Deutsche Lufthansa AG — Interim / Quarterly Report 2007

Apr 26, 2007

1st Interim Report

January – March 2007

EUR revenue 4.7bn

36m EUR operating result

554m

EUR net profi t for the period

LufthansaGroup overview

Key data *
		January – March 2007	January – March 2006	Change in %
Revenue and Result
Revenue	€m	4,696	4,446	5.6
- of which traffic revenue	€m	3,568	3,364	6.1
Operating result	€m	36	– 75	–
EBIT	€m	161	– 10	–
EBITDA	€m	436	250	74.4
Net profit/loss for the period	€m	554	– 98	–
Key balance sheet and cash flow statement figures
Total assets	€m	21,014	19,227	9.3
Equity ratio	%	26.4	23.3	3.1pp
Net liquidity **	€m	162	74	118.9
Cash flow from operating activities	€m	529	290	82.4
Capital expenditure	€m	470	612	– 23.2
Key profitability and value creation figures
Operating margin	%	0.8	– 1.7	2.5pp
EBIT margin	%	3.4	– 0.2	3.6pp
EBITDA margin	%	9.3	5.6	3.7pp
The Lufthansashare
Share price at quarter end	€	20.33	14.77	37.6
Earnings per share	€	1.21	– 0.21	–
Traffic figures
Passengers	thousands	12,329	11,412	8.0
Freight/mail	thousand tonnes	427	410	4.1
Passenger load factor	%	74.5	71.9	2.6pp
Cargo load factor	%	69.1	68.3	0.8pp
Available tonne-kilometres	millions	6,382	6,114	4.4
Revenue tonne-kilometres	millions	4,605	4,315	6.7
Overall load factor	%	72.2	70.6	1.6pp
Number of flights		163,047	156,437	4.2
Employees
Employees as of 31 March	number	95,696	92,616	3.3

* 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.

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

The interim report at 31 March 2007 was prepared in accordance with the rules of IAS 34, taking into account the standards applicable since 1 January 2007.

Date of disclosure: 26 April 2007

Contents

• 1 To our shareholders
• 7 Business segments
• 15 Interim fi nancial statements
• 20 Further notes Credits

Dear Shareholders,

Lufthansais on a growth track – as is the global economy, which has been growing for nearly four years. All the indicators show that the upswing in the airline industry is set to continue. Lufthansais still gaining altitude. Not only did traffi c volume increase substantially, the operating result also improved further. For the fi rst time after four years a positive operating result was recorded for the fi rst quarter at EUR 36m. Net profi t for the period improved by EUR 652m to EUR 554m. This includes a gain of EUR 499m from the sale of the Thomas Cook stake.

The share

Stock markets developed unevenly in the fi rst quarter. The upward trend in the German stock index DAX was interrupted by two major corrections. Overall the DAX managed a climb of 4.9 per cent, however, reaching 6,917 points at the end of March.

The Lufthansashare dropped by 2.5 per cent, however, and was quoted at EUR 20.33 on 30 March. But analysts continue to rate Lufthansastock positive. Over half have given a 'buy' recommendation and none of the 20 analysts have recommended selling. Target prices currently range from EUR 21 to EUR 26.

On 31 March 55.9 per cent of Lufthansa's share capital was held by German shareholders. Shareholders from the US held 15.5 per cent and those in the UK 13.5 per cent. 24.0 per cent of common stock was held by private individuals and 76.0 per cent held or managed by institutional investors.

Significant events in the first quarter

On 17 February Lufthansaand the trade union ver.di agreed on a new wage settlement for ground staff. The agreement is to run for 17 months until the end of May 2008. From May 2007 the basic salary will rise by 3.4 per cent. A one-off payment of EUR 525 will be paid for the period January to April. Staff will also receive a profi t-linked payment. In addition, the crisis agreement signed in 2004 was extended, which allows the Company to adjust staff capacities fl exibly under certain defi ned economic conditions.

On 7 March Lufthansa's Supervisory Board approved the sale of the stake in Thomas Cook. The EU competition authorities gave their approval on 26 March, bringing the agreement signed with KarstadtQuelle AG in December 2006 into effect. Under the terms of this agreement Lufthansawill increase its stake in Condor Flugdienst GmbH from the 10.0 per cent held previously to 24.9 per cent and will take over Condor's holding in SunExpress, subject to the approval by the anti-trust authorities .

Lufthansareceived numerous awards for its corporate policy during the course of the reporting period. The Company won the "Talent Inside" award from the "PotenzialFrankfurt Rhein Main" initiative and was honoured with several prizes by the readers of the business travel magazine "Business Traveller Deutschland". Once again the LufthansaSchool of Business won an award for its "CorporateUniversity" and Lufthansaagain received a trophy from the Armbrust Aviation group for the best fuel management in the airline industry.

Changes in management

There were no changes to the management in the last quarter.

Economic settings

Global economic expansion is now in its fourth successive year. The drive is provided primarily by the Asian countries, but the economic climate has brightened appreciably in Europe too. In Germany the upswing is sustained in equal measure by domestic demand and export business. The global economy is expected to grow at 3.4 per cent and the euro zone at 2.4 per cent for the full year.

Risks are likely to come from volatile raw material prices, geopolitical tensions and a possible sharper economic downturn in the United States. Volatility on the oil markets is less severe than last year. The average price for a barrel (159 litres) of Brent crude oil was USD 59 (previous year: USD 63).

The global economic upswing has also quickened airline traffi c. In the fi rst two months of the year passenger traffi c increased by 6.5 per cent and cargo traffi c by 2.6 per cent year on year according to IATA information.

For the full year 2007 the industry is anticipating growth of between 6 and 7 per cent in passenger traffi c and 5 per cent for freight traffi c.

Standards used and changes in the group of consolidated companies

The present interim report as at 31 March 2007 was prepared in accordance with IAS 34. In preparing the interim fi nancial statements the standards and interpretations applicable from 1 January 2007 have been applied. Otherwise the same accounting methods were applied as for the consolidated fi nancial statements for 2006.

Compared to 31 March 2006 the group of consolidated companies was expanded to include in particular Aerococina S.A. de C.V., which was majoritarily acquired in the fourth quarter 2006 and LSG Sky Chefs Birmingham Ltd., in which a majority was acquired in early January 2007. Two new companies were consolidated in the Passenger Transportation segment, four in the Cateringsegment and seven in the segment Service and Financial Companies. Eight special purpose entities were removed from the group of consolidated companiesin the Passenger Transportation segment, three in the Logistics segment, twelve in the Catering segment and fi ve in the segment Service and Financial Companies. Further details are provided on Page 20 of this report and in the respective segment reporting.

Course of business

LufthansaGroup traffi c rose considerably in the fi rst quarter 2007. LufthansaPassenger Airlines and Lufthansa Cargo expanded their capacity measured in tonne-kilometres by a total of 4.4 per cent. At the same time sales

increased by 6.7 per cent. So the overall load factor was boosted by 1.6 per cent to 72.2 per cent.

Between January and March LufthansaPassenger Airlines carried 13.3 million passengers, 8.0 per cent more than last year. Capacity grew by 4.6 per cent and sales by 8.5 per cent, enabling an improvement in the passenger load factor of 2.6 percentage points to 74.5 per cent.

Volumes increased in the cargo business by 4.1 per cent to 427,000 tonnes. Sales rose faster (4.5 per cent) than capacity (+ 3.2 per cent), resulting in an increase in the cargo load factor of 0.8 per cent to 69.1 per cent.

Income

Group traffi c revenue rose by 6.1 per cent in the fi rst quarter to EUR 3.6bn. The Passenger Transportation segment showed an increase of 8.5 per cent with a signifi cant expansion of capacity and stable average yields. However, traffi c revenue in the Logistics segment was down by 4.2 per cent.

Other revenue improved by 4.3 per cent to EUR 1.1bn. The MRO business segment accounts for EUR 527m (+ 3.5 per cent) and Catering for EUR 426m (+ 4.2m). Total revenue increased to EUR 4.7bn, a rise of 5.6 per cent year on year.

Operating income in total climbed by 6.0 per cent to EUR 5.1bn.

Expenses

Operating expenses in contrast increased underproportionally by 3.8 per cent to EUR 5.0bn, of which EUR 2.5bn were due to the cost of materials and services alone (+ 4.6 per cent). The increase was particularly infl uenced

by 2.7 per cent higher fees (EUR 686m) due to increased traffi c. MRO expenses went up by 24.0 per cent to EUR 207m, as the fi rst quarter was increasingly used for maintenance events. EUR 752m were spent on fuel, 0.1 per cent more than last year. The hedging result was EUR – 8m in the fi rst quarter. The Group systematically hedges the fuel requirement for the next 24 months against price fl uctuations. The aim is to reduce volatility and allow better planning. As hedges are made on a monthly basis, temporary negative effects are accepted in the case of declining oil prices as part of the overall hedging strategy.

Staff costs went up by 1.7 per cent to EUR 1.3bn. On 31 March 2007 the Group employed 95,696 staff, 3.3 per cent more than last year. Adjusted for changes in the group of consolidated companies the employee fi gure would have been 2.4 per cent higher year on year.

Depreciation and amortisation rose by 5.9 per cent to EUR 269m.

Result

LufthansaGroup is able to report substantial improvements in results at all levels.

The result from operating activities was up by EUR 102m to EUR 56m. The operating result adjusted for extraordinary items also rose substantially by EUR 111m to EUR 36m. EBIT (earnings before interest and taxes), which includes the results of equity investments, even went up to EUR 161m (previous year: EUR – 10m). The net profi t for the Group amounts to EUR 554m (EUR + 652m). This includes a gain of EUR 499m on the sale of the Thomas Cook stake to KarstadtQuelle.

Reconciliation of results

	January – March 2007		January – March 2006
in €m	Income statement	Reconcili ation with operating result	Income statement	Reconcili ation with operating result
Revenue	4,696		4,446
Changes in stocks	49		34
Other operating income	320		299
- of which book gains from financial investments		– 10		– 5
- of which earnings from write-back of provisions		– 9		– 25
- of which write-ups on capital assets		– 5		– 1
- of which period-end exchange rate or non-current financial liabilities		– 6		– 3
Total operating income	5,065	– 30	4,779	– 34
Cost of materials and services	– 2,502		– 2,392
Staff costs	– 1,273		– 1,252
- of which length of service costs to be offset retroactively		–		–
Depreciation	– 269		– 254
- of which impairments		–		–
Other operating expenses	– 965		– 927
- of which expenses incurred from book losses and financial investments		4		5
- of which period-end valuation of non-current financial liabilities		6		0 *
- of which provision for onerous contract		–		–
Total operating expenses	– 5,009	10	– 4,825	5
Profit from operating activities	56		– 46
Balance from reconciliation with operating result		– 20		– 29
Operating result		36		– 75
Income from subsidiaries, joint ventures & associates	91		27 **
Other financial items	14		9
EBIT	161		– 10 **
Write-downs (on operating result)	269		254
Write-downs on financial investments (incl. at-equity)	6		6
EBITDA	436		250 **

* Rounded below EUR 1m.

** Previous year adjusted for Thomas Cook.

Financial position

At the end of the fi rst quarter 2007 total Group assets went up by EUR 1.6bn compared to year-end 2006 to EUR 21.0bn. This substantial increase is also due to the recognition of a receivable for EUR 880m from the disposal of the Thomas Cook stake. As the transaction was only closed on 2 April, the carrying amount for the stake in Thomas Cook is still reported as asset held for sale at 31 March 2007, as it was at year-end 2006. For this reason, and also due to seasonal and billing factors , current receivables increased by EUR 1.2bn whilst liquid funds remained at their year-end level. Non-current assets rose by EUR 340m to EUR 13.3bn, of which aircraft account for a rise of EUR 137m to EUR 7.5bn. This represents a decrease in non-current assets as a percentage of total assets from 66.6 per cent at yearend to 63.3 per cent at the end of the quarter.

Shareholders' equity (including minority interests) grew by EUR 639m compared to year-end 2006 and now amounts to EUR 5.5bn. This growth is largely due to the high net profi t for the period of EUR 554m. Minority interests also went up by EUR 39m, which is primarily due to the pro rata result at SWISS of EUR 37m attributable under the equity method to third parties.

The equity ratio increased to 26.4 per cent compared with 25.2 per cent at year-end 2006.

At 31 March 2007 net liquidity – including longterm liquidity reserves of EUR 546m – amounted to EUR 162m, compared with EUR 101m at year-end 2006. Gearing including retirement benefi t obligations stands at 67.3 per cent (year-end 2006: 75.7 per cent).

Cash flow and capital expenditure

Operating cash fl ow of EUR 529m (previous year: EUR 290m) was generated in the fi rst three months of the fi nancial year 2007. The improvement is mainly due to the better result and a positive development in working capital. Gross capital expenditure amounted to EUR 470m in total, of which fi nal payments for three Airbus A340 and two Airbus A319, as well as aircraft overhauls and initial payments for aircraft accounted for EUR 357m. EUR 43m were invested in fi nancial assets, of which EUR 18m in equity investments. In additionto this capital expenditure a further EUR 92m

were invested in current securities. The necessary liquidity was partly fi nanced by interest and dividend income and by asset disposals, so that net cash used in investing activities and cash investments amounted to EUR 502m (previous year: EUR 127m). EUR 112m (previous year: EUR 842m) were required for fi nancing activities, i.e. scheduled debt repayments, dividend payments to minority interests and current interest payments so that cash and cash equivalents dropped by EUR 85m (previous year: EUR 679m). The internal fi nancing ratio was 112.6 per cent for the last quarter, compared with 47.4 per cent for the same period last year.

Group fleet

Number of commercial aircraft as at 31.3.2007

Manufacturer/Type									Change	Share
	Lufthansa	Lufthansa Cargo	CityLine	Air Dolomiti	Germanwings	Eurowings	Group	vis-à-vis 31.3.2006	vis-à-vis 31.12.2006	thereof Finance/ Operating Lease
Airbus A300	14	–	–	–	–	–	14	–	–	–
Airbus A310	4	–	–	–	–	–	4	– 1	–	–
Airbus A319 **	20	–	–	–	21	–	41	+ 4	+ 2	13
Airbus A320	36	–	–	–	3	–	39	–	–	3
Airbus A321	26	–	–	–	–	–	26	–	–	1
Airbus A330	10	–	–	–	–	–	10	– 2	–	–
Airbus A340	45	–	–	–	–	–	45	+ 6	+ 3	–
Boeing 747	30	–	–	–	–	–	30	–	–	1
Boeing 737	63	–	–	–	–	–	63	–	–	2
MD 11F	–	19	–	–	–	–	19	–	–	–
Canadair *	9	–	58	–	–	8	75	– 4	– 3	8
BAE 146 ***	5	–	–	–	–	14	19	–	–	18
AVRO	–	–	18	–	–	–	18	–	–	13
ATR	–	–	–	14	–	15	29	–	–	20
Total	262	19	76	14	24	37	432	+ 3	+ 2	79

Leasing rate LufthansaGroup: 18%

* Aircraft owned by Lufthansaand leased to Eurowings.

** One of the aircraft owned by Lufthansais leased to Germanwings.

*** Five of Lufthansa's operating lease aircraft are leased to Air Dolomiti.

Significant events after the reporting period

On 16 April 2007 45.75 per cent of shareholders registered in the share register of Deutsche LufthansaAG did not hold German nationality, or their registered company offi ces were not located in Germany. This means that the proportion of shares held by foreign shareholders once again exceeded the threshold of 45 per cent.

On 17 April 2007 the Supervisory Board approved the order of 45 short-haul aircraft, made up of 30 Embraers 190-family and 15 Bombardier CRJ 900-family for the modernisation and expansion of the regional fl eet.

At the Annual General Meeting held on 18 April 2007 Dr Clemens Börsig, Chairman of the Supervisory Board of Deutsche Bank AG, Frankfurt am Main, was elected to the Supervisory Board as a shareholders' representative until the end of the ordinary Annual GeneralMeeting 2008.

At the Annual General Meeting the Executive Board was also authorised until 17 October 2008 to purchase Company stock of up to 10.0 per cent of issued capital at the time the resolution was taken.

Outlook

Global economic expansion is expected to continue for the current year. Lufthansawill also benefi t from this growth. The volatile oil price will still affect results, as will considerable over-capacities, both of which put pressure on prices. However, the Group has responded to these challenges with effective programmes for raising productivity and profi tability. All business segments intend to improve their fi nancial performance over the years ahead.

If the current favourable economic conditions persist, we therefore anticipate reaching the target of EUR 1bn in operating profi t already in 2007. The full consolidation of SWISS expected for the third quarter 2007 will further improve the operating result.

The segments

Passenger Transportation

Passenger Transportation
		January – March 2007	January – March 2006	Change in %
Revenue	€m	3,186	2,917	9.2
- of which with companies of the LufthansaGroup	€m	141	129	9.3
Segment result	€m	35	– 87	–
Operating result	€m	– 41	– 113	63.7
EBITDA *	€m	256	41	524.4
Segment capital expenditure	€m	346	150	130.7
Employees as of 31 March	num ber	38,995	37,502	4.0
Passengers carried **	thousands	12,329	11,412	8.0
Available seat-kilometres **	millions	35,028	33,486	4.6
Revenue passenger kilometres	millions	26,109	24,066	8.5
Passenger load factor	%	74.5	71.9	+ 2.6pp

* Before profit transfer from other business segments.

** LufthansaPassenger Airlines.

The segment Passenger Transportation can look back on a successful fi rst quarter. Revenue and result both increased signifi cantly.

There were minor changes to the group of consolidated companies compared with the fi rst quarter 2006. The Group includes Deutsche LufthansaAG, Eurowings(including Germanwings), Air Dolomiti, LufthansaCityLine, several aircraft fi nance companies and from 1 JanuaryMiles & More International GmbH and LufthansaWorldShopGmbH. In addition, Air Trust is fully consolidated, meaning that SWISS is accounted for at-equity.

From January to March LufthansaPassenger Airlines (Lufthansaand the airlines collaborating under the LufthansaRegional brand, Air Dolomiti, CityLine, Eurowings , Contact Air and Augsburg Airways) carried 12.3 million passengers, 8.0 per cent more than a year ago. All traffi c regions played a part in this result, recording high single-digit growth rates. Sales increased by 8.5 per cent and capacity by 4.6 per cent, resulting in an improvement in the passenger load factor of 2.6 percentage points to 74.5 per cent.

A crucial factor in this success was the positive development of the largest traffi c region, Europe, with 9.5 million passengers (+ 8.1 per cent). The expansion of the route network paid off, as did the successful marketing of the "betterFly" rates. Despite strong competition in Europe the additional capacity was fully sold in the market. In the reporting period capacity rose by 10.6 per cent, sales by 12.8 per cent and the passenger load factor by 1.2 percentage points to 61.3 per cent.

In the Americas traffi c region the number of passengers also grew substantially at 8.1 per cent. Capacity was increased slightly (+ 2.0 per cent). Sales went up by 6.9 per cent and the passenger load factor climbed again by 3.7 percentage points to 81.4 per cent.

Lufthansacan also report growth in the Asia/Pacifi c traffi c region. The number of passengers increased by 7.3 per cent and sales by 6.2 per cent. Capacity was expanded by 1.1 per cent. The passenger load factor improved considerably from 78.3 to 82.3 per cent. Demand was especially high for routes to and from India.

The Middle East/Africa traffi c region also showed improved performance. Overall passenger numbers rose by 8.1 per cent. Sales went up by 9.0 per cent and the passenger load factor by 3.8 percentage points to 73.5 per cent. LufthansaPassenger Airlines fl ew some 163,000 fl ights worldwide, 4.2 per cent more than in the same quarter last year.

These positive developments also affected traffi c revenue of the business segment, which rose by 8.5 per cent to EUR 3.0bn (of which Germanwings accounted for EUR 105m). This was the result of market-oriented capacity and revenue management. In the fi rst quarter ,

when demand is seasonally low, the emphasis was on optimising aircraft utilisation. Average yields at Lufthansaand its regional partners nevertheless remainedstable at – 0.1 per cent, despite the signifi cant increase in capacity and negative currency effects. Higher revenue was therefore mainly the result of growth in passenger traffi c. The share of premium passengers and the revenue attributable to them remained high. Other revenue went up by 42.2 per cent to EUR 91m. Revenue was 9.2 per cent above last year's at EUR 3.2bn in total and other segment income improved to EUR 287m (+ 32.9 per cent). This also includes the excellent at-equityresult of SWISS with EUR 73m. Overall the segment Passenger Transportation reported segment income of EUR 3.5bn (+ 10.9 per cent).

The increase in segment expenses was lower than that of revenue at 6.8 per cent and totalling EUR 3.4bn. The cost of materials and services amounted to EUR 2.0bn (+ 7.6 per cent); thereof fuel EUR 645m (+ 1.9 per cent compared to last year). EUR 618m was paid in fees, 3.7 per cent more than a year ago. These include higher security fees (+ 21.8 per cent) and higher charges for air traffi c control (+ 11.4 per cent) mainly caused by increased traffi c. On the other hand airport handling fees were reduced by 2.5 per cent.

Other purchased services amounted to EUR 651m (+ 16.8 per cent). Higher purchased technical services (+ 26.9 per cent) for engine overhauls and projects for product improvements in the intercontinental fl eet were responsible.

Staff costs went up by 8.2 per cent to EUR 646m. Causes of the increase are higher staff capacity, one-off payments from the new wage settlement agreement, additional expenses for profi t-sharing and performancerelated pay components and the expansion of the early retirement programme.

Additions to retirement benefi t obligations went down by 3.4 per cent to EUR 57m. The workforce increased by 1,493 employees or 4.0 per cent to 38,995 at the end of March. Additional staff was recruited in the operating units in particular, due to the increased capacity.

Depreciation and amortisation were 3.9 per cent higher year on year at EUR 186m. Other operating expenses rose by 3.7 per cent to EUR 647m.

Capital expenditure in the segment increased by EUR 196m to EUR 346m mainly related to aircraft.

In the fi rst quarter the segment Passenger Transportation improved its segment result by EUR 122m to EUR 35m (previous year: EUR – 87m). SWISS made an important contribution to this with an excellent at-equity result of EUR 73m. The operating result for the segment also improved by 63.7 per cent to EUR – 41m. If the forecast for the development of the global economy proves accurate and there are no disruptions due to drastic oil price increases, geopolitical risks or pandemics, the Passenger Transportation segment anticipates a higher operating result for 2007 than last year. The full consolidation of SWISS will lead to a further improvement in results.

Karl Ulrich Garnadt became a member of the divisional management board of LufthansaPassenger Airlines on 15 January, with responsibility for Service and Human Resources. He replaces Carsten Spohr, who became CEO of LufthansaCargo AG on the same date.

The 28 March marked the end of a successful ten-day route proving programme run by Lufthansaand Airbus . Twelve fl ights and 65 fl ying hours were carried out by the new wide body aircraft Airbus A380 and a total of 3,750 passengers. A fl ight path of more than 60,000 kilometres took the aircraft from Frankfurt to New York, Chicago, Hong Kong, Washington and Munich.

With the new summer fl ight schedule Lufthansa's global route network increased to 192 destinations (previous year: 188) in 78 countries (77). This represents growth of 3.7 per cent in overall capacity; 3.8 per cent in Europeantraffi c and 3.7 per cent in intercontinental traffi c. In the Americas traffi c region the increase was even 6.7 per cent, mainly due to more frequent fl ights and larger aircraft. Capacity was also expanded in the Asia/ Pacifi c traffi c region (+ 2.2 per cent). The fl ight schedule has six new destinations, including Busan (South Korea) and Tirana (Albania). In Europe direct connections from Düsseldorf, Stuttgart and Hamburg were expanded. A cooperation programme with Turkish Airlines was started for fl ights between Germany and Turkey.

Lufthansawill continue to grow the offer for business travellers. Therefore lounges are to be refurbished and extended in the next two years at a cost of some EUR 100m. In early March the Businessand Senator Lounges at Berlin-Tegel airport were reopened after a complete refurbishment. Construction has been underway since November 2006 on a new First Class Lounge at Munich airport and capacities are also being expanded in Frankfurt. Projects are also under way in New York and Paris. Demand is increasing as well for the individual premium service LufthansaPrivate Jet. The agreement with NetJets has therefore been renewed for a further fi ve years and the collaboration intensifi ed. From 1 April this product is supplemented by a free limousine service.

Customers appreciate the initiatives taken by the Passenger Transportation segment. The readers of the business travel magazine "Business Traveller Deutschland" awarded Lufthansatop marks for service, security and website, and voted the airline into fi rst place for 2006 in fi ve different categories.

Logistics

Logistics
		January – March 2007	January – March 2006	Change in %
Revenue	€m	639	679	– 5.9
- of which with companies of the LufthansaGroup	€m	4	4	0.0
Segment result	€m	9	18	– 50.0
Operating result	€m	6	11	– 45.5
EBITDA	€m	42	49	– 14.3
Segment capital expenditure	€m	3	2	50.0
Employees as of 31 March	number	4,558	4,695	– 2.9
Freight/mail	thousand tonnes	427	410	4.1
Available cargo tonne-kilometres	millions	2,857	2.769	3.2
Revenue cargo tonne-kilometres	millions	1,975	1,891	4.5
Cargo load factor	%	69.1	68.3	+ 0.8pp

LufthansaCargo AG sold the majority in its subsidiary "time:matters" at year-end 2006. The shareholding is therefore no longer included in the group of consolidated companies.

Business in the fi rst quarter of the new fi nancial year was mixed for LufthansaCargo. The upswing in the global economy and the positive economic climate in Germany did have a tangible affect on the cargo business, but over-capacities and the concurrent competitive situation put pressure on average yields. The operating result of EUR 6m was therefore below that of last year.

Nevertheless, performance indicators improved and the course was set for profi table growth. Lufthansa Cargo intends to expand its market position and quality leadership in animal transport, valuable cargo, airmail and temperature-sensitive goods substantially. The competences are being bundled in individual units with specialised teams, who will manage the entire value chain of specialised products for their customers. LufthansaCargo has also extended its services. With the start of the summer fl ight schedule the frequency of departures to Dallas, São Paulo and Shanghai has been increased. New in the fl ight schedule are Lahore (Pakistan) and Wilmington (USA). The extension of LufthansaPassenger Airlines' route network also generates additional freight business. For the summer fl ight schedule LufthansaCargo is deploying 19 own aircraft and three chartered planes. In the reporting period some 427,000 tonnes of freight and mail were transported, 4.1 per cent more than last year. Capacity expanded by 3.2 per cent and sales were up by 4.5 per cent year on year, so the cargo load factor increased by 0.8 percentage points to 69.1 per cent. Due to a reduction in charter activities the number of fl ights declined by 10.5 per cent. In the European traffi c region freight volumes rose by 2.6 per cent and capacity by 3.5 per cent as a result of greater capacities at Passenger Airlines. Sales increased by 4.2 per cent and led to an improvement in the cargo load factor of 0.3 percentage points to 44.2 per cent.

Growth in the Americas business was above average. 113,725 tonnes of freight and mail were transported, 10.2 per cent more than in the previous year. Capacity was expanded signifi cantly by 11.8 per cent and fully sold in the market (+ 13.2 per cent). The cargo load factor thereby increased by 0.9 percentage points to 73.8 per cent. Freight capacity was deliberately redirected from Asia to America.

Thereby capacity declined in the Asia/Pacifi c traffi c region (– 2.8 per cent). Sales dropped by 1.4 per cent, but transport volumes rose by 1.6 per cent to 109,073, resulting in a 1.0 percentage points higher cargo load factor at 73.0 per cent. In the traffi c region Middle East/Africa freight and post volumes remained roughly stable at 28,049 tonnes (– 0.2 per cent). Capacity was up by 1.5 per cent, sales by 1.3 per cent and the cargo load factor dropped slightly by 0.1 percentage points to 59.4 per cent.

Compared to last year revenue declined by 5.9 per cent to EUR 639m, whereby traffi c revenue dropped by 4.2 per cent to EUR 611m. A major reason for this is that LufthansaCargo has reduced the number of joint services with other airlines. The decline in average yields of 8.2 per cent also had a negative impact on traffi c revenue in this segment.

Other operating income dropped by 31.0 per cent to EUR 20m. This is primarily due to foreign currency differences at the reporting date.

Segment expenses decreased overall by 5.8 per cent to EUR 650m. The cost of materials and services declined by 4.9 per cent to EUR 442m and fuel expenses by 8.5 per cent to EUR 107m. Lower price levels, better currency rates and lower purchasing volumes all contributed to this decrease.

The reduction in joint services led to a drop in charter expenses of 8.0 per cent to EUR 207m.

MRO expense rose by 24.1 per cent to EUR 36m as a result of a change in the billing method for engine overhauls.

Staff costs sank by 2.4 per cent to EUR 82m and employment in the reporting period went down by 2.9 per cent. Adjusted for the effects of consolidation the decline in staff numbers would have been 2.3 per cent.

The drop in other operating expenses by EUR 16m to EUR 94m is mainly due to currency translations at the reporting date and to lower legal and consultancy fees. Other expense items remained at roughly the level of the previous year.

Capital expenditure rose by EUR 1m to EUR 3m and served principally to purchase cargo containers at the subsidiary Jettainer GmbH.

In the seasonally weak fi rst quarter the segment result was positive at EUR 9m, but could not attain last year's level (EUR 18m). The operating result also sank to EUR 6m (previous year: EUR 11m). However a higher operating result than last year's is expected for the fi nancial year 2007.

The optimisation programme "Excellence + Growth" continues this year and will be supplemented by other projects and initiatives to increase quality and reduce unit costs.

On 15 January Carsten Spohr became the new CEO of LufthansaCargo AG. He succeeds Jean-Peter Jansen, who retired in March 2006 for health reasons. Stefan Lauer, member of the Group Executive Board of Deutsche LufthansaAG, had taken on the role of CEO on an interim basis and has now resumed his position as Chairman of the Supervisory Board of Lufthansa Cargo AG.

The joint venture with Shenzhen Airlines, Jade Cargo, took its third Boeing 747-400ERF into service. Since March the company is fl ying twice a week to Leipzig-Halle.

Maintenance, Repair and Overhaul (MRO)

MRO

		January – March 2007	January – March 2006	Change in %
Revenue	€m	934	859	8.7
- of which with companies of the LufthansaGroup	€m	407	350	16.3
Segment result	€m	65	64	1.6
Operating result	€m	60	58	3.4
EBITDA	€m	88	85	3.5
Segment capital expenditure	€m	44	22	100.0
Employees as of 31 March	number	18,588	17,759	4.7

Global demand for aircraft maintenance, repair and overhaul services continues to be brisk. At the same time price pressure is ever-present. The Lufthansa Technikgroup started the year well and has increased both revenue and operating result.

Revenue improved by 8.7 per cent to EUR 934m, revenue from the LufthansaGroup even increased by 16.3 per cent to EUR 407m. Revenue from external customers rose by 3.5 per cent to EUR 527m. The strong growth from the LufthansaGroup is largely due to aircraft conversions and additions to the fl eet. In the fi rst quarter 162 additional contracts were signed with external customers and 15 new customers were aquired, expected to generate revenue of EUR 226m for the year 2007. LufthansaTechnik currently services 1,332 aircraft worldwide, a climb of 19.0 per cent year on year.

Other segment income increased by EUR 8m to EUR 43m, largely as a result of currency gains. Overall the MRO segment reported segment income of EUR 977m (+ 9.3 per cent).

Segment expenses rose by 9.9 per cent to EUR 912m. The greatest jump was in the cost of materials and services, which went up by 11.9 per cent to EUR 498m as a result of the higher revenue. Other

operating expenses rose by 18.7 per cent to EUR 146m, mainly due to currency translation at the reporting date and increased expenses for property maintenance and external staff.

Depreciation and amortisation rose by 11.1 per cent to EUR 20m. Staff costs amounted to EUR 248m, 1.6 per cent above last year's total. On 31 March Lufthansa Technikhad 18,588 employees (+ 4.7 per cent).

Segment capital expenditure, which doubled to EUR 44m, was primarily for the purchase of two reserve engines, new machinery and technical equipment as well as for the construction of the A380 maintenance hangar in Frankfurt.

The segment result improved by EUR 1m to EUR 65m and the operating result by EUR 2m to EUR 60m.

LufthansaTechnik is well positioned in the market and benefi ts sustainably from the positive trends in global air traffi c. With the "Perspektiven Technik" programme the segment has also shown that it can maintain and improve its competitiveness by sustainable cost savings and higher revenue. Despite an increasingly competitive environment the operating result in 2007 should surpass last year's.

Cathay Pacifi c Airways and LufthansaTechnik have signed a new ten-year agreement for the maintenance of 15 Boeing 747-400s equipped with Pratt & Whitney engines.

The Italian airline Mistral Air, a subsidiary of Gruppo Poste Italiane (Italian postal service), intends to have the equipment and engines on its three new Boeing 737QC maintained and overhauled by LufthansaTechnik.

Under the name Total LandingGear Support (TLS) a new product has been added to the "Full Service " product family. LufthansaTechnik services its customers' landing gear over the whole lifecycle, from monitoring time in operation to emergency support, overhaul, replacement gear, and leasing right through to resale.

With the "websuite" "manage/m" a new product was launched which enables aircraft operators to track and manage the entire core functions of their technical fl eet operations with one click on their Internet PC.

LufthansaTechnik is the fi rst company in the industry with an integrated certifi cation for the standards EN 9100/9110 (Quality), EN ISO 14001/EMAS (Environment) and OHSAS 18001 (Safety at work).

N3 Engine Overhaul Services, the joint engine maintenance business of LufthansaTechnik and Rolls-Royce, based in Arnstadt in Thuringia, has been approved by the European Aviation Authority as maintenance operator for Rolls-Royce large engines from the Trent 500 series.

LufthansaTechnik is to open a new facility in India, to gain access to the growing local aviation market. The new business will offer overhauls for the Airbus A320 family and for Boeing 737s at the site of the new airport in Hyderabad. LufthansaTechnik is the fi rst international MRO supplier with a base in India. Operations are due to start in late 2008.

IT Services

IT Services
		January – March 2007	January – March 2006	Change in %
Revenue	€m	159	154	3.2
- of which with companies of the LufthansaGroup	€m	96	89	7.9
Segment result	€m	4	9	– 55.6
Operating result	€m	4	9	– 55.6
EBITDA	€m	13	17	– 23.5
Segment capital expenditure	€m	11	11	0.0
Employees as of 31 March	number	3,242	3,321	– 2.4

LufthansaSystems was able to increase revenue in the fi rst quarter, but many airlines remain reluctant to invest given the fragile state of their fi nances. This means that the sales emphasis is on outsourcing projects and platform solutions with pricing models dependent on the number of passengers. High pre-production costs continue to depress earnings.

Revenue went up by 3.2 per cent to EUR 159m. Although external revenue dropped slightly by EUR 2m to EUR 63m, revenue from Group companies rose by 7.9 per cent to EUR 96m, especially due to the infrastructure outsourcing agreement with LSG Sky Chefs.

Other segment income amounted to EUR 6m, 14.3 per cent lower than last year. Total segment income improved by 2.5 per cent and reached EUR 165m.

Segment expenses rose by 5.9 per cent to EUR 161m.

The 42.9 per cent increase in the cost of materials and services (EUR 10m) was mainly used for modernising the system environment.

Staff costs went up by 3.3 per cent to EUR 63m and depreciation and amortisation increased by 12.5 per cent to EUR 9m.

Other operating expenses rose by 3.9 per cent to EUR 79m, particularly in connection with the outsourcing of development work for the new passenger platform FACE.

Capital expenditure was at the same level as last year at EUR 11m.

The operating result and the segment result for the IT Services segment sank to EUR 4m (previous year: EUR 9m). This substantial drop is due to high pre-production costs for the development of new technologies and outsourcing projects, as well as increased price pressure.

Demand is expected to pick up, however, as the need to modernise IT systems remains pressing and delivers benefi ts both in cost and effi ciency. Lufthansa Systems therefore anticipates good volume development. The pre-production costs mentioned and ongoing price pressure will continue to burden the result in the current year, however. Despite this, a positive operating result is expected, but which is likely to be below last year's level.

In the mid to long-term LufthansaSystems intends to develop its product portfolio into an IT platform for the aviation industry that can be deployed fl exibly. This will essentially be realised in the FACE project. Various sub-systems have been modernised in recent years to meet this goal. Now the core components Bookings, Inventory and Check-in are to be implemented on a new platform. In order to maintain competitiveness, services are increasingly being provided from countries with attractive wage structures.

Catering

Catering

		January – March 2007	January – March 2006	Change in %
Revenue	€m	546	526	3.8
- of which with companies of the LufthansaGroup	€m	120	117	2.6
Segment result	€m	3	– 31	–
Operating result	€m	1	– 9	–
EBITDA	€m	18	– 11	–
Segment capital expenditure	€m	14	11	27.3
Employees as of 31 March	number	29,038	28,240	2.8

LSG Sky Chefs made a good start to the year and increased both revenue and the operating result. This development was made possible by higher traffi c volume, successful new contract wins and the extension of the group of consolidated companies. The extension since the fi rst quarter 2006 includes LSG Sky Chefs BirminghamLtd., in which a majority share was acquired in early January, as well as AIRO Catering Services (Ukraine), LSG Sky Chefs (India) Private Ltd., Infl ight Catering Services, (Dar es Salaam), and Aerococina S.A. de C.V. (Mexico). As part of the continued streamlining and focussing of the organisation ten companies were merged, one sold and one company wound up. The company in France was sold and removed from the group of consolidated companies in August 2006.

In the fi rst quarter 2007 revenue rose by 3.8 per cent to EUR 546m. External revenue went up by 4.2 per cent to EUR 426m whilst internal revenue increased by 2.6 per cent to EUR 120m. Effects of changes in the group of consolidated companies accounted for EUR + 10m, and currency rate movements had a negative impact of EUR 16m.

All regions generated revenue growth. In Europe it was above all Scandinavia, Italy and the UK which contributed to the higher revenue, particularly by winning new orders, which more than made up for the decline in revenue from the deconsolidation of the French company.

Generic growth in air traffi c in the Asia/Pacifi c region has made itself particularly felt at the LSG Sky Chefs subsidiaries in Korea and Thailand. Revenue grew as well in the USA, but were wiped out by currency rate movements and recorded as a decline in EUR terms. In Latin America LSG Sky Chefs were able to post strong revenue growth, especially thanks to the Mexican company that was consolidated for the fi rst time, and to higher revenue in Brazil and Venezuela.

Other segment income declined by 50.0 per cent year on year partly as a result of lower currency gains.

Segment expenses amounted to EUR 557m, a drop of 4.8 per cent over last year.

This was essentially caused by 14.7 per cent lower staff costs at EUR 214m. This decrease was in turn due to the one-off payment made last year in the course of renegotiating the wage agreement in the USA and the deconsolidation of the French subsidiary. The new US wage settlement also had a positive effect on staff costs. The fi rst-time consolidation of companies meant that staff numbers went up by 2.8 per cent to 29,038.

The cost of materials and services rose by 7.7 per cent to EUR 238m as a result of increased business and outsourcing. This shift in the cost structure refl ects the Company's goal of improving fl exibility.

There was no change in depreciation and amortisation compared to last year. Other segment expenses declined thanks to lower currency losses, lower rents, auditing and consultancy fees.

The operating result went up to EUR 1m (previous year: EUR – 9m). The segment result followed this upward trend, improving to EUR 3m from EUR – 31m last year. The successful implementation of restructuring measures and increased demand both contributed to this positive development.

Segment capital expenditure rose by EUR 3m to EUR 14m as part of expansion work at Frankfurt airport and the construction of a new facility there.

LSG Sky Chefs extended their catering contract with American Airlines until 2012 at the Dallas hub (Texas). US Airways also renewed or signed new catering contracts with twelve key European LSG Sky Chefs locations.

Thanks to the cost-cutting programmes "Triangle" and "Lean Total Direct Cost" the Group has created

sustainably competitive cost structures to combat the strong margin pressure in the industry. Last year further major cost savings were realised by outsourcing the IT infrastructure.

For the current year LSG Sky Chefs is expecting an operating result signifi cantly above last year's level, as a result of higher air traffi c volume, further implementation of the cost-cutting programme and successful acquisition of new customers.

Better customer relations are intended to enable further growth whilst continuing to improve cost structures. Increasing demand for complete solutions for infl ight management offers additional opportunities. LSG Sky Chefs therefore intends to expand its Solutions division internationally. Together with the China National Aviation Group (Ltd.) a production site for frozen meals is being built in Qingdao. With an initial capacity of 35,000 frozen air-meals per day the company will cover ever increasing demand in the Asia/Pacifi c region.

Service and Financial Companies

Service and Financial Companies
	January – March 2007	January – March 2006	Change in %
Other segment income	€m	139	131	6.1
Segment expenses	€m	100	95	5.3
Segment results	€m	39	36	8.3
Employees as of 31 March	number	1,275	1,099	16.0

The group of consolidated companies includes Lufthansa Commercial Holding GmbH, the LufthansaAirPlus group with its four new international subsidiaries, Lufthansa Flight Training GmbH and from 1 January 2007 Lufthansa Flight Training Berlin GmbH, as well as a few fi nancing companies. Income from training, credit card commissions and services, as well as profi ts from equity investments and disposal gains are shown under other

segment income. The corresponding expenses are recognised in other segment expenses.

Segment income totalled EUR 139m, EUR 8m more than last year. The segment result improved to EUR 39m compared with EUR 36m last year.

The AirPlus group made a contribution of EUR 2m to the result. Billing volumes increased, particularly for international business. A new division has been set up for major international customers. A new payment solution for the road charge for trucks was launched at Toll Collect under the name Road Account.

The contribution of LufthansaCommercial Holding to the result amounted to EUR 9m. Following an amendment to the contract on 28 March the Group received a dividend of EUR 8m solely from the WAM Acquisition S.A.

LufthansaFlight Training accounts for a contribution of EUR 7m to the result. Demand for simulator training remains strong, both from customers within the Group and outside it.

Leisure Travel

The Leisure Travel segment was discontinued when the letter of intent for the sale of the Thomas Cook group to KarstadtQuelle was signed on 22 December 2006 and is therefore no longer included in Lufthansa's 2007 reporting.

The agreement takes effect with the approval of the EU competition authority given on 26 March. Lufthansais realising an after-tax gain of EUR 499m on the sale, which is being recognised in the result of the discontinued Leisure Travel segment. Payment was made on 2 April 2007.

As part of the agreement Lufthansawill increase its stake in Condor Flugdienst GmbH from 10.0 per cent to 24.9 per cent and will take over Condor's shareholding in SunExpress, subject to anti-trust approval. In future the results from these companies will be included in the fi nancial result.

Consolidated income statement January – March 2007

in €m	January–March 2007	January–March 2006
Traffic revenue	3,568	3,364
Other revenue	1,128	1,082
Revenue	4,696	4,446
Changes in inventories and work performed by the enterprise and capitalised	49	34
Other operating income	320	299
Cost of materials and services	– 2,502	– 2,392
Staff costs	– 1,273	– 1,252
Depreciation, amortisation and impairment	– 269	– 254
Other operating expense	– 965	– 927
Profit/loss from operating activities	56	– 46
Result from investments accounted for using the equity method	73	9
Other income from subsidiaries, joint ventures and associates	18	18
Interest income	37	70
Interest expenses	– 94	– 141
Other financial items	14	9
Financial result	48	– 35
Profit/loss before income taxes	104	– 81
Income taxes	– 10	30
Profit/loss from continuing operations	94	– 51
Profit/loss of discontinued operations of the Leisure Travel segment	499	– 44
Result after taxes	593	– 95
Result attributable to minority shareholders	– 39	– 3
Results attributable to shareholders of Deutsche Lufthansa AG	554	– 98
Basic earnings/loss per share in €	1.21	– 0.21
Diluted earnings/loss per share in €	1.20	– 0.21

Consolidated balance sheet as of 31 March 2007

Assets
in €m	31 March 2007	31 December 2006	31 March 2006
Intangible assets with an indefinite useful life*	589	589	592
Other intangible assets	172	172	160
Aircraft and spare engines	7,542	7,405	7,156
Repairable aircraft spare parts	540	540	518
Other tangible assets	3	20	17
Investment property	1,563	1,505	1,444
Investments accounted for using the equity method	855	791	901
Other financial items	1,558	1,526	1,537
Receivables and other assets	224	158	106
Derivative financial instruments	42	21	96
Actual income tax assets	90	90	–
Deferred income tax assets	131	152	184
Non-current assets	13,309	12,969	12,711
Inventories	458	457	463
Trade receivables on other assets	4,160	3,011	3,214
Derivative financial instruments	137	93	249
Actual income tax assets	21	1	23
Securities	2,173	2,083	2,008
Cash and cash equivalents	369	455	493
Assets held for sale	387	392	66
Current asset	7,705	6,492	6,516
Total assets	21,014	19,461	19,227

* Including goodwill.

To our shareholders	Business segments	Interim fi nancial statements	Further notes
---------------------	-------------------	-------------------------------	---------------

Shareholders' equity and liabilities
in €m	31 March 2007	31 December 2006	31 March 2006
Issued capital	1,172	1,172	1,172
Capital reserve	1,366	1,366	1,366
Fair value reserves	50	– 11	256
Retained earnings	2,087	1,293	1,586
Net profit/loss for the period	554	803	– 98
Equity share of the shareholders of Deutsche LufthansaAG	5,229	4,623	4,282
Minority interests	313	280	190
Shareholders' equity	5,542	4,903	4,472
Retirement benefit obligations	3,894	3,814	4,102
Other provisions and accruals	334	329	407
Borrowings	2,686	2,730	2,346
Other liabilities	43	59	91
Payments received on account and deferred income	68	63	11
Derivative financial instruments	169	242	209
Deferred income tax liabilities	595	633	621
Non-current provisions and liabilities	7,789	7,870	7,787
Other provisions and accruals	1,434	1,443	1,445
Borrowings	223	226	539
Trade payables and other liabilities	4,011	3,368	3,377
Liabilities from unused flight documents	1,519	1,115	1,232
Payments received on account and deferred income	46	104	112
Derivative financial instruments	322	278	231
Actual income tax liabilities	128	154	32
Current provisions and liabilities	7,683	6,688	6,968
Total shareholders' equity and liabilities	21,014	19,461	19,227

Consolidated statement of changes in shareholders' equity

in €m	Issued capital	Capital reserve	Fair value reserves hedging instruments	Fair value reserves other financial assets	Currency translation differences	Retained earnings	Net profit/ loss for the period	Equity share of share hold ers of Lufthansa AG	Minority interests	Total
Balance on 31 December 2005	1,172	1,366	0 *	74	– 90	1,357	453	4,332	190	4,522
Transfers	–	–	–	–	–	453	– 453	–	–	–
Dividends/minorities	–	–	–	–	–	–	–	–	–	–
Group/minority results	–	–	–	–	–	–	– 98	– 98	3	– 95
Currency translation differences	–	–	–	–	3	–	–	3	–	3
Changes in fair value of financial investments and cash flow hedges	–	–	64	136	–	–	–	200	–	200
Transfers to acquisition cost	–	–	– 3	–	–	–	–	– 3	–	– 3
Transfers to the income statement	–	–	– 14	– 1	–	–	–	– 15	–	– 15
Other neutral changes	–	–	–	–	–	– 137	–	– 137	– 3	– 140
Balance on 31 March 2006	1,172	1,366	47	209	– 87	1,673	– 98	4,282	190	4,472
Balance on 31 December 2006	1,172	1,366	– 156	145	– 130	1,423	803	4,623	280	4,903
Transfers	–	–	–	–	–	803	– 803	–	–	–
Dividends/minorities	–	–	–	–	–	–	–	–	– 5	– 5
Group/minority results	–	–	–	–	–	–	554	554	39	593
Currency translation differences	–	–	–	–	– 12	–	–	– 12	– 2	– 14
Changes in fair value of financial investments and cash flow hedges	–	–	34	10	–	–	–	44	–	44
Transfers to acquisition cost	–	–	6	–	–	–	–	6	–	6
Transfers to the income statement	–	–	10	1	–	–	–	11	–	11
Other neutral changes	–	–	–	–	–	3	–	3	1	4
Balance on 31 March 2007	1,172	1,366	– 106	156	– 142	2,229	554	5,229	313	5,542

* Rounded below EUR 1m.

The difference resulting from currency translation is shown in the balance sheet under retained earnings. Of other neutral changes in retained earnings in 2006 EUR – 102m are due to the repayment of the Lufthansaconvertible bond in January 2006. Further significant changes in other neutral changes are the result of applying the equity method, of which associates account for EUR – 4m (previous year: EUR – 24m).

The retained earnings for 2007 include EUR – 81m of shareholders' equity in connection with the discontinuation of the business segment Leisure Travel as at 22 December 2006, of which EUR – 35m are due to neutral changes in 2006 (see Note 15 to the Consolidated Financial Statements 2006).

Changes in equity with and without effect on results

in €m
As at 31 December 2005	4,332	190	4,522
Neutral changes	150	– 3	147
Changes with effect on results	– 98	3	– 95
Dividends/Conversion of convertible bond	– 102	–	– 102
As at 31 March 2006	4,282	190	4,472
As at 31 December 2006	4,623	280	4,903
Neutral changes	52	– 1	51
Changes with effect on results	554	39	593
Dividends	–	– 5	– 5
As at 31 March 2007	5,229	313	5,542

Consolidated cash fl ow statement

in €m	January – March 2007	January – March 2006
Cash and cash equivalents on 1 January	455	1,173
Profit/loss before income taxes	104	– 81
Depreciation of fixed assets (net of reversals)	269	260
Depreciation of repairable aircraft spare parts	18	30
Result from fixed asset disposal	– 2	– 5
Income from subsidiaries, joint ventures and associates	– 91	– 27
Net interest	57	71
Income taxes paid	– 115	2
Change in working capital**	289	40
Cash flows from operating activities	529	290
Purchases of tangible assets and intangible assets	– 425	– 198
Purchase of financial assets	– 25	– 216
Additions to repairable aircraft spare parts	– 19	– 46
Proceeds from sale of non-consolidated equity investments	–	3
Proceeds from sale of consolidated equity investments	0 *	0 *
Acquisition of non-consolidated equity investments	– 18	– 198
Acquisition of consolidated equity investments	– 2	0 *
Proceeds from disposals of intangible assets, tangible assets and other financial assets	26	23
Interest received	34	70
Dividends received	19	18
Net cash used in investing activities	– 410	– 544
Securities/fixed-term deposits	– 92	–
Sale of shares	–	417
Net cash used in investing activities and cash investments	– 502	– 127
Net capital increase	–	–
Repayments of conversion options from 2002 convertible bond	–	– 102
Long-term borrowings	1	0 *
Repayment of long-term borrowings	– 59	– 638
Other borrowings	– 1	0 *
Dividends paid	– 5	–
Interest paid	– 48	– 102
Net cash used in financing activities	– 112	– 842
Net decrease in cash and cash equivalents	– 85	– 679
Effects of exchange rate changes	– 1	– 1
Cash and cash equivalents on 31 March	455	1,173
Securities	2,173	2,008
Total liquid funds	2,542	2,501
Net increase/decrease in liquid funds	4	– 1,097

* Rounded below EUR 1m.

** The working capital consists of inventories, receivables, payables and provisions and accruals.

No cash flows resulted from the Leisure Travel business segment discontinued on 22 December 2006.

Further notes to the Interim Financial Statements

Effects of changes in the group of consolidatedcompanies

The consolidated fi nancial statements include all material domestic and foreign affi liated companies as well as Deutsche Lufthansa AG as the parent company. In early January the majority was acquired in LSG Sky Chefs Birmingham Ltd. and the company is now consolidated. Miles & More International GmbH and LufthansaWorld-Shop GmbH, both part of the PassengerTransportation segment, were also consolidated for the fi rst time on 1 January 2007. In the CateringSegment the companies AIRO Catering Services – Ukraine, LSG Sky Chefs (India) Private Ltd. and Infl ight Catering Services, Dar es Salaam, were consolidated for the fi rst time and the Service and Finance segment now includes Lufthansa

Income statement
in €m	Group January – March 2007	of which from changes in the group of conso lidated compa nies compared with the interim reporting in March 2006	Group January – March 2006	of which from changes in the group of conso lidated compa nies compared with the interim reporting in March 2005
Revenue	4,696	38	4,446	76
Operating income	5,065	42	4,779	86
Operating expenses	– 5,009	– 33	– 4,825	– 107
Profit/loss from operating activities	56	9	– 46	– 21
Financial result	48	0 *	– 35	2
Income taxes	– 10	– 4	30	2
Profit of discontinued operationsof the Leisure Travel segment	499	–	– 44	–
Profit/loss after income taxes	593	5	– 95	– 17

* Rounded below EUR 1m.

Flight Training Berlin GmbH and four international subsidiaries of AirPlus GmbH. At 1 January 2007 three near money market funds that were merged into another consolidated fund were removed from the group of consolidated companies, as were two aircraft leasing companies from the Logistics segment and one from the Passenger Transportation segment as well as one merged company from the Catering segment.

More compared to the 31 March 2006 the group of consolidated companies has been extended to include Aerococina S.A. de C.V., in which a majority was acquired in the fourth quarter 2006, two companies consolidated for the fi rst time in the second quarter 2006, Lufthansa Malta Finance Ltd. and LSG Sky Chefs Objekt- und Verwaltungs gesellschaft mbH, as well as CAMANA Grundstücks-Verwaltungsgesellschaft mbH, which was fi rst consolidated in the fourth quarter. In the fi rst quarter 2006 the group of consolidated companies had still included LSG Sky Chefs France S.A., which was sold in August 2006, and time:matters Holding GmbH, sold in December 2006, as well as nine companies from the Catering segment and two near money market funds from the Service and Finance segment, which were all merged with other companies

Balance sheet *
in €m	Group 31 March 2007	of which from changes in the group of consolidated companies of the year 2007
Non-current assets	13,309	1
Current assets	7,705	146
Total assets	21,014	147
Shareholders' equity	5,542	– 43
Non-current provisions and liabilities	7,789	56
Current provisions and liabilities	7,683	134

* In the previous year no balance sheet effects due to changes to the group of consolidated companies.

from their respective segments. Also LSG Sky Chefs Canada, liquidated in late June 2006 and seven special purpose entities which were deconsolidated in the fi nal quarter of 2006 as their businesses were discontinued. The following tables show the main effects of the changes in the group of consolidated companies compared with the same quarter in 2006.

Contingencies and events after the balancesheet date

Various provisions with a total potential effect over the coming years of EUR 234m were not made because of the minor likelihood of being used. At the balance sheet date for 2006 the equivalent fi gure was EUR 233m.

Contingent liabilities
in €m	31.3.2007	31.12.2006
From guarantees, bills and cheque charges	710	724
From warranty agreements	913	923
From collateralisation of third-party liabilities	3	3

A maximum cash infl ow of EUR 9m of the contingent asset recognised in the consolidated fi nancial statements for 2006 in connection with the sale of an equity investment can be recovered, of which it is expected that EUR 3m will be received in 2007 and the remainder over the following years. In the fi rst three months of 2007 a total cash infl ow of EUR 13m was received and a gain of EUR 4m recognised on the disposal of three CRJ 200 aircraft already formally agreed at year-end 2006. The disposal of the remaining three CRJ 200 is expected to give rise to a further cash infl ow of EUR 10m in 2007.

In addition, a sales agreement was signed in the fi rst quarter for an ATR42 aircraft that will produce a cash infl ow of EUR 5m in 2007 and give rise to a gain of EUR 1m.

Assets held for sale

in €m	January – March 2007	Financial Statements 2006	January – March 2006
Assets
Aircraft and spare engines	13	19	63
Financial assets	372	372	–
Other assets	2	1	3
Equity/liabilities from assets held for sale
Equity	– 81	– 81	–
Liabilities	–	–	–

The contingent asset recognised in the consolidated fi nancial statements for 2006 from a D&O policy in connection with damages that occurred in Scandinavia is maintained at EUR 130m.

At the end of March 2007 purchase commitments of EUR 6.3bn existed for capital expenditure on property, plant and equipment and on intangible assets. At 31 December 2006 outstanding purchase commitments totalled EUR 6.6bn.

Issued capital

At the Annual General Meeting held on 16 June 2004 the Executive Board was authorised, with the approval of the Supervisory Board and until 15 June 2009, to increase issued capital by EUR 25m by issuing new bearer shares to members of staff for payment in cash. Shareholders' subscription rights do not apply.

At the 54th Annual General Meeting held on 18 April the Executive Board and Supervisory Board proposed payment of a dividend of EUR 0.70 per share.

Segment reporting LufthansaGroup

Business segment information January – March 2007

	Passenger Transpor tation 1)	Logistics 1)	MRO	IT Services	Catering 1)	Leisure Travel 2)	Service and Financial	Segment total
in €m							Companies
External revenue	3,045	635	527	63	426	–	–	4,696
- of which traffic revenue	2,957	611	–	–	–	–	–	3,568
Inter-segment revenue	141	4	407	96	120	–	–	768
Total revenue	3,186	639	934	159	546	–	–	5,464
Other segment income	287	20	43	6	14	–	139	509
- of which from invest ments accounted for using the equity method	67	2	2	–	2	–	0 *	73
Cost of materials	1,959	442	498	10	238	–	7	3,154
Staff costs	646	82	248	63	214	–	20	1,273
Amortisation and depreciation	186	32	20	9	15	–	8	270
- of which impairments	–	–	–	–	–	–	–	–
Other operating expenses	647	94	146	79	90	–	65	1,121
Segment results	35	9	65	4	3	–	39	155
– of which from invest ments accounted for using the equity method	67	2	2	–	2	–	0 *	73
Segment assets	9,340	1,159	2,328	272	1,112	–	3,171	17,382
- of which from invest ments accounted for using the equity method	655	35	103	–	58	–	4	855
Segment liabilities	7,756	624	1,411	229	645	–	1,212	11,877
- of which from invest ments accounted for using the equity method	–	–	–	–	–	–	–	–
Capital expenditure	346	3	44	11	14	–	21	439
- of which from invest ments accounted for using the equity method	–	–	–	–	–	–	–	–
Other significant non-cash items	69	6	15	4	10	–	1	105
Employees at the balancesheet date	38,995	4,558	18,588	3,242	29,038	–	1,275	95,696

* Rounded below EUR 1m.

1) 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.

2) Business segment given up as of 22 December 2006.

Business segment information January – March 2006

	Passenger Transpor tation 1)	Logistics 1)	MRO	IT Services	Catering 1)	Leisure Travel 2)	Service and Financial	Segment total
in €m							Companies
External revenue	2,788	675	509	65	409	–	–	4,446
- of which traffic revenue	2,726	638	–	–	–	–	–	3,364
Inter-segment revenue	129	4	350	89	117	–	–	689
Total revenue	2,917	679	859	154	526	–	–	5,135
Other segment income	216	29	35	7	28	– 44	131	402
- of which from invest ments accounted for using the equity method	– 1	4	4	–	2	– 44	0 *	– 35
Cost of materials	1,820	465	445	7	221	–	6	2,964
Staff costs	597	84	244	61	251	–	17	1,254
Amortisation and depreciation	179	31	18	8	15	–	5	256
- of which impairments	–	–	–	–	–	–	–	–
Other operating expenses	624	110	123	76	98	–	67	1,098
Segment results	– 87	18	64	9	– 31	– 44	36	– 35
- of which from invest ments accounted for using the equity method	– 1	4	4	–	2	– 44	0 *	– 35
Segment assets	8,693	1,284	2,242	252	1,025	285	3,071	16,852
- of which from invest ments accounted for using the equity method	434	15	103	–	61	285	3	901
Segment liabilities	7,152	707	1,528	233	756	–	1,235	11,611
- of which from invest ments accounted for using the equity method	–	–	–	–	–	–	–	–
Capital expenditure	150	2	22	11	11	–	12	208
- of which from invest ments accounted for using the equity method	2	–	–	–	–	–	–	2
Other significant non-cash items	95	7	16	4	11	–	1	134
Employees at the balancesheet date	37,502	4,695	17,759	3,321	28,240	–	1,099	92,616

* Rounded below EUR 1m.

1) 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.

2) Business segment given up as of 22 December 2006.

Reconciliation of segment information with consolidated figures

		Segment total		Reconciliation	Group
in €m	January – March 2007	January – March 2006	January – March 2007	January – March 2006	January – March 2007	January – March 2006
External revenue	4,696	4,446	–	–	4,696	4,446
- of which traffic revenue	3,568	3,364	–	–	3,568	3,364
Inter-segment revenue	768	689	– 768	– 689	–	–
Total revenue	5,464	5,135	– 768	– 689	4,696	4,446
Other revenue	509	402	– 140	– 69	369	333
- of which from investments accounted for using the equity method	73	– 35	– 73	35	–	–
Cost of materials	3,154	2,964	– 652	– 572	2,502	2,392
Staff costs	1,273	1,254	–	– 2	1,273	1,252
Amortisation and depreciation	270	256	– 1	– 2	269	254
- of which impairments	–	–	–	–	–	–
Other operating expenses	1,121	1,098	– 156	– 171	965	927
Results	155	– 35	– 99	– 11	56	– 46
- of which from investments accounted for using the equity method	73	– 35	– 73	35	–	–
Assets	17,382	16,852	3,632	2,375	21,014	19,227
- of which from investments accounted for using the equity method	855	901	–	–	855	901
Liabilities	11,877	11,611	3,595	3,144	15,472	14,755
- of which from investments accounted for using the equity method	–	–	–	–	–	–

Geographical segment information January – March 2007

in €m	Europe	North America	Central and South America	Asia/Pacific	Middle East	Africa	Other	Segment Total
Traffic revenue **	2,430	470	69	477	50	72	–	3,568
Other operating revenue	551	247	41	196	67	26	0 *	1,128
Total revenue	2,981	717	110	673	117	98	0 *	4,696

* Rounded below EUR 1m.

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

Geographical segment information January – March 2006

in €m	Europe	North America	Central and South America	Asia/Pacific	Middle East	Africa	Other	Segment Total
Traffic revenue **	2,264	417	71	484	52	76	–	3,364
Other operating revenue	449	333	87	166	24	23	0 *	1,082
Total revenue	2,713	750	158	650	76	99	0 *	4,446

* Rounded below EUR 1m.

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

Financial data 2007/08

Contact

Deutsche LufthansaAG Investor Relations

Frank Hülsmann

LufthansaAviation Center, Airportring 60546 Frankfurt/Main, Germany Phone: + 49 (0) 69 696 - 2 80 01 Fax: + 49 (0) 69 696 - 9 09 90 Email: investor.relations@dlh.de

Erika Laumer Ralph Link Axel Pfeilsticker

LufthansaAviation Center, Airportring 60546 Frankfurt/Main, Germany Phone: + 49 (0) 69 696 - 2 80 02, - 64 70 or - 9 09 97 Fax: + 49 (0) 69 696 - 9 09 90 Email: investor.relations@dlh.de

You can order the annual and interim reports in Germanor English via our website or from: Deutsche LufthansaAG, FRA IR LAC, Room C6.800, Airportring 60546 Frankfurt/Main, Germany Phone: + 49 (0) 69 696 - 28 00 8 Fax: + 49 (0) 69 696 - 90 99 0 Email: cgnirsek@dlh.de

Latest fi nancial information on the internet: http://www.lufthansa-fi nancials.com

Publisher

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

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

Editing

Frank Hülsmann, Erika Laumer Deutsche LufthansaAG, Investor Relations

Concept and Design

Kirchhoff Consult AG, Hamburg, Germany

Printed by Broermann Offset Druck, Cologne, Germany

2007

26 July	Release of Interim Report January – June 2007
25 Oct.	Press Conference and Analysts' Conferenceon interim result January– September 2007
	2008
	12 March Press Conference and Analysts' Conferenceon 2007 result
25 April	Release of Interim Report January – March 2008
29 April	Annual General Meeting Cologne
30 July	Release of Interim Report

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

January – June 2008

The 1st Interim Report 2007 is a translation of the original German Lufthansa 1. Zwischenbericht Januar – März 2007.

Please note that only the German version is legally binding.

Disclaimer in respect of forward-looking statements

Information published in the 1st Interim Report 2007 with regard to the future development of the LufthansaGroup and its subsidiaries consists purely of forecasts and assessments and not of defi nitive historical facts. Its purpose is exclusively informational identifi ed 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 forwardlooking 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.

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