Deutsche Lufthansa AG — Interim / Quarterly Report 2009

Nov 17, 2009

3rd Interim Report January –September 2009

Lufthansa Group overview

Key Figures
		Jan.–Sept. 2009	Jan. –Sept. 20083)	Change in %	July –Sept. 2009	July–Sept. 20083)	Change in %
Revenue and result
Revenue	€m	16,162	18,611	– 13.2	5,936	6,553	– 9.4
- of which traffic revenue	€m	12,589	15,032	– 16.3	4,743	5,310	– 10.7
Operating result	€m	226	954	– 76.3	218	277	– 21.3
EBIT	€m	130	784	– 83.4	328	220	49.1
EBITDA	€m	1,339	1,838	– 27.1	722	549	31.5
Net profit/loss for the period	€m	– 32	529		184	149	23.5
Key balance sheet and cash flow statement figures
Total assets	€m	27,281	22,821	19.5	–	–	–
Equity ratio	%	22.5	29.1	– 6.6 pts	–	–	–
Net debt 1)	€m	1,908	– 357		–	–	–
Cash flow from operating activities	€m	1,438	2,142	– 32.9	408	389	4.9
Capital expenditure	€m	1,777	1,660	7.0	612	429	42.7
Key profitability and value creation figures
Adjusted operating margin 2)	%	2.0	5.4	– 3.4 pts	–	–	–
EBITDA margin	%	8.3	9.9	– 1.6 pts	–	–	–
The Lufthansa share
Share price at quarter-end	€	12.11	13.80	– 12.2	–	–	–
Earnings per share	€	– 0.07	1.16
Traffic figures
Passengers	thousands	55,368	53,767	3.0	22,164	18,922	17.1
Freight/mail	thousand tonnes	1,231	1,455	– 15.4	443	472	– 6.3
Passenger load factor	%	78.0	79.5	– 1.5 pts	82.4	81.7	0.7 pts
Cargo load factor	%	57.9	63.5	– 5.6 pts	60.8	60.1	0.7 pts
Available tonne-kilometres	millions	25,838	26,370	– 2.0	9,481	9,205	3.0
Revenue tonne-kilometres	millions	17,929	19,022	– 5.7	6,961	6,626	5.1
Overall load factor	%	69.4	72.1	– 2.7 pts	73.4	72.0	1.4 pts
Number of flights		636,199	627,342	1.4	242,246	214,038	13.2
Employees
Number of employees as of 30.9		118,945	109,401	8.7	–	–	–

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

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

3) Last year's figures have been adjusted in line with IFRIC 13.

The interim report at 30 September 2009 was prepared in accordance with the rules of IAS 34, taking into account the standards applicable since 1 January 2009. More information on changes to the accounting standards can be found in the Notes to the consolidated financial statements on page 40. Date of disclosure: 29 October 2009.

Contents

• 1 To our shareholders
• 40 Notes to the financial statements Credits/Contact Financial calendar 2009/2010
• 3 Interim management report
• 34 Interim financial statements

Dear Shareholders,

The crane has mastered another leg of the journey. Despite strong headwinds, the Lufthansa Group was able to close the first nine months of 2009 with an operating profit.

This was achieved although the aviation sector was still exposed to the effects of the ongoing economic crisis in the third quarter. The international air traffic association IATA raised its forecast for industry-wide losses in 2009 to USD 11bn, and for European airlines, too, the predicted losses of USD 3.8bn are now twice as high as recently anticipated. Overall, a bottoming-out of sales can be identified in meanwhile, but the sector is still headed for a tough fourth quarter.

Faced with worldwide collapsing revenue and very weak demand, the Lufthansa Group also had to accept considerable losses in the first nine months of the year. As the number one in European air traffic, the Group was nevertheless able to report an operating result of EUR 226m, not least thanks to its diversified structure and the early measures taken to safeguard earnings. However, the result included a positive valuation effect in the third quarter from the initial consolidation of Austrian Airlines and British Midland in the financial statements for the Group. We welcome the new partners to our group and will support them at our best in the necessary restructuring works. Their success and stable performance of all the business segments in the fourth quarter will decide whether we can meet our target of achieving at least a balanced operating result for the full year 2009.

In the first nine months, all segments were affected by the crisis, in particular however, passenger and freight traffic. In the Passenger Airline Group revenue and operating result were well down on last year's strong performance. In addition to the ongoing capacity adjustments, sustainable cost-cutting measures are being taken to deal with the change in demand and revenue. Within the scope of

its Climb 2011 programme to safeguard earnings, Lufthansa Passenger Airlines specified its main focus areas in the third quarter and began implementation.

Lufthansa Cargo was hit particularly hard by the downswing and has therefore tightened its efforts to safeguard earnings, reduced capacities and expanded its cost-cutting programme. The Catering and IT Services segments were also not able to match last year's good revenue and results. The MRO segment in contrast continued its growth path, achieving revenue growth and a higher operating profit than last year. All business segments are pursuing their programmes to safeguard earnings and will continue to adapt them to changes in demand.

Despite the current difficult business environment, we would like to assure you, dear shareholders, that we are not only proficient in crisis management, but also keep looking ahead and shaping the future. Even in this difficult year we have continued to renew our fleet and are ensuring that the quality of our product does not suffer. We remain convinced of the long-term growth of the aviation market, and with the integration of SWISS into the Lufthansa airline group and the integration now taking place of Austrian Airlines, British Midland and Brussels Airlines, we have taken vital steps to ensuring we continue to share in this growth.

We intend to stay on course as we move forward. Our solid foundations, consisting of a management team experienced in dealing with crisis, our highly qualified and committed staff and our sound financial profile, provide the basis for our progress. However, it is principally the steps taken by all the segments to safeguard earnings which are making a key contribution to passing through the turbulence safely and to exploiting the opportunities in our industry at the same time.

We thank you for your trust.

Wolfgang Mayrhuber Chairman of the Executive Board and CEO

Christoph Franz Deputy Chairman of the Executive Board and CEO Lufthansa German Airlines

Stephan Gemkow Member of the Executive Board Chief Financial Officer

Stefan Lauer Member of the Executive Board Chief Officer Group Airlines and Corporate Human Resources

Share

In the third quarter of 2009, stock exchanges worldwide continued the rally that began in the spring. Share price increases were based on the macroeconomic indicators having reached their low point and on speculation that demand would soon recover sustainably. As only a few fundamental data points actually corroborate the claim of a sustainable upswing, more restrained announcements regularly led to minor setbacks, but these were unable to establish a trend. Positive economic data and studies from large US banks further bolstered the positive mood, causing the leading international indices to climb sharply.

The German share index DAX 30 was able to report a new high for the year in September at 5,736 points and closed the third quarter at 5,675 points, up 18.0 per cent over the quarter (+14.1 per cent since the start of the year).

Lufthansa's share price trend (indexed on 31 December 2008)

DAX Lufthansa British Airways Air France-KLM compared with the DAX and competitors in % 90 60 120 150 31.12. 2008 31.3. 2009 30.9. 2009 30.6. 2009

The shares of aviation companies benefited from this positive atmosphere. British Airways in particular was able to make good the severe falls of recent months, rising by 76.8 per cent in the third quarter and by 22.7 per cent for the year to the end of September. The share benefited to an exceptional extent from the hope of a swift economic recovery on both sides of the Atlantic and in the financial industry. Somewhat less pronounced, but nevertheless very distinct, was the rise in the shares of Air France-KLM (+36.5 per cent) and Lufthansa (+35.6 per cent). Since the beginning of the year the Lufthansa share has reported an increase of 8.2 per cent, or 14.5 per cent including the dividend payment.

The great majority of analysts are still recommending the Lufthansa share as a buy and justifying this primarily with the Group's stable and conservative financial structure, diversified business model

and strategic advantages in the consolidation of the European aviation industry. Many analysts are expecting Lufthansa to emerge from the crisis strengthened, or even as industry leader.

In the third quarter, Lufthansa continued its intensive discussions with institutional and private investors, presenting the Company at numerous conferences and events. The presentations and further information are available on the Internet at www.lufthansa.com/investor-relations, as are current financial reports, traffic figures and financial news, in addition to an extensive archive.

Lufthansa's place in the Dow Jones Sustainability Index (DJSI) was reconfirmed in September. Its total score rose once again since being included for the first time in 1999. The Lufthansa crane was given top marks in the areas of efficiency, environmental reporting, local air quality, route network, noise protection, HR development, and employer attractiveness and staff loyalty.

120 150 In the third quarter, there were no significant changes in the shareholder structure, which remained broadly German dominated. The proportion of Lufthansa share capital held by German dominated investors came to 73.0 per cent as of the reporting date and was therefore well above the statutory minimum. The second-largest share at 10.6 per cent is held by investors from Luxembourg, while shareholders from the USA account for 7.5 per cent. They are followed by the U.K. and France with 3.4 and 1.1 per cent. Overall, institutional investors hold 67.3 per cent of Lufthansa's share capital and private shareholders 32.7 per cent.

Shareholder structure by nationality (as of 30 September 2009) in %

At the end of the quarter, AXA Group was the largest shareholder, holding 4.70 per cent of share capital. In early October it reduced its stake to 2.55 per cent. This makes Deka Investment GmbH the largest shareholder, accounting for 3.01 per cent of the shares. The free float remains at 100 per cent. The shareholder structure is updated quarterly and published, together with other changes disclosed, on our website at www.lufthansa.com/investor-relations.

Interim management report

Economic environment and sector performance After the massive slump in the fourth quarter 2008 and at the start of this year, the global economy's downward trend has slowed considerably since the summer. Indicators suggest that the trough of the deepest global recession since the second world war is now past. While the industrialised countries appear to have overcome the worst, some emerging economies even recorded considerable increases in production.

Signs that the world economy is stabilising are also coming from global trade. At the start of the year, trade experienced an unprecedented and simultaneous decline around the world and is now beginning to recover. Particularly the emerging economies in Asia have increased their imports from the rest of the world. Inventory stocks have also been reduced, which caused production to rise again. Both production and trade are nevertheless far removed from their pre-crisis levels.

	Year-on-year GDP growth 2009
in %	Q1*	Q2*	Q3**	Q4**	Full year**
World	– 3.2	– 3.2	– 2.1	0.1	– 2.1
Europe	– 5.0	– 4.9	– 4.1	– 1.9	– 4.0
- Germany	– 6.7	– 5.9	– 4.8	– 1.9	– 4.8
North America	– 3.2	– 3.8	– 2.4	– 0.4	– 2.5
South America	– 2.5	– 3.4	– 2.5	0.2	– 2.0
Asia/Pacific	– 1.4	– 0.3	0.9	3.4	0.7
- China	6.1	7.9	8.5	9.3	8.1
Middle East	0.7	– 0.5	– 0.9	– 0.4	– 0.3
Africa	2.0	1.4	1.3	1.6	1.7

Source: Global Insight World Overview as of 13 October 2009.

* Partially forecast.

** Forecast.

The economic turnaround was largely due to the stabilisation of financial markets. This in turn was the result of massive intervention by central banks and government programmes in many countries to refloat and stimulate the economy. Consumer and business confidence has improved overall. However, there is still uncertainty about the sustainability of the economic recovery. Global output is expected to fall by 2.1 per cent in the third quarter, a much smaller decline than in the previous quarter.

Production in the USA collapsed dramatically in the winter halfyear, but has stabilised in recent months. Data suggests that the downward economic trend slowed in the third quarter compared with the second. But faced with restrictive lending terms and gloomier labour market statistics, both private consumer spending and corporate capital expenditure declined again. Some momentum came from public-sector demand due to the economic stimulus package and from external trade, as imports fell faster than exports.

In the euro area too, the downhill trend seems to have flattened out. An only mild fall in gross domestic product was reported in the second quarter. Performance for the national economies in the euro area was mixed. While real gross domestic product fell again in the second quarter in Spain and Austria, for instance, the downswing over the same period in the two largest euro economies, Germany and France, was much slighter. The euro area is primarily benefiting from a revival of exports and the ongoing economic stimulus programmes. The expectation for the third quarter is that negative figures for gross domestic product will be much less bleak than in the previous quarter.

Following a massive economic slump at the start of the year, the German economy has also settled down since the second quarter, albeit at a low level. The main impetus came from private consumer demand and external trade. The strong upswing in orders from abroad should also bolster production and exports in the third quarter. For the third quarter the expectation is that the German economy will contract by 4.8 per cent year on year, compared with –5.9 per cent in the second quarter.

The economic picture for the Asian economies has brightened considerably in recent months. Business has been picking up again since the second quarter and most countries are reporting positive growth for the quarter. Monetary policy measures and substantial economic stimulus packages animated domestic demand. In China especially, the economy has again been growing strongly since the second quarter. The main reasons for the recovery were a massive programme of state spending and strong expansion of lending.

The Middle East and Africa are still also generally in the throes of the global economic crisis. In Africa, the decline in growth has slowed down, however. In the Middle East, too, the recession was eased by monetary and fiscal policy measures, combined with higher oil prices.

Over the whole reporting period, the global economic recession had a considerable effect on the Lufthansa Group's performance. In the third quarter companies in the Passenger Airline Group and Lufthansa Cargo were again hit particularly hard by the collapse in demand and a drastic decline in average yields.

In the third quarter, the euro continued its upward trend against the US dollar that began in mid April. It ranged from USD 1.39/EUR to USD 1.48/EUR. The rate at the end of the quarter was USD 1.46/EUR; the average rate for the first three quarters was USD 1.37/EUR, which is 10.2 per cent down on the average for the same period last year.

The strong exchange rate fluctuations have had a tangible effect on individual items of the income statement. Overall, however, the impact on the Lufthansa Group has been limited. Lufthansa follows a continuous, rule-based hedging policy which is largely independent of opinions about future exchange rates. More detailed information is available in the 2008 Annual Report on pages 121 and 183.

The oil price went up in the third quarter to more than USD 70/bbl. Following a correction in mid July 2009 it continued its upward trend. In the final weeks of the quarter, however, prices sagged again due to persistent uncertainty about the sustainability of the

economic recovery. On 30 September, a barrel of Brent crude cost USD 65.49 and was therefore around one-third cheaper than a year ago. Compared with the start of the year, the oil price has nevertheless gone up by some 40 per cent.

The difference to the price for kerosene (jet fuel crack) was also much lower than in 2008. This is largely due to falling demand for middle distillates as a result of the recession and the subsequently high levels of stock. Refineries have been systematically cutting production capacities for weeks in order to combat the weak jet fuel crack. Up to and including September, the average was USD 8.57/bbl, while for the same period in 2008 crack came to USD 30.39/bbl.

As a result, the price for kerosene fluctuated between USD 386.25 and USD 646.75/tonne over the first nine months. The average price for the period was USD 527.50/bbl and therefore less than half of last year's (USD 1,124.13/bbl).

300 600 900 1200 With a share of 14.7 per cent of total operating expenses, fluctuations in fuel prices have a considerable effect on the Group's profitability. Lufthansa's fuel hedging follows a rule-based logic, with the aim of reducing the extent of fluctuations (see also the 2008 Annual Report, starting on page 120). This means that the effects of price swings on fuel markets are limited in both directions and their impact on Lufthansa's cost base is delayed.

0 Aviation market Demand for air traffic in the third quarter also reflected the bottoming-out of the overall economy. According to figures from the air traffic association IATA, sales for the aviation industry experienced a fall of 6 per cent in passenger traffic and of 18 per cent in cargo traffic for the year up to and including August. In the first half-year, the figures were –8 per cent and –20 per cent, respectively. While all other regions recorded falls in demand, thanks to capacity increases the Middle East was still the only

growth region for air traffic (+8.4 per cent), mainly due to increased capacity. The massive economic stimulus programmes in Asia also had an effect on aviation and brought some relief. After falling by 12 per cent in the first half-year, demand was only down by around 10 per cent for the year up to and including August.

One result of the improved demand is that the load factor for passenger traffic regained its level of last year at the beginning of the third quarter. The average load factor of airlines in the European industry association AEA was 83 per cent in August and therefore 1 percentage point up on the year. However, the airline industry is still suffering from severely depleted average yields.

In the premium segment (First and Business Class), which has fallen sharply since the beginning of the year, the downward trend slowed appreciably in the third quarter. In this segment the AEA airlines reported a fall in demand of 23 per cent in the first half-year, but in the first two months of the third quarter the contraction was limited to 15 per cent. Passenger demand and average yields in the premium sector are nevertheless still at an insufficient, very low level. Earnings for the industry are therefore still much lower than expected. In the first six months alone, the sector incurred losses of USD 6bn worldwide.

Economic pressures are also accelerating the consolidation process underway in the airline industry. In Europe for example, this is apparent in the takeover of Austrian Airlines and British Midland by Lufthansa and its equity investment in Brussels Airlines. British Airways and Iberia have also restarted their merger discussions. In the Asian market the acquisition of Shanghai Airlines by China Eastern Airlines. In addition, the heavily indebted Japan Airlines began talks with American Airlines and Delta Airlines on a possible equity investment.

The legal environment has not changed over the last nine months. The comments in the 2008 Annual Report (page 48) therefore still apply.

Course of business

The economic crisis continued to have an adverse effect on the course of business for the Lufthansa Group in the third quarter. The collapse in demand, capacity adjustments and drastically lower prices led to further sharp falls in volumes and revenue in the Passenger Airline Group and Lufthansa Cargo were particularly affected and their revenues and results were considerably lower than the strong figures for last year. The IT Services and Catering segments were also not able to match last year's figures in terms of revenue or operating result. The MRO segment was affected less strongly. Revenue here even increased, and the operating result was also up on last year.

The measures to safeguard earnings taken in view of the persistently weak economic environment were extended again in the third quarter. Lufthansa Cargo amplified the cost-cutting measures introduced in the first half-year – while maintaining reduced working hours – and took further steps to exploit market opportunities: staff and other operating costs were reduced again and project funding was trimmed. Staggered price increases were also introduced as part of the programme to safeguard earnings (ESP 2.0) for the upcoming peak season.

The Climb 2011 programme initiated by Lufthansa Passenger Airlines at the beginning of the third quarter of 2009, which is intended to deliver earnings improvements of EUR 1bn by 2011 – primarily by decreasing the cost base – was intensified in terms of its focus areas in the meantime. In view of its current economic position, Austrian Airlines AG (AUA), which has been consolidated since September, also launched programmes to achieve short-term savings and overcome the crisis. These are to be supplemented successively by lasting cost savings of more than EUR 300m. Details of these programmes and measures can be found in the chapters on the respective business segments.

Significant events After clearance from the European Commission under competition regulations, Lufthansa completed the purchase of 45 per cent of the parent company of Brussels Airlines, SN Airholding SA/NV, in June of this year. Lufthansa can exercise the call option for the remaining 55 per cent in 2011, when the air traffic rights have been secured. Brussels Airlines has been accounted for using the equity method since 30 June.

Once all conditions precedent were met, Lufthansa, AUA and Österreichische Industrieholding AG (ÖIAG) completed the takeover of AUA by Lufthansa. This means that since September 2009 AUA has been part of the Lufthansa Group. The European Commission had previously approved the merger of the airlines and restructuring aid of EUR 500m from ÖIAG. Including the shares acquired from ÖIAG and those from the outstanding public takeover offer, Lufthansa now holds more than 95 per cent of AUA's share capital.

After reaching an out-of-court settlement in June with Sir Michael Bishop, the previous majority shareholder of bmi, on the agreed put option, and once the British Lufthansa subsidiary LHBD Holding Limited (LHBD) had purchased 50 per cent plus one share of bmi, LHBD reached an agreement with the SAS Group in early October under which LHBD is to acquire a further 20 per cent of the bmi shares for a purchase price of around GBP 19m from 1 November. Lufthansa is paying SAS a further GBP 19m for waiving its rights under the shareholder agreement signed in 1999. The agreement provides for SAS to share in any profit earned in the event of a subsequent sale, providing certain conditions are met.

The rating agencies adjusted their estimates for Lufthansa at the end of August in the face of a currently weaker operating environment and the direct effects of acquisitions on its financial profile. Standard & Poor's downgraded its rating by one notch to BBB– (outlook: negative). Moody's also downgraded Lufthansa by one level to Ba1 (outlook: stable). However, Lufthansa is still one of only four airlines worldwide with an investment grade rating.

Staff and management At the end of September the Lufthansa Group, including the newly consolidated companies, had 118,945 employees. There were sharp falls compared with the same period last year at Lufthansa Cargo and LSG Sky Chefs, among others. This is primarily due to the measures taken throughout the Group to safeguard earnings, which include a hiring freeze and job cuts in many companies.

Employees by business segment (as of 30 September 2009) in %

Despite its difficult economic situation, Lufthansa acknowledges its social responsibility and is continuing to invest in training young people. In 2009, more than 330 young women and men will have begun vocational training with the Group. There are 19 apprenticeships on offer throughout the Group, most of them with a technical focus.

Following the changes made to the structure of the Executive Board of Deutsche Lufthansa AG in May and June 2009, Wolfgang Mayrhuber is now Chairman of the Executive Board, Christoph Franz is CEO Lufthansa Passenger Airlines (and Deputy Chairman of the Executive Board), Stefan Lauer is Chief Officer Group Airlines and Corporate Human Resources, and Stephan Gemkow is Chief Officer for Finances and Aviation Services. Wolfgang Mayrhuber is also Deputy Chairman of Austrian Airlines and a member of the Supervisory Board of Brussels Airlines. Stefan Lauer was appointed Chairman of the Board of Directors of bmi as of 1 July 2009, and elected as Chairman of the Supervisory Board of Austrian Airlines AG in September 2009. Mr Lauer is also a member of the Board of Directors of SWISS and of SN Airholding SA/NV. Stephan Gemkow took over the chairmanship of the Supervisory Boards of Lufthansa Cargo AG, Lufthansa Technik AG, LSG Lufthansa Service Holding AG and Lufthansa Systems AG in September 2009. By putting the new division of responsibilities within the Group Executive Board into practice, the necessary organisational steps have been taken for new airlines to be integrated into the Lufthansa airline group.

Negotiations on a wage agreement have been going on between the Vereinigung Cockpit pilots' union and Lufthansa since May 2009. The present crisis means that an overall package is now under discussion, which includes potential contributions to the Climb 2011 programme to safeguard earnings in addition to the salary and job protection demands of the cockpit staff. The collective bargaining is still ongoing.

Changes in the group of consolidated companies There were significant changes to the group of consolidated companies compared with the same period last year. British Midland Airways and its holding company British Midland plc were included in the consolidated financial statements for Deutsche Lufthansa AG for the first time as of 1 July 2009, and Austrian Airlines AG and its subsidiaries as of 3 September 2009. The table starting on page 40 shows the other companies which have joined or left the group of consolidated companies compared with year-end 2008 and 30 September 2008. The changes to the group of consolidated companies had significant effects on the consolidated balance sheet and income statement. These are presented in the relevant comments and in the tables on page 42.

Changes in reporting requirements have also arisen from IFRS 8 Operating Segments and IFRIC 13 Customer Loyalty Programmes, which are binding as from 1 January 2009. To facilitate comparison, the figures presented in this report have been calculated as if the amended standards had already been applied last year. See page 40 of the Notes to the consolidated financial statements for further details.

Earnings position

Traffic for the Lufthansa Group went up in the first nine months of 2009 compared with the same period last year due to the growth in the group of consolidated companies. Without the recently consolidated companies, however, the figures reveal a decline, as in prior quarters. The Group's airlines transported some 55 million passengers (+3.0 per cent) and around 1.2 million tonnes of freight and mail (–15.4 per cent). Without AUA and bmi, passenger numbers were down 3.0 per cent on last year. Although capacity rose by 2.1 per cent due to the larger group of consolidated companies, the corresponding sales only went up by 0.1 per cent. As

a result, the adjusted passenger load factor sank by 1.5 percentage points to 78.0 per cent. Without the recently consolidated airlines, a 1.7 per cent reduction in capacity was met by a drop of 3.6 per cent in sales. Sales in the Group's airfreight business (including Swiss WorldCargo and the freight business of the newly consolidated companies) as measured in tonne-kilometres declined by 15.3 per cent, while capacity was cut by 7.5 per cent. The cargo load factor fell by 5.4 percentage points to 63.5 per cent.

At Lufthansa, the traffic figures are a major management metric for the Group's airborne companies. The individual performance figures and indicators for the other business segments (e.g. new orders, order backlog) are presented in the respective chapters.

In the first nine months of the financial year, traffic revenue fell by 16.3 per cent to EUR 12.6bn (adjusted: –19.2 per cent). Lower volumes accounted for 5.7 per cent and pricing for 15.3 per cent of the fall in revenue. Currency effects and consolidation changes had a positive effect, however, of 1.8 per cent and 2.9 per cent, respectively. The Passenger Airline Group accounted for EUR 11.1bn (–12.7 per cent; adjusted for consolidation: –16.2) of traffic revenue in the reporting period and the Logistics segment for EUR 1.3bn (–36.7 per cent).

Other revenue was roughly stable year on year at EUR 3.6bn (–0.2 per cent). Of this total, the MRO segment reported revenue of EUR 1.8bn (+10.9 per cent), IT Services EUR 187m (–9.7 per cent) and Catering EUR 1.2bn (–9.9 per cent). The airborne companies in the Passenger Airline Group and Logistics segments contributed EUR 390m (–7.1 per cent) to other revenue.

Operating expenses

	Jan.–Sept. 2009 in €m	Jan.–Sept. 2008 in €m	Change in %
Cost of materials and services	9,172	10,326	– 11.2
- of which fuel	2,612	4,105	– 36.4
- of which fees and charges	2,705	2,626	3.0
Staff costs	4,307	4,225	1.9
Depreciation, amortisation and impairment	1,061	939	13.0
Other operating expenses	3,270	3,426	– 4.6
- of which sales commission paid to agencies	339	488	– 30.5
Total operating expenses	17,810	18,916	– 5.8

Group revenue slumped by 13.2 per cent to EUR 16.2bn as a result of lower traffic revenue. Without the consolidation changes, revenue would have fallen by 15.7 per cent. In the third quarter the decline was 9.4 per cent to EUR 5.9bn. Adjusted for consolidation changes (–16.9 per cent), this represents a slight improvement compared with the first half-year. The Passenger Airline Group's share of total revenue rose to 74.6 per cent (+0.6 pp) as a result of the changes in the group of consolidated companies. The graph on page 9 shows the development of revenue over the last five years. A breakdown of revenue by region is shown in the segment reporting on page 47.

Revenue distribution by business segment in %

Other operating income went up by EUR 672m or 60.4 per cent to EUR 1.8bn. This rise is partly due to much higher exchange rate gains than last year (up by EUR 377m to EUR 829m), but which were offset by slightly higher exchange rate losses in other operating expenses. Income from the write-back of provisions increased to EUR 45m. The changes in the group of consolidated companies were also responsible for an increase of 2.9 per cent. A badwill of EUR 61m from the first-time consolidation of AUA was recognised immediately in profit and loss in accordance with IFRS. Other income totalling EUR 69m resulted from insurance payments in connection with damages in Scandinavia and compensation for the cancellation of the Internet system Flynet. Income from writeups (EUR 15m) relates partly to the reversal of impairment losses (EUR 7m) on four Airbus A300-600s due to the prices received in US dollars and the rise in the exchange rate of the US dollar. These aircraft have since been sold. Book gains, principally on the disposal of aircraft and financial investments, went up by EUR 8m to

EUR 43m. This includes a book gain of EUR 18m on the sale of the remaining Condor shares in the first quarter 2009. The other items did not change significantly year on year.

Total operating income came to EUR 18.1bn (–8.7 per cent). Adjusted for changes in the group of consolidated companies, the decline amounted to 11.2 per cent.

0 20 60 80 100 Operating expenses contracted to EUR 17.8bn (–5.8 per cent). Without consolidation changes the fall would have been 8.1 per cent. This decline is primarily due to the drop of 11.2 per cent in the cost of materials and services to EUR 9.2bn, which would even have been 14.0 per cent without the consolidation changes. This, in turn, stemmed from the fall of EUR 1.5bn (–36.4 per cent to EUR 2.6bn) in fuel costs. Lower volumes accounted for 6.6 per cent of the fall. The fuel price (after hedging) sank by 42.3 per cent. The higher US dollar exchange rate and the change in the group of consolidated companies had the opposite effect, increasing expenses by 10.5 per cent and 2.1 per cent, respectively. Fuel expenses include a negative result of price hedging of EUR 123m. Fees rose as a result of consolidation changes by 3.0 per cent. Without the newly consolidated companies there would have been a decline of 2.1 per cent, largely due to lower handling charges (–8.0 per cent). Within other purchased services, the main increase came from external MRO services, which were up 23.0 per cent due to volumes and exchange rates. Consolidation changes accounted for an increase of 6.1 per cent.

Staff costs rose by 1.9 per cent. This is in line with a rise of 2.0 per cent in the average number of employees to 110,421, which is solely due to the recently consolidated companies, however. The fact that staff costs adjusted for consolidation changes declined by just 0.4 per cent, while the average number of employees fell by 3.3 per cent, is mainly due to the wage settlements agreed last year and to higher contributions to the pension insurance scheme.

Depreciation and amortisation rose to EUR 1.1bn (+13.0 per cent). Depreciation of aircraft, mainly last year's and this year's new purchases, and consolidation changes accounted for EUR 38m (+5.0 per cent) of the increase. A total of EUR 70m also related to impairment charges on six decommissioned Airbus A300-600s,

twelve Canadair Regional Jet 200s held for sale and depreciation on 20 additional Canadair Regional Jet 200s, which, according to current plans, are to be retired successively through the end of 2010.

Other operating expenses fell by 4.6 per cent to EUR 3.3bn. Higher exchange rate losses (+EUR 58m) and additional expenses due to consolidation changes (+0.4 per cent) were offset by lower agency commissions (EUR –160m), write-downs on current financial investments and current assets (EUR –55m) and indirect staff costs (EUR –42m). The other items did not vary significantly compared with last year.

Profit from operating activities improved considerably compared with the half-year financial statements, coming to EUR 316m. This is nevertheless EUR 620m or 66.2 per cent less than in the same period last year (adjusted for consolidation effects, –74.1 per cent). The operating result after the usual adjustments shown in the table on page 11 came to EUR 226m (previous year: EUR 954m). For the first time this includes consolidation contributions from AUA and bmi totalling EUR 28m as well as the badwill of EUR 61m. The comparable operating margin fell to 2.0 per cent (previous year: 5.4 per cent). This is calculated as operating result plus write-backs of provisions divided by revenue.

The result from equity investments of EUR 47m was EUR 15m above last year's figure. Net interest fell by EUR 106m, mainly due to higher interest on pension provisions and increased interest expense for new borrowing in 2009, coming to EUR –235m. Other financial items amounted to EUR –233m. This includes an impairment charge on the Fraport shares of EUR 140m recognised in the first quarter and negative changes in the value of hedging instruments, which are considered trading transactions under IAS 39 (EUR –58m).

Earnings before interest and taxes (EBIT) includes profit from operating activities as well as the result from equity investments and other financial items. It came to EUR 130m (previous year: EUR 784m). Earnings before taxes (EBT) fell by EUR 760m, coming to EUR –105m. Income taxes improved the result by EUR 85m, largely due to the negative pre-tax result and tax-deductibles on negative option values recognised in prior years in connection with an acquisition. Last year income taxes resulted in a charge of EUR 118m.

The net profit or loss after minority interests (EUR 12m) was EUR –32m (previous year: EUR 529m). Earnings per share were therefore EUR –0.07 (diluted and undiluted, see also the Notes on page 44).

Cash flow and capital expenditure

In the first nine months of the 2009 financial year, the Group generated cash flow from operating activities of EUR 1.4bn (previous year: EUR 2.1bn). The decline is principally due to the fact that earnings before taxes shrank by EUR 760m and declining working capital. By contrast, an increase of EUR 149m in non-cash depreciation and amortisation and the change in income tax payments (+EUR 145m) had a positive impact on cash flow from operating activities.

Primary, secondary and financial investments (Jan.–Sept.) in €m

Gross capital expenditure came to EUR 1.8bn, of which EUR 1.4bn was for final payments on three Airbus A340s, five Airbus A330s, eight Airbus A321s, four Airbus A320s, four Airbus A319s, six Canadair Regional Jet 900s, eleven Embraer E195s and five Cessna Citations, as well as for aircraft overhauls and advance payments on aircraft. A total of EUR 107m was spent to purchase financial investments. The acquisition of 45 per cent of the shares in SN Airholding accounted for EUR 65m and the purchase of additional JetBlue shares as part of a capital increase for EUR 13m. Repairable spare parts were purchased for a further EUR 139m. A total of EUR 56m after deduction of cash balances acquired was spent on purchasing consolidated companies (particularly AUA and bmi). In addition, a total of EUR 1.6bn was invested in current securities and funds, net of disposals. On the income side, the Lufthansa Group received interest and dividend payments of EUR 162m. Proceeds on the disposal of assets contributed EUR 298m, of which EUR 77m came from the sale of the remaining Condor shares and repayment of related lending. In total, EUR 3.1bn in net cash was used for investing and cash management activities (previous year: EUR 2.0bn).

Free cash flow, calculated as cash flow from operating activities less net capital expenditure, was slightly negative in the third quarter at EUR –18m. The detailed cash flow statement can be found on page 39.

Financing activities, i.e. new borrowing, scheduled capital repayments on existing borrowing, dividend payments to shareholders of Deutsche Lufthansa AG and to minority shareholders, and current interest payments, produced a net cash inflow of EUR 1.5bn. Successful fundraising in 2009 attracted EUR 2.5bn, particularly from the issue of non-current bonded loans, two bonds and aircraft financing arrangements. The second bond for EUR 750m was issued on 1 July 2009.

After accounting for lower valuations of cash and cash equivalents due to exchange rate movements (EUR –16m), total cash and cash equivalents declined in the first nine months by EUR 85m to EUR 1.4bn (previous year: EUR 1.6bn). The internal financing ratio was 80.9 per cent (previous year: 129.0 per cent). Overall, cash including securities at the end of the third quarter rose to EUR 4.8bn (previous year: EUR 3.4bn).

Net assets and financial position

The balance sheet structure as of 30 September 2009 is marked by the changes in the group of consolidated companies (particularly AUA and bmi). They have had significant effects, which are reflected in changes in individual balance sheet items. The effects due to changes in the group of consolidated companies are therefore given in brackets.

The consolidated balance sheet total at the end of the third quarter of 2009 was EUR 4.9bn higher (of which EUR 3.3bn is from changes in the group of consolidated companies) than the year-end figure for 2008 at EUR 27.3bn. While non-current assets increased by EUR 2.5bn (EUR 2.1bn) to EUR 17.4bn, current assets rose by EUR 2.4bn (EUR 1.2bn) to EUR 9.8bn.

Within non-current assets the item aircraft and reserve engines went up by EUR 1.6bn (of which EUR 1.2bn were due to consolidation changes) to EUR 10.3bn. The rise of EUR 670m in intangible assets was almost entirely due to changes in the group of consolidated companies. Miscellaneous property, plant and equipment increased – mainly due to consolidation effects – by EUR 226m. Equity investments rose by EUR 105m (EUR 46m). By contrast, derivative financial instruments (predominantly from currency hedges) declined by EUR 122m, loans and other receivables by EUR 85m and non-current securities by EUR 81m. Within current assets, receivables increased by EUR 895m (EUR 634m). Securities rose by EUR 1.6bn, largely due to the investment of the funds raised. Cash balances sank by EUR 85m in contrast, despite the EUR 431m in additional cash from newly consolidated companies. The proportion of non-current assets in the balance sheet total declined from 66.8 per cent at year-end 2008 to currently 63.9 per cent.

With regard to shareholders' equity and liabilities, the measurement change for miles awarded under bonus miles programmes but not yet used, in accordance with IFRIC 13, meant that the corresponding obligations rose to EUR 1.5bn as of 1 January 2009 compared with EUR 1.0bn as of 31 December 2008. At the same time, deferred tax liabilities sank by EUR 103m and shareholders' equity by EUR 325m to EUR 6.6bn. This change reduced the equity ratio as of 1 January 2009 from 30.9 per cent to 29.4 per cent.

At the end of the third quarter, shareholders' equity (including minority interests) dropped by EUR 457m compared with the adjusted figure as of 1 January 2009. The fall is predominantly due to the negative post-tax result of EUR –20m and the dividend payment of EUR 320m for the 2008 financial year. At the end of the reporting period, the equity ratio was 22.5 per cent and therefore below the medium-term target of 30 per cent.

Reconciliation of results

	Jan.–Sept. 2009		Jan. –Sept. 2008
in €m	Income statement	Reconciliation with operating result	Income statement	Reconciliation with operating result
Revenue	16,162		18,611
Changes in inventories	179		128
Other operating income	1,785		1,113
- of which income from book gains and current financial investments		– 53		– 38
- of which income from reversal of provisions		– 93		– 48
- of which write-ups on fixed assets		– 15		– 2
- of which period-end valuation of non-current financial liabilities		– 26
Total operating income	18,126	– 187	19,852	– 88
Cost of materials and services	– 9,172		– 10,326
Staff costs	– 4,307		– 4,225
- of which past service cost		– 18
Depreciation, amortisation and impairment	– 1,061		– 939
- of which impairment charge		70
Other operating expenses	– 3,270		– 3,426
- of which expenses incurred from book losses and current financial investments		33		90
- of which period-end valuation of non-current financial liabilities		12		16
- of which provisions for contingent losses
Total operating expenses	– 17,810	97	– 18,916	106
Profit from operating activities	316		936
Total from reconciliation with operating result		– 90		18
Operating result		226		954
Income from subsidiaries, joint ventures and associates	47		32
Other financial items	– 233		– 184
EBIT	130		784
Write-downs (on profit from operating activities)	1,063		939
Write-downs on financial investments (incl. at equity)	146		115
EBITDA	1,339		1,838

Non-current liabilities and provisions went up by EUR 3.9bn (EUR 1.8bn) to EUR 11.6bn, and current borrowing also rose by EUR 1.5bn (EUR 1.5bn) to EUR 9.5bn. The rise in non-current borrowing to EUR 11.6bn after adjustment for consolidation changes is due to increased financial debt of EUR 2.1bn. The newly issued bond and the non-current bonded loans were largely responsible for the increase.

Adjusted for the effects of changes in the group of consolidated companies, current borrowing declined by EUR 58m (including consolidation effects: EUR +1.5bn). The increase in liabilities from unused flight documents (EUR +290m) due to seasonal and billing factors is more than made up for by lower other provisions (EUR –48m) and the decline in negative market values of derivative financial instruments (EUR –302m).

As of 30 September 2009, net indebtedness came to EUR 1.9bn (including EUR 368m in non-current liquidity reserves). At year-end 2008, the Group still had net debt of EUR –125m. Gearing, including pension provisions, came to 79.6 per cent (year-end 2008: 34.5 per cent) and was therefore outside the target corridor of 40 to 60 per cent.

Group fleet 1)

Number of commercial aircraft of Deutsche Lufthansa AG (LH), SWISS (LX), Lufthansa Cargo (LCAG), Lufthansa CityLine (CLH), Air Dolomiti (EN), Austrian Airlines (OS), British Midland (BD), Eurowings (EW) and Germanwings (4U) as of 30 September 2009

Manufacturer/type	Number									Group fleet	of which finance lease	of which operating lease	Change as of 31.12.2008	Change as of 30.9.2008
	LH	LX	LCAG CLH		EN	OS	BD	EW	4U
Airbus A300	8									8			– 5	– 5
Airbus A3107)	4									4
Airbus A319	24	7				7	11		27	76	3	23	+ 20	+ 20
Airbus A320	36	23				8	10			77	3	15	+ 19	+ 22
Airbus A321	39	6				6	9			60	2	10	+ 21	+ 21
Airbus A330	15	13				1	3			32		10	+ 7	+ 7
Airbus A340	52	13				2				67		4	+ 3	+ 4
Airbus A380										0
Boeing 737	63					11	17			91		17	+ 28	+ 28
Boeing 747	30									30
Boeing 767						6				6		2	+ 6	+ 6
Boeing 777						4				4			+ 4	+ 4
Boeing MD-11F			19							19
F70						9				9	1		+ 9	+ 9
F100						15				15			+ 15	+ 15
DH8						19				19	2		+ 19	+ 19
Canadair Regional Jet	152)			54		13		10		92		10	+ 18	+ 18
ATR6)	5				14			5		24	6	11	– 1	– 2
Avro RJ		20		18						38		19
BAe 146	23)							12		14		13	– 6	– 6
Embraer	115)	47)				3	18			36	3	8	+ 32	+ 32
Cessna	44)									4			+ 2	+ 2
Total aircraft	308	86	19	72	14	104	68	27	27	725	20	142	191	194

1) Includes the consolidation of AUA and bmi.

2) Leased out to Eurowings.

3) Leased out to Air Dolomiti.

4) Leased out to SWISS.

5) Five aircraft are leased to Air Dolomiti, five to Augsburg Airways and one to CLH.

6) Nine aircraft are leased to Contact Air and one to Air Dolomiti.

7) Leased out to companies outside the Group.

Passenger Airline Group segment

Passenger Airline Group						Lufthansa Passenger Airlines		Passenger Airline Group
		Jan.– Sept. 2009	Jan. – Sept. 20083)	Change in %	Jan.– Sept. 2009	Change in %	July– Sept. 2009	July– Sept. 20083)	Change in %
Revenue	€m	12,050	13,770	– 12.5	9,100	– 16.7	4,578	4,871	– 6.0
- of which with companies of the Lufthansa Group	€m	442	477	– 7.3			153	167	– 8.4
Operating result	€m	239	507	– 52.9	36	– 87.4	204	144	41.7
Segment result	€m	306	517	– 40.8			240	155	54.8
EBITDA1)	€m	1,171	1,142	2.5	779	5.4	626	260	140.8
Segment capital expenditure	€m	1,462	1,079	35.5			486	376	29.3
Employees as of 30.9	number	58,907	46,980	25.4	37,661	– 1.9	58,907	46,980	25.4
Passengers 2)	thousands	55,368	53,767	3.0	41,921	– 3.9	22,164	18,922	17.1
Available seat-kilometres 2)	millions	150,908	147,875	2.1	119,470	– 1.9	56,756	52,004	9.1
Revenue passenger kilometres 2)	millions	117,635	117,556	0.1	92,798	– 3.8	46,780	42,470	10.1
Passenger load factor 2)	%	78.0	79.5	– 1.5	77.7	– 1.5	82.4	81.7	0.7

1) Before profit/loss assumed from other companies.

2) Without Germanwings.

3) Last year's figures have been adjusted due to a new segment structure (IFRS 8) and valuation changes in line with IFRIC 13.

Course of business The economic environment remains very difficult, and this had a distinct negative effect on the segment's performance in the third quarter. The load factor improved slightly in the summer months due to seasonally higher demand, the increasing effectiveness of capacity management and weak figures for last year due to strike action, but traffic revenue still fell sharply as a result of the steep decline in average yields since the beginning of the year. In addition to ongoing capacity adjustments, the Climb 2011 programme was set up to safeguard earnings at Lufthansa Passenger Airlines, with the aim of shrinking the cost base sustainably by EUR 1bn by the end of 2011. In the course of the third quarter its main focus areas were specified. For the first time, the operating result includes the consolidation of AUA and bmi. An operating profit was achieved in a difficult environment, but it was well below last year's, which was particularly successful.

Segment structure In addition to Lufthansa Passenger Airlines (including the regional airlines, Miles & More and WorldShop), Swiss International Air Lines AG, Germanwings and the equity investments in SunExpress and JetBlue, the segment expanded to include the following companies in the third quarter:

In June, 45 per cent of SN Airholding SA/NV, the parent company of Brussels Airlines, was acquired following clearance from competition authorities. The company has been consolidated using the equity method since 30 June 2009.

bmi was initially accounted for using the equity method, but following the majority acquisition it has been fully consolidated since July 2009. The shares are held by the British LHBD Holding Limited (LHBD), a 35 per cent subsidiary of Lufthansa. It is to acquire a further 20 per cent of the bmi shares from the SAS Group from 1 November, and will then be the sole shareholder. Lufthansa anticipates acquiring 100 per cent of LHBD as soon as the air traffic rights are confirmed.

Once all conditions precedent were met, Lufthansa, Austrian Airlines (AUA) and Österreichische Industrieholding AG completed the takeover of AUA by Lufthansa. This means that AUA has been a fully consolidated part of the Lufthansa Group's Passenger Airline Group since September 2009.

In the course of expanding the segment, the reporting structure has been adapted to improve readability. The comments mainly relate to the business segment, to Lufthansa Passenger Airlines and to key drivers of the other companies, in order to elucidate the segment's economic performance. Further information on the other companies can be found in the overview starting on page 18 and in the references to the companies' own publications.

* Incl. Eurowings.

The new accounting standard IFRS 8 Operating Segments applies as of 1 January 2009. The segment previously known as Passenger Transportation is therefore now shown under the name of Passenger Airline Group, without the centralised Group functions. The operating result for the new segment was adjusted accordingly for the same period last year and increased by EUR 76m as a result. By contrast, the application of IFRIC 13 Customer Loyalty Programmes depressed earnings by EUR 30m. In accordance with this standard, which has been binding since 1 January 2009, air miles distributed as part of bonus miles programmes and as yet unused are to be recognised at fair value using the deferred revenue method. To facilitate comparison, the figures presented in this report have been calculated as if the amended standards had already been applied last year. In total, these two effects increased last year's operating result by EUR 46m to EUR 507m. Further details are available in the Notes starting on page 40.

Product and route network In response to the persistently low demand and difficult economic conditions, Lufthansa Passenger Airlines have reduced their number of flights by 5.7 per cent and capacities by 1.9 per cent since the start of the year. A decision has already been taken as part of Climb 2011 to expedite withdrawal from the 50-seater segment. This will reduce the regional fleets at CityLine and Eurowings by around one-third in total by the end of 2010. We will continue to monitor demand closely in order to adjust capacities as necessary. The other companies in the segment have also taken steps to respond appropriately to continuing weak demand and the deterioration of average yields.

In managing the crisis Lufthansa is also exploiting opportunities to develop its route network in growth markets. The route network to Africa has been expanded. As of February 2009, Lufthansa Italia also flies from Milan Malpensa to eleven destinations in Europe with its fleet of eight Airbus A319s. The extended airline group enables synergies to be applied in opening up new markets. More long-haul flights to Africa, for instance, are being offered on a code-sharing basis in cooperation with Brussels Airlines. Since September 2009, Brussels Airlines has been offering seven new connections from Brussels to Africa in addition to the previous flights. Immediately after competition clearance was given, Lufthansa and Brussels Airlines opened up their route networks to their respective passengers on all routes between Germany and Belgium and on selected European connections, and harmonised their frequent flyer programmes. Now that the US Department of Transportation has given its approval, Lufthansa is to intensify its collaboration with JetBlue by means of a code-share agreement. The agreement means that JetBlue will offer Lufthansa customers increased opportunities for travelling to twelve destinations in the USA and Puerto Rico via New York (JFK) and Boston.

Despite the economic crisis Lufthansa is upholding its commitment to the environment. Since September, Lufthansa and SWISS customers have been able to offset their CO2 emissions voluntarily using premium miles from the frequent flyer programme Miles & More. The Swiss foundation myclimate receives a corresponding amount of money from Miles & More, which it invests in high-quality climate protection projects.

Lufthansa CityLine has been certified for its successful environmental management for the fourth time. It again received the certificate under the European Eco-Management and Audit Scheme (EMAS). The company was also re-certified under the international environmental standard ISO 14001. CityLine was the first airline to receive both certificates and today, is one of two airlines worldwide to meet both environmental standards.

Operating performance The downward trend in passenger numbers has been affecting nearly all companies in the segment since the beginning of the year. In the third quarter, the traffic figures were also influenced by the initial consolidation of bmi and AUA. Over the full reporting period this meant that growth in passenger numbers for the segment came to 3.0 per cent. Lufthansa Passenger Airlines registered a fall of 3.9 per cent in total, to 41.9 million passengers. SWISS, however, was able to increase passenger volume by 1.3 per cent. This was in addition to the effect of consolidating AUA and bmi. Segment capacity rose by 2.1 per cent with sales roughly stable (+0.1 per cent); the passenger load factor fell by 1.5 percentage points. Adjusted for consolidation effects, capacity declined by 1.7 per cent, however, and sales volumes by 3.6 per cent. The passenger load factor also sank by 1.5 percentage points on an adjusted basis. With the help of a 1.9 per cent reduction in capacity, Lufthansa Passenger Airlines were able to absorb at least part of the slump in demand (–3.8 per cent).

The passenger migration clearly visible since the end of last year from the premium segment (First and Business Class) to the Economy Class continued in the third quarter, on top of the unbroken fall in demand. It was not least this factor which adversely impacted traffic revenue and average yields for all the companies in the segment. Traffic revenue was down 12.9 per cent year on year. Average yields also tumbled compared with last year, by 12.9 per cent, despite minor positive effects from currency movements (1.7 per cent) and fuel surcharges (0.2 per cent).

In Europe, capacity of the segment went up by a total of 7.1 per cent. The passenger load factor remained stable (–0.1 percentage points). Without consolidation effects the cut in capacity came to 1.0 per cent and the passenger load factor totalled 69.9 per cent (–0.6 percentage points). Traffic revenue fell by 13.4 per cent overall and average yields by 19.1 per cent.

A sharp cut in capacity of 4.5 per cent for the Americas traffic region (North and South) meant that the load factor remained high at 84.1 per cent (–0.9 percentage points). The effects of consolidation on traffic were not particularly marked here. Average yields also contracted by 11.8 per cent and traffic revenue was down by 16.7 per cent.

In the Asia/Pacific region there is also no sign of a recovery as yet. The 1.2 per cent cut in capacity was accompanied by a fall in the passenger load factor of 1.7 percentage points. In this region, too, the picture does not differ significantly without the effects of consolidation. Traffic revenue was also depleted by a further fall in average yields (–13.5 per cent) and sank by 16.2 per cent.

Consolidation of the new companies did have a pronounced effect in the Middle East/Africa traffic region, however. Capacity swelled by 21.4 per cent, against which the passenger load factor declined by just 4.8 percentage points to 72.8 per cent. Adjusted for consolidation, the increase in capacity came to 12.2 per cent and the passenger load factor to 72.6 per cent (–5.0 percentage points). Traffic revenue went up by 6.7 per cent despite falling average yields (–6.2 per cent).

Fuel surcharges were increased over the course of the year due to sharp oil price rises and have been maintained, as the situation has not changed. We continue to monitor changes in the oil price and will make further adjustments dependent on future price levels.

All companies in the segment continued their efforts to manage capacity and costs. Focus areas were identified as part of the Climb 2011 programme at Lufthansa Passenger Airlines in order to meet the target of improving earnings by EUR 1bn by the end of 2011. The administrative workload is to be carried out with 20 per cent fewer staff and staff productivity increased by 10 per cent overall. Requirements in terms of possible savings are being reviewed jointly with internal and external suppliers. The business model is being put under the microscope, particularly in European direct traffic, in terms of the scope of locations, fleet and partners. New pricing models are also being investigated and capital expenditure postponed at the same time.

Revenue and earnings development As a result of diminishing traffic, traffic revenue fell to EUR 11.1bn compared with last year's strong performance (–12.7 per cent). Without the newly consolidated AUA and bmi the decline would have been 16.2 per cent. Lower sales volumes accounted for 3.8 per cent of the fall in revenue and lower pricing for 14.1 per cent. By contrast, the changes in the group of consolidated companies and positive currency effects improved traffic revenue by 3.5 per cent and 1.7 per cent, respectively.

Other operating income climbed by EUR 670m to around EUR 1.0bn, largely due to higher currency gains compared with last year, damages for the Flynet Internet system cancelled by Boeing and income of EUR 61m from the write-back of a badwill recognised on the initial consolidation of AUA.

Total operating revenue declined by 7.4 per cent to EUR 13.1bn. Adjusted for consolidation, total operating revenue would have fallen by 11.3 per cent.

Operating expenses were successfully cut by 5.7 per cent year on year to EUR 12.8bn. Without the new companies AUA and bmi, the reduction would have been even greater at 9.0 per cent. This is largely due to the much lower cost of materials and services of

EUR 7.7bn (–11.0 per cent, adjusted for consolidation: –14.7 per cent). The main driver for which was fuel costs, which fell by 34.0 per cent to EUR 2.4bn (adjusted: –36.3 per cent). Fees and charges rose, mainly as a result of consolidation changes, by 5.6 per cent (adjusted: –0.5 per cent) to EUR 2.6bn.

Staff costs went up by 4.0 per cent to EUR 2.4bn and the average number of employees rose to 50,387 (+8.4 per cent). Without the consolidation changes, staff costs would have remained more or less unchanged and the average number of employees would have been 0.9 per cent lower. In this respect, the effects of wage settlements agreed last year, lower expenses for variable remuneration components and increased contributions to the pension insurance scheme balanced each other out. The hiring freeze imposed in summer 2008 still applies. Lufthansa Passenger Airlines, AUA and bmi are also striving to make further job cuts.

Depreciation and amortisation rose by 2.9 per cent due to the delivery of new aircraft and by 3.2 per cent as a result of consolidation changes, to EUR 729m in total.

Other operating expenses went up as a result of the recent consolidation by 2.0 per cent to EUR 2.0bn. Without AUA and bmi, other operating expenses would have risen by 1.4 per cent, particularly due to higher exchange rate losses (+EUR 160m) and lower agency commissions (EUR –130m).

Trends in traffic regions

Passenger Airline Group (excl. Germanwings)

	Number of passengers in thousands			Available seat-kilometres in millions		Revenue passenger-kilometres in millions		Passenger load factor in %
	Jan. – Sept. 2009	Change in %	Jan. – Sept. 2009	Change in %	Jan.– Sept. 2009	Change in %	Jan. – Sept. 2009	Change in pts
Europe	43,214	4.3	48,721	7.1	34,310	7.0	70.4	– 0.1
America	5,879	– 5.4	51,293	– 4.5	43,149	– 5.6	84.1	– 0.9
Asia/Pacific	3,683	– 4.6	35,581	– 1.2	29,031	– 3.2	81.6	– 1.7
Middle East/Africa	2,569	15.1	15,279	21.4	11,120	13.8	72.8	– 4.8
Total scheduled services	55,346	3.0	150,874	2.1	117,609	0.1	78.0	– 1.5
Charter	22	3.3	35	– 32.6	26	– 23.8	74.4	8.7
Total	55,368	3.0	150,908	2.1	117,635	0.1	78.0	– 1.5

The operating result dropped compared with last year's strong performance by EUR 268m to EUR 239m. Lufthansa Passenger Airlines contributed an operating profit of EUR 36m. The consolidation of AUA and bmi added a total of EUR 89m to the operating result. The earnings contributions of the individual companies are shown in the overview starting on page 18.

Other segment income went up by EUR 110m to EUR 153m, mainly due to book gains on the disposal of aircraft (+EUR 30m) and income from higher write-backs of provisions (+EUR 24m). Other segment expenses came to EUR 85m (previous year: EUR 3m). These include a total of EUR 70m in impairment charges on six decommissioned Airbus A300-600s, twelve Canadair Regional Jet 200s held for sale and 20 additional Canadair Regional Jet 200s, which, according to current plans, are to be retired successively through the end of 2010. The result of the equity valuation (including bmi up to 30 June 2009 and SunExpress) nearly broke even (previous year: EUR –30m). The segment result fell overall by EUR 211m to EUR 306m.

Segment capital expenditure was up 35.5 per cent on the year to EUR 1.5bn due to aircraft deliveries. In the first nine months of the year, the Passenger Airline Group invested in three Airbus A340s, five Airbus A330s, eight Airbus A321s, four Airbus A320s, four Airbus A319s, six Canadair Regional Jet 900s, eleven Embraer E195s and two Cessna Citations.

Outlook The market environment for passenger transportation is still very difficult. Initial signs of a stabilisation in volumes are far away from making up for the enormous and unrelenting pressure stemming from the massive fall in price levels. The industry is thus still a long way away from a recovery. Furthermore, it has to be assumed that a large part of the fall in revenue – particularly in European traffic – is structural in nature and will therefore have a lasting adverse effect. The airlines can therefore only reply to these challenges with a structural response. On the cost side, volatile fuel prices are also an issue. They are expected to continue their upward trend in anticipation of an economic recovery.

Lufthansa and its partners in the airline group are monitoring developments continually and taking both short-term and structural steps to combat them. In particular, Austrian Airlines and British Midland, both strongly hit by the crisis, are making considerable efforts to restructure, which are intended to bring them back to profitability in the medium term. Lufthansa Passenger Airlines, SWISS and Germanwings are, however, also making great efforts to overcome the challenges. Of particular importance is the Lufthansa Passenger Airlines' programme Climb 2011, which was launched in the summer. Its activities and sub-projects are to be further specified and implemented in the months ahead. The target is to improve earnings by EUR 1bn by the end of 2011, principally by reducing the cost base.

For the remainder of the current year, the dominant factors are expected to remain weak demand and continuing heavy price pressure. These effects may be accentuated if the economic crisis blights consumer spending in the winter months, which are usually weaker anyway. Lufthansa Passenger Airlines and its partners are therefore preparing for a challenging fourth quarter.

Against this backdrop, a sharp fall in revenue and pressure on earnings are assumed for the full year. The new companies are also expected to deliver a negative earnings contribution in the fourth quarter. All endeavours are therefore still directed towards avoiding an operating loss for the segment. The achievement of this target is subject to considerable risk, though. Thus, comprehensive measures in capacity and cost management by all companies in the segment are essential. Despite the steps already taken, Lufthansa Passenger Airlines are expected to contribute a loss to the operating result of the segment for the full year.

Other companies in the Passenger Airline Group

SWISS

SWISS1)
	Jan.–Sept. 2009	Change %
Revenue	2,066	– 14.5
Operating result	75	– 67.0
EBITDA	217	– 30.2
Employees (30.9)	7,234	– 4.1

1) Further information on SWISS can be found at www.swiss.com.

Traffic at Swiss International Air Lines AG was dominated by the difficult ongoing economic conditions. Weak demand and the subsequent deterioration of average yields continued in the third quarter, which is traditionally the strongest. Freight business put in a poor performance as a result of the economic crisis. Nevertheless, the company has so far been able to absorb the brunt of the crisis by means of extensive cost and capacity measures. In the first nine months, SWISS was thus able to report an operating result of EUR 75m (previous year: EUR 227m), despite the sharp fall in revenue of 14.4 per cent.

SWISS reduced its capacity by 3.6 per cent year on year over the reporting period. Two wide-bodied jets have been temporarily grounded. Capacities are to be reduced year on year by a total of 5.2 per cent for the winter flight schedule. Connections where demand has risen, such as to New York and Boston, Bangkok and Berlin, are being introduced or scaled up in contrast.

At Swiss WorldCargo, reduced working hours have been in place since June. Thanks to its successful management of capacity and costs, SWISS is expecting a positive operating result for the full year.

SWISS is pursuing its programme of capital expenditure in order to secure its long-term market position and strengthened its competitiveness by introducing a new in-flight product in all three classes on the Airbus A330-300. The A340 fleet is also to be equipped with a new Business Class and other features by 2011. In the spring, SWISS was able to underline its good reputation when it won the Skytrax 2009 World Airline Award as "Best Airline in Europe".

On 19 October, Christoph Franz and Stefan Lauer took over the seats previously held by Wolfgang Mayrhuber and Dr Klaus Schlede on the Administrative Board of SWISS.

Austrian Airlines

Austrian Airlines 1)
	Jan.–Sept. 20092)	Change %
Revenue	188
Operating result	38
EBITDA	53
Employees (30.9)	8,356

1) Further information on Austrian Airlines can be found at www.aua.com. 2) AUA has been fully consolidated since 3 September 2009.

Now that the takeover of Austrian Airlines AG by Lufthansa has been completed, the integration activities on the part of both companies are continuing apace. Austrian Airlines have been fully consolidated in the financial statements for the Lufthansa Group since 3 September.

In view of persistently weak demand, passenger figures at AUA for the period January to September were 12.8 per cent down on last year at around 7.6 million. As a result of focused capacity adjustments, the overall load factor sank by just 1.8 percentage points to 73.9 per cent. A slight improvement in the load factor was visible in the third quarter, especially in Western Europe and on long-haul routes.

In the first nine months of the financial year, Austrian Airlines reported a fall of 21.1 per cent in revenue to around EUR 1.5bn and EBIT of EUR –225m. Lufthansa's quarterly financial statements include a revenue share for the month of September (consolidated since 3 September) of EUR 188m as well as an operating profit of EUR 38m, which includes a positive one-time effect of EUR 26m.

The economic situation at Austrian Airlines remains tense. The restructuring activities are therefore being continued and intensified. A package of short-term measures was adopted for savings of EUR 225m. It includes capacity adjustments of around 10 per cent, route adjustments, human resources measures, organisational optimisation and negotiations with system partners, and looks likely to outperform the targets set for 2009. Additional restructuring activities include another package of cost-savings for EUR 150m in human resources and the retirement of the 50-seater fleet as of the summer flight schedule 2010, as well as organisational restructuring within the company. AUA will nevertheless report an operating loss for the current year.

Even at times of upheaval, Austrian Airlines remains true to its quality promise. This was demonstrated by its being voted to second place in the European traffic category by the readers of Business Traveller magazine at the beginning of the year.

As of 3 September, Stefan Lauer became Chairman and Wolfgang Mayrhuber Deputy Chairman of the Austrian Airlines Supervisory Board.

British Midland

British Midland1)
	Jan.–Sept. 20092)	Change %
Revenue	301
Operating result	– 10
EBITDA	– 14
Employees (30.9)	4,559

1) Further information on British Midland can be found at www.flybmi.com.

2) bmi has been fully consolidated since 1 July 2009.

British Midland PLC (bmi) has been fully consolidated since July 2009. After reaching an agreement with SAS on the purchase of its 20 per cent stake, Lufthansa will be the sole shareholder in bmi from 1 November, via LHBD Holding Ltd.

As the second-largest airline at Heathrow airport, bmi offers weekly flights to destinations in the UK, Europe, the Middle East and Africa. The company has three business segments: bmi mainline, bmi regional and bmibaby. Business in all three segments has been adversely affected by the global recession. Measures have been adopted to increase results sustainably and make good the shortfall in revenue. As of November, bmi mainline will no longer be offering services to Venice and Palma de Mallorca, for instance. Certain long and short-haul connections, e.g. from Manchester, Cardiff and Birmingham had already been discontinued. A comprehensive restructuring plan to increase profitability is currently being prepared.

Nevertheless, bmi is continuing to expand its route network in specific high-potential niche markets, even during restructuring. A service to Kiev in the Ukraine has recently been included in the flight plan, for instance. Following EasyJet's withdrawal from East Midlands airport, bmibaby is to extend its capacity there in future. bmi regional also launched a charter service with two planes between Britain and Toulouse on behalf of Airbus. In June, bmi opened a new premium lounge at Heathrow airport for Business Class passengers on international flights. At the same time, synergies are expected from intensifying the collaboration with Lufthansa, particularly in distribution. However, for the full year an operating loss is to be expected.

With effect from 1 July 2009, Stefan Lauer was appointed as Chairman of the Board of Directors of British Midland. In doing so, he took over the position from Sir Michael Bishop, who has left the Board. Wolfgang Prock-Schauer was also initially appointed as Deputy CEO of bmi with effect from 1 November this year. As of 1 December 2009 he is to succeed Nigel Turner in his capacity as CEO. Nigel Turner will then move to the Board of Directors as Deputy Chairman. Mr Prock-Schauer has been active successfully as CEO of Jet Airways in India since 2003, and has many years of senior management experience at Austrian Airlines and the Star Alliance.

Germanwings

Germanwings 1)
	Jan.–Sept. 2009	Change %
Revenue	451	– 7.6
Operating result	39	425.0
EBITDA	64	112.3
Employees (30.9)	1,097	3.3

1) Further information on Germanwings can be found at www.germanwings.com.

Germanwings has successfully established itself in the no-frills segment in Europe. In the first nine months of the year, it was able to increase its operating result, despite a fall in revenue due to reduced capacity.

With its current fleet of 27 Airbus A319s, Germanwings offers flights from its five locations, Cologne/Bonn, Stuttgart, Berlin-Schönefeld, Hamburg and Dortmund, to 65 destinations on the European continent. In order to ensure its long-term competitiveness, the company restructured its network in late 2008 and reduced the fleet by five A319s. Although the aviation industry as a whole has been hard hit by the global economic and financial crisis, Germanwings can take advantage of available opportunities and is benefiting, for instance, from the changed travel patterns of many business customers. In spring, the company therefore integrated two new Airbus A319s into its fleet and leased additional capacity for the summer. From the autumn, the sites in Cologne/Bonn and Hamburg are to be expanded and new destinations included in the flight plan.

Despite a fall in the load factor of 2.5 percentage points to 80.8 per cent, average yields have been maintained at last year's level. The lost volume was also fully offset by the change in the kerosene price. As a result, the company achieved an operating result of EUR 39m and an operating margin of 8.4 per cent. Overall, Germanwings is expecting a positive operating result for the full year, which is set to be well above last year's.

Germanwings was rewarded with numerous awards over the past nine months. The company received two respected creative prizes, the Silver Lion in Cannes and the Bronze Nail from the Art Directors Club (ADC). Germanwings' innovative pricing concept also won respect. Its "seating lottery" was awarded the German Dialogue Marketing Prize.

On 1 June 2009, Dr Axel Schmidt succeeded Dr Joachim Klein on the Management Board. In order to respond even better to the increased demands of Eurowings management, Dr Klein will concentrate on his position as Executive Board member of Eurowings. At the same, the contract with Thomas Winkelman, the spokesman of the Germanwings Management Board, was renewed until 2014.

Logistics business segment

Logistics
		Jan.– Sept. 2009	Jan. – Sept. 2008	Change in %	July– Sept. 2009	July– Sept. 2008	Change in %
Revenue	€m	1,389	2,179	– 36.3	473	758	– 37.6
- of which with companies of the Lufthansa Group	€m	18	20	– 10.0	6	7	– 14.3
Operating result	€m	– 200	160		– 66	46
Segment result	€m	– 193	177		– 61	51
EBITDA	€m	– 100	269		– 29	82
Segment capital expenditure	€m	17	12	41.7	6	3	100.0
Employees as of 30.9	number	4,542	4,654	– 2.4	4,542	4,654	– 2.4
Freight and mail	thousand tonnes	1,092	1,287	– 15.2	397,569	418,077	– 4.9
Available cargo tonne-kilometres	millions	8,632	9,461	– 8.8	2,929	3,263	– 10.3
Revenue cargo tonne-kilometres	millions	5,298	6,285	– 15.7	1,946	2,058	– 5.4
Cargo load factor	%	61.4	66.4	– 5.0 pts	66.5	63.1	3.4 pts

Course of business In the first nine months of the year, Lufthansa Cargo suffered a sharp fall in revenue and a considerable operating loss. To overcome the effects of the recession, the steps initiated to safeguard earnings at the end of 2008 were ramped up over the reporting period: capacities were decreased further, the cost-cutting programme expanded in several phases and reduced working hours introduced at sites in Germany, which were raised from 20 to 25 per cent in the second quarter. Given the precipitate decline in volumes and pricing, all these measures could not, however, prevent the first three quarters from closing with considerable operating losses.

Segment structure In addition to Lufthansa Cargo AG, the Logistics segment also includes Lufthansa Cargo Charter Agency GmbH, Jettainer GmbH, which specialises in the management of airfreight containers, and the equity investments in AeroLogic GmbH and Jade Cargo International Ltd. At the start of the year, Lufthansa Cargo also took over the business of its subsidiary cargo counts GmbH.

AeroLogic GmbH started flight operations in June this year. The joint venture between DHL Express and Lufthansa Cargo flies its Boeing 777F aircraft directly between its home airport Leipzig/Halle and growth markets in Asia.

Product and route network The economic and financial crisis and the subsequent decline in exports worldwide has had a lasting impact on Lufthansa Cargo. As a result, it decommissioned three of its freighters altogether as of 30 September 2009 and reduced the use of its remaining fleet. This meant that capacities equivalent to around four aircraft are left unused.

In order to participate in key developments in growth regions despite this, Lufthansa Cargo is continuing to position itself in specific important markets such as Mexico, Columbia and Brazil. Since July, it has also been offering a service from Chicago to Amsterdam, which provides a link to the Jade Cargo network for transport to Asia.

Additional synergies within the Cargo network are also being used. Lufthansa Cargo has intensified the collaboration with Croatia Airlines in place since 2007. This means that clients can be offered additional capacity to Eastern Europe. Lufthansa Cargo was also able to win new clients for handling processes at four US stations.

In September, the first joint warehouse handling tender by three members of the Lufthansa Group came to a successful close. For the next four years, Swiss WorldCargo, Brussels Airlines and Lufthansa Cargo are to have a common handling provider in

Brussels. The new contract will realise annual savings of more than EUR 1m. The total tonnage lead to above-average synergy effects, which meant better rates for the cargo divisions of the Lufthansa Group mentioned.

Operating performance The ongoing weak demand (tonne-kilometres transported down by 15.2 per cent year on year) meant that the cargo load factor in the first nine months of the year sank by 5.0 percentage points to 61.4 per cent, despite wide-ranging capacity measures. This was accompanied by a collapse in average yields of 23.8 per cent compared with last year. Lufthansa Cargo countered the slump in demand for freight transport by cutting capacity and continuing to optimise its flight routes. The success of this scheduling was evidenced by an increased overall load factor in the third quarter, when the cargo load factor was 2.3 percentage points higher than last year at 65.4 per cent. Additional short-term services to Asia and South America strengthened Lufthansa Cargo's position.

Capacity in the Asia/Pacific traffic region was cut by 9.3 per cent in the first three quarters. Tonne-kilometres transported went up compared with prior quarters, but overall they were still below last year's. With AeroLogic, the freight airline recently set up with DHL, Lufthansa Cargo can exploit opportunities on the Asian market with additional weekend services to China. In addition, Lufthansa Cargo and its joint venture Jade Cargo serve the Asian market from major European cities, making it possible to gain market share outside the domestic market.

The Middle East/Africa traffic region bucked the trend with a yearon-year increase of 12.4 per cent in tonne-kilometres transported. In the Middle East, too, Lufthansa Cargo benefited from expanding capacity, enabling market share to be gained.

Performance in the Americas traffic region (North and South) was mixed. In the North American market, in particular, lower volumes led to cuts in capacity. South American demand was met with additional services. This traffic region recorded a modest stabilisation in the third quarter. The load factor rose by 3.6 percentage points compared with the same quarter last year to 64.1 per cent.

Capacity in the Europe traffic region was reduced by 14.1 per cent year on year and the load factor improved slightly (+1.1 percentage points).

The programme to safeguard earnings (ESP) enabled capacities to be reduced and costs cut over recent months. Operating costs were scaled back substantially and project budgets trimmed. Reduced working hours apply for around 2,600 employees at Lufthansa Cargo ground staff in Germany. Staff costs at sites abroad were reduced based on the policies available locally in each case. At mid-year, the programme to safeguard earnings was expanded to cover ways to increase revenue and this was also effective: freight volumes were recouped in the third quarter, which improved load factors, albeit at much reduced rates. As part of ESP 2.0, Lufthansa Cargo has recently halted the decline in freight rates and was able to adjust prices across the board.

Revenue and earnings development Traffic revenue collapsed given the low freight volumes and increased price adjustments. In the first nine months it fell by 36.7 per cent to EUR 1.3bn.

Trends in traffic regions

Lufthansa Cargo
	Freight/mail in tonnes		Available cargo tonne-kilometres in millions			Revenue cargo tonne-kilometres in millions	Cargo load factor in %
	Jan. – Sept. 2009	Change in %	Jan.– Sept. 2009	Change in %	Jan.– Sept. 2009	Change in %	Jan.– Sept. 2009	Change in pts
Europe	402,499	– 16.8	667	– 14.1	303	– 12.0	45.4	1.1
America	298,696	– 18.7	3,524	– 10.6	2,125	– 17.9	60.3	– 5.4
Asia/Pacific	298,081	– 15.9	3,630	– 9.3	2,397	– 17.5	66.0	– 6.6
Middle East/Africa	92,491	12.4	809	9.2	473	5.9	58.4	– 1.8
Total	1,091,767	– 15.2	8,632	– 8.8	5,298	– 15.7	61.4	– 5.0

Other operating income rose to EUR 80m (previous year: EUR 68m). The increase stemmed mainly from currency gains on foreign exchange translation and higher income from staff secondment.

Overall, total operating revenue fell by 34.6 per cent to EUR 1.5bn.

Operating expenses were cut by 20.0 per cent year on year to EUR 1.7bn. The reduction in the cost of materials and services by 22.8 per cent to EUR 1.1bn was mainly due to lower fuel costs (–55.9 per cent). This, in turn, was the result of capacity adjustments, a lower fuel price and reduced fuel volumes. The movement of the US dollar and a lower hedging result had the opposite effect. Fees and charges (EUR 175m) also sank, by 19.0 per cent, thanks to fewer flight movements and capacity reductions. MRO expenses of EUR 86m were lower than last year, partly as a result of fewer maintenance inspections.

The steps taken as part of the programme to safeguard earnings, such as staff cuts, running down overtime accounts, scaling back overtime requiring extra pay, and reduced working hours, were able to make up for the wage increase for ground staff. The number of employees declined year on year by 2.4 per cent to 4,542. Staff costs went down disproportionately by 4.1 per cent to EUR 232m.

Depreciation and amortisation was stable year on year at EUR 92m.

Other operating expenses of EUR 212m were also reduced significantly compared with last year, by 25.9 per cent. The main cause of the reduction was consistent cost management, e.g. cutting back on agency commissions, consultancy expenses, travel and staff costs, rental and maintenance costs, and insurance expenses. Foreign exchange losses were also lower than last year.

The cost-cutting measures were able to absorb more than 50 per cent of the drastic collapse in revenue. In the first nine months, Lufthansa Cargo nevertheless reported an operating result of EUR –200m (previous year: EUR 160m).

The segment result was EUR 370m below last year's at EUR –193m. This includes a positive equity result of EUR 1m (previous year: EUR 12m). Earnings contributions came from the equity investment in Shanghai Pudong International Airport Cargo Terminal Co. Ltd and others. In the second quarter, the joint venture AeroLogic was also consolidated for the first time when it began operations. This resulted in expenses of EUR 3.9m.

Segment capital expenditure was 41.7 per cent above last year's at EUR 17m. The increase stemmed primarily from the equity increase at AeroLogic GmbH, which is accounted for using the equity method.

Outlook In view of the global economic crisis there can still be no all-clear for the airfreight industry. Drops in volumes were not as severe as in prior quarters, but revenue is still falling steeply as a result of the price erosion since the summer. The programme to safeguard earnings has enabled staff and operating costs to be cut drastically since the beginning of the year and freighter capacities to be rolled back. Measures such as shorter working hours, tighter project budgets, reduced operating costs and aircraft capacities have only made up for part of the collapse in revenue.

The stricter version of the programme to safeguard earnings adopted at the beginning of April has been implemented on schedule. By the end of October, four MD11 freighters will be grounded for at least a year. Operating costs will continue to be strictly reviewed to ensure they are absolutely necessary. Reduced working hours still apply for ground staff in Germany.

In addition to the cost-cutting measures, the success of the price adjustments that have been introduced will be decisive for the course of future business. For the current financial year, Lufthansa Cargo nevertheless continues to expect much lower revenue than last year and a substantial operating loss.

MRO business segment

MRO
		Jan.– Sept. 2009	Jan. – Sept. 2008	Change in %	July– Sept. 2009	July– Sept. 2008	Change in %
Revenue	€m	3,008	2,687	11.9	934	875	6.7
- of which with companies of the Lufthansa Group	€m	1,214	1,069	13.6	376	345	9.0
Operating result	€m	229	227	0.9	85	69	23.2
Segment result	€m	236	236	0.0	89	72	23.6
EBITDA	€m	319	311	2.6	130	94	38.3
Segment capital expenditure	€m	81	82	– 1.2	33	42	– 21.4
Employees as of 30.9	number	19,823	19,213	3.2	19,823	19,213	3.2

Course of business Lower flight capacities and the sharp fall in air-transport revenue are also increasingly hitting the sector of aeronautical services for civil aircraft. The size of the global fleet is still rising, despite the number of parked aircraft, but demand for maintenance, repair and overhaul (MRO) services is falling. The airlines are under enormous cost pressure due to a severe loss of revenue, resurgent kerosene prices and deteriorating average yields. This burden is being passed on to MRO providers, adding considerably to the pricing pressure. Despite this difficult environment, the Lufthansa Technik group has so far maintained its growth path, increasing both revenue and operating result.

Segment structure Lufthansa Technik AG holds direct and indirect equity investments in 57 companies; around the world, the MRO group includes a total of 32 technical maintenance operators.

Lufthansa Technik has also made further additions to this group over the course of the current year. In May, the first A330 C check was carried out in Lufthansa Technik Malta's newly opened hangar, and Lufthansa Technik Sofia added the Boeing models 737 Classic and Next Generation to the portfolio for its second overhaul line as of July. In autumn, BizJet International will deliver the first VIP cabin completion in an A318 Elite to Airbus as planned.

LTQ Engineering, the joint venture for engine overhauls between Qantas Airways Ltd. and Lufthansa Technik AG in Melbourne, Australia, has established itself on the market.

Products Lufthansa Technik is the MRO world market leader in the field of civil aircraft, with a portfolio ranging from the latest repair procedures through to individual completion programmes for VIP aircraft. Being voted best maintenance, repair and overhaul (MRO) provider by the British trade publisher and exhibition organiser

UBM Aviation confirms this position. With a total of four prizes in twelve categories, Lufthansa Technik was the most successful out of 24 companies worldwide.

Ameco Beijing, the joint venture set up in 1989 between Air China and Lufthansa, also won the Laureate Award for International Cooperation at the 13th Aviation Expo, held in China.

At this year's European Business Aviation Convention and Exhibition (EBACE) in Geneva, Lufthansa Technik presented new highlights from its in-flight entertainment and cabin management system "nice" (networked integrated cabin equipment). These primarily include developments for managing and controlling different cabin systems for VIP and business aircraft.

The collaboration between Lufthansa Technik and eJet Services was extended, thereby broadening the existing range of maintenance and operating services for VIP aircraft conversions based on Bombardier CRJs. The joint programme was introduced in 2008 and can offer operators of smaller, less frequently used business aircraft in particular an all-round, global package of maintenance services and operational support.

Operating performance Lufthansa Technik continued to grow its business outside the Lufthansa Group. In the third quarter, it gained a further twelve clients and signed 80 new contracts, though one client from Asia was lost. Over the entire reporting period it has therefore acquired 32 new clients and 355 new contracts with a volume of EUR 430m for the full year 2009. Worldwide, Lufthansa Technik services a fleet of 1,983 aircraft (+16.5 per cent).

This now includes providing the entire airline group at Aeroflot with aircraft components, meaning that Lufthansa Technik has aircraft

from all the companies in the largest Russian aviation group Aeroflot under contract. A ten-year component supply contract was also signed with Air Canada for 18 Boeing 777s.

Wizz Air, the biggest no-frills airline in Central and Eastern Europe and Lufthansa Technik are extending their cooperation within the scope of a Total Component Support contract (TCS). The A320 fleet, which is set to grow from 26 aircraft today to 132 in 2017, is to be serviced for another ten years.

Lufthansa Technik also signed three-year contracts with Vietnam Airlines, Etihad Airways, Aegean Airlines and Ryanair.

Revenue and earnings development Despite the shrinking MRO market in 2009, Lufthansa Technik was able to buck the trend and grow, even slightly improving its operating result of EUR 229m compared with last year (+0.9 per cent). The steps to safeguard earnings and liquidity initiated in November 2008, especially the tight management of staff capacities and cuts of 30 per cent in project budgets and capital expenditure, also played a decisive role in this achievement. So far this has more than made up for the adverse effects of the crisis on results.

Buoyed by the course of the US dollar, revenue with external clients went up by EUR 176m (+10.9 per cent) to EUR 1.8bn. Revenue from companies in the Lufthansa Group grew by EUR 145m (+13.6 per cent) to EUR 1.2bn as a result of the larger fleet and an increased number of aircraft rest periods and engine upgrades compared with 2008. Total revenue came to EUR 3.0bn, which is EUR 321m or 11.9 per cent more than in the same period last year. The ratio of external revenue to total revenue was roughly the same as last year at around 59.6 per cent.

Other operating income fell by 16.5 per cent to EUR 101m, primarily due to much lower exchange rate gains. Overall, the MRO segment generated total operating revenue of EUR 3.1bn (+10.7 per cent).

Operating expenses climbed by EUR 299m (+11.6 per cent) to EUR 2.9bn. The cost of materials and services continued to account for the largest rise, going up by EUR 221m (+16.9 per cent) to EUR 1.5bn. In addition to the material-intensive revenue growth in the engine maintenance division and the adverse effects of the US dollar trend, this also reflects increased outsourcing to the Lufthansa Technik group as well as a one-off effect due to the inventory valuation date.

On average, in the first nine months of the year, the Lufthansa Technik group employed 19,742 staff (+4.0 per cent). The increase is due to the addition of Lufthansa Technik Switzerland with 516 employees, a slight rise at Shannon Aerospace and more vacational trainees. Staff costs went up as a result by EUR 38m (+5.1 per cent) to EUR 786m. Lufthansa Technik is continuing to extend its vocational training despite the crisis and is thereby investing in its future. In Germany, a total of 307 young people began apprenticeships in 2009 (previous year: 285). The steps to safeguard earnings meant that, adjusted for consolidation effects, staff capacity at Lufthansa Technik AG otherwise declined compared with last year.

Depreciation and amortisation rose by 4.9 per cent to EUR 64m.

The increase in other expenses by 8.0 per cent to EUR 498m results from the date used for currency valuations and the increased deployment of outside staff in the Lufthansa Technik group.

The operating result improved by 0.9 per cent to EUR 229m and the segment result matched last year's figure of EUR 236m, as the investments accounted for using the equity method – Alitalia Maintenance Systems and HEICO – contributed lower results.

The project cut-backs made as part of the programme to safeguard earnings are also reflected in segment capital expenditure, which fell slightly below last year's level to EUR 81m (–1.2 per cent).

Outlook The MRO segment took early action to prepare for the downswing with programmes for making capacity more flexible, cutting costs and increasing efficiency, partly under the Groupwide Upgrade to Industry Leadership initiative. So far the Lufthansa Technik group has been able to make up for dwindling demand in individual segments and to grow, against the market trend.

Judging from past experience, the effects of the global recession will have a delayed impact on the MRO market. The price and cost pressure on airline clients will increasingly be passed on to MRO providers. Under these conditions, Lufthansa Technik still expects revenue to grow, but for the full year it will be difficult to repeat the good operating result achieved in 2008.

IT Services business segment

IT Services
		Jan.– Sept. 2009	Jan. – Sept. 2008	Change in %	July– Sept. 2009	July– Sept. 2008	Change in %
Revenue	€m	451	485	– 7.0	149	170	– 12.4
- of which with companies of the Lufthansa Group	€m	264	278	– 5.0	87	95	– 8.4
Operating result	€m	12	29	– 58.6	5	11	– 54.5
Segment result	€m	11	29	– 62.1	3	12	– 75.0
EBITDA	€m	41	57	– 28.1	14	20	– 30.0
Segment capital expenditure	€m	43	38	13.2	13	12	8.3
Employees as of 30.9	number	3,028	3,014	0.5	3,028	3,014	0.5

Course of business In the first nine months of the year the course of business at Lufthansa Systems was heavily influenced by the difficult situation in the international aviation industry. Faced with declining passenger numbers, most airlines have reduced or postponed their capital expenditure. Revenue at Lufthansa Systems went down as a result. The company responded swiftly with measures to safeguard earnings, improving results from the second quarter. Profitability went up modestly in the third quarter.

Segment structure In addition to its head offices in Kelsterbach, Germany, Lufthansa Systems has several other sites in Germany and in 16 other countries. This includes production sites in Europe and the USA, as well as a global sales team with account managers in all strategic markets. Services are delivered in five divisions: Airline Management Solutions, Passenger Airline Solutions, Airline Operations Solutions, Industry Solutions and Infrastructure Services.

In the first quarter, the company divested its minority stake of 49 per cent in Lufthansa Systems Indonesia in Jakarta.

Products The portfolio at Lufthansa Systems consists of numerous solutions which help airlines to save costs and increase revenue.

These include the Sirax AirFinance platform for revenue accounting and the flight path planning system Lido/Flight.

Integrated solutions are becoming ever more important, as they improve the speed and quality of decision-making processes by supplying all the necessary information via a uniform interface. The most recent product of this type, the Integrated Operations Control Center (IOCC) platform, is the first integrated IT platform with which all an airline's operating processes, which in practice are closely linked, can be monitored and controlled. This enables users of the IOCC platform to optimise their flight operations and make considerable cost-savings at the same time.

Operating performance Despite the increasingly difficult situation in the airline industry over the first nine months of the year, Lufthansa Systems was able to sign a series of contracts with new and existing clients and expand its client base. In addition to numerous contracts signed over the course of the year, the third quarter saw the navigation maps Lido/RouteManual introduced at Malaysia Airlines, and Virgin Blue from Australia selected the load planning solution LoadControl for its aircraft handling. SWISS appointed Lufthansa Systems to operate its core IT applications. The new Italian cargo airline Cargoitalia has also used an extensive IT package from Lufthansa Systems since it began operations. Furthermore, important implementation projects were brought to a successful conclusion at China Southern Airlines and Thomas Cook.

To combat the fall in demand throughout the sector, Lufthansa Systems has established numerous measures to safeguard earnings and is adapting them to market developments on a continuous basis. The number of outside staff has been cut, holidays and overtime accounts have been systematically run down and planned capital expenditure has been reduced.

Revenue and earnings development Revenue fell further at Lufthansa Systems during the reporting period due to persistently weak demand. In the first three quarters, the company generated total revenue of EUR 451m, down 7.0 per cent year on year. Revenue from Lufthansa Group companies came to EUR 264m, down 5.0 per cent due to outsourced IT services and lower prices for operator models. Revenue of EUR 187m was generated on the external market (–9.7 per cent). Here, falls in prices and volumes were partly made up for by new business in the areas of Airline Management Solutions and Industry Solutions.

Other operating income sank by 6.9 per cent to EUR 27m. The fall that is now visible in comparison with the increase in the first halfyear of 2009 is due to a one-off effect in the third quarter of 2008 (the capitalisation of development costs).

Total operating revenue of EUR 478m was therefore below last year's figure (–7.0 per cent).

The cost of materials and services went up to EUR 60m (+7.1 per cent). The main reason for the increase was higher costs for purchasing services in connection with operator models and their roll-out.

The steps to safeguard earnings are reflected in both staff costs and in other operating expenses. Staff costs went down in the third quarter thanks to reductions in overtime and holiday entitlement accounts. In the first nine months of the year, they still rose by a total of 0.6 per cent to EUR 174m. The average number of employees sank over the course of the year, but at 3,043 was 1.8 per cent above the same period last year.

Other operating expenses were successfully cut by 10.5 per cent to EUR 205m. This was mainly achieved by releasing outside staff.

Depreciation and amortisation were stable year on year at EUR 27m.

This meant that over the first nine months and despite some contrary effects, total operating expenses were reduced by 3.9 per cent to EUR 466m.

The operating result for Lufthansa Systems fell due to lower revenue to EUR 12m (previous year: EUR 29m), but the steps taken to cut costs took effect and improved profitability slightly in the third quarter.

Segment capital expenditure of EUR 43m (+13.2 per cent) was aimed primarily at safeguarding existing business as well as modernising the product portfolio.

Outlook Despite some signs that the macroeconomic situation is easing, the position of the airlines around the world remains difficult. Their inclination to invest is still correspondingly limited. Lufthansa Systems is therefore actively approaching clients to show them how, with intelligent IT solutions, they can cut costs sustainably and increase their revenue.

No significant revenue improvement is to be expected for 2009, however. For this reason, the steps taken to safeguard earnings and make costs more flexible will be pursued and further intensified.

For the current financial year, the result is still expected to be below last year's but substantially positive.

Catering business segment

Catering
		Jan.– Sept. 2009	Jan. – Sept. 2008	Change in %	July– Sept. 2009	July– Sept. 2008	Change in %
Revenue	€m	1,586	1,755	– 9.6	562	637	– 11.8
- of which with companies of the Lufthansa Group	€m	384	421	– 8.8	138	143	– 3.5
Operating result	€m	53	56	– 5.4	28	25	12.0
Segment result	€m	73	80	– 8.8	30	37	– 18.9
EBITDA	€m	81	119	– 31.9	7	87	– 92.0
Segment capital expenditure	€m	40	90	– 55.6	8	39	– 79.5
Employees as of 30.9	number	28,871	31,897	– 9.5	28,871	31,897	– 9.5

Course of business The collapse in bookings at airlines meant that demand fell sharply for catering products and in-flight management services in the first nine months. Revenue in the Catering segment is therefore considerably lower than last year. The operating result for LSG Sky Chefs for the first nine months is still positive, but lower than last year.

Segment structure The LSG Sky Chefs group consists of 129 companies, with more than 200 plants in 50 countries. Additional equity investments were made in the first nine months of the year in order to strengthen its market position in selected regions with identifiable growth potential. The group of consolidated companies was extended by eight subsidiaries, including some in Brazil, China and Bahrain.

Jens Theuerkorn was appointed by the Supervisory Board as CFO of LSG Holding, the parent company of LSG Sky Chefs, with effect from 1 July 2009. Responsibilities within the Executive Board were redistributed at the same time. There are now three Executive Board seats: the Chief Executive Officer, responsible for Group functions and initiatives; Chief Financial Office, including IT/Processes, Purchasing and M&A; and Chief Operating Officer, which includes Sales. Thomas Nagel retired from his position as Chief Operating Officer as of 30 September. Along with the reorganisation, the geographic breakdown for Europe, the Middle East and Africa has now been changed to three regions, Germany, Europe and Emerging Markets. The assignment of responsibilities is thus more strongly in line with the demands of different markets than previously. This enables LSG Sky Chefs to adapt more quickly to constantly evolving markets.

Products The LSG Sky Chefs product portfolio ranges from the development, procurement and logistics of in-flight service articles to the management of all upstream and downstream in-flight service processes. The company's competence and ability to innovate was again acknowledged when it was awarded the Observeur du Design accolade by the French Design Council on the basis of its new concept for Corsairfly. LSG Sky Chefs has set up a special innovation team within the central sales team to further intensify its collaboration with clients in terms of product development and innovation.

Operating performance Despite the difficult market environment, LSG Sky Chefs stood its ground and was able to further strengthen its client base over the first nine months. Major contracts for individual sites were signed or successfully renewed with Air Canada, Qantas, TUI group, Swedish Railroad and Dragonair. The contract with SAS in Scandinavia expired at the end of April, however.

The company was also able to make progress towards its expansion goals for Africa by signing cooperation agreements with individual local partners. In the reporting period, joint venture agreements were signed in Egypt and Angola, as well as management contracts in Uganda and Nigeria.

Since mid 2009, LSG Sky Chefs has been confronting the market's current operating challenges with two additional packages of measures to safeguard earnings. The aim of the Performance 2009 programme is to achieve short-term contributions to earnings. In this context, LSG Sky Chefs launched a programme in its two largest markets, Germany and the USA, to bundle and optimise procurement channels and methods. The lean initiative was also intensified significantly and standardised processes implemented consistently in the 40 largest plants worldwide, which represent 80 per cent of revenue.

The initiative Upgradeplus is intended to run for two years. It is primarily intended to build a lastingly competitive and sustainable corporate structure. A function has been established at departmental level to support the implementation and exchange of best

practice. In addition to "lean" and "procurement", the introduction of new operating models in selected sites plays an important role. Structures already implemented and proven in Korea, Italy, Germany and Scandinavia serve as models, which are increasingly to be transferred to other sites. This will also involve a review of all processes and structures in the administration departments worldwide. LSG Sky Chefs is also increasingly evaluating new business potential in related markets, such as school or railway catering.

Revenue and earnings development Despite the slight rise in demand during the summer, revenue for the first nine months fell year on year by 9.6 per cent to EUR 1.6bn. This is largely due to the airlines' sharp cuts in capacity, the ensuing lower volumes, the ongoing passenger migration from the premium to the economy classes and the loss of SAS as a major client.

External revenue fell to EUR 1.2bn (–9.9 per cent), while internal revenue sank by 8.8 per cent to EUR 384m. The companies consolidated within the LSG Sky Chefs group for the first time made a revenue contribution of EUR 40m.

Other operating income went up by EUR 68m to EUR 98m, primarily due to a settlement before an arbitration tribunal on the D&O policy (EUR 40m), as well as positive exchange rate movements.

Overall, however, total operating revenue declined by 5.7 per cent to EUR 1.7bn.

Total operating expenses were also cut by 5.7 per cent, coming to EUR 1.6bn for the first nine months.

A key contribution stemmed from the cost of materials and services, which went down to EUR 712m (–10.9 per cent) thanks to lower volumes, positive exchange rate effects and savings in purchasing, in spite of a slight rise in food prices.

The average number of employees at the LSG Sky Chefs group sank over the first nine months by 8.1 per cent to 28,969. Staff costs fell by just 4.8 per cent to EUR 590m. This is due to the fact that pay increases, structural effects and the movement of the US dollar could not be fully offset by reducing staff capacities in the operating and administrative areas.

Depreciation and amortisation came to EUR 44m (+10.0 per cent). Higher depreciation on the new catering facility at Frankfurt Airport was a significant contributor to the increase.

Other operating expenses were 5.6 per cent up on the year at EUR 285m. This is mainly the result of adverse exchange rate effects.

LSG Sky Chefs was able to make good a large part of the decline in results caused by the fall in revenue. The operating result for the first nine months of the year came to EUR 53m (–5.4 per cent).

The segment result of EUR 73m was 8.8 per cent lower than last year and includes a positive contribution of EUR 15m from changes in pension provisions in the USA, as well as a decline in other segment income of EUR 23m. The latter stems mainly from the gains realised last year on the disposal of the Spanish subsidiary and of LSG-Airport Gastronomiegesellschaft mbH.

Segment capital expenditure came to EUR 40m (–55.6 per cent). The main reason for the fall was the capital expenditure made last year for the new catering facility at Frankfurt airport and for expanding global frozen food capacities. Capital expenditure during the reporting period was limited to the minimum necessary for operations as part of the programme to safeguard earnings. The construction of a new catering facility in Madras was suspended in response to the current market developments in India.

Outlook The global economic crisis seems to have passed its worst. Nevertheless, most airlines are sticking to their savings programmes and cutting capacities for the winter flight schedules. Based on current estimates, the volume of premium passengers will stay weakened over the medium term. LSG Sky Chefs therefore expects its airline clients' catering budgets to remain curtailed. The expectation is that revenue for the LSG Sky Chefs group for the full year 2009 will also remain well below last year's. By means of the short-term initiative Performance 2009 and other structural adjustments, LSG Sky Chefs is still remaining with its ambitious goal to follow up on last year's operating result.

Jan.– Sept. 2009

Operating result €m – 98 – 16 – 37 – 15

EBITDA €m – 18 – 67 73.1 2 – 62

Jan. – Sept. 2008

Total operating income €m 891 913 – 2.5 281 359 – 21.8

Segment result €m – 70 – 49 – 42.9 – 16 – 49 67.3

Segment capital expenditure €m 54 111 – 51.4 9 29 – 69.0 Employees as of 30.9 number 3,774 3,643 3.6 3,774 3,643 3.6

Change in %

Other

Other

Structure/change in reporting standards As a result of IFRS 8 Operating Segments, applicable from 1 January 2009, the segment reporting has been structurally adapted to the reports regularly presented to decision-makers within the Group. The segment Other therefore now includes the Service and Financial Companies, where Lufthansa's equity investments are held (Lufthansa Flight Training, AirPlus, Lufthansa Commercial Holding) and also the centralised Group functions of Deutsche Lufthansa AG. To facilitate comparison, the figures for last year have been restated using the new parameters. More information can be found in the Notes to the consolidated financial statements on page 40.

In the reporting period, Lufthansa Commercial Holding acquired Germanwings GmbH from Eurowings Luftverkehrs AG for a purchase price of EUR 14.5m.

Operating performance Due to restricted business travel and different travel patterns, AirPlus processed fewer tickets overall and in addition, mainly tickets in lower price categories. This situation is reflected in billing revenue for the first nine months, which contracted by 19.4 per cent. Revenue was down on the year, but this was partly made up for by cost savings in staff and operating costs. AirPlus won the Excellence in Payments Innovation Award 2009

from the European Payments Consulting Association (EPCA) for its central billing solution for the event sector.

July– Sept. 2009

July– Sept. 2008 Change in %

Business at Lufthansa Flight Training was also impaired by the weak macroeconomic environment, as this reduces the need for pilot training worldwide. However, the long-term contracts signed in prior years, along with new contracts, ensured that the flight simulators operated at satisfactory capacity. Nevertheless, revenue was lower than last year. Consistent cost management, however, meant that expenses were contained. OAO Vnukovo International Airport and Lufthansa Flight Training GmbH have set up a joint company to open a simulator centre for training flight crews in Moscow. The simulator centre is due for completion in mid 2010.

Revenue and earnings development The companies represented in this segment reported total operating revenue of EUR 891m (–2.5 per cent). The contribution from AirPlus made up 19.3 per cent at EUR 172m. Lufthansa Flight Training delivered EUR 110m, or 12.3 per cent of total operating revenue. Operating expenses rose by 6.4 per cent to a total of EUR 989m. The operating result was negative at EUR –98m, which was due exclusively to the newly included Group functions. This also applies to the segment result, which fell from EUR –49m last year to EUR –70m.

Risk report

As an international aviation company, Deutsche Lufthansa AG is exposed to sector-specific, company and financial risks. These consist mainly of market and competition risks, which can effect capacity and load factors. They are flanked by strategic risks, political risks, operational risks, procurement risks, collective bargaining risks, IT risks and financial and treasury risks.

Lufthansa's risk strategy allows us to take advantage of business opportunities as long as a risk-adjusted return can be realised on market terms and the risks are appropriate and acceptable within the scope of creating value. Group-wide opportunity and risk controlling enables management to identify these in advance and thereby provide support for their efficient and effective management. More information on the opportunity and risk management system, the risk categories and the risk situation at the Group can be found in the 2008 Annual Report starting on pages 114 and 183.

There have been no significant changes in the first nine months of the year in the opportunities and risks for the Group compared with those described in detail in the Annual Report. Some of the risks described there have, however, increased sharply in recent months. The Group's risk position is still dominated by the global recession. Due to the contraction of economic activity, passenger and freight volumes in global aviation have declined considerably over the course of the year, but are beginning to stabilise at a low level. Airfreight volumes, in particular, have experienced a dramatic collapse worldwide and are only recovering slowly. Forecasts of future developments in demand are still subject to significant risks. This trend is intensified by the sharp fall in prices and average yields compared with last year, e.g. by a lower proportion of passengers travelling First and Business Class.

Lufthansa has responded to these developments. Flight capacities were adjusted and steps taken to cut costs. In view of persistently weak demand and revenue trends, and rising fuel prices, Lufthansa has tightened the programmes to safeguard earnings still further, among other things by introducing the Climb 2011 programme, which is aimed at cutting the costs of Lufthansa Passenger Airlines by EUR 1bn by 2011. The Company has sufficient flexibility to reduce capacities again if the economic situation should deteriorate further.

In the other business segments as well, resources are deployed individually in line with respective sales expectations and the steps to safeguard earnings are being ramped up. Prices for crude oil and jet fuel fell sharply in the first quarter compared with their historic highs in mid 2008. However, fuel prices have gone up again by some 40 per cent since the start of the year, although this rise is not based on any improvement in demand from the real economy.

The new additions to Lufthansa's portfolio of equity investments, Austrian Airlines, British Midland and Brussels Airlines, are exposed to the same sectoral risks as other Group airlines. As a result, this could have additional effects on profitability and economic development. In response, these companies will also intensify their restructuring efforts and adjust their resources in line with economic developments. However, synergy opportunities from cooperation within the airline group are also expected.

Counterparty risks are becoming more important in the current economic environment, both in financial markets and with regard to clients in all business segments. Lufthansa tracks these risks on a continual basis and manages them according to the creditworthiness of the counterparty.

Lufthansa has sufficient liquidity. Over the course of 2009, it was possible to raise a considerable amount of funding on advantageous terms. The split rating following the downgrade by Moody's to a non-investment-grade rating has so far made lending conditions only marginally more expensive. If, in future, Standard & Poor's were to also downgrade the credit rating to non-investment grade, which cannot be ruled out, this could lead to a distinct deterioration in funding terms and encumber access to new funding. Intensive efforts to strengthen cash flow from operating activities and postpone capital expenditure are being made in order to safeguard the rating and improve it over the medium term.

Risk report Supplementary report Outlook

The regulation of OTC derivatives currently planned by the European Commission and US financial regulators could lead to considerable additional costs for Lufthansa to the financing of any margin requirements. Further plans to standardise hedging transactions could lead to increased earnings volatility as they would make hedge accounting more difficult, or impossible.

An unrelenting global recession, falling revenue and significant price rises for fuel at the same time could also severely impair profitability in the current financial year and in the future.

Taking all known facts and circumstances into account, there are nevertheless currently no risks which could jeopardise the Group's existence in the foreseeable future.

Supplementary report

With the prices of crude oil and jet fuel having seen further massive increases, SWISS has made modest adjustments to its present fuel surcharges. SWISS's fuel surcharge for long-haul flights will increase by CHF 12 per sector, fuel surcharge for European flights will see a slight CHF 3 rise per sector.

On 23 October, the Executive Board of Austrian Airlines AG and the majority shareholder in Austrian Airlines, ÖLH Österreichische Luftverkehrs-Holding-GmbH (ÖLH), have jointly agreed on appropriate cash compensation of 0.50 EUR per share in a squeeze out of the remaining shareholders of Austrian Airlines. The adequacy of this cash compensation still has to be verified by the Board of Directors of Austrian Airlines. A decision endorsing the squeeze out will be taken by an extraordinary shareholder meeting, which will presumably be held in mid-December. The minority shareholders of Austrian Airlines will receive cash compensation for their shares in conformity with the law after notification of the squeeze out has been entered in the commercial register. That will probably occur in the first half of 2010. Lufthansa already holds 95.4 per cent of the share capital of Austrian Airlines via ÖLH.

On 27 October US carrier Continental Airlines has joined the Star Alliance as a new member. From 31 October, all Continental flights between the United States and Germany will also be bookable under a Lufthansa flight number. In addition, Lufthansa customers will have a choice of connections to 37 destinations in the United States via Continental's hubs at Newark and Houston. At Frankfurt Airport, Continental has relocated to Terminal 1 and is now under one roof with Lufthansa. Additonally, members of Lufthansa's frequent flyer programme Miles & More and Continental's loyalty programme OnePass will be able to earn and redeem miles on all the partner airline's flights.

Outlook

General economy and sector It can be assumed that the global economy has reached the low point of the recession and that thanks to the strong impetus given by economic policy it will continue to recover. The economy should pick up sharply in most emerging markets, as they were hit less hard by the financial crisis than by the collapse in global trade. For the industrialised nations the recovery is only expected to be meagre, as unemployment there will rise and disposable income will contract as a result. Overall, international trade is likely to remain the driving force for a further revival. Worldwide gross domestic product for 2009 will still be well below last year's, however. The anticipation is that it will decline on a yearly basis by 2.1 per cent.

The prospects for the US economy have improved. There are many signs that in the months ahead, the American economy will gradually swing back onto a growth path. The economic stimulus programme will have its greatest effect in the upcoming winter halfyear. Private consumption will rise much more slowly than in the past, however, as households suffered an enormous depletion of assets and are likely to increase their savings rate. High unemployment will depress consumer spending. Altogether, the expectation is that the US economy will shrink year on year by 2.5 per cent.

Indicators suggest that the euro area is also set for an economic recovery. The improvement compared with the two preceding quarters is likely to be weaker in the other euro countries than in Germany. Growth will primarily come from increasing global trade. Due to its great dependence on exports, this should particularly benefit the German economy. Public-sector capital expenditure will also increasingly be realised against the backdrop of the economic stimulus package. For the full year 2009, the German economy is anticipated to contract by 4.8 per cent year on year. Output in the euro area is predicted to shrink by 4.0 per cent.

The economies of Asian emerging markets will grow rapidly by contrast. Given the modest demand from industrialised countries, however, it should be assumed that the dynamic growth rates of the years before the recession will not return yet. Growth will be especially strong in China, where expansion only ceased for a short period. China is expected to grow by 8.1 per cent in 2009. Production will also pick up substantially in the other emerging economies affected by the slump in world trade. The Japanese economy, however, still reported a fall of 5.5 per cent in the third quarter after a severe recession. For the Asia/Pacific region overall growth of 0.7 per cent is expected.

Market participants expect the economic recovery to be accompanied by a return to higher oil prices in the medium term. This is also reflected in forward rates. Forward contracts for delivery in December 2010 are trading at almost USD 79/bbl.

In view of poor revenue development and rising oil prices, IATA revised its financial forecasts for global air traffic in September. For the full year, the industry association expects revenues to fall by 15 per cent year on year to USD 455bn. Losses of USD 11bn are predicted for global air traffic in 2009. This is USD 2bn more than previously forecast. According to initial indications the industry will still report a loss of nearly USD 4bn in 2010. European airlines will face net losses for 2009 of USD 3.8bn, and for 2010 of USD 1.9bn according to IATA forecasts.

Lufthansa Group Despite existing signs of an incipient economic recovery, the market environment for the air traffic industry remains very tense. Massive erosion of average yields far exceeds the improvements in passenger and freight volumes. Volatile fuel prices also weigh on costs. Recent months have shown that speculation alone on a potential economic recovery can lead to direct and excessive leaps in the oil price. The result is a considerable earnings risk for airlines. This does not just affect the airborne companies in the Lufthansa Group. As part of many airlines' growing crisis management they are passing their cost pressure directly onto the service companies in the Group. This market environment will depress the fourth quarter with its traditionally weak results even further.

Earnings development at the Lufthansa Group therefore remains subject to very considerable risks – despite the stabilising effect of the Group structure. In addition to their capacity and cost management, all business segments must therefore address the structural changes wrought by this crisis and adapt to them. All companies are making substantial efforts in this direction, such as the Climb 2011 project at Lufthansa Passenger Airlines or the Upgradeplus initiative at LSG SkyChefs. These measures and the outlook for the individual segments are discussed in detail in the respective chapters. The new companies in the Group that are particularly affected by the crisis, AUA and bmi, are also faced with massive restructuring work to make themselves profitable again in the medium term. Their success will also have a major influence on the Group's profitability.

In this challenging environment, the Lufthansa Group still expects a sharp fall in revenue and a diminished result for the full year. Negative earnings contributions are anticipated from the new companies in the airline group over the months ahead. Business performance in the fourth quarter will therefore be a deciding factor in whether these factors can be successfully compensated for and the goal of a positive operating result for the now expanded Group can still be achieved. Net result and earnings per share will develop correspondingly negatively in the current financial year.

The environment described above will affect the development of the Lufthansa Group's financial profile, too. Cash flow from operating activities will thus be well below last year's despite consolidation of the new companies. Given expected capital expenditure (EUR 2.6bn gross), it does not seem possible to generate free cash flow in 2009. Planned capital expenditure was recently adjusted to meet the new market conditions, but the expenditures will remain above EUR 2bn in subsequent years as well. The weak cash flow trend, high capital expenditure and the consolidation of new companies have already led to a tangible, though justifiable, rise in net indebtedness in the third quarter. We anticipate a comparable volume for the full year. In reaction the equity ratio will fall below the target level of 30 per cent. The defined minimum liquidity requirement of EUR 2bn is considerably more than matched by available liquid funds. The majority of the Lufthansa fleet is owned and unencumbered. The ratio of unencumbered aircraft in the Group fell by 5 percentage points to 65 per cent following the consolidation of AUA and bmi.

The Group is developed according to the principles of value-based management. Cash value added (CVA) is the relevant indicator. Details of the management philosophy and its parameters are explained in full in the 2008 Annual Report, starting on page 41. Lufthansa's aim is to generate positive value over the cycle, despite cyclical volatility. As CVA of around EUR 2.9bn has already been generated since the system was introduced in 2000, this target will still be met – even if it will not be possible to achieve a positive figure for the current financial year.

Information on the economic, product and other developments in the individual segments can be found in the respective chapters.

Consolidated income statement January –September 2009

in €m	Jan.– Sept. 2009	Jan. – Sept. 2008	July– Sept. 2009	July – Sept. 2008
Traffic revenue	12,589	15,032	4,743	5,310
Other revenue	3,573	3,579	1,193	1,243
Total revenue	16,162	18,611	5,936	6,553
Changes in inventories and work performed by the enterprise and capitalised	179	128	58	42
Other operating income	1,785	1,113	539	360
Cost of materials and services	– 9,172	– 10,326	– 3,402	– 3,814
Staff costs	– 4,307	– 4,225	– 1,459	– 1,407
Depreciation, amortisation and impairment	– 1,061	– 939	– 387	– 331
Other operating expenses	– 3,270	– 3,426	– 989	– 1,211
Profit/loss from operating activities	316	936	296	193
Result of equity investments accounted for using the equity method	8	– 11	17	4
Result from other equity investments	39	43	10	11
Interest income	126	143	45	49
Interest expense	– 361	– 272	– 142	– 92
Net interest	– 235	– 129	– 97	– 43
Other financial items	– 233	– 184	5	12
Financial result	– 421	– 281	– 65	– 16
Profit/loss before income taxes	– 105	655	231	177
Income taxes	85	– 118	– 41	– 25
Profit/loss after income taxes	– 20	537	190	152
Minority interests	– 12	– 8	– 6	– 4
Net profit/loss attributable to shareholders of Deutsche Lufthansa AG	– 32	529	184	148
Basic earnings per share in €	– 0.07	1.16	0.40	0.32
Diluted earnings per share in €	– 0.07	1.15	0.40	0.32

Consolidated income statement Consolidated statement of comprehensive income

Consolidated statement of comprehensive income

in €m	30.9.2009	30.9.2008
Profit/loss after income taxes	– 20	537
Expenses and income without effect on profit and loss	– 49	37
Currency translation differences	0	– 268
Changes in accounting principles	210	– 79
Subsequent measurement of available-for-sale financial assets	– 325	129
Subsequent measurement of cash flow hedges	– 6	4
Expenses and income without effect on profit and loss from financial investments accounted for using the equity method	– 43	0
Other expenses and income without effect on profit and loss	4	– 14
Income taxes relating to components of other comprehensive income	95	57
= Other comprehensive income after income taxes	– 114	– 134
= Total comprehensive income	– 134	403
Total comprehensive income attributable to minority interests	– 52	– 11
= Total comprehensive income attributable to shareholders of Deutsche Lufthansa AG	– 186	392

Consolidated balance sheet of 30 September 2009

Assets
in €m	30.9.2009	31.12.2008	30.9.2008
Intangible assets with indefinite useful life	1,491	821	809
Other intangible assets	315	261	243
Aircraft and spare engines	10,332	8,764	8,693
Repairable spare parts for aircraft	777	669	640
Property, plant and other equipment	2,157	1,931	1,881
Investment property	3	3	3
Investments accounted for using the equity method	327	298	299
Other equity investments	895	790	852
Non-current securities	428	509	283
Loans and receivables	390	475	419
Derivative financial instruments	217	339	285
Deferred charges and prepaid expenses	20	15	21
Effective income tax receivables	69	72	70
Deferred claims for income tax rebates	21	28	5
Non-current assets	17,442	14,975	14,503
Inventories	640	581	575
Trade receivables and other receivables	3,910	3,015	3,944
Derivative financial instruments	154	213	280
Accrued income and advance payments	144	119	100
Effective income tax receivables	24	130	56
Securities	3,399	1,834	1,793
Cash and cash equivalents	1,359	1,444	1,565
Assets held for sale	209	97	5
Current assets	9,839	7,433	8,318
Total assets	27,281	22,408	22,821

To our shareholders I Interim management report I Interim financial statements I Notes to the financial statements Consolidated balance sheet

in €m	30.9.2009	31.12.2008	30.9.2008
Issued capital	1,172	1,172	1,172
Capital reserve	1,366	1,366	1,366
Retained earnings	3,094	2,872	2,878
Other neutral reserves	431	579	635
Net profit/loss for the period	– 32	542	527
Equity attributable to shareholders of Deutsche Lufthansa AG	6,031	6,531	6,578
Minority interests	106	63	57
Shareholders' equity	6,137	6,594	6,635
Pension provisions	2,975	2,400	2,330
Other provisions	579	291	382
Borrowings	6,163	3,161	3,060
Other financial liabilities	48	51	38
Advance payments received, deferred income and other non-financial liabilities	992	1,024	985
Derivative financial instruments	284	118	140
Deferred income tax liabilities	589	710	664
Non-current provisions and liabilities	11,630	7,755	7,599
Other provisions	975	847	779
Borrowings	801	420	389
Trade payables and other financial liabilities	4,037	3,626	4,036
Liabilities from unused flight documents	2,272	1,693	2,169
Advance payments received, deferred income and other non-financial liabilities	1,146	882	893
Derivative financial instruments	190	492	242
Actual income tax liabilities	93	99	79
Current provisions and liabilities	9,514	8,059	8,587

Total shareholders' equity and liabilities 27,281 22,408 22,821

Consolidated statement of changes in shareholders' equity

in €m	Issued capital	Capital reserve	Fair value of financial instru ments	Currency transla tion dif ferences	Revalu ation reserve	Other neutral reserves	Total other neutral reserves	Retained earnings	Net profit/ loss for the period	Equity at tributable to share holders of Lufthansa AG	Minority interests	Total equity
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 accounting principles	–	–	–	–	–	–	–	– 268	–	– 268	–	– 268
Adjusted amount as of 31.12.2007	1,172	1,366	140	– 180	237	392	589	1,795	1,655	6,577	55	6,632
Capital increases/reductions	–	–	–	–	–	–	–	–	–	–	–	–
Reclassifications	–	–	–	–	–	–	–	1,083	– 1,083	–	–	–
Dividends	–	–	–	–	–	–	–	–	– 572	– 572	– 9	– 581
Consolidated net profit/ loss attributable to minority interest	–	–	–	–	–	–	–	–	527	527	9	536
Other neutral changes	–	–	21	39	–	– 14	46	–	–	46	2	48
Adjusted amount as of 30.9.2008	1,172	1,366	161	– 141	237	378	635	2,878	527	6,578	57	6,635
As of 31.12.2008	1,172	1,366	1	– 52	237	393	579	3,140	599	6,856	63	6,919
Changes in accounting principles	–	–	–	–	–	–	–	– 268	– 57	– 325	–	– 325
Adjusted amount as of 31.12.2008	1,172	1,366	1	– 52	237	393	579	2,872	542	6,531	63	6,594
Capital increases/reductions	–	–	–	–	–	–	–	–	–	–	6	6
Reclassifications	–	–	–	–	–	2	2	222	– 222	2	– 2	–
Dividends	–	–	–	–	–	–	–	–	– 320	– 320	– 9	– 329
Consolidated net profit/ loss attributable to minority interest	–	–	–	–	–	–	–	–	– 32	– 32	12	– 20
Other neutral changes	–	–	– 20	– 47	– 43	– 40	– 150	–	–	– 150	36	– 114
As of 30.9.2009	1,172	1,366	– 19	– 99	194	355	431	3,094	– 32	6,031	106	6,137

Consolidated statement of changes in shareholders' equity Consolidated cash flow statement

Consolidated cash flow statement

in €m	Jan.– Sept. 2009	Jan.– Sept. 2008	July – Sept. 2009	July– Sept. 2008
Cash and cash equivalents 1.11)	1,444	2,079	1,029	1,770
Net profit/loss before income taxes	– 105	655	231	177
Depreciation, amortisation and impairment losses on non-current assets (net of reversals)	1,200	1,051	391	328
Depreciation on repairable spare parts for aircraft and on current assets	77	44	15	16
Net proceeds on disposal of non-current assets	– 36	– 28	0	– 10
Result of equity investments	– 47	– 32	– 27	– 15
Net interest	235	129	97	43
Income tax payments	58	– 87	56	– 35
Changes in working capital 2)	56	410	– 355	– 115
Cash flow from operating activities	1,438	2,142	408	389
Capital expenditure for property, plant and equipment and intangible assets	– 1,614	– 1,349	– 547	– 396
Capital expenditure for financial assets	– 14	– 33	– 7	– 2
Additions to repairable spare parts for aircraft	– 139	– 96	– 26	– 49
Income from sales of non-consolidated equity investments	91	8	1	1
Income from sales of consolidated equity investments	0	30	0	13
Expenses from acquisitions of non-consolidated equity investments	– 93	– 263	– 5	– 19
Expenses from acquisitions of consolidated equity investments 3)	– 56	– 15	– 53	– 12
Income on disposal of intangible assets, property, plant and equip ment and other financial assets	207	63	23	13
Interest income	107	136	37	40
Dividends received	55	66	11	15
Net cash used in investing activities	– 1,456	– 1,453	– 566	– 396
Purchase of securities/fund investments 4)	– 2,465	– 575	– 219	– 87
Sale of securities/fund investments	869		77
Net cash from/for investing and cash management activities	– 3,052	– 2,028	– 708	– 483
Capital increase 5)	6	–	6	–
Long-term borrowings	2,501	291	906	4
Repayment of long-term borrowings	– 419	– 219	– 206	– 90
Other financial debt	13	16	6	15
Dividends paid	– 329	– 581	– 1	– 2
Interest paid	– 227	– 168	– 78	– 58
Net cash used in financing activities	1,545	– 661	633	– 131
Net change in cash and cash equivalents	– 69	– 547	333	– 225
Changes due to exchange rate differences	– 16	33	– 3	20
Cash and cash equivalents 30.94)	1,359	1,565	1,359	1,565
Securities	3,399	1,793	3,399	1,793
Total liquidity	4,758	3,358	4,758	3,358
Net change in total liquidity	1,480	– 249	– 27	– 318

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

2) Working capital consists of inventories, receivables, liabilities and provisions.

3) Less cash balances acquired of EUR 431m (previous year: EUR 1m).

4) In the previous year including allocation to the LH Pension Trust of EUR 283m.

5) Capital increase of minority interests.

Notes

1) Standards applied and changes

in the group of consolidated companies This interim report as of 30 September 2009 has been prepared in condensed form in accordance with IAS 34. In preparing the interim financial statements the standards and interpretations applicable as of 1 January 2009 have been applied. Under the revised version of IAS 1 Presentation of Financial Statements, a statement of comprehensive income is required which includes income and expenses previously recognised in equity without effect on income (other comprehensive income). The standard will affect the presentation of the financial statements, but not the net assets, financial and earnings position of the Group. IAS 23 Borrowing Costs, as amended, replaces the option of either capitalising or recognising as expenses borrowing costs incurred in close connection with the financing of the purchase or production of an asset with the obligation to capitalise these costs for financial years beginning on or after 1 January 2009. The corresponding interest expense is to be determined using the effective interest method. The main effects on the net assets, financial and earnings position of the Group will come from the capitalisation of financing costs for prepayments on aircraft orders placed after 1 January. In accordance with IFRIC 13 Customer Loyalty Programmes, mandatory from 1 January 2009, miles earned but unused under bonus miles programmes are to be accounted for at fair value using the deferred revenue method.

Changes in the group of consolidated companies in the period 1.10.2008 to 30.9.2009

Name, corporate domicile	Addition as of	Disposal as of	Reason
Segment Passenger Airline Group
Lufthansa Italia S.p.A., Milan, Italy	5.6.09		Established
LHBD Holding Ltd., London, Great Britain	19.6.09		Established
Austrian Airlines AG, Vienna, Austria	3.9.09		Acquisition
Lauda Air Luftfahrt GmbH, Vienna, Austria	3.9.09		Acquisition
Tyrolean Airways Tiroler Luftfahrt GmbH, Innsbruck, Austria	3.9.09		Acquisition
AUA Beteiligungen Gesellschaft m.b.H., Vienna, Austria	3.9.09		Acquisition
TRAVIAUSTRIA Datenservice für Reise und Touristik GmbH & Co. Nfg. KG, Vienna, Austria	3.9.09		Acquisition
Austrian Airlines Lease & Finance Company Ltd., Guernsey, Great Britain	3.9.09		Acquisition
Suriba Beteiligungsverwaltungs GmbH, Vienna, Austria	3.9.09		Established
ÖLB Österreichische Luftverkehrs-Beteiligungs GmbH, Vienna, Austria	3.9.09		Consolidated for the first time
ÖLH Österreichische Luftverkehrs-Holding GmbH, Vienna, Austria	3.9.09		Consolidated for the first time
ÖLP Österreichische Luftverkehrs-Privatstiftung, Vienna, Austria	3.9.09		Consolidated for the first time
British Midland Airways Ltd., Donington Hall, Great Britain	1.7.09		Increased shareholding
British Midland plc, Donington Hall, Great Britain	1.7.09		Increased shareholding
Lufthansa Leasing Austria GmbH & Co. OG Nr. 1, Salzburg, Austria	6.7.09		Established
UIA Beteiligungsgesellschaft mbH, Vienna, Austria	3.9.09		Acquisition
A319 LDA-LDB-LDC Ltd., George Town, Cayman Islands	3.9.09		Acquisition
A319 LDD-LDE-LDF Ltd., George Town, Cayman Islands	3.9.09		Acquisition
AUA 2006 MSN 263 Ltd., George Town, Cayman Islands	3.9.09		Acquisition
AUA A320/A321 2001 Ltd., George Town, Cayman Islands	3.9.09		Acquisition
AUA LNR/LNS/LNT/LNU Ltd., George Town, Cayman Islands	3.9.09		Acquisition
LNN/LNO/LAE Ltd., George Town, Cayman Islands	3.9.09		Acquisition
LPC/LNP/LNQ Finance Ltd., George Town, Cayman Islands	3.9.09		Acquisition
Segment Logistics
cargo counts GmbH, Hattersheim		1.1.09	Merger
Segment MRO
Lufthansa Technik Switzerland GmbH, Basle, Switzerland	1.10.08		Established

Changes in the group of consolidated companies in the period 1.10.2008 to 30.9.2009

Addition as of	Disposal as of	Reason
	31.12.08	Merger
	31.12.08	Liquidation
1.1.09		Consolidated for the first time
1.1.09		Consolidated for the first time
1.1.09		Consolidated for the first time
1.1.09		Consolidated for the first time
7.1.09		Acquisition
7.1.09		Acquisition
7.1.09		Acquisition
1.7.09		Consolidated for the first time
		Established
		Consolidated for the first time
1.1.09		Consolidated for the first time
3.9.09		Increased shareholding
25.9.09		Established
	5.12.08 1.1.09

Compared with the additional cost method applied to date, this will result in a considerably higher deferred value per mile and have a corresponding effect on the Group's net assets, financial and earnings position. Following this switch, the obligation under bonus miles programmes increased as of 1 January 2009 compared with the financial statements for 2008, from EUR 1,026m to EUR 1,454m, deferred tax liabilities fell by EUR 103m and equity by EUR 325m. If IFRIC 13 had been applied to the interim report as of 30 September 2008, the net profit before income taxes would have been EUR 30m lower and the net profit after income taxes EUR 23m lower. As a result of IFRS 8 Operating Segments, applicable from 1 January 2009, the segment reporting has been adapted structurally and in terms of its contents to the reports regularly presented to decision-makers within the Group. The main earnings indicator in the segment reporting is now the operating result, instead of the segment result previously reported under IAS 14. The standard affects the presentation of segment reporting but not the Group's net assets, financial and earnings position. The comparable figures shown in the segment reporting for this reporting period have been adjusted as if IFRS 8 had already

been applied the previous year. The segment previously known as Passenger Transportation is presented under the new name of Passenger Airline Group, without the centralised Group functions. The operating result for the new segment adjusted accordingly was therefore shown as being EUR 76m higher in the previous year. There is no further segment reporting on Service and Financial Companies as for this operating segment there is no obligation to report under IFRS 8. Other amendments to the standards in comparison with the previous year had no significant effect on the net assets, financial and earnings position of the Group. Otherwise the same accounting principles were applied as for the 2008 consolidated financial statements. Income tax expense has been determined as a best estimate based on the results of the consolidated companies and the respective deferred tax rates: effects of consolidation were measured at the applicable deferred tax rates. Permanent differences have been recognised for the difference between the carrying amount of an asset or a liability in the consolidated financial statements and the equivalent amount for tax purposes. The quarterly financial statements and management report have not been reviewed by the auditors.

Income statement

in €m	Group Jan.– Sept. 2009	of which from changes in the group of consolidated companies	Group Jan.– Sept. 2008	of which from changes in the group of consolidated companies
Revenue	16,162	475	18,611	2,444
Operating income	18,126	522	19,852	2,488
Operating expenses	– 17,810	– 490	– 18,916	– 2,235
Profit from operating activities	316	32	936	253
Financial result	– 421	14	– 281	– 13
Income taxes	85	– 30	– 118	– 27
Result after taxes	– 20	16	537	213

Balance sheet
in €m	Group 30.9.2009	of which from changes in the group of consoli dated companies of the year 2009	Group 30.9.2008	of which from changes in the group of consoli dated companies of the year 2008
Non-current assets	17,442	2,120	14,503	3
Current assets	9,839	1,158	8,318	12
Total assets	27,281	3,278	22,821	15
Equity	6,137	– 13	6,635	5
Non-current provisions and liabilities	11,630	1,781	7,599	1
Current provisions and liabilities	9,514	– 1,510	8,587	9

Assets held for sale
	Jan.– Sept. 2009	Financial Statements	Jan.– Sept. 2008
in €m		2008
Assets
Aircraft and spare engines	66	18	380
Financial assets	143	79	16
Other assets	–	–	187
Equity/liabilities from assets held for sale
Equity	–	–	15
Liabilities	–	–	464

British Midland Airways and its holding company British Midland plc were included in the consolidated financial statements for Deutsche Lufthansa AG for the first time as of 1 July 2009. Having acquired a stake of 50 per cent plus one share in bmi via LHBD Holding Limited, a Lufthansa subsidiary, the Group momentarily holds 80 per cent of the bmi shares. The purchase price for the shares was GBP 48m. Lufthansa also paid Sir Michael Bishop GBP 175m in compensation for the waiver of his put option. The remaining 20 per cent of bmi shares are held by SAS Scandinavian Airlines.

Austrian Airlines AG and its subsidiaries were also included for the first time in the consolidated financial statements for Deutsche Lufthansa AG, with effect from 3 September 2009. After the European Commission had approved the merger between Austrian Airlines and Lufthansa, and cleared the payment of EUR 500m in restructuring aid for Austrian Airlines by Österreichische Industrieholding AG (ÖIAG), all the conditions precedent for completing the transaction were met. By purchasing the shares held by ÖIAG and those acquired as part of the public takeover offer, Lufthansa – via ÖLH Österreichische Luftverkehrs-Holding GmbH – has acquired 95.4 per cent of the share capital of Austrian Airlines AG for a total purchase price of EUR 208m. In addition to the amount paid to ÖIAG and the remaining shareholders, the acquisition costs include the fair value of the earn-out agreement with ÖIAG. Comparing the fair value of assets and liabilities with the acquisition cost of the shares results in negative goodwill ("badwill") of EUR 61m, which in accordance with IFRS 3 is to be recognised immediately in profit and loss and is shown under other operating income.

The following table shows the companies' main assets and liabilities immediately before and after the acquisition date. Due to the fact that both acquisitions took place in the current quarter, the amounts are based on preliminary measurements as of the acquisition date.

British Midland
in €	Before acquisition 1.7.2009	After acquisition 1.7.2009
Non-current assets	94	678
Cash and cash equivalents	31	31
Other current assets	130	131
Current assets	161	162
Total assets	255	840
Shareholders' equity	– 787	– 286
Non-current liabilities	316	355
Current liabilities	726	771
Total equity and liabilities	255	840

Austrian Airlines

in €	Before acquisition 1.9.2009	After acquisition 1.9.2009
Non-current assets	1,745	1,647
Cash and cash equivalents	380	380
Other current assets	444	448
Current assets	824	828
Total assets	2,569	2,475
Shareholders' equity	486	285
Non-current liabilities	1,150	1,257
Current liabilities	933	933
Total equity and liabilities	2,569	2,475

Fully consolidating these companies contributed EUR 55m to net profit for the period. If they had been fully consolidated as of 1 January 2009, Group revenue would have been EUR 1.8bn higher and net profit would have been EUR –434m lower.

In addition, the table on page 40 shows the companies which have joined or left the group of consolidated companies compared with year-end 2008 and 30 September 2008. The changes in the group of consolidated companies affected the balance sheet and the income statement substantially. The tables on page 42 detail these changes.

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

Detailed comments on the income statement, the balance sheet, the cash flow statement and the segment reporting can be found in the management report on pages 6 to 33.

3) Seasonality

The Group's business is mainly exposed to seasonal effects via the Passenger Airline Group segment. As such, revenue in the first and fourth quarters is generally lower as people travel less, while higher revenue and operating profits are normally earned in the second and third quarters.

4) Contingencies

Several provisions could not be made because an outflow of resources was not sufficiently probable. The potential financial effect of these provisions on the result would have been EUR 193m for subsequent years. As of the balance sheet date for 2008 the figure was EUR 195m. The contingent receivable in connection with the disposal of an equity investment described in the consolidated financial statements for 2008 is not expected to result in any further proceeds. Signed contracts for the sale of eight Airbus A300-600s are expected to generate profits of EUR 11m in 2009 and EUR 1m in 2010. These disposals as well as signed contracts for the sale of 11 Canadair Regional Jet 200s, two Dash 8-200s and one British Aerospace 146 will result in total cash inflow of EUR 30m in 2009 and EUR 49m in 2010. On 23 March 2009, Deutsche Lufthansa AG and the insurance companies involved agreed on a payment of EUR 40m in compensation for damages which occurred in Scandinavia and were described in the consolidated financial statements for 2008 as a contingent receivable under a D&O insurance policy (see Note 46). This settles all claims relating to the aforementioned damages. At the end of September 2009, there were purchase commitments of EUR 6.6bn for capital expenditure on property, plant and equipment and intangible assets. As of 31 December 2008 the purchase commitments came to EUR 7.2bn.

Contingent liabilities
in €m	30.9.2009	31.12.2008
From guarantees, bills of exchange and cheque guarantees	848	861
From warranty contracts	884	901
From providing collateral for third-party liabilities	13	3

5) Earnings per share

		30.9.2009	30.9.2008
Basic earnings per share	€	– 0.07	1.16
Consolidated net profit/loss	€m	– 32	529
Weighted average number of shares			457,870,209 457,895,293
Diluted earnings per share	€	– 0.07	1.15
Consolidated net profit/loss	€m	– 32	529
+ interest expenses on the convertible bonds	€m	1	1
– current and deferred taxes	€m	0*	0*
Adjusted net profit/loss for the period	€m	– 31	530
Weighted average number of shares			460,394,831 460,430,237

* Rounded below EUR 1m.

6) Issued capital

A resolution passed at the Annual General Meeting on 24 April 2009 authorised the Executive Board until 23 April 2014, subject to approval by the Supervisory Board, to increase the Company's issued capital by up to EUR 25m by issuing new registered shares to employees for payment in cash. The new shares are to be offered for sale solely to employees of Deutsche Lufthansa AG and its affiliated companies. Existing shareholders' subscription rights are excluded. Following a resolution of the Annual General Meeting held on 24 April 2009, the distributable profit of EUR 320m shown in the financial statements for Deutsche Lufthansa AG was paid out as dividends. The dividend for the 2008 financial year was EUR 0.70 per share.

7) Segment reporting for the Lufthansa Group

Operating segment information January –September 2009

	Passenger Airline Group	Logistics	MRO	IT Services	Catering	Reportable operating	Other	Recon ciliation	Group
in €m						segment total
External revenue	11,608	1,371	1,794	187	1,202	16,162	–	–	16,162
- of which traffic revenue	11,055	1,317	–	–	–	12,372	–	217	12,589
Inter-segment revenue	442	18	1,214	264	384	2,322	–	– 2,322	–
Total revenue	12,050	1,389	3,008	451	1,586	18,484	–	– 2,322	16,162
Other operating income	1,008	80	101	27	98	1,314	891	– 427	1,778
Total operating income	13,058	1,469	3,109	478	1,684	19,798	891	– 2,749	17,940
Operating expenses	12,819	1,669	2,880	466	1,631	19,465	989	– 2,740	17,714
- of which cost of materials	7,710	1,133	1,532	60	712	11,147	63	– 2,038	9,172
- of which staff costs	2,361	232	786	174	590	4,143	186	– 4	4,325
- of which amortisation and depreciation (on schedule)	729	92	64	27	44	956	32	5	993
- of which other operating expenses	2,019	212	498	205	285	3,219	708	– 703	3,224
Operating result**	239	– 200	229	12	53	333	– 98	– 9	226
Other segment income	153	6	6	–	1	166	29	– 9	186
Other segment expenses	85	–	–	1	– 12	74	1	21	96
- of which impairment charge	70	–	–	–	0*	70	–	–	70
Result of investments accounted for using the equity method	– 1	1	1	–	7	8	–	– 8	–
Segment result (profit from operating activities)**	306	– 193	236	11	73	433	– 70	– 47	316
Segment assets***	14,036	823	2,845	269	1,213	19,186	1,578	6,517	27,281
- of which from investments accounted for using the equity method	132	23	112	–	49	316	10	1	327
Segment liabilities	9,571	461	1,355	195	478	12,060	1,348	7,736	21,144
Segment capital expenditure	1,462	17	81	43	40	1,643	54	80	1,777
- of which from investments accounted for using the equity method	65	4	–	–	–	69	–	–	69
Other significant non-cash items	191	16	32	7	18	264	1	–	265
Employees at the balance sheet date	58,907	4,542	19,823	3,028	28,871	115,171	3,774	–	118,945
Average staff numbers	50,387	4,595	19,742	3,043	28,969	106,736	3,685	–	110,421

* Rounded below EUR 1m.

** See page 11 of the management report for reconciliation between operating result and profit from operating activities.

*** Segment assets consist of property, plant and equipment and intangible assets.

Operating segment information January –September 2008

	Passenger Airline Group	Logistics	MRO	IT Services	Catering	Reportable operating	Other	Recon ciliation	Group
in €m						segment total
External revenue	13,293	2,159	1,618	207	1,334	18,611	–	–	18,611
- of which traffic revenue	12,666	2,081	–	–	–	14,747	–	285	15,032
Inter-segment revenue	477	20	1,069	278	421	2,265	–	– 2,265	–
Total revenue	13,770	2,179	2,687	485	1,755	20,876	–	– 2,265	18,611
Other operating income	338	68	121	29	30	586	913	– 334	1,165
Total operating income	14,108	2,247	2,808	514	1,785	21,462	913	– 2,599	19,776
Operating expenses	13,601	2,087	2,581	485	1,729	20,483	929	– 2,590	18,822
- of which cost of materials	8,662	1,467	1,311	56	799	12,295	56	– 2,025	10,326
- of which staff costs	2,270	242	748	173	620	4,053	178	– 6	4,225
- of which amortisation and depreciation (on schedule)	687	92	61	27	40	907	28	4	939
- of which other operating expenses	1,982	286	461	229	270	3,228	667	– 563	3,332
Operating result**	507	160	227	29	56	979	– 16	– 9	954
Other segment income	43	6	5	1	24	79	121	– 124	76
Other segment expenses	3	1	0*	1	3	8	154	– 68	94
- of which impairment charge	–	–	–	–	–	–	2	– 2	–
Result of investments accounted for using the
equity method	– 30	12	4	–	3	– 11	–	11	–
Segment result (profit from operating activities)**	517	177	236	29	80	1,039	– 49	– 54	936
Segment assets ***	10,987	1,081	2,636	271	1,261	16,236	3,552	3,033	22,821
- of which from investments accounted for using the equity method	7	26	151		59	243	3	– 38	208
Segment liabilities	8,338	598	1,211	219	498	10,864	1,717	3,313	15,894
Segment capital expenditure	1,079	12	82	38	90	1,301	111	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	270	2	–	272
Employees at the balance sheet date	46,980	4,654	19,213	3,014	31,897	105,758	3,643	–	109,401
Average staff number	46,496	4,607	18,991	2,989	31,528	104,611	3,604	–	108,215

* Rounded below EUR 1m.

** See page 11 of the management report for reconciliation between operating result and profit from operating activities.

*** Segment assets consist of property, plant and equipment and intangible assets.

Information about geographical regions January –September 2009

in €m		Europe North America	Central and South America	Asia/Pacific	Middle East	Africa	Other	Segment Total
Traffic revenue**	8,513	1,761	249	1,508	318	240	–	12,589
Other operating revenue	1,750	712	104	623	209	175	0*	3,573
Total revenue	10,263	2,473	353	2,131	527	415	0*	16,162

* Rounded below EUR 1m.

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

Information about geographical regions January –September 2008

in €m		Europe North America	Central and South America	Asia/Pacific	Middle East	Africa	Other	Segment Total
Traffic revenue**	10,303	2,043	286	1,868	283	249	–	15,032
Other operating revenue	1,906	699	88	556	210	120	0*	3,579
Total revenue	12,209	2,742	374	2,424	493	369	0*	18,611

* Rounded below EUR 1m.

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

8) Related-party disclosures

As stated in Note 50 to the consolidated financial statements for 2008, the operating segments in the Lufthansa Group render numerous services to related parties within the scope of their ordinary business activities and also receive services from them. These extensive supply and service relationships take place unchanged on the basis of market prices. There have been no significant changes in comparison with the balance sheet date. The contractual relationships with the group of related parties described in Note 51 to the 2008 consolidated financial statements also still exist unchanged, but are not of material significance for the Group.

Declaration by the legal representatives

We declare that to the best of our knowledge and according to the applicable accounting standards for interim reporting, the consolidated interim financial statements give a true and fair view of the net assets, financial and earnings position of the Group and that the Group interim management report gives a true and fair view of the course of business, including the business result, and the situation of the Group, and suitably presents the opportunities and risks to its future development in the remainder of the financial year.

The Executive Board, 28 October 2009

Wolfgang Mayrhuber Chairman of the Executive Board and CEO

Christoph Franz Deputy Chairman of the Executive Board and CEO Lufthansa German Airlines

Stephan Gemkow Member of the Executive Board Chief Financial Officer

Stefan Lauer Member of the Executive Board Chief Officer Group Airlines and Corporate Human Resources

Disclaimer in respect of forward-looking statements

Information published in the 3rd Interim Report 2009 with regard to the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of definitive historical facts. 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. Lufthansa makes a point of checking and updating the information it publishes. It cannot, however, assume any obligation to adapt forward-looking statements to accommodate events or developments that may occur at some later date. Accordingly, it neither expressly nor conclusively accepts liability, nor gives any guarantee, for the actuality, accuracy and completeness of this data and information.

Credits

Published by

Deutsche Lufthansa AG Von-Gablenz-Str. 2–6 50679 Cologne Germany

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

Editorial staff

Frank Hülsmann (Editor) Johannes Hildenbrock Anna-Maria Wehenkel

Deutsche Lufthansa AG, Investor Relations

Photography Martin Jehnichen, Leipzig, Germany

Concept, design and realisation Kirchhoff Consult AG, Hamburg, Germany

Translation by

EnglishBusiness GbR, Hamburg, Germany

Printed by

Broermann Offset-Druck, Troisdorf, Germany

Printed in Germany ISSN 1616-0231

The 3rd Interim Report 2009 is a translation of the original German Lufthansa 3. Zwischenbericht. Please note that only the German version is legally binding.

Contact

Frank Hülsmann Head of Investor Relations +49 69 696-28001

Jobst Honig +49 69 696-28011

Gregor Schleussner +49 69 696-28012

Deutsche Lufthansa AG Investor Relations LAC, Airportring 60546 Frankfurt/M. Germany Phone: +49 69 696-28008 Fax: +49 69 696-90990 E-mail: investor.relations@dlh.de

Financial calendar 2009/2010

2009

29 Oct. Press Conference and Analysts' Conference on interim result January–September 2009

2010

• 11 March Press Conference and Analysts' Conference on 2009 result
• 29 April Annual General Meeting, Berlin
• 5 May Release of Interim Report January –March 2010
• 29 July Release of Interim Report January – June 2010
• 28 Oct. Press Conference and Analysts' Conference on interim result January –September 2010

You can order the Annual and Interim Reports in German or English via our website – www.lufthansa.com/investor-relations – or from the address stated.

Latest financial information on the Internet: www.lufthansa.com/investor-relations

www.lufthansa.com www.lufthansa.com/investor-relations www.lufthansa.com/responsibility