains committed to sustainable value enhancement in its investment, financing and strategic decisions.

Consolidated income statement Januar y – September 2008

in €m	Jan. – Sept. 2008	Jan.  – Sept. 2007	July  – Sept. 2008	July  – Sept. 2007
Traffic revenue	15,018	12,739	5,297	5,000
Other revenue	3,578	3,628	1,243	1,278
Total revenue	18,596	16,367	6,540	6,278
Changes in inventories and work performed by the enterprise and capitalised	128	72	42	11
Other operating income	1,113	1,055	360	375
Cost of materials and services	–  10,281	–  8,403	–  3,798	–  3,254
Staff costs	–  4,225	–  3,963	–  1,407	–  1,368
Depreciation, amortisation and impairment	–  939	–  886	–  331	–  344
Other operating expenses	–  3,426	–  3,051	–  1,211	–  1,128
Profit from operating activities	966	1,191	195	570
Result of equity investments accounted for using the equity method	–  11	227	4	36
Result from other equity investments	43	130	11	81
Interest income	143	124	49	29
Interest expense	–  272	–  293	–  92	–  97
Net interest	–  129	–  169	–  43	–  68
Other financial items	–  184	–  128	12	–  100
Financial result	– 281	60	– 16	– 51
Profit before income taxes	685	1,251	179	519
Income taxes	–  126	–  74	–  26	72
Profit from continuing operations	559	1,177	153	591
Profit from the discontinued Leisure Travel segment	0	503	0	0
Profit after income taxes	559	1,680	153	591
Minority interests	–  8	–  102	–  4	–  5
Net profit attributable to shareholders of Deutsche Lufthansa AG	551	1,578	149	586
Basic earnings per share in €	1.20	3.45	0.32	1.28
Diluted earnings per share in €	1.20	3.43	0.33	1.27

Consolidated balance sheet of 30 September 2008

Assets
in €m	30.9.2008	31.12.2007	30.9.2007
Intangible assets with indefinite useful life	809	797	802
Other intangible assets	243	252	250
Aircraft and reserve engines	8,693	8,380	8,374
Repairable spare parts for aircraft	640	586	574
Property, plant and other equipment	1,881	1,773	1,702
Investment property	3	3	3
Investments accounted for using the equity method	299	323	334
Other equity investments	852	777	719
Non-current securities	283	298	559
Loans and receivables	419	399	401
Derivative financial instruments	285	368	76
Accrued income and advance payments	21	22	17
Effective income tax receivables	70	79	82
Deferred claims for income tax rebates	5	19	177
Non-current assets	14,503	14,076	14,070
Inventories	575	511	507
Trade receivables and other receivables	3,944	3,448	3,842
Derivative financial instruments	280	481	233
Accrued income and advance payments	100	110	134
Effective income tax receivables	56	62	19
Securities	1,793	1,528	1,989
Cash and cash equivalents	1,565	2,079	2,398
Assets held for sale	5	25	17
Current asset	8,318	8,244	9,139
Total assets	22,821	22,320	23,209

Shareholders' equity and liabilities
in €m	30.9.2008	31.12.2007	30.9.2007
Issued capital	1,172	1,172	1,172
Capital reserve	1,366	1,366	1,366
Retained earnings	3,146	2,063	2,551
Other neutral reserves	635	589	–61
Net profit for the period	551	1,655	1,578
Equity attributable to shareholders of Deutsche ­Lufthansa AG	6,870	6,845	6,606
Minority interests	57	55	59
Shareholders' equity	6,927	6,900	6,665
Pension provisions	2,330	2,461	3,674
Other provisions	382	349	445
Borrowings	3,060	3,098	3,099
Other financial liabilities	38	55	49
Advance payments received, accruals and deferrals and other non-financial liabilities	62	66	62
Derivative financial instruments	140	371	322
Deferred income tax liabilities	756	749	565
Non-current provisions and liabilities	6,768	7,149	8,216
Other provisions	1,810	1,686	1,495
Borrowings	389	247	247
Trade payables and other financial liabilities	4,036	3,959	4,043
Liabilities from unused flight documents	2,169	1,546	1,886
Advance payments received, accruals and deferrals and other non-financial liabilities	401	289	84
Derivative financial instruments	242	481	465
Actual income tax liabilities	79	51	108
Liabilities included in disposal groups	0	12	0
Current provisions and liabilities	9,126	8,271	8,328
Total shareholders' equity and liabilities	22,821	22,320	23,209

Consolidated statement of changes in shareholders' equity

in €m	Issued capital	Capital reserve	Fair value of ­financial instru ments	Currency differ ences	Revalu ation reserve	Other neutral reserves	Total other neutral reserves	Retained earnings	Net profit/ loss for the period	Equity share of share holders of Lufthansa AG	Minority interests	Total equity
As of 31.12.2006	1,172	1,366	– 11	– 130	0	– 158	– 299	1,581	803	4,623	280	4,903
Reclassifications	–	–	–	–	–	–	–	482	–  482	–	–	–
Dividends/minorities	–	–	–	–	–	–	–	–	–  321	–  321	–  6	–  327
Consolidated net profit/loss ­attributable to minority interest	–	–	–	–	–	–	–	–	1,578	1,578	102	1,680
Currency differences	–	–	–	–  59	–	–	–  59	–	–	–  59	13	–  46
Fair value of financialassets and cash flow hedges	–	–	–  73	–	–	–	–  73	–	–	–  73	–	–  73
Transfer to cost without effect on profit and loss	–	–	21	–	–	–	21	–	–	21	–	21
Reversals through profit and loss for the period	–	–	2	–	–	–	2	–	–	2	–	2
Other neutral changes	0*	0*	–	–	237	598	835	–	–	835	–  330	505
As of 30.9.2007	1,172	1,366	– 61	– 189	237	440	427	2,063	1,578	6,606	59	6,665
Total changes in equity with and without effect on profit and loss	–	–	–  50	–  59	237	598	726	482	775	1,983	–  221	1,762
As of 31.12.2007	1,172	1,366	140	– 180	237	392	589	2,063	1,655	6,845	55	6,900
Changes in the consolidation group	–	–	–	–	–	–	–	–	–	–	–	–
First time adaption of new IAS	–	–	–	–	–	–	–	–	–	–	–	–
Reclassifications	–	–	–	–	–	–	0	1,083	–  1,083	–	–	–
Dividends/minorities	–	–	–	–	–	–	0	–	–  572	–  572	–  9	–  581
Consolidated net profit/loss attrib utable to minority interest	–	–	–	–	–	–	0	–	551	551	9	560
Currency differences	–	–	–	39	–	–	39	–	–	39	–  2	37
Fair value of financialassets and cash flow hedges	–	–	315	–	–	–	315	–	–	315	–	315
Transfer to cost without effect on profit and loss	–	–	103	–	–	–	103	–	–	103	–	103
Reversals through profit and loss for the period	–	–	–  397	–	–	–	–  397	–	–	–  397	–	–  397
Other neutral changes	–	–	0*	–	–	–  14	–  14	–	–	–  14	4	–  10
As of 30.9.2008	1,172	1,366	161	– 141	237	378	635	3,146	551	6,870	57	6,927
Total changes in equity with and without effect on profit and loss	–	–	21	39	–	–  14	46	1,083	–  1,104	25	2	27

* Rounded below EUR 1m.

Changes in the other neutral changes for 2008 result from valuation under the equity method; of these EUR 3m (previous year: EUR –4m) relate to associated companies.

shareholders' equity Consolidated cash flow statement

Consolidated cash flow statement

in €m	Jan. – Sept. 2008	Jan.  – Sept. 2007	July – Sept. 2008	July  – Sept. 2007
2) Cash and cash equivalents 1.1.	2,079	455	1,770	699
Net profit before income taxes	685	1,251	179	519
Depreciation, amortisation and impairment losses on non-current assets (net of reversals)	1,051	892	328	350
Depreciation, amortisation and impairment losses on current assets	44	61	16	29
Net proceeds on disposal of non-current assets	–  28	–  11	–  10	64
Result of equity investments	–  32	–  357	–  15	–  117
Net interest	129	169	43	68
Income tax payments	–  87	–  125	–  35	19
3) Changes in working capital	380	95	–  117	–  31
Cash flow from operating activities	2,142	1,975	389	901
Capital expenditure for property, plant and equipment and intangible assets	–  1,349	–  1,180	–  396	–  493
Capital expenditure for financial assets	–  33	–  59	–  2	–  10
Additions to repairable spare parts for aircraft	–  96	–  82	–  49	–  41
Income from sales of non-consolidated equity investments	8	832	1	32
4) Income from sales of consolidated equity investments	30	0	13	0
Expenses from acquisitions of non-consolidated equity investments	–  263	–  27	–  19	–  4
5) Expenses from acquisitions of consolidated equity investments	–  15	341	–  12	350
Income on disposal of intangible assets, property, plant and equipment and other financial assets	63	116	13	29
Interest income	136	114	40	16
Dividends received	66	151	15	83
Net cash used in investing activities	–  1,453	206	– 396	– 38
- of which income from the diposal of the business segment ­Leisure Travel discontinued on 22.12.2006	–	800	–	–
6) Purchase of securities/fund investments	–  575	–  367	–  87	–  45
Disposal of securities/fund investments	–	514	–	1,046
Net cash used in investing activities and cash investments	–  2,028	353	– 483	963
7) Capital increase	–	0 1)	–	0
Long-term borrowings	291	258	4	–  1
Repayment of long-term borrowings	–  219	–  178	–  90	–  91
Other financial debt	16	13	15	–  16
Dividends paid	–  581	–  325	–  2	3
Interest paid	–  168	–  149	–  58	–  57
Net cash used in financing activities	– 661	– 381	– 131	– 162
Net increase/decrease in cash and cash equivalents	– 547	1,947	– 225	1,702
Changes due to exchange rate differences	33	–  4	20	–  3
Cash and cash equivalents 30.9.	1,565	2,398	1,565	2,398
Securities	1,793	1,989	1,793	1,989
Total liquid	3,358	4,387	3,358	4,387
Net increase/decrease in total liquidity	–  249	1,849	–  359	1,079

1) Rounded below EUR 1m.

2) In the presentation of the individual quarter cash and cash equivalents as of 1.7.

3) Working Capital consists of inventories, receivables, liabilities and provisions.

4) Liquid funds of EUR 2m sold.

5) Less acquired liquid funds of EUR 1m (previous year: EUR 357m).

6) Including the allocation to the Lufthansa Pension Trust in the amount of EUR 283m. (In the previous year EUR 283m were allocated to the

Lufthansa Pension Trust and EUR 84m to the external trust fund as hedging for claims from partial retirement agreements).

7) In 2007 from conditional capital via conversion of a nominal value of EUR 40,000 of the convertible bond from 2002/2012.

Notes to the financial statements

1) Standards used and changes in the group of consolidated companies

The interim report as of 30 September 2008 has been prepared in accordance with the provisions of IAS 34; the statements are presented in condensed form. In preparing the interim financial statements the standards and interpretations applicable as of 1 January 2008 have been applied. Otherwise the same accounting and valuation principles were applied as for the 2007 consolidated financial statements. Income tax expenses have been calculated as a best estimate based on the results of the companies included and the deferred tax rates applicable in each case. The effects of consolidation have been accounted for using the applicable tax rates. Permanent differences between the consolidated carrying amount of assets and liabilities and their

corresponding value for tax purposes have been taken into account.

The interim financial statements and the interim management report have not been reviewed by the auditors.

Since Swiss International Airlines and its subsidiaries were included in the consolidated financial statements of Lufthansa AG for the first time as of 1 July 2007, they are not fully included in the figures for the previous year. The table below shows the companies that have joined or left the group of consolidated companies compared with year-end 2007 and 30 September 2007.

These changes have had a material effect on the consolidated balance sheet and the consolidated income statement in comparison with the same period last year and are shown in the following tables.

Changes in the group of consolidated companies in the period 1.7.2007 – 30.9.2008

Name, Corporate domicile	Addition as of	Disposal as of	Reason
Segment Passenger Transportation
Swiss Aviation Software AG	1.7.07		Acquisition
Swiss Aviation Training Ltd.	1.9.07		Acquisition
Swiss European Air Lines AG	1.7.07		Acquisition
Swiss International Air Lines AG	1.7.07		Acquisition
Segment Catering
LSG Sky Chefs Taxfree AB, Sigtuna, Sweden		30.11.07	Disposal
UAB Airo Catering Services Lietuva, Wilna (Vilnius), Lithuania	1.1.08		Consolidated for the first time
Myanmar LSG ­Lufthansa Service Ltd., Yangon, Myanmar	1.1.08		Consolidated for the first time
Starfood S.r.l., Fiumicino, Italy	1.1.08		Estabilshed
SkylogistiX GmbH, Neu-Isenburg	1.1.08		Estabilshed
AVIAPIT-SOCHI OOO, Russia	1.1.08		Acquisition
LSG Sky Chefs Lounge GmbH, Neu-Isenburg	13.3.08		Estabilshed
LSG Sky Chefs North America Solutions, Inc., USA	7.4.08		Estabilshed
LSG Sky Chefs Rus, Russia	19.5.08		Estabilshed
ZAO AeroMEAL, Russia	1.7.08		Acquisition
CLS Catering Services Ltd., Richmond, Canada	22.7.08		Increased Shareholding
LSG Sky Chefs España S.A., Spain		31.1.08	Disposal
LSG-Airport Gastronomiegesellschaft mbH, Neu-Isenburg		1.7.08	Disposal
Service and Financial Companies
CAMANA Grundstücks-Verwaltungsgesellschaft mbH		31.12.07	End of intra-group business relationship
­Lufthansa­International Finance (Netherlands) N.  V.		15.5.08	End of intra-group business relationship

Standards used and changes in the group of consolidated companies

Income statement

Group Jan. – Sept. 2008	of which SWISS January  – Sept. 2008	of which from changes in the group of consolidated companies	Group Jan. – Sept. 2007	of which SWISS July – Sept. 2007	of which from changes in the group of consolidated companies
18,596	2,420	24	16,367	754	841
19,837	2,462	26	17,494	819	909
–  18,871	–  2,215	–  20	–  16,303	–  708	–  763
966	247	6	1,191	111	146
–  281	–  12	–  1	60	2	3
–  126	–  25	–  2	–  74	0*	–  8
–	–	–	503	–	–
559	210	3	1,680	113	141

* Rounded below EUR 1m.

Balance sheet

in €m	Group 30.9.2008	of which from changes in the group of consoli dated companies of the year 2008	Group 30.9.2007	of which from changes in the group of consoli dated companies of the year 2007
Non-current assets	14,503	3	14,070	709
Current assets	8,317	12	9,139	1,239
Total assets	22,820	15	23,209	1,948
Equity	6,927	5	6,665	677
Non-current provisions and liabilities	6,768	1	8,216	434
Current provisions and liabilities	9,125	9	8,328	837

Assets held for sale
in €m	Jan. – Sept. 2008	Financial Statements 2007	Jan.  – Sept. 2007
Assets
Aircraft and spare engines	3	5	15
Financial assets	2	–	–
Other assets	–	20	2
Equity/liabilities from assets held for sale
Equity  *	–	–	–
Liabilities	–	12	–

*  From the fair value of derivatives.

2) Notes on the income statement, balance sheet, cash flow statement and segment reporting

Detailed statements on the income statement, balance sheet, cash flow statement and segment reporting are available in the interim management report on pages 6–24.

3) Seasonality

The Passenger Transportation segment in particular exposes the Group's business to seasonal influences. Revenue in the first and fourth quarters is generally lower due to less frequent travel, while higher revenue and operating profits are normally earned in the second and third quarters.

4) Contingencies

The Passenger Transportation segment in particular exposes the Group's business to seasonal influences. Revenue in the first and fourth quarters is generally lower due to less frequent travel, while higher revenue and operating profits are normally earned in the second and third quarters. Due to the low probability of their use, several separate provisions with a total potential effect on profit of EUR 175m in the following years could not be made. At the 2007 reporting date the figure was EUR 187m.

Of the contingent receivable described in the 2007 consolidated financial statements in connection with the disposal of an equity investment, a maximum of EUR 3m will presumably be received by year-end 2008. A contract for the sale of a Canadair Regional Jet 200 that was already formally signed at year-end generated a total cash flow of EUR 4m in the first quarter of 2008. In addition, a contract for the sale of shares in LSG Sky Chefs España S.A. that was already formally signed at year-end 2007 generated sales revenue of EUR 17m and book gains of EUR 11m.

The contingent receivable from a D&O policy described in the 2007 consolidated financial statements in connection with an insurance event in Scandinavia is still being carried at EUR 130m. A civil law suit has been brought to recover the remaining EUR 23m in insurance cover and a further EUR 102m from the second layer. Corresponding claims were filed with the regional courts in Frankfurt and Cologne in the fourth quarter of 2005. The Cologne regional court has since dismissed the case and an appeal has been made to the higher regional court in Cologne.

At the end of September 2008 order commitments of EUR 7.2bn exist for capital expenditure on property, plant and equipment and intangible assets. As of 31 December 2007 order commitments of EUR 7.5bn were disclosed.

Contingent liabilities

in €m	30.9.2008	31.12.2007
From guarantees, bills and cheque charges	825	727
From warranty agreements	853	820
From collateralisation of third-party liabilities	3	3

5) Earnings per share

		2007	2006
Undiluted earnings per share	€	1.20	3.45
Consolidated net profit	€m	551	1,578
Weighted average number of shares			457,895,293 457,901,780

		2007	2006
Diluted earnings per share	€	1.20	3.43
Consolidated net profit	€m	551	1,578
+ interest expenses on the ­convertible bonds	€m	1	1
– current and deferred taxes	€m	0*	0*
Adjusted net profit for the period	€m	552	1,579
Weighted average number of shares		460,430,237	460,436,724

* Rounded below EUR 1m.

6) Issued capital

At the Annual General Meeting held on 16 June 2004 the Executive Board was authorised until 15 June 2009 to increase issued capital by up to EUR 25m subject to Supervisory Board approval by issuing new registered shares to employees in return for payment in cash. The shareholders' subscription rights do not apply.

In accordance with a resolution adopted at the Annual General Meeting held on 29 April 2008 the distributable profit of EUR 572m disclosed in the financial statements of Deutsche Lufthansa AG was paid out in dividends. For the financial year 2007 the dividend amounted to EUR 1.25 per ordinary share.

Notes on the income statement, balance sheet and cash flow statement Seasonality Contingencies Earnings per share Issued capital Segment reporting for the Lufthansa Group

7) Segment reporting for the Lufthansa Group

Business segment information January  –  September 2008

in €m	Passenger Transporta tion  **	Logistics	MRO	IT Services	Catering  **	Service and Financial Companies  **	Segment total	Recon ciliation	Group
External revenue	13,278	2,159	1,618	207	1,334	–	18,596	–	18,596
- of which traffic revenue	12,652	2,081	–	–	–	–	14,733	285	15,018
Inter-segment revenue	477	20	1,069	278	421	–	2,265	–  2,265	–
Total revenue	13,755	2,179	2,687	485	1,755	–	20,861	–  2,265	18,596
Other operating income	729	68	121	29	30	339	1,316	–  151	1,165
Total operating income	14,484	2,247	2,808	514	1,785	339	22,177	–  2,416	19,761
Operating expenses	14,023	2,087	2,581	485	1,729	279	21,184	–  2,407	18,777
- of which cost of materials	8,651	1,467	1,311	56	799	22	12,306	–  2,025	10,281
- of which staff costs	2,382	242	748	173	620	66	4,231	–  6	4,225
- of which amortisation and depreciation (on schedule)	694	92	61	27	40	21	935	4	939
Operating result	461	160	227	29	56	60	993	– 9	984
Other segment income	43	6	5	1	24	121	200	–  124	76
Other segment expenses	3	1	0*	1	3	154	162	–  68	94
- of which impairment charge	–	–	–	–	–	2	2	2	–
Result of investments accounted for using the equity method	–  30	12	4	–	3	0*	–  11	11	–
Segment result (profit from operating activities)	471	177	236	29	80	27	1,020	– 54	966
Segment assets	10,987	1,081	2,636	271	1,261	3,462	19,698	3,123	22,821
- of which from investments ­accounted for using the equity method	7	26	151	–	59	3	246	–  38	208
Segment liabilities	8,338	598	1,211	219	498	1,488	12,352	3,542	15,894
- of which from investments ­accounted for using the equity method
Segment capital expenditure	1,079	12	82	38	90	111	1,412	248	1,660
- of which from investments ­accounted for using the equity method	–	–	1	–	2	–	3	–  3	–
Other significant non-cash items	189	13	42	8	18	2	272	–	272
Employees at the balance sheet date	49,205	4,654	19,213	3,014	31,897	1,418	109,401	–	109,401
Average stuff numbers	48,725	4,607	18,991	2,989	31,528	1,375	108,215	–	108,215

* Rounded below EUR 1m.

** Due to changes in the group of consolidated companies the comparability of the figures with those of the previous year is limited to some extend.

Business segment information January  –  September 2007

in €m	Passenger Transporta tion  **	Logistics	MRO	IT Services	Catering  **	Service and Financial Companies  **	Segment total	Recon ciliation	Group
External revenue	11,117	1,987	1,654	208	1,401	–	16,367	–	16,367
- of which traffic revenue	10,751	1,909	–	–	–	–	12,660	79	12,739
Inter-segment revenue	439	13	1,037	291	387	–	2,167	–  2,167	–
Total revenue	11,556	2,000	2,691	499	1,788	–	18,534	–  2,167	16,367
Other operating income	669	54	119	21	48	291	1,202	–  246	956
Total operating income	12,225	2,054	2,810	520	1,836	291	19,736	–  2,413	17,323
Operating expenses	11,481	1,989	2,613	509	1,753	254	18,599	–  2,361	16,238
- of which cost of materials	6,692	1,359	1,419	28	780	23	10,301	–  1,898	8,403
- of which staff costs	2,083	244	733	182	659	65	3,966	–  3	3,963
- of which amortisation and depreciation (on schedule)	593	95	60	27	43	23	841	2	843
Operating result	744	65	197	11	83	37	1,137	– 52	1,085
Other segment income	54	7	6	1	2	183	253	–  82	171
Other segment expenses	0*	0*	1	43	0*	42	86	–  21	65
- of which impairment charge	–	–	–	43	–	–	43	–	43
Result of investments accounted for using the equity method	197	10	10	–	10	0*	227	–  227	–
Segment result (profit from operating activities)	995	82	212	– 31	95	178	1,531	– 340	1,191
Segment assets	10,759	1,161	2,393	262	1,169	3,501	19,245	3,964	23,209
- of which from investments ­accounted for using the equity method	137	25	107	–	61	4	334	–	334
Segment liabilities	8,558	610	1,371	227	606	1,422	12,794	3,750	16,544
- of which from investments ­accounted for using the equity method
Segment capital expenditure	952	10	141	41	87	49	1,280	–  355	925
- of which from investments ­accounted for using the equity method	58	–	–	–	–	–	58	–  58	–
Other significant non-cash items	202	20	49	10	22	3	306	–	306
Employees at the balance sheet date	46,643	4,616	18,899	3,122	30,566	1,353	105,199	–	105,199
Average stuff numbers	41,710	4,579	18,670	3,197	29,792	1,305	99,253	–	99,253

* Rounded below EUR 1m.

** Due to changes in the group of consolidated companies the comparability of the figures with those of the previous year is limited to some extend.

Segment reporting for the Lufthansa Group Related party transactions Responsibility statement by the legal representatives

Geographical segment information January –September 2008

in €m		Europe North America	Central and South ­America	Asia/Pacific	Middle East	Africa	Other	Segment Total
Traffic revenue  **	10,154	2,093	340	1,886	265	280	–	15,018
Other operating revenue	1,905	699	88	556	210	120	0*	3,578
Total revenue	12,059	2,792	428	2,442	475	400	0*	18,596

* Rounded below EUR 0.5m.

** Traffic revenue ist allocated by original place of sale.

Geographical segment information January –September 2007

in €m		Europe North America	Central and South ­America	Asia/Pacific	Middle East	Africa	Other	Segment Total
Traffic revenue  **	8,268	1,951	274	1,789	196	261	–	12,739
Other operating revenue	1,914	726	67	623	219	79	0*	3,628
Total revenue	10,182	2,677	341	2,412	415	340	0*	16,367

* Rounded below EUR 0.5m.

** Traffic revenue ist allocated by original place of sale.

8) Related party transactions

As discussed in item 50 of the notes to the consolidated financial statements for 2007, the business segments in the LufthansaGroup provide numerous services to related parties in the course of their normal business and equally purchase services from these parties. These extensive supplier relationships for products and services continue to take place at market rates. There have been no major changes compared with that reporting date. The contractual relationships with related parties described in item 51 of the notes to the consolidated financial statements also exist unchanged, but are not of material significance for the Group.

9) Responsibility statement by the legal representatives

To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the interim management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the financial year.

The Executive Board, 30 September 2008

Wolfgang Mayrhuber Chairman and CEO

Stephan Gemkow Member of the Executive Board Chief Financial Officer

Stefan Lauer Member of the Executive Board Chief Officer Aviation Services and Human Resources

Credits

Published by

Deutsche LufthansaAG Von-Gablenz-Straße 2  –  6 50679 Cologne, Germany

Entered in the Commercial Register of Cologne District Court under HRB 2168

Editorial staff

Frank Hülsmann (Editor) Johannes Hildenbrock Erika Müller Deutsche LufthansaAG, Investor Relations

Concept, design and realisation

Kirchhoff Consult AG, Hamburg, Germany

Printed by

Broermann Offset Druck, Troisdorf, Germany

The 3ndInterim Report 2008 is a translation of the original German Lufthansa3. Zwischenbericht. Please note that only the German version is legally binding.

Contact

Deutsche LufthansaAG Investor Relations

Frank Hülsmann

LufthansaAviation Center, Airportring 60546 Frankfurt/M., Germany Phone: +49 69 696  -  28001 Fax: +49 69 696  -  90990 E-Mail: investor.relations@dlh.de

Sebastian Steffen Jobst Honig

LufthansaAviation Center, Airportring 60546 Frankfurt/M., Germany Phone: +49 69 696  -  28010 or -  28011 Fax: +49 69 696  -  90990 E-Mail: investor.relations@dlh.de

You can order the Annual and Interim Reports in Germanor English via our website – www.lufthansa-financials.com – or from: Deutsche LufthansaAG, FRA IR LAC, Raum C6.800, Airportring 60546 Frankfurt/M., Germany Phone: +49 69 696  -  28008 Fax: +49 69 696  -  90990 E-Mail: cgnirsek@dlh.de

Latest financial information on the Internet: http://www.lufthansa-financials.com

Disclaimer in respect of forward-looking statements

Information published in the 3nd Interim Report 2008 with regard to the future development of the LufthansaGroup and its subsidiaries consists purely of forecasts and assessments and not of definitive historical facts. Its purpose is exclusively informational identified by the use of such cautionary terms as "believe", "expect", "forecast", "intend", "project", "plan", "estimate" or "intend". 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 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. Lufthansamakes 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. Accordingly, it neither expressly nor conclusively accepts liability, nor gives any guarantee, for the actuality, accuracy and completeness of this data and information.

Financial calendar 2008/2009

2008

29 Oct. Press Conference and Analysts' Conferenceon interim result January–September 2008

2009

• 11 March Press Conference and Analysts' Conferenceon 2008 result
• 24 April Annual General Meeting Cologne
• 30 April Release of Interim Report January–March 2009
• 30 July Release of Interim Report January–June 2009
• 29 Oct. Press Conference and Analysts' Conferenceon interim result January–September 2009

www.lufthansa.com www.lufthansa-financials.com http://responsibility.lufthansa.com