Deutsche Lufthansa AG — Interim / Quarterly Report 2009

Aug 18, 2009

Lufthansa Group overview

Key figures
		Jan. –June 2009	Jan. –June 20083)	Change in %	April –June 2009	April –June 20083)	Change in %
Revenue and result
Revenue	€m	10,226	12,057	– 15.2	5,211	6,469	– 19.4
- of which traffic revenue	€m	7,846	9,722	– 19.3	4,033	5,255	– 23.3
Operating result	€m	8	677	– 98.8	52	505	– 89.7
EBIT	€m	– 198	564		7	470	– 98.5
EBITDA	€m	617	1,289	– 52.1	362	837	– 56.8
Net profit/loss for the period	€m	– 216	381		40	337	– 88.1
Key balance sheet and cash flow statement figures
Total assets	€m	23,474	23,632	– 0.7	–	–	–
Equity ratio	%	25.7	27.9	– 2.2 pts	–	–	–
Net liquidity 1)	€m	– 396	916		–	–	–
Cash flow from operating activities	€m	1,030	1,753	– 41.2	322	1,012	– 68.2
Capital expenditure	€m	1,165	1,231	– 5.4	501	423	18.4
Key profitability and value creation figures
Adjusted operating margin 2)	%	0.5	5.9	– 5.4 pts	–	–	–
EBITDA margin	%	6.0	10.7	– 4.7 pts	–	–	–
The Lufthansa share
Share price at the half-year end	€	8.93	13.70	– 34.8	–	–	–
Earnings per share	€	– 0.47	0.83
Traffic figures
Passengers	thousands	33,185	34,845	– 4.8	18,142	18,850	– 3.8
Freight/mail	thousand tonnes	788	983	– 19.8	413	498	– 17.1
Passenger load factor	%	75.2	78.3	– 3.1 pts	76.2	79.4	– 3.2 pts
Cargo load factor	%	56.4	65.3	– 8.9 pts	57.9	64.2	– 6.3 pts
Available tonne-kilometres	millions	16,369	17,165	– 4.6	8,496	9,011	– 5.7
Revenue tonne-kilometres	millions	10,971	12,396	– 11.5	5,816	6,524	– 10.8
Overall load factor	%	67.0	72.2	– 5.2 pts	68.5	72.4	– 3.9 pts
Number of flights		393,896	413,302	– 4.7	206,128	217,625	– 5.3
Employees
Number of employees as of 30.6		105,499	108,073	– 2.4	105,499	108,073	– 2.4

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

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 June 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 34. Date of disclosure: 30 July 2009.

Contents

1 To our shareholders

3 Interim management report

28 Interim financial statements

34 Notes to the financial statements Credits/Contact

Financial calendar 2009/2010

Dear Shareholders,

The weak demand in the aviation market already visible in the first quarter of this year continued in the second quarter. It was particularly marked in the premium segment. Around the world, airlines are therefore struggling with sharp falls in revenue and results. The aviation industry association IATA is forecasting that the sector will lose a total of USD 9bn in 2009. Airlines' losses in the first quarter already ran to more than USD 3bn.

In the first half-year of 2009, Lufthansa was able to avoid the worst storms, but in the current environment the crane is also exposed to turbulences, sometimes severe. The persistent economic crisis and its effects on demand for our services present the Lufthansa Group with major challenges. We suffered a sharp fall in revenue in the first half-year, which meant that we were only able to report a considerably reduced operating profit of EUR 8m. A year ago the figure was EUR 677m.

All business segments were affected by the fall in earnings. The Passenger Airlines Group was not able to repeat last year's good results. It nevertheless managed to post a profit. Logistics was able to make up for a good half of the fall in revenue, but ultimately still had to recognise a significant loss. The Catering and IT Services segments were also not able to match last year's revenue and results. Only the MRO segment continued its revenue growth, although it also posted an operating result below last year's.

In June we were forced to lower our earnings expectations for the Group for the full year. Our activities nevertheless remain focused on achieving an operating profit. At the same time we have to see the risks en route, and address them. The Lufthansa crane therefore temporarily needs to leave its cruising altitude, in order to circumnavigate some patches of dangerous weather. The Group still benefits from its solid position, operating flexibility and robust financial profile, but the force of the economic downturn and the structural changes which have since occurred oblige us to take additional measures.

We have therefore increased our efforts to safeguard earnings in all segments. For this reason Lufthansa Passenger Airlines has launched the ambitious but necessary programme CLIMB 2011 in order to face the structural changes in demand as well as to adapt current capacities and costs. By 2011, the segment's earnings

base is to be sustainably improved by EUR 1bn, principally by cost-cutting measures. The other segments have also tightened their existing programmes significantly. More information can be found in the respective chapters.

The steps we are taking are intended to keep the Lufthansa crane on course, even in turbulent times. We are convinced that our market positioning and our solid fundamentals enable us to offer our shareholders, customers and employees promising prospects for the future. Aviation is and will remain a growth industry, but one which is subject to extreme fluctuations in demand. All our endeavours are therefore focused on adapting our business to the current challenges, while not losing sight of the medium and longterm perspective. It is not least our solid financial position which enables us to do so. But this also needs to be maintained. In our strategic and forward-looking decision-making, we therefore attach great importance to conserving this perspective: cost structures must remain competitive, wage settlements must be reasonable and the transactions in the course of the necessary consolidation of the industry must be appropriate and financially acceptable, as must the potential conditions for competition clearance.

We are therefore delighted by the approval of our equity investment in Brussels Airlines and the compromise reached with the previous majority shareholder of British Midland, Sir Michael Bishop. We can now work together at full thrust with both airlines on elaborating sustainable business models. The planed takeover of Austrian Airlines is also to be expected an important enhancement, despite the momentarily difficult situation of our long-time Star Alliance partner. However, we are still awaiting the urgent necessary approvals of the European Commission.

Dear shareholders, the entire Lufthansa Group, with its experienced management and motivated staff, is taking all the steps necessary to continue to safely navigate through the present turbulences. CLIMB 2011 and the other programmes to sustainably safeguard earnings will make a major contribution to allowing us to reach cruising altitude again. During our flight we will waver neither in our service and quality promise, nor in our principle of sustainable value creation.

We thank you for your confidence.

Wolfgang Mayrhuber Chairman of the Executive Board and CEO

Christoph Franz Member of the Executive Board 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 first quarter, stock exchanges reflected the ongoing economic crisis and poor company news in falling share prices, but in the second quarter they made good the lost ground. This upswing was initially buoyed by improved reports from the financial sector and subsequently by the hope of a more widespread economic recovery. Fundamental signs of a general economic convalescence were still lacking, however. Speculation that the global economy would soon recover nevertheless caused the oil price to rise sharply. The major international indices performed correspondingly well. The German stock market index DAX rose by 18 per cent in the second quarter, regaining its year's opening level of 4,809 points.

The shares of European airlines did not benefit from this rally. British Airways registered a fall of 29 per cent in the first half-year. Shares in Air France-KLM, which had already suffered heavy losses in 2008, sank by a further three per cent. The Lufthansa share reported a decline of around 20 per cent; adjusted to include the dividend payment the drop was 14 per cent. The share finished trading on 30 June at EUR 8.93.

Despite the weak environment, which led to a correction in earnings expectations and further measures to safeguard earnings, the majority of analysts continue to see the Lufthansa Group as a longterm winner in the industry. Three reasons are given for this: better operating stability compared with the competition, the solid financial position, and an active strategic development option by means of various alternatives, even in difficult times. Thanks to its greater earnings stability, Lufthansa was also the only European airline able to pay its shareholders a dividend for the previous financial year. A resolution was passed at the Annual General Meeting on 24 April to distribute EUR 0.70 per share, which was paid out on 27 April.

At the Investor Day held on 25 June at the Lufthansa Conference & Training Center in Seeheim, Lufthansa management presented and discussed a wide range of background information on the Group with analysts and investors. The focus was on steps to safeguard earnings in the different business segments, flexibility in capacity and cost management, and the further strategic development of the Group. The presentations and the webcast of this event are available on the Internet at www.lufthansa.com/investor-relations.

100 Transparency and active communications also in times of crisis are much appreciated by investors. In June, this led to Lufthansa being awarded the renowned Capital Investor Relations prize for 2009. Nearly 400 analysts rated companies according to criteria such as target group focus, transparency and track record.

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

The shareholder structure remains majoritarily German and therefore complies with statutory requirements. As of 30 June 2009, German investors held 70.3 per cent of Lufthansa's share capital. Shareholders from the USA were the second-largest group with 8.8 per cent, followed by Luxembourg (8.7 per cent), the UK (6.2 per cent) and France with 1.2 per cent of issued capital. Some 31 per cent of shares are held by private individuals and around 69 per cent by institutional investors. The largest shareholder is the AXA Group, which holds 8.23 per cent of the Lufthansa shares. According to notification sent on 29 May, 4.98 per cent of the total are held by the group's subsidiary AllianceBernstein. The second-largest investor in Lufthansa is Deka Investment GmbH with 3.01 per cent (as disclosed on 3 June). The free float came to 100 per cent. The shareholder structure is published quarterly on the website www.lufthansa.com/investor-relations.

Interim management report

Economic environment and sector performance The global economy is still in a severe and persistent slump. Following the massive collapse in autumn 2008, the situation deteriorated further in the first half-year of 2009. The downturn is continuing with undiminished speed in both industrialised countries and emerging economies. Indeed, the factor having the main negative influence on developments in emerging markets (especially in Central and Eastern Europe) is the recession in the industrialised countries. The fall in growth has nevertheless slowed since the end of the second quarter. However, at the same time, commodities prices began to recover from their low-water marks, sometimes notedly.

Around the world, governments have reacted to the economic and financial crisis with wide-ranging measures. Monetary policy has been loosened drastically; in many cases central bank lending rates were cut to zero or just above. After declining by 3.1 per cent in the first quarter, the global economy is expected to have contracted by 3.4 per cent in the second quarter – this is by some margin the unfavourable performance since the Second World War.

Year-on-year GDP growth 2009
in %	Q1*	Q2**	Q3**	Q4**	Full year**
World	– 3.1	– 3.4	– 2.9	– 0.9	– 2.6
Europe	– 5.0	– 5.1	– 4.7	– 3.0	– 4.4
- Germany	– 6.9	– 6.8	– 6.1	– 3.9	– 6.0
North America	– 2.4	– 3.6	– 3.3	– 1.5	– 2.7
South America	– 2.4	– 3.3	– 2.8	0.1	– 2.1
Asia/Pacific	– 1.6	– 1.2	– 0.4	2.0	– 0.2
- China	6.1	7.0	7.4	7.9	7.2
Middle East	0.4	– 1.1	– 1.4	– 0.8	– 0.7
Africa	2.2	1.1	0.7	0.7	1.0

Source: Global Insight World Overview as of 14 July 2009.

* Partially forecast.

** Forecast.

The recession continues to weigh heavily on the USA. Weak growth is primarily the result of the sharp fall in exports and capital expenditure as well as persistently weak signals from the housing market. Individual consumption picked up slightly, however, encouraged by tax cuts. The euro area is also still in recession and suffering from the global economic slump, not least due to its dependence on exports and to the property crisis in some countries. This has hit Germany particularly hard, triggering a severe recession here, too. Household consumption has bolstered the economy so far, supported by the steps taken as part of the government's economic stimulus package, low inflation and moderate unemployment figures.

Economic performance in Asian countries was very poor in the first half-year of 2009, due to their great dependence on external demand. The Middle East and Africa have also been hit by the global economic crisis, partly due to lower exports of natural resources and lower commodities prices. Some countries are still benefiting from reserves laid down during the boom, however.

The worldwide economic slump had a considerable impact on business at the Lufthansa Group in the first half-year of 2009. The companies in the Passenger Airlines Group and Lufthansa Cargo were particularly affected. They were confronted with sharp falls in demand and an accelerating deterioration of average yields.

After falling sharply in the first quarter, the euro fluctuated considerably in the second (low: USD 1.29/EUR, high: USD 1.43/EUR). At the close of the half-year the rate was USD 1.40/EUR; the average rate was USD 1.33/EUR, or some 13 per cent down on last year. As exchange rates affect various items of the income statement, Lufthansa follows a rule-based and continuous hedging policy, which is largely independent of forecast currency developments. More detailed information is available in the 2008 Annual Report on pages 121 and 183.

Despite the continued frailty of the global economy, the oil price rose by around 50 per cent during the first six months of the year. It fluctuated considerably within a range of USD 39.55/bbl and USD 71.79/bbl. The reason for the price rise was essentially speculation on a positive global economic performance. Financial investors also started betting on rising commodities prices again. The difference to the price for kerosene (jet fuel crack) in the first half-year of 2009 was still much lower than in the same period of 2008. This is mainly the result of falling demand due to the

recession and largely unaltered production of the middle distillates, which led to increasing stocks. In the first half-year of 2009 the average for jet fuel crack was around USD 9.38/bbl (versus USD 30.14/bbl in the first half-year of 2008). The price for kerosene moved between USD 386/tonne and USD 645/tonne during the reporting period. The average price was USD 491/tonne, which is 55 per cent lower than in the first half-year of 2008. The dynamic market resulted, however, in a price for the end of the quarter which was 34 per cent above that of the previous quarter.

Lufthansa has a rule-based approach also to fuel hedging. The Group was able to benefit extensively from the considerable fall in fuel prices compared with 2008 by the use of spread options. On the other hand, any further fuel price increases would also partially impact Lufthansa's costs as well.

The global economic slump meant that demand in the aviation industry fell again in the second quarter. According to figures from the air traffic association IATA, the industry reported up to and including May a fall of 7.7 per cent in passenger traffic and of even 21.3 per cent in cargo traffic year on year. The airlines responded by adjusting capacities, moderately overall. In passenger traffic capacity was cut by a total of 3.9 per cent and in freight traffic by 10.4 per cent compared with the previous year.

Overcapacities on the aviation market and tougher competition meant that the second quarter saw not only a fall in demand for passenger traffic, but also a contraction in average yields. Premium traffic (First and Business Class) fell particularly sharply. In this segment the carriers in the European industry association AEA reported that demand in international traffic was down by 21 per cent on the year to the end of May. This resulted in a fall in revenue for the premium sector of more than 30 per cent overall.

The airlines' results also suffer from these developments. According to IATA estimates, the industry has run up losses of more than USD 3bn in the first quarter of 2009.

Their uncertain operating performance led airlines worldwide to raise more capital for investment and restructuring on financial markets. Air France-KLM issued a convertible bond for EUR 575m to part-fund the renewal of its aircraft fleet. Japan Airlines received a loan of EUR 750m for restructuring from a Japanese development bank. Air Berlin raised EUR 39m in new capital by issuing 11.1 million shares. In July, the shareholders of the Japanese airline ANA also injected the equivalent of some EUR 1.1bn in fresh capital and British Airways, too, issued a convertible bond for GBP 350m. In recent months Lufthansa also successfully issued two bonds and non-current bonded loans. More information can be found in the following chapters.

The consolidation of the industry continues hesitantly. Important progress was made in the second quarter in terms of expanding the Lufthansa airline group. The European Commission approved the equity investment in Brussels Airlines and the takeover of British Midland (bmi). In June, Lufthansa reached agreement with the founder of bmi, Sir Michael Bishop, on the purchase of his stake of 50 per cent plus one share in the British airline. Lufthansa is still awaiting the remaining decisions by the EU on the planned takeover of Austrian Airlines.

Course of business

The continuing economic crisis meant that the effects of the severe fall in demand in the first quarter persisted across the full first halfyear. While last year's performance was strong, the period under review saw sharp falls in revenue and volumes. The companies in the Passenger Airlines Group and Lufthansa Cargo in particular had to face up to considerably lower revenue and results. However, the IT Services and Catering segments were not able to match the last year's figures in terms of revenue or operating result either. Only the MRO segment was able to increase revenue, although its operating result was below last year's.

As the course of business is still weak and the general environment remains poor, the programme to safeguard earnings is to be extended in all segments. Lufthansa Cargo upgraded its measures to safeguard earnings by a further level. In addition to the cost cutting measures already in place, this now makes generating extra income an additional priority. Further steps were also taken in the Passenger Airlines Group. The CLIMB 2011 programme introduced by the Lufthansa passenger airlines is intended to save a further EUR 1bn by 2011. Details on the individual programmes and measures can be found in the chapters on the respective business segments.

Significant events A total of 88.1 per cent of shareholders in Austrian Airlines AG offered their shares for sale to Lufthansa within the period of acceptance for the public takeover bid on 11 May 2009. The public offer is still subject to the condition precedent of authorisation by the competition authorities and approval by the European Commission of EUR 500m in aid for Austrian Airlines AG from the Republic of Austria.

Lufthansa completed the purchase of 45 per cent of SN Airholding SA/NV, the parent company of Brussels Airlines, for EUR 65m, two days after competition clearance was given by the European Commission on 22 June 2009. From 2011, after Brussels Airlines' air traffic rights have been secured, Lufthansa will be able to exercise its option to purchase the remaining 55 per cent and thereby complete the full take-over of Brussels Airlines. The company is accounted for using the equity method as of 30 June.

In June, an out-of-court settlement was also reached with Sir Michael Bishop on the terms for exercising the put option over British Midland. Sir Michael Bishop agreed that the put option would not be exercised and that Lufthansa is not obliged to acquire the shares. For this concession Lufthansa is to pay him GBP 175m. As of 1 July 2009, the UK-based LHBD Holding Limited (Lufthansa stake 35 per cent) acquired the 50 per cent plus one share of bmi previously held by BBW for consideration of GBP 48m. The company has been fully consolidated since 1 July, as Lufthansa has economic control.

In the first half-year, Lufthansa successfully raised non-current funding via the issue of bonded loans (around EUR 600m) and a benchmark bond (EUR 850m). Another benchmark bond was issued for EUR 750m in July. Even under the challenging conditions on the financial markets the transactions met with considerable interest. Lufthansa benefited from its solid financial profile, which is also reflected in its ratings. Standard & Poor's and Moody's did lower their rating outlooks in June in view of deteriorating demand. However, Lufthansa remains the only European airline with an investment grade rating (S&P's: BBB CreditWatch negative; Moody's: Baa3 outlook negative).

Staff and management The Lufthansa Group had 105,499 employees at the end of June. The number of staff fell by 2.4 per cent year on year. The decline reflects the steps taken in 2008 to safeguard earnings (especially the hiring freeze), which took increasing effect in 2009.

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

Since 1 June 2009, Christoph Franz, formerly CEO of Swiss International Air Lines AG, has been a new member of the Executive Board of Deutsche Lufthansa AG with responsibility for Lufthansa Passenger Airlines. These duties were previously also carried out by the Chairman of the Executive Board Wolfgang Mayrhuber. At the same time, Christoph Franz is Chief Executive Officer Lufthansa German Airlines and Deputy Chairman of the Executive Board of Deutsche Lufthansa AG.

In early May 2009, the Supervisory Board also extended Stefan Lauer's appointment as Executive Board member for the new post Group Airlines and Corporate Human Resources for five years until 30 April 2015. In addition to the position of Chief Human Resources Officer, Stefan Lauer has been responsible since 1 June for those airlines not part of Lufthansa Passenger Airlines, and has been driving inter-company collaboration between these airlines.

* Deputy Chairman of the Executive Board of Deutsche Lufthansa AG.

The Group organisational structure was also refined. The position of Chief Financial Officer held by Stephan Gemkow now also includes responsibility for the segments Logistics, MRO, Catering and IT Services, and has been renamed Finance and Aviation Services. Since this date the Executive Board of Deutsche Lufthansa AG has been composed of four areas of responsibility, these being Chairman and Chief Executive Officer, Lufthansa Passenger Airlines, Group Airlines and Corporate Human Resources, and Finance and Aviation Services. The new internal regulations and division of responsibilities reflect Lufthansa's development into a federal system of autonomous airlines.

The collective bargaining dispute between Lufthansa and the trade unions UFO and ver.di was resolved in March 2009, while in May, right in the middle of the current crisis, salary negotiations began with the Vereinigung Cockpit (VC) pilots' union for some 4,500 pilots at Lufthansa Cargo and Lufthansa Passenger Airlines. The VC's demands correspond to a total increase of around nine per cent – assuming Group profit of zero. If earnings are substantially positive the pay rise could exceed 20 per cent. Talks are to continue.

SWISS reached agreement with the majority of its cabin staff on a new general employment contract which is valid for four years. It came into force on 1 May and includes a structural salary increase of 4 per cent and a profit-related component.

Changes in the group of consolidated companies There were no significant changes to the group of consolidated companies compared with the same period last year. Individual changes compared with year-end 2008 and 30 June 2008 are shown in the table on page 34. They had no significant effect on the consolidated balance sheet and income statement.

However, IFRS 8 Operating Segments and IFRIC 13 Customer Loyalty Programmes, applicable from 1 January 2009, have resulted in changes in reporting requirements. To facilitate comparison,

the figures presented in this report have been calculated as if the amended standards had already been applied last year. For further details see the Notes to the consolidated financial statements on page 34.

Earnings position

Traffic at the Lufthansa Group decreased considerably in the first half-year of 2009 compared with the same period last year. The Group's airlines transported some 33 million passengers (–4.8 per cent) and around 0.8 million tonnes of freight and mail (–19.8 per cent). In passenger traffic the load factor fell by 3.1 percentage points to 75.2 per cent. Capacity was reduced by 1.8 per cent, while sales fell by 5.7 per cent. Sales in the Group's airfreight business (including SWISS World Cargo) as measured in tonnekilometres declined by 20.5 per cent, while capacity was cut by 7.9 per cent. The cargo load factor was down 8.9 percentage points at 56.4 per cent. The individual performance figures and indicators for the other business segments are presented in the respective chapters.

Traffic revenue fell in the first half-year by 19.3 per cent to EUR 7.8bn, reflecting the reduced traffic. Lower volumes accounted for 8.1 per cent and pricing for 13.2 per cent of the fall in revenue. In contrast, currency effects had a positive effect of 2.0 per cent. The Passenger Airlines Group accounted for EUR 6.8bn (–16.4 per cent) of traffic revenue in the reporting period and the Logistics segment for EUR 0.9bn (–35.8 per cent).

Other revenue went up to EUR 2.4bn (+1.9 per cent), mainly due to higher MRO revenue. Of the total, the MRO segment reported revenue of EUR 1.2bn (+13.6 per cent), IT Services EUR 125m (–5.3 per cent) and Catering EUR 778m (–7.4 per cent). The airborne companies in the Passenger Airlines Group and Logistics segments contributed EUR 241m (–12.4 per cent) to other revenue.

Operating expenses
	Jan.–June 2009 in €m	Jan.–June 2008 in €m	Change in %
Cost of materials and services	5,770	6,512	– 11.4
- of which fuel	1,557	2,454	– 36.6
- of which fees and charges	1,677	1,720	– 2.5
Staff costs	2,848	2,818	1.1
Depreciation, amortisation and impairment	674	608	10.9
Other operating expenses	2,281	2,215	3.0
- of which sales commission paid to agencies	216	328	– 34.1
Total operating expenses	11,573	12,153	– 4.8

Airline Group 70.2

Group revenue decreased by 15.2 per cent to EUR 10.2bn as a result of lower traffic revenue. The Passenger Airlines Group's share of total revenue fell to 70.3 per cent (–1.0 percentage points). The graph on page 8 shows the development of revenue over the last five years. The revenue distribution across regions is shown in the segment reporting on page 39.

Other operating income rose by EUR 493m to EUR 1.2bn, especially due to exchange rate gains (EUR +335m to EUR 658m) and recognised income from insurance payments in connection with a damage claim in Scandinavia and compensation payments for the discontinuation of the Internet system Flynet totalling EUR 69m. Of total income from write-backs (EUR 13m), EUR 7m relates to reversals on four previously written-down Airbus A300-600s due to realised prices in USD and higher USD exchange rates. Three of these aircraft have since been sold. Book gains on the disposal of aircraft and financial investments went up by EUR 20m to EUR 41m. This includes a book gain of EUR 18m on the sale of the remaining Condor shares in the first quarter. Other items did not vary significantly compared with the previous year. Total operating income came to EUR 11.6bn (–10.1 per cent).

Operating expenses contracted to EUR 11.6bn (–4.8 per cent). This reduction is due to the fact that the cost of materials and services fell by 11.4 per cent to EUR 5.8bn. This in turn stemmed from the fall of EUR 897m (–36.6 per cent to EUR 1.6bn) in fuel costs. Lower volumes accounted for 6.6 per cent of the fall. The fuel price (after hedging) sank by 44.2 per cent. The stronger US dollar had the opposite effect, increasing costs by 14.2 per cent. Fuel expenses include a negative hedging result of EUR 87m. Fees and charges declined by 2.5 per cent, principally due to lower handling charges. Within other purchased services the main increase came from external MRO services, which were up 31.9 per cent due to volumes and exchange rates.

Staff costs rose by 1.1 per cent. As the average number of employees fell by 1.0 per cent, this is largely the result of wage settlements agreed last year and increased contributions to the pension insurance scheme. On average over the half-year the Group had 106,223 employees.

20 40 60 80 Depreciation and amortisation rose to EUR 674m (+10.9 per cent). Depreciation of aircraft, mainly last year's new purchases, accounted for EUR 30m (+6.2 per cent) of the increase. A total of EUR 32m related to impairment losses on six decommissioned Airbus A300- 600s and six Canadair Regional Jet 200s now held for sale.

Other operating expenses went up by 3.0 per cent to EUR 2.3bn. Increased exchange rate losses (EUR +226m) and write-downs on current financial investments and other current assets (EUR +20m) were partly offset by lower agency commissions (EUR –112m). The other items did not vary significantly compared with last year.

Profit from operating activities came to EUR 20m and was therefore EUR 723m lower than in the same period last year. Adjusted for non-recurring factors, the operating profit (see table on page 9) was EUR 8m compared with EUR 677m in the particularly strong first half-year of 2008. The comparable operating margin fell to 0.5 per cent (previous year: 5.9 per cent). This is calculated as operating result plus reversals of provisions divided by revenue.

The result from equity investments of EUR 20m was slightly above last year's figure of EUR 17m. Net interest fell, mainly due to higher interest on pension provisions, by EUR 52m, coming to EUR –138m. Other financial items amounted to EUR –238m. 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 considered as trading transactions under IAS 39 (EUR –51m).

Earnings before interest and taxes (EBIT) includes profit from operating activities as well as the result from equity investments and other financial items and came to EUR –198m (previous year: EUR 564m). Earnings before taxes (EBT) fell by EUR 814m, coming to EUR –336m. Income taxes improved the result by EUR 126m,

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 93m. The net profit/loss for the first half-year after minority interests (EUR 6m) was EUR –216m (previous year: EUR 381m). Earnings per share were therefore EUR –0.47 (diluted and undiluted, see also the Notes on page 36).

Net profit/loss for the operating result and period (Jan.–June) in €m

* Rounded below EUR 1m.

Cash flow and capital expenditure

Cash flow from operating activities of EUR 1.0bn (previous year: EUR 1.8bn) was generated in the first half of the 2009 financial year. The decline is principally due to the fact that earnings before taxes shrank by EUR 814m and working capital deteriorated. By contrast, higher non-cash depreciation and amortisation of EUR 120m had a positive effect on cashflow from operating activities.

Gross capital expenditure came to EUR 1.2bn, of which EUR 898m was for final payments on three Airbus A340s, three Airbus A330s, four Airbus A321s, three Airbus A320s, four Airbus A319s, two Cessna Citations, three Canadair Regional Jet 900s

9000 12000 15000 and seven Embraer E195s, as well as for aircraft overhauls and prepayments on aircraft. A total of EUR 95m 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 113m. In addition, a total of EUR 1.5bn was invested in current securities and funds, net of disposals. On the income side, the Lufthansa Group received interest and dividend payments of EUR 114m. Proceeds on the disposal of assets contributed EUR 274m, of which EUR 77m came from the sale of the remaining Condor shares and repayment of related lending. In total, EUR 2.3bn in net cash was used for investing and cash management activities (previous year: EUR 1.5bn).

0 3000 Free cash flow is the sum of cash flow from operating activities less net capital expenditure. It was positive in the first half-year at EUR 140m. The detailed cash flow statement is shown on page 33.

600 800 1000 On balance, financing activities, i.e. new borrowing, scheduled repayment of existing borrowing, dividends paid to shareholders of Deutsche Lufthansa AG and minority shareholders and current interest payments, brought the Group a net cash inflow of EUR 912m. Particularly important was the EUR 1.6bn in new funding raised in the first quarter with non-current bonded loans and a bond. Another bond issued on 1 July for EUR 750m is not included in these interim financial statements.

-400 -200 0 200 After accounting for lower valuations of cash and cash equivalents due to exchange rate movements (EUR –13m), cash and cash equivalents declined in total by EUR 415m to EUR 1.0bn (previous year: EUR 1.8bn). The internal financing ratio was 88.4 per cent (previous year: 142.4 per cent). Overall, cash including securities at the end of the half-year rose to EUR 4.3bn (previous year: EUR 3.7bn).

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

Cash flow and capital expenditure Assets and financial position

Assets and financial position

The consolidated balance sheet total amounted to EUR 23.5bn at the end of the first half-year of 2009, or EUR 1.1bn more than at year-end 2008. Non-current assets rose only slightly by EUR 36m to EUR 15.0bn while current assets went up by EUR 1.0bn to EUR 8.5bn. Within non-current assets the items aircraft and spare engines increased by EUR 301m due to additions. In contrast, equity investments fell by EUR 57m, derivative financial instruments (mostly from currency hedges) by EUR 118m and long-term securities by EUR 117m.

Under current assets, receivables rose by EUR 136m for seasonal and billing reasons. Securities went up by EUR 1.4bn, particularly from investing cash inflows. Cash and cash equivalents declined

by EUR 415m, however. Non-current assets as a proportion of total assets sank as a result from 66.8 per cent at year-end 2008 to 64.0 per cent on the reporting date.

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.

Reconciliation of results
	Jan. –June 2009		Jan.–June 2008
in €m	Income statement	Reconciliation with operating result	Income statement	Reconciliation with operating result
Revenue	10,226		12,057
Changes in inventories	121		86
Other operating income	1,246		753
- of which income from book gains and current financial investments		– 46		– 23
- of which income from reversal of provisions		– 42		– 36
- of which write-ups on fixed assets		– 13		– 2
- of which period-end valuation of non-current financial liabilities				– 55
Total operating income	11,593	– 101	12,896	– 116
Cost of materials and services	– 5,770		– 6,512
Staff costs	– 2,848		– 2,818
- of which past service cost		– 17
Depreciation, amortisation and impairment	– 674		– 608
- of which impairment charge		32		3
Other operating expenses	– 2,281		– 2,215
- of which expenses incurred from book losses and current financial investments		52		39
- of which period-end valuation of non-current financial liabilities		22		8
- of which provisions for contingent losses
Total operating expenses	– 11,573	89	– 12,153	50
Profit from operating activities	20		743
Total from reconciliation with operating result		– 12		– 66
Operating result		8		677
Income from subsidiaries, joint ventures and associates	20		17
Other financial items	– 238		– 196
EBIT	– 198		564
Write-downs (on profit from operating activities)	674		608
Write-downs on financial investments (incl. at equity)	141		117
EBITDA	617		1,289

In the first half-year, shareholders' equity (including minority interests) dropped by EUR 552m compared with the adjusted figure as of 1 January 2009. The fall is predominantly due to the negative post-tax result of EUR –216m and the dividend payment of EUR 320m for the 2008 financial year. At the end of the first halfyear, the equity ratio was 25.7 per cent and therefore below the medium-term target of 30 per cent.

Non-current liabilities and provisions went up by EUR 1.3bn to EUR 9.1bn and current borrowing also rose by EUR 290m to EUR 8.3bn. The rise in non-current borrowing is due to increased financial debt of EUR 1.4bn. The newly assumed non-current bonded loans and the bond were responsible for the increase.

Higher current liabilities mainly resulted from the rise in liabilities from unused flight documents for seasonal and billing reasons (EUR +464m) and higher other provisions (EUR +121m) while trade payables and other financial liabilities declined by EUR 211m and the market value of derivative financial instruments by EUR 182m.

As of 30 June 2009, the Group exhibited net indebtedness again for the first time since 2003 at EUR 396m (including EUR 368m in non-current liquidity reserves). At year-end 2008 the Group had net liquidity of EUR 125m.

Gearing including pension provisions came to 47.8 per cent (year end 2008: 34.5 per cent) and was therefore within the target corridor of 40 to 60 per cent.

Group fleet

Number of commercial aircraft of Deutsche Lufthansa AG (LH), SWISS (LX), Lufthansa Cargo (LCAG), Lufthansa CityLine (CLH),

Manufacturer/type	Number							Group fleet	of which finance lease	of which operating lease	Change as of 31.12.2008	Change as of 30.6.2008
	LH	LX	LCAG	CLH	EN	EW	4U
Airbus A300	9							9			– 4	– 5
Airbus A310	41)							4
Airbus A319	24	7					27	58	3	12	+ 2	+ 2
Airbus A320	36	23						59	3	8	+ 1	+ 4
Airbus A321	35	6						41	2	2	+ 2	+ 4
Airbus A330	15	11						26		7	+ 1	+ 1
Airbus A340	52	15						67	1	5	+ 3	+ 4
Airbus A380								0
Boeing 737	63							63
Boeing 747	30							30
Boeing MD-11F			19					19
Canadair Regional Jet	122)			55		10		77		10	+ 3	+ 3
ATR3)	5				14	5		24	6	11	– 1	– 2
Avro RJ		20		18				38		19
BAe 146	44)					15		19		18	– 1	– 1
Embraer	75)	41)						11		4	+ 7	+ 7
Cessna	46)							4			+ 2	+ 3
Total aircraft	300	86	19	73	14	30	27	549	15	96	15	20

1) Leased out to companies outside the Group.

2) Leased out to Eurowings.

3) Ten aircrafts are leased out to Contact Air.

4) Leased out to Air Dolomiti.

5) Five aircrafts are leased out to Air Dolomiti and two to Augsburg Airways.

6) Leased out to SWISS.

Passenger Airline Group segment

Passenger Airline Group					SWISS	Passenger Airline Group
		Jan.– June 2009	Jan. – June 20083)	Change in %	Jan.– June 2009	April– June 2009	April – June 20083)	Change in %
Revenue	€m	7,472	8,899	– 16.0	1,356	3,858	4,820	– 20.0
- of which with companies of the Lufthansa Group	€m	289	310	– 6.8	25	150	159	– 5.7
Operating result	€m	35	363	– 90.4	44	65	326	– 80.1
Segment result	€m	66	362	– 81.8	–	90	336	– 73.2
EBITDA1)	€m	545	882	– 38.2	183	382	556	– 31.3
Segment capital expenditure	€m	976	703	38.8	274	418	213	96.2
Employees as of 30.6	number	46,179	46,610	– 0.9	7,299	46,179	46,610	– 0.9
Passengers 2)	thousands	33,185	34,845	– 4.8	6,515	18,142	18,850	– 3.8
Available seat-kilometres 2)	millions	94,132	95,871	– 1.8	17,150	49,939	50,733	– 1.6
Revenue passenger kilometres 2)	millions	70,820	75,087	– 5.7	13,015	38,076	40,261	– 5.4
Passenger load factor 2)	%	75.2	78.3	– 3.1 pts	75.9	76.2	79.4	– 3.2 pts

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 global economic downturn affected the traffic figures for the segment throughout the first half-year of 2009. The collapse in demand led to decreasing load factors and sharp falls in average yields. Traffic revenue fell sharply as a result. The operating result was well below last year's successful performance. In view of persistently weak demand further capacity adjustments were made at Lufthansa and SWISS. Lufthansa Passenger Airlines also launched a programme to safeguard earnings known as CLIMB 2011, which is to lower the cost base sustainably by EUR 1bn by the end of 2011.

Segment structure The segment consists of Lufthansa Passenger Airlines (including regional airlines, Miles & More and WorldShop), Swiss International Air Lines AG, Germanwings and the equity investments in British Midland (bmi), SunExpress and JetBlue. In June 2009, Lufthansa participated in a capital increase of JetBlue. Lufthansa's stake is therefore 15.57 per cent.

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 new 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 42m as a result. By contrast, the application of IFRIC 13 Customer Loyalty Programmes depressed earnings by EUR –28m. In accordance with this standard, which is binding from 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 14m to EUR 363m. More information is available in the Notes starting on page 34.

Following anti-trust approval in June and the acquisition of 45 per cent of SN Airholding SA/NV, the parent company of Brussels Airlines, the company was consolidated using the equity method as of 30 June 2009. The commercial collaboration already underway has been extended.

On 1 July 2009, following an out-of-court settlement, LHBD Holding Limited, a company owned 35 per cent and controlled by Lufthansa, acquired a stake of 50 per cent plus one share in bmi. This gives the Group a total interest of 80 per cent in bmi. The remaining 20 per cent are held by SAS Scandinavian Airlines. The transaction is structured using a local holding company in line with industry practice. This primarily serves to secure the air traffic rights. Lufthansa anticipates acquiring 100 per cent of LHBD as soon as these are confirmed. From 1 July onwards bmi will be fully consolidated. Bmi has over 11 per cent of all take-off and landing rights at London Heathrow, Europe's largest airport.

Product and route network Lufthansa and SWISS cut their capacities again in the second quarter in view of persistently weak demand in passenger traffic. Lufthansa reduced capacities in the first half-year by a total of 2.5 per cent. The decisions made involve retiring 25 short and long haul aircraft from operations. SWISS also adjusted its capacity again to decreasing demand in the second quarter, especially in intercontinental traffic. In the first half-year, capacities at SWISS still rose by 1.2 per cent overall, but this was 4.2 percentage points less than originally planned. Both companies continue to monitor changes in demand closely and will adjust capacity as necessary.

As well as responding rapidly to fluctuations in demand, Lufthansa is still pursuing its long-term goal of expanding the route network in growing markets. For instance, Lufthansa Italia started flight operations at Milan Malpensa on 2 February, from where it now serves eleven destinations in Europe with its fleet of eight Airbus A319s. Since July 2009, Lufthansa has also been growing in Africa and has been flying five times a week from Frankfurt via Accra to Libreville, the capital of Gabon. Gabon has considerable reserves of oil and manganese and is a significant timber exporter, with a GDP above the African average. Capacity to Angola has also been well received and a second weekly flight has been added. This means that Lufthansa now offers its customers a total of 15 destinations in Africa. Capacity in this region was also significantly expanded by the strong route networks of SWISS and Brussels Airlines.

The merger between Lufthansa and Brussels Airlines also allows both airlines to realise further synergies – by coordinating flight schedules and enabling better transfers, for example. The Brussels frequent flyer programme "Privilege" is also to be merged with Miles & More from the end of October. This will enable Lufthansa and Brussels Airlines to cement their competitive positions further and strengthen their collaboration for the benefit of customers.

The customer loyalty programme Miles & More again won decorations at the 2009 Freddie Awards (gold, silver and two bronze). A total of more than 700,000 customers worldwide ranked frequent flyer and hotel bonus programmes. For the first time Miles & More won a bronze medal for Best Web Site.

SWISS also won a prize. The renowned British consultancy Skytrax gave its much sought-after World Airline Award 2009 to SWISS as the Best Airline in Europe for short and long haul. The accolade is based on a survey in which more than 15 million passengers from 95 different countries assessed over 160 airlines.

With the two Airbus A330-300 planes introduced in April, SWISS offers its long haul customers an innovative new in-flight product with more leg room, completely flat pneumatic air-cushion beds, suites and the latest in-flight entertainment systems. In comparison with their predecessors at SWISS, the new aircraft use around 13 per cent less fuel per passenger, essentially thanks to their modern engines. Two more planes of this type are to follow in the weeks ahead.

On 17 June 2009 Lufthansa CityLine celebrated its 50th jubilee. In order to focus more on the shuttle services for Munich and Frankfurt in the future, the group company is to get 20 Embraer 190/195 regional jets from autumn 2009 and retire 35 smaller and in some cases older planes.

Operating performance Weak demand continued into the second quarter, affecting all the carriers in the Passenger Airlines Group.

Around 33.2 million passengers flew with Lufthansa or SWISS in the first half-year, down 4.8 per cent on the previous year. Whereas Lufthansa Passenger Airlines reported a fall of 6.1 per cent to 26.7 million passengers, SWISS increased passenger numbers year on year by 1.0 per cent. This meant it transported 6.5 million passengers in the reporting period. In the first half-year, Lufthansa Passenger Airlines reduced their capacities (including the added capacity at Lufthansa Italia) by a total of 2.5 per cent. This reduction was not able to make up for the drop of 6.4 per cent in sales, however. The passenger load factor for Lufthansa sank correspondingly by 3.1 percentage points to 75.1 per cent. SWISS could also not sell its marginal increase of 1.2 per cent in capacity in the market in the first half-year of 2009; sales fell by 2.5 per cent and the passenger load factor declined by 2.9 percentage points to 75.9 per cent. The overall load factor for both airlines shrank by 3.1 percentage points to 75.2 per cent.

In addition to the fall in demand, the change in travel habits continued markedly in the course half of the first half-year. The "migration" of passengers from the premium segment (First and Business Class) to Economy Class and an increase in redeemed bonus miles had an adverse affect on average yields and traffic revenue. Even after the positive effects of exchange rate movements (2.1 per cent) and fuel surcharges (1.5 per cent), average yields contracted by 11.8 per cent in the first half-year. Following a fall of 5.7 per cent in the first quarter, this represents a decline of 16.8 per cent in the second quarter 2009.

With the exception of Middle East and Africa, all traffic regions were affected by the collapse in demand. In the domestic European market the slightly lower capacity could not be sold in the market and sales fell by 3.2 per cent year on year. The passenger load factor was down 1.8 percentage points at 67.3 per cent. Average yields contracted by 16 per cent and traffic revenue was 18.6 per cent down on the year.

Despite sharp adjustments to capacity in the Americas traffic region of –6.2 per cent the passenger load factor fell by 2.6 percentage points to 81.0 per cent. Average yields were also down (–9.3 per cent) and traffic revenue shrank by 17.6 per cent.

In the Asia/Pacific traffic region the passenger load factor fell by 4.1 percentage points at slightly lower capacity (–0.7 per cent), to 78.9 per cent. These conditions depressed average yields by 13.2 per cent and traffic revenue by 18.1 per cent.

The smallest traffic region, Middle East and Africa, was much less affected. Growth of 2.2 per cent to 1.5 million passengers was achieved here. As capacity was expanded by 9.0 per cent, the load factor fell to 71.5 per cent (–4.9 percentage points), however. Average yields were roughly stable (–1.1 per cent) so that traffic revenue in this region rose by 1 per cent.

Lufthansa and SWISS raised the fuel surcharges modestly for all flights in view of the sharp rise in oil prices since the beginning of the year, which amounted to more than 50 per cent at times. The companies monitor the oil price continually and will make further adjustments to the fuel surcharge depending on future prices.

Germanwings carried around 3.3 million passengers in the first half-year, 7.7 per cent fewer than a year ago. The load factor dropped by 1.9 percentage points to 77.9 per cent. Faced with this fall in demand, Germanwings reduced its capacity by 9.1 per cent.

In addition to the capacity adjustments already mentioned, numerous cost-cutting activities are underway at the companies in the segment, such as the hiring freeze in place at Lufthansa Passenger Airlines since summer 2008, as well as caps on project and other operating expenses.

Revenue and earnings development As a result of the negative trend in traffic figures in the first half-year, traffic revenue was not able to match last year's high level and declined to EUR 6.8bn (–16.4 per cent). SWISS contributed EUR 1.2bn to the total, down year on year by 11.6 per cent. Germanwings generated traffic revenue of EUR 251m (–5.6 per cent). The fall in revenue stemmed from 5.7 per cent lower sales volumes, with prices accounting for –12.6 per cent. Exchange rate movements, however, improved traffic revenue by 1.9 per cent.

Other operating income rose by EUR 534m to EUR 709m, principally due to higher exchange rate gains compared with last year and compensation for damages for the Internet system Flynet cancelled by Boeing. Total operating revenue declined by 9.8 per cent to EUR 8.2bn.

Operating expenses were successfully cut by 6.5 per cent year on year to EUR 8.1bn. This reduction is largely due to the considerable fall in the cost of materials and services to EUR 4.8bn (–12.0 per cent). The major driver was the 34.4 per cent fall in fuel

Trends in traffic regions

Lufthansa Passenger Airlines and Swiss International Air Lines AG

		Number of passengers in thousands	Available seat-kilometres in millions		Revenue passenger-kilometres in millions			Passenger load factor in %
	Jan. – June 2009	Change in %	Jan.– June 2009	Change in %	Jan.– June 2009	Change in %	Jan. – June 2009	Change in pts
Europe	25,809	– 4.4	29,496	– 0.6	19,848	– 3.2	67.3	– 1.8
America	3,531	– 9.0	32,161	– 6.2	26,041	– 9.2	81.0	– 2.6
Asia/Pacific	2,336	– 6.5	23,129	– 0.7	18,248	– 5.6	78.9	– 4.1
Middle East/Africa	1,500	2.2	9,326	9.0	6,670	2.1	71.5	– 4.9
Total scheduled services	33,175	– 4.8	94,113	– 1.8	70,806	– 5.7	75.2	– 3.1
Charter	10	– 30.9	19	– 50.1	14	–	71.9	1.3
Total	33,185	– 4.8	94,132	– 1.8	70,820	– 5.7	75.2	– 3.1

costs to EUR 1.4bn. Fees and charges dropped slightly by 0.5 per cent to EUR 1.6bn.

Staff costs were stable at EUR 1.5bn. Cost increases from wage settlements and increased contributions to the pension insurance scheme were offset by lower staff numbers and reduced expenses for variable remuneration components. The average number of employees fell slightly by 0.3 per cent to 46,135 for the first halfyear. The hiring freeze in place since summer 2008 continues to apply.

Depreciation and amortisation went up due to new aircraft deliveries by 6.8 per cent to EUR 468m. Other operating expenses rose by 4.0 per cent, due in particular to much higher exchange rate losses, partly offset by lower agency fees, to EUR 1.4bn.

The operating result declined in comparison with last year's strong performance by EUR 328m to EUR 35m. SWISS contributed an operating profit of EUR 44m to the result of the Passenger Airlines Group.

Other segment income rose by EUR 41m to EUR 71m, largely due to book gains on the disposal of aircraft. Other segment expenses came to EUR 30m (last year: EUR 3m). This includes impairment losses on six decommissioned Airbus A300-600s and six Canadair Regional Jet 200s held for sale. The result of the equity valuation (including bmi, SunExpress) improved to EUR –10m (previous year: EUR –28m). The segment result fell overall by EUR 296m to EUR 66m.

Segment capital expenditure was 38.8 per cent above last year's at EUR 976m due to aircraft purchases. In the first half-year of 2009, the Passenger Airlines Group aircraft investment allotted to three Airbus A340s, three Airbus A330s, four Airbus A321s, three Airbus A320s, four Airbus A319s, two Cessna Citations, three Canadair Regional Jet 900s and seven Embraer E195s.

Outlook The market environment for passenger traffic remains difficult and there are still no signs of a recovery. On the contrary – the continued weak demand has led to a substantial structural decline in average yields. Extremely volatile fuel prices weigh heavily on costs and the most recent leaps were unconnected with any recovery in the real economy.

Lufthansa and its partners in the airline group monitor developments closely and take action as needed on the basis of predefined phased plans. In managing its capacity Lufthansa is aided by the great flexibility in its largely unencumbered fleet. Lufthansa is therefore equally prepared for a further drop in demand and for the opportunities which would arise if competitors left the market.

In addition to the existing capacity and cost-cutting measures, Lufthansa Passenger Airlines set up a new programme to ensure their lasting competitiveness in July 2009. The goal of CLIMB 2011 is to achieve EUR 1bn in sustainable earnings improvements by 2011 at the latest, by means of structural alterations – principally cost reductions. The steps include process changes as well as efficiency gains in staffing and administration, and a review of the timetable for aircraft deliveries. The concrete form this will take is to be developed successively over the coming weeks.

In addition to its operating performance, the Passenger Airline Group segment will also be influenced by the initial consolidation of bmi. For the second half-year a negative effect on the result is to be expected.

Altogether the segment is expecting a sharp fall in revenue (without accounting or consolidation effects). The steps already taken and established to safeguard earnings shall avert an operating loss for the full year. However, there are considerable risks to the achievement of this goal from future developments in demand and fuel prices. It will also depend on the short-term implementation of individual measures and the further financial development of the newly consolidated companies.

Logistics business segment

Logistics
		Jan.– June 2009	Jan. – June 2008	Change in %	April– June 2009	April – June 2008	Change in %
Revenue	€m	916	1,421	– 35.5	447	739	– 39.5
- of which with companies of the Lufthansa Group	€m	12	13	– 7.7	5	6	– 16.7
Operating result	€m	– 134	114		– 62	68
Segment result	€m	– 132	126		– 66	75
EBITDA	€m	– 71	187		– 34	106
Segment capital expenditure	€m	11	9	22.2	7	4	75.0
Employees as of 30.6	number	4,598	4,589	0.2	4,598	4,589	0.2
Freight and mail	thousand tonnes	694	869	– 20.1	366	441	– 16.9
Available cargo tonne-kilometres	millions	5,635	6,198	– 9.1	2,849	3,235	– 11.9
Revenue cargo tonne-kilometres	millions	3,338	4,227	– 21.0	1,734	2,167	– 20.0
Cargo load factor	%	59.2	68.2	– 9.0 pts	60.8	67	– 6.2 pts

Course of business In a persistently weak economic environment Lufthansa Cargo reported a severe fall in revenue and a considerable operating loss in the first half-year of 2009. The programme to safeguard earnings was bolstered, reduced working hours ramped up from 20 per cent to 25 per cent, capacity cut further and other operating budgets trimmed by 25 per cent across the board.

Segment structure The Logistics business segment includes, alongside Lufthansa Cargo AG, Lufthansa Cargo Charter Agency GmbH, container airfreight specialist Jettainer GmbH and equity investments in AeroLogic GmbH and Jade Cargo International Ltd. At the beginning of the year, Lufthansa Cargo also took over the business of its subsidiary cargo counts GmbH.

At its site in Leipzig, Lufthansa Cargo officially moved into the World Cargo Center (WCC) at Leipzig/Halle airport at the end of April. Some 20,000 square metres have been let in the WCC, making it an important freight handling centre for Lufthansa Cargo.

On 19 June 2009 AeroLogic GmbH – the joint venture between DHL Express and Lufthansa Cargo – began flight operations. AeroLogic deploys the fuel-saving Boeing 777F in its fleet, currently the most

modern wide-body freighter on the market. It offers reduced delivery times for its freight, especially on direct flights between its home airport Leipzig/Halle and the Asian growth markets.

Product and route network The contraction of the global export economy adversely affected Lufthansa Cargo in the second quarter, too. The result was that capacities equivalent to around four aircraft were left unused. From 1 June 2009, capacities equivalent to just three Boeing 747-400s are being deployed under Lufthansa Cargo's responsibility at Jade Cargo.

Lufthansa Cargo nevertheless extended its route network in certain areas in order to remain involved in key developments in growth markets. For instance, since April it has offered more new destinations in Africa in cooperation with the Kenyan cargo airline Astral Aviation. Jade Cargo International also flies twice a week from Shanghai via Shenzhen to Chennai, and from there via Sharjah on to Lagos in Nigeria.

Once the Russian government had met Lufthansa Cargo's operational and commercial conditions for a move, the technical stopover base for cargo flights was relocated from Astana,

Kazakhstan, to Krasnoyarsk in Russia. The new stopover site in Krasnoyarsk cuts the flight time to the far East by an average of twelve minutes each way and therefore makes a valuable contribution to saving costs.

Lufthansa Cargo received two major awards in the first half-year. It took first place at the World Air Cargo Awards in the category Air Cargo Industry Customer Care. It received a further accolade at the Asian Freight & Supply Chain Awards (AFSCA), being voted Best Air Cargo Carrier Europe.

Operating performance Confronted with a fall of 21.0 per cent in sales, Lufthansa Cargo has made massive reductions to its freighter capacities. Total capacity (including belly capacities and trucks) was down 9.1 per cent year on year. The cargo load factor nevertheless sank by 9.0 percentage points to 59.2 per cent for the reporting period.

All traffic regions were hit by the fall in demand. In the Americas traffic region for instance, sales slumped by 25.6 per cent compared with the same period last year. As well as reducing some freighter tours, specific route alterations were made in order to exploit market opportunities and strengthen Lufthansa Cargo's market position.

The Europe traffic region also experienced a double-digit fall in demand. While the belly and freighter capacities remained stable, road feeder capacities were reduced by more than average. On balance, the load factor fell moderately by 1.1 percentage points year on year.

In Asia, too, the poor conditions continued. Enormous competitive pressure and the ensuing low cargo load factor marred Lufthansa Cargo's performance. Most recently there have been signs of a recovery in terms of volumes on the Chinese routes.

Demand rose by 2.8 per cent in the Middle East and Africa traffic region. In particular import volumes to the Middle East improved.

In view of the still-feeble demand and the collapse in average yields, cost-cutting measures were heightened. Expanding the programme to safeguard earnings that had been launched previously enabled staff and operating costs at Lufthansa Cargo to be reduced significantly and freighter capacities to be curtailed in the first half-year of 2009. Measures such as reduced working hours, project budget cuts, reductions in other operating costs and aircraft capacities made it possible to compensate for around half of the revenue shortfall. The first stage of this programme was primarily aimed at cutting costs directly, but in the second quarter priority was also given to greater customer focus and the exploitation of market opportunities, i.e. generating additional revenue. Further efforts during the second stage of the programme to safeguard earnings are intended to improve the operating result for 2009.

Revenue and earnings development Traffic revenue nosedived by 35.8 per cent to EUR 873m in a generally weak economic environment. As in the first quarter, unsold volumes and further adjustments to prices were again the cause.

Trends in traffic regions Lufthansa Cargo

		Freight/mail in tonnes		Available cargo tonne-kilometres in millions	Revenue cargo tonne-kilometres Cargo load factor in millions in %
	Jan. – June 2009	Change in %	Jan. – June 2009	Change in %	Jan.– June 2009	Change in %	Jan.– June 2009	Change in pts
Europe	259,847	– 21.5	442	– 14.3	197	– 16.3	44.5	– 1.1
America	185,218	– 25.7	2,250	– 12.4	1,308	– 25.6	58.2	– 10.2
Asia/Pacific	188,804	– 19.2	2,412	– 7.7	1,525	– 21.2	63.2	– 10.8
Middle East/Africa	60,330	9.3	532	6.4	308	2.8	57.9	– 2.1
Total	694,198	– 20.1	5,635	– 9.1	3,338	– 21.0	59.2	– 9.0

Other operating income rose to EUR 52m (previous year: EUR 41m). The increase stems mainly from currency gains on foreign exchange translation and other periodic and non-periodic income from staff secondment.

In the first half-year, Lufthansa Cargo generated total operating revenue of EUR 968m, which was 33.8 per cent lower than last year.

Operating expenses came to EUR 1.1bn, a significant saving of 18.2 per cent year on year. The reduction in the cost of materials and services by 21.1 per cent to EUR 743m stemmed largely from lower fuel costs (–53.6 per cent). The volume effect and lower fuel prices were offset by the change in the US dollar and the hedging result. The number of flight movements and the considerable reduction in capacity also resulted in lower fees and charges. They fell by 19.4 per cent to EUR 116m. MRO expenses went down year on year, partly due to fewer maintenance events, by 6.5 per cent to EUR 58m.

Staff costs were cut by 3.7 per cent to EUR 156m in the first six months despite a pay increase for ground staff and a slight increase in the workforce to 4,623 employees on average (+0.9 per cent). From 31 December 2008 to 30 June 2009, the number of employees fell by 1.2 per cent to 4,598. This was mainly due to the steps taken to date to safeguard earnings, such as running down overtime accounts, decreasing extra pay for overtime and reducing working hours.

Depreciation and amortisation was stable year on year at EUR 61m.

Other operating expenses of EUR 142m were also reduced significantly compared with last year, by 22.4 per cent. The main reason for the saving was the lowering of agency commissions, travel and staff costs, insurance expenses and exchange rate losses.

Lufthansa Cargo had to report an operating loss of EUR 134m in the period under review. This represents a fall of EUR 248m compared with the same period last year.

The segment result was EUR 258m below last year's at EUR –132m. This includes a negative equity result of EUR –3m (previous year: EUR 7m). In addition to the profit contribution from the equity investment in Shanghai Pudong International Airport Cargo Terminal Co. Ltd., the joint venture AeroLogic GmbH was consolidated for the first time in the second quarter, and its start-up costs were reflected in a negative contribution of EUR 4.6m to the result of the equity valuation.

Segment capital expenditure was 22.2 per cent up on the year at EUR 11m, primarily for operating and office equipment and the capital increase at AeroLogic GmbH.

Outlook The economic crisis continues to have a drastic effect on the results of the airfreight industry. Compared with last year there are some signs of a recovery in terms of falling volumes, but the price erosion persists. Renewed fuel price rises proved to be an additional burden in the second quarter.

In early July the Executive Board of Lufthansa Cargo decided on further cuts in staff and other operating budgets. This means that in future the equivalent of six out of a total of 19 MD-11 freighters are not to be used. From 1 October at the latest, four of these MD-11 freighters are to be retired for at least a year. Since June 2009, capacities equivalent to just three Boeing 747-400s are being deployed under Lufthansa Cargo's responsibility at Jade Cargo International. Expenditure on operating costs continues to be strictly monitored to ensure it is absolutely necessary. The reduced working hours for ground staff in Germany are also set to continue.

Additional business has been generated in recent months through targeted sales activities. Lufthansa Cargo has been offering a weekly connection to Guadalajara in Mexico since 22 July 2009, for instance. Overall, Lufthansa Cargo is nevertheless still expecting the current year's revenue to be significantly below that of last year and is anticipating a substantial operating loss.

MRO business segment

MRO
		Jan.– June 2009	Jan. – June 2008	Change in %	April– June 2009	April – June 2008	Change in %
Revenue	€m	2,074	1,812	14.5	981	899	9.1
- of which with companies of the Lufthansa Group	€m	838	724	15.7	375	337	11.3
Operating result	€m	144	158	– 8.9	83	87	– 4.6
Segment result	€m	147	164	– 10.4	86	93	– 7.5
EBITDA	€m	189	217	– 12.9	116	121	– 4.1
Segment capital expenditure	€m	48	40	20.0	19	20	– 5.0
Employees as of 30.6	number	19,657	18,881	4.1	19,657	18,881	4.1

Course of business Airlines again cut capacities sharply in the first half-year due to persistently weak demand. In 2009 alone, an additional 160 aircraft deliveries have been postponed, 2,450 planes are still grounded and active aircraft are being deployed less frequently. In addition to the collapse in volumes, airlines' results are being eroded by lower prices and higher kerosene costs. These developments were accompanied in the first half-year by a continuously shrinking global demand for maintenance, repair and overhaul (MRO) services, and by a further increase in pricing pressure.

In these difficult circumstances Lufthansa Technik continued its growth, increasing revenue by 14.5 per cent year on year. At the same time operating profit fell to EUR 144m (–8.9 per cent).

Segment structure Lufthansa Technik AG is based in Hamburg and is the global market leader in MRO and aeronautical services for civil aircraft. The Lufthansa Technik group now includes 32 technical maintenance operators worldwide. The company also holds direct and indirect stakes in 56 companies.

This group is still being expanded in specific areas, even in the crisis. Lufthansa Technik Maintenance International (LTMI) opened an extra maintenance station in Milan in the first quarter and Lufthansa Technik Malta, too, extended its aircraft overhaul facilities, while Lufthansa Technik Sofia began operations on a second overhaul line in the second quarter. In addition to the Airbus A320 family, the portfolio there also includes the Boeing models 737 Classic and Next Generation as of July 2009.

On 11 May 2009, Lufthansa Technik Switzerland opened its new VIP cabin interior shop. The ultra-modern workshop overhauls and modifies VIP cabin interiors on the aircraft types Boeing Business Jet and Airbus Corporate Jet.

BizJet International received the first Airbus A318 Elite from Europe in May. For the company, based in Tulsa, Oklahoma, this is the scheduled start to the rolling transfer of individual aircraft completions with VIP and business travel interiors to Lufthansa Technik's Hamburg factory. The first plane is to be handed over to Airbus in autumn.

Products Lufthansa Technik offers a wide product portfolio, ranging from the latest repair procedures to individual completion programmes for VIP aircraft. Its expertise was underlined in the first half-year when it won the Crystal Cabin Award for the "niceview" product and when it was voted best MRO provider by the British trade publisher UBM Aviation. With a total of four prizes in twelve categories, Lufthansa Technik was the most successful of the 24 companies worldwide chosen to take part in the first UBM Aviation Industry Awards.

Innovation and new product development, to reduce emissions for example, is an area of high priority for Lufthansa Technik. This also involved extending the scope of cooperation with the German Aerospace Center in testing fuel cells for aviation. The current highlight is the stationing of the experimental fuel-cell aircraft ANTARES DLR-H2 at Lufthansa Technik's base in Hamburg. This is the first manned, fuel cell-powered aircraft in the world and it successfully completed its public maiden flight in Hamburg in July.

Lufthansa Technik has now also taken over Total Technical Support (TTS) under a ten-year contract for the Boeing 777F in operation for AeroLogic GmbH since June.

Lufthansa Technik and eJet Services have extended the scope of their collaboration. This expands the range of comprehensive services to include servicing and operating Bombardier CRJs converted into VIP aircraft. The joint programme was introduced in 2008 and offers operators of smaller, less frequently used business aircraft an all-round, global package of maintenance services and operational support.

Operating performance In terms of external business Lufthansa Technik remains on a growth path. In the first half of this year, 20 new clients were acquired for the full year and 275 new contracts with a total volume of EUR 373m were signed. Its fleet under management rose by 21 per cent to 1,995 aircraft worldwide.

In the first half-year, Lufthansa Technik extended its component supply service for Aeroflot to the entire group. This means that Lufthansa Technik has aircraft from all the companies in the largest Russian aviation group under contract. SAS (Scandinavian Airlines System) also signed a ten-year contract for the landing gear of its Airbus fleet, which consists of more than 20 planes. Lufthansa Technik Tulsa acquired a ten-year contract valued at several million US dollars from Jet Blue Airways. The US subsidiary is to take over the overhaul of the thrust reversers for their entire Airbus A320 fleet as part of a fixed programme.

Revenue and earnings development Lufthansa Technik reported further growth. Revenue with external clients increased due to both volumes and exchange rates by EUR 148m to EUR 1.2bn (+13.6 per cent) in the first half-year. Revenue from Lufthansa Group companies grew by EUR 114m (+15.7 per cent) to EUR 838m thanks to the larger fleet as well as greater number of aircraft rest periods and engine upgrades compared with 2008. Total revenue came to EUR 2.1bn, which is EUR 262m or 14.5 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 60 per cent.

Other operating income fell, largely due to considerably lower exchange rate gains, by EUR 31m to EUR 63m. The MRO segment therefore generated total operating revenue of EUR 2.1bn (+12.1 per cent).

Operating expenses climbed by EUR 245m (+14.0 per cent) to EUR 2.0bn. The cost of materials and services accounted for the largest rise, going up by EUR 182m (+20.4 per cent) to EUR 1.1bn. This is the result of material-intensive revenue growth in the engine maintenance segment and exchange rate effects. It also reflects more outsourcing to the wider Lufthansa Technik group and a oneoff effect due to the inventory valuation date.

The average number of employees at Lufthansa Technik went up due to the addition of Lufthansa Technik Switzerland with 526 staff, 215 extra vocational trainees and a slight increase at Lufthansa Technik AG and Shannon Aerospace by 4.4 per cent to 19,724. Staff costs went up by EUR 40m (+8.0 per cent) to EUR 540m.

Depreciation and amortisation rose by EUR 2m to EUR 42m.

The crisis depresses both earnings and liquidity for MRO providers, not only due to falling demand and greater client pressure on prices, but increasingly also as a result of the airlines' unsatisfactory payment practices, including outright defaults. Write-downs on receivables are therefore one of the reasons for the increase in other operating expenses by EUR 21m (+6.7 per cent) to EUR 336m, in addition to exchange rate losses on currency translation as of the reporting date.

The operating result fell as a result by 8.9 per cent (EUR 14m) to EUR 144m. The segment result declined by EUR 17m (–10.4 per cent) to EUR 147m, primarily because the interest in Alitalia Maintenance Systems, which is accounted for using the equity method, contributed lower earnings.

The purchase of an additional reserve engine was largely responsible for the fact that capital expenditure was EUR 8m higher in 2009 than last year. Segment capital expenditure came to EUR 48m.

Outlook The global downturn has empirically a delayed effect on the MRO market. So far, Lufthansa Technik has been able to make up for dwindling demand in individual segments and even to grow, against the market trend. The segment also took early action to prepare for the downturn with programmes for making capacity more flexible, cutting costs and increasing efficiency – partly under the Group-wide Upgrade to Industry Leadership initiative.

Lufthansa Technik is therefore still anticipating revenue growth for the full year, but under the circumstances described it will be very difficult to repeat 2008's good operating result.

IT Services business segment

IT Services
		Jan.– June 2009	Jan. – June 2008	Change in %	April– June 2009	April – June 2008	Change in %
Revenue	€m	302	315	– 4.1	154	162	– 5
- of which with companies of the Lufthansa Group	€m	177	183	– 3.3	90	92	– 2
Operating result	€m	7	18	– 61.1	5	7	– 29
Segment result	€m	8	17	– 52.9	6	6	0
EBITDA	€m	27	37	– 27.0	14	17	– 18
Segment capital expenditure	€m	30	26	15.4	13	14	– 7
Employees as of 30.6	number	3,039	2,987	1.7	3,039	2,987	2

Course of business In the first half-year of 2009, business at Lufthansa Systems was dominated by the global economic crisis and its effects on the international aviation sector. Airlines were cautious about investing in IT projects and revenue was therefore down as a result. Costs have been consistently cut since the start of the current financial year; the variable cost block in particular has been pared down through the use of fewer external staff. These steps resulted in improved results from the second quarter of 2009.

Segment structure In addition to its head offices in Kelsterbach, Lufthansa Systems has sites in Germany and 16 other countries. Several production sites in Europe and the USA, as well as a sales team with account managers in all strategic markets worldwide, ensure that the company is as close to its customers as possible. Services are delivered in five divisions: Airline Management Solutions, Passenger Airline Solutions, Airline Operations Solutions, Industry Solutions and Infrastructure Services. In the first half-year, Lufthansa Systems terminated its involvement as a minority shareholder in Lufthansa Systems Indonesia, based in Jakarta. The 49 per cent interest in the company was sold in the first quarter of 2009 to the majority shareholder Garuda Indonesia.

Products Airlines in the global passenger and cargo businesses are endeavouring to cut costs and increase revenue. For this reason, Lufthansa Systems offers IT solutions with positive effects on costs or income that airlines can track directly, and which therefore pay for themselves in a short period of time. These primarily include

the flight planning system Lido OC, which can save up to five per cent in kerosene consumption by optimising flight paths. The Sirax AirFinance platform also delivers a key contribution by making revenue accounting more efficient. The Integrated Operations Control Center (IOCC) provides all the modules needed to manage flight operations, covering the main planning and operational areas such as flight path planning as well as crew and flight plan management. The central platform enables significant cost savings compared with stand-alone solutions.

Operating performance Despite the adverse effects of the general economic situation, Lufthansa Systems was able to sign some major new customer contracts in the first half-year. Both Ethiopian Airlines and Luxair chose to deploy IT applications from Lufthansa Systems. In the field of flight-path planning and navigation solutions, Lufthansa Systems was also able to expand its customer base with Germanwings and Cargoitalia. Significant implementation projects were also completed successfully, such as the introduction of the Dynamic Price Engine for setting prices at the Central and South American airline TACA and in the network management space at Asia's largest carrier, China Southern Airlines. AeroLogic, the new German cargo airline, has been using an extensive IT package from Lufthansa Systems since it started flight operations in mid June. Austrian Airlines now uses the mobile phone check-in facility installed by Lufthansa Systems. The roll-out of 2,500 new PCs and laptops in all German-speaking locations of the leisure travel group Thomas Cook was also completed.

Revenue and earnings development Revenue fell year on year as a result of lower demand. In the first half of the current 2009 financial year, Lufthansa Systems recorded total revenue of EUR 302m (–4.1 per cent). Revenue from Lufthansa Group companies came to EUR 177m, down 3.3 per cent due to outsourced IT services and lower prices for operator models. An amount of EUR 125m (–5.3 per cent) was generated on the external market. Here, declines in prices and volumes could not be made up for by new business in the areas of Airline Management Solutions and Industry Solutions.

Other operating income rose by 29.4 per cent to EUR 22m. This is largely due to work in progress in connection with ongoing client business and the modernisation of Lufthansa System's product portfolio. Total operating revenue of EUR 324m was slightly below last year's figure (–2.4 per cent).

The cost of materials and services went up to EUR 38m (+2.7 per cent). The main reason for the increase was higher costs for purchasing services in connection with operator models and their roll-out.

Staff costs rose by 5.3 per cent to EUR 119m, largely due to wage increases agreed under the pay settlement. The growth in average staff numbers of 2.4 per cent to 3,053 also contributed to the rise.

Depreciation and amortisation was stable year on year at EUR 18m.

Although energy costs were higher than last year, the steps to safeguard earnings had a positive effect, mainly due to reducing outside staff. Other operating expenses declined by 2.7 per cent to EUR 142m.

This brought total operating expenses for the first half-year of 2009 to EUR 317m (+1.0 per cent).

The operating result for Lufthansa Systems sank to EUR 7m (previous year: EUR 18m). This is due to price adjustments for operator models and less business as a result of general market conditions. Lufthansa Systems reported a segment result of EUR 8m (previous year: EUR 17m).

Segment capital expenditure of EUR 30m (+15.4 per cent) was aimed primarily at safeguarding existing business as well as revising and modernising the product portfolio.

Outlook The worldwide recession continues to inhibit airlines' willingness to invest in IT systems. It is nevertheless with strategically chosen IT solutions that airlines can optimise processes in a crisis and thereby gain a financial advantage. Lufthansa Systems is therefore specifically positioning itself with systems that cut costs or increase revenue directly and swiftly for the airlines.

Revenue is no longer expected to pick up appreciably in 2009, however. The steps to safeguard earnings and make costs more flexible will, for this reason, be pursued and intensified. For the current financial year, the result is expected to be below last year's but substantially positive.

Catering business segment

Catering
		Jan.– June 2009	Jan. – June 2008	Change in %	April– June 2009	April – June 2008	Change in %
Revenue	€m	1,024	1,118	– 8.4	526	590	– 10.8
- of which with companies of the Lufthansa Group	€m	246	278	– 11.5	135	147	– 8.2
Operating result	€m	25	31	– 19.4	4	26	– 84.6
Segment result	€m	43	43	0.0	22	24	– 8.3
EBITDA	€m	74	32	131.3	17	41	– 58.5
Segment capital expenditure	€m	32	51	– 37.3	18	31	– 41.9
Employees as of 30.6	number	28,420	31,403	– 9.5	28,420	31,403	– 9.5

Course of business The weak demand in the passenger business of many airlines led to further reductions in their capacities. Combined with the pronounced passenger migration from premium to economy classes, this has perpetuated, and in some cases exacerbated, revenue erosion due to lower volumes and prices in the first half-year. These developments led to a sharp decline in demand for catering products and in-flight management services. Volumes and revenue in the Catering segment are therefore considerably lower than last year. The operating result for LSG Sky Chefs in the first half-year of 2009 is below that for the same period last year.

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

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 development and successful marketing of new products is the result of the company's increased ability to innovate. In addition to its culinary expertise, LSG Sky Chefs also demonstrates its creativity in in-flight service equipment. The focus here is on protecting the environment and reducing weight. This means, for instance, that PET red wine bottles have been in use

in Economy Class since June, which weigh 90 per cent less than conventional glass bottles.

In addition, at the end of June the new Lufthansa Economy Class tableware developed by the design team at LSG Sky Chefs Catering Logistics won the respected "red dot design award: best of the best" for its successful brand-enhancing design. This tableware was also nominated for the "Designpreis der Bundesrepublik Deutschland 2010".

Operating performance LSG Sky Chefs held steady in the current difficult market environment and was able to strengthen its customer base in the first half-year. Major contracts were signed or renewed for individual locations with Alaska Airlines, TUI Group, Dragonair, Thomson and Condor. The contract with SAS in Scandinavia expired at the end of April, however.

In addition to the investment and hiring freeze introduced in September 2008, and the reduced working hours in force in some German plants, LSG Sky Chefs is also countering revenue and margin deterioration with two wide-ranging initiatives: Performance 2009 and Upgradeplus.

Performance 2009 is a short-term programme intended to ensure a positive operating result for 2009 and generate positive cash flow. Significant cost savings are to be achieved by expediting the implementation of purchasing and lean management activities and exchanging best practice in the areas of innovation and the

environment. Professional training and maintenance activities are also to be postponed and a systematic cash management policy implemented.

Upgradeplus is to run for two years and primarily serves to identify and establish a company structure which is competitive and sustainable over the long term. The targeted cost savings are to come from accelerating the lean management programme, introducing new operating models at selected sites and cutting the cost of materials and other operating expenses. This will involve a review of all processes and structures in the administration departments worldwide. Furthermore, Upgradeplus is aimed at increasing the operating result via the acquisition of new business.

As well as continuously optimising cost structures, LSG Sky Chefs is also redoubling its efforts to intensify its customer relationships. This principally means marketing new product ideas in the fields of equipment and logistics services. LSG Sky Chefs is also exploring new revenue potential in related markets, such as railway catering. The successful renewal of the contract with Swedish Railroads forms a good basis for further customer acquisitions.

Revenue and earnings development In the first half-year, revenue fell by 8.4 per cent to EUR 1.0bn compared with the same period last year. This is mainly the result of airlines reducing their capacities, the ensuing lower volumes, the shift within booking classes and the loss of the major client SAS as previously mentioned. Nearly all countries worldwide were affected by the fall in revenue.

External revenue sank underproportionate to EUR 778m (–7.4 per cent) in spite of positive exchange rate effects and acquiring new business. Internal revenue from Lufthansa Group companies was down 11.5 per cent to EUR 246m. The companies consolidated within the LSG Sky Chefs group for the first time made a revenue contribution of EUR 36m in the first half-year.

Other operating income went up by EUR 63m to EUR 82m, primarily due to a settlement before an arbitration tribunal on the D&O policy for the SAS contract in Scandinavia (EUR 40m), as well as positive exchange rate movements. Overall, total operating revenue fell by 2.7 per cent to EUR 1.1bn.

Total operating expenses were reduced to almost the same degree, thanks to the great cost flexibility which has been installed at LSG Sky Chefs. They too came to EUR 1.1bn in the first half-year of 2009, or 2.3 per cent below the figure for the same period last year. Despite higher food prices than last year and the movement of the US dollar, lower volumes meant lower costs of materials and services, down 8.0 per cent to EUR 459m.

The LSG Sky Chefs group had an average of 29,041 employees (–6.3 per cent) in the first half-year. Staff costs fell by just 1.2 per cent to EUR 401m. This is due to the fact that pay increases, structural effects and the movement of the US dollar could not be fully offset by increased productivity in the operating areas and reduced administrative overheads.

Depreciation and amortisation came to EUR 29m (+7.4 per cent). Higher depreciation on the new catering facility at Frankfurt Airport contributed to this increase.

Other operating expenses were 10.3 per cent up on the year at EUR 192m. This is mainly the result of adverse exchange rate effects.

The operating result fell to EUR 25m (–19.4 per cent). The segment result of EUR 43m was the same as last year and includes a positive contribution of EUR 15m from changes in pension provisions in the USA as well as a decline in miscellaneous segment income of EUR 11m. This is mainly due to the profits realised last year on the sale of the Spanish subsidiary.

Segment capital expenditure came to EUR 32m (–37.3 per cent). The main reasons for this fall were the capital expenditure made last year for the new catering facility at Frankfurt airport and for expanding global frozen food capacities as well as the current investment restrictions imposed as part of the programme to safeguard earnings.

Outlook As not all areas of the world have yet reached the trough of the global economic crisis, many airlines are expected to intensify their cost-cutting programmes in the second half-year. LSG Sky Chefs will therefore be faced, to an even greater extent, with alterations in the catering budgets of its airline clients – on top of the reduced volumes and lower service levels. From today's perspective, it is therefore to be assumed that the revenue contraction at the LSG Sky Chefs group will continue to worsen in the second half of the year.

By means of the short-term initiative Performance 2009 and other structural adjustments, LSG Sky Chefs is still remaining with its ambitious goal of follow up on last year's operating result.

Other

Other

	Jan.– June 2009	Jan. – June 2008	Change in %	April– June 2009	April– June 2008	Change in %
€m	610	554	10.1	296	265	11.7
€m	– 61	– 1		– 32	– 8
€m	– 54	0		– 25	– 8
€m	– 20	– 5		– 9	14	35.7
€m	45	82	– 45.1	13	71	– 81.7
number	3,606	3,603	0.1	3,606	3,603	0.1

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, etc.) 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 34.

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

Operating performance Both the tendency for companies to be restrained about business travel and the structural change in travel behaviour persisted into the second quarter of 2009. At AirPlus, billing revenue was therefore 17 per cent down on last year in the first six months. This also had an effect on the earnings position. Revenue was below last year's level but this was partly made up for by the fact that costs were cut. For one thing, a hiring freeze was imposed in late 2008 in view of the difficult economic situation. AirPlus also launched an international initiative for more efficiency in travel management. This programme helps companies to uncover additional savings potential in their business travel management.

Business at Lufthansa Flight Training is also dependent on the overall economic environment. Although the need for pilot training fell, utilisation of the flight simulators in the first half-year was satisfactory thanks to long-term contracts signed in prior years and new contracts. Revenue was lower than last year due to the crisis, but tight cost management meant that expenses could be brought down. Lufthansa Flight Training began construction work at its Frankfurt site to house eight flight simulators. A simulator centre was also added to the service and emergency training centre in Munich.

Revenue and earnings development Total operating revenue for the companies reported in this area came to EUR 610m (+10.1 per cent). The contribution from AirPlus made up 19.3 per cent at EUR 118m. Lufthansa Flight Training contributed EUR 72m (11.8 per cent) to revenue. Operating expenses rose by 20.8 per cent to a total of EUR 671m. The operating result was negative at EUR –61m, which was exclusively a result of the newly included Group functions. This also applies to the segment result, which fell from EUR 0m last year to EUR –54m.

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

Other Risk report

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 framework of creating value. Group-wide opportunity and risk controlling enables management to analyse and 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.

In the first half-year of 2009, there were no significant changes 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. Regional economic shifts have also affected the risk position. The forecast for economic output in Germany has been adjusted substantially downwards, for instance. Declining economic activity means less passenger and freight traffic in global aviation. Airfreight volumes in particular have experienced a dramatic collapse worldwide. Forecasts of future developments in demand are currently subject to high risks. The effect of this trend is exacerbated by sharp falls in prices and average yields, e.g. by a smaller proportion of passengers travelling in First and Business Class. Lufthansa responded early to these developments. Flight capacities were adjusted and steps taken to cut costs. In view of persistently weak demand and revenue trends, and increasing fuel costs Lufthansa has tightened the

programme to safeguard earnings. The Company also has sufficient flexibility to reduce capacities again in predefined stages if the 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, the fuel price has since gone up again by some 50 per cent, although this rise is not based on any improvement in demand from the real economy.

The two new additions to Lufthansa's portfolio of equity investments, Brussels Airlines and bmi, are exposed to the same sectoral risks as other Group airlines. As a result, these could have considerable effects on profitability and economic development. In response to this, capacities and resources are to be adjusted in line with economic development. On the other hand, opportunities are still expected from synergy effects.

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.

Debt is noticeably more expensive and harder to come by as a result of the international financial crisis. In this situation, Lufthansa's investment grade rating and sound liquidity reserves give it a relatively good start and the Company was able to borrow considerable amounts on favourable terms in recent months. If the rating were to be downgraded to below investment grade, which cannot be ruled out, this would make funding much more expensive and could restrict access to new funding.

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

On 1 July 2009, Lufthansa successfully issued another benchmark bond. The bond had a volume of EUR 750m with a maturity of seven years and a coupon of 6.5 per cent. The issue yield of 6.573 per cent corresponds to a margin of 330 basis points over the mean swap rate. This issue met with great interest and was oversubscribed almost seven times. Both the volume and terms of the bond underline the high level of confidence in Lufthansa in general and specifically as a borrower.

After having reached an out-of-court settlement with Sir Michael Bishop, the LHBD Holding Limited acquired 50 per cent plus one share of bmi. Since 1 July, bmi has been fully consolidated. More information on this topic can be found in the respective chapter Passenger Airline Group segment, page 11.

At the end of July it became apparent that a resilient agreement with the European Commission regarding the planned merger with Austrian Airlines AG can be reached. As a result Lufthansa has filed an application with the Austrian Takeover Commission in agreement with Österreichische Industrieholding AG (ÖiAG), to prolong the deadline to 31 August 2009 for the fulfilment of the suspensive conditions precedent.

Outlook

General economy and sector The global economic situation remains tense. But leading indicators show that the contraction of the world economy is slowing down. Around the world, economic stimulus packages have been established and the central banks' expansive monetary policy is gradually having an effect. It can nevertheless not be assumed that a sustainable recovery will set in before the second half of 2010. As the current recession is combined with a banking and property crisis, it is likely to last longer than usual. Downward pressure still comes from negative sales prospects for companies, restrictive and more expensive lending by banks, greater uncertainty on financial markets – where further losses are expected from write-downs – and the continuing erosion of assets, by falling property prices for instance. Altogether, the global economy is expected to shrink by 2.6 per cent in 2009 (see also the table on page 3).

The prospects for the US economy remain poor. Despite extensive state intervention, the deteriorating condition of the labour market and the attempts at saving by private households are expected to put considerable pressure on consumption, which accounts for over 70 per cent of gross domestic product in the USA. Companies will be cautious about investing given the sluggish pace of lending.

Exports will also stagnate due to the stumbling global economy. Experts are expecting gross domestic product to fall by 2.8 per cent in 2009.

In the Euro-Zone, too, weakness is initially expected to continue. Private consumption will decline as a result of the worsening situation on the employment market. Capital expenditure will continue to decline. Exports will also not be capable of providing a substantial fillip to economic growth in the Euro-Zone. Altogether, this will cause gross domestic product to fall by an estimated 4.6 per cent.

In Germany, there are tentative signals that the chances of the recession flattening out in the second half-year have improved. The general assumption is that the encouraging monetary and fiscal policies implemented around the world will have an increasingly positive effect on the German economy, too. It is nevertheless feared that pressure on the labour market will rise in the months ahead and that countermeasures such as reduced working hours or the car-scrapping scheme will expire. In 2009 the German economy is expected to shrink by 6 per cent.

With the exception of India and China, the economy in Asia will only stabilise gradually. The Indian economy is expected to remain relatively robust due to solid growth in domestic demand. In China, economic output will benefit from the billions spent on stimulus programmes and significant expansion of lending. The Chinese economy should therefore grow by an estimated 7.2 per cent in 2009.

Market players are expecting oil prices to rise in the medium term, as expectations for the general economic situation worldwide are less pessimistic. Futures contracts for delivery in December 2009 are therefore currently trading at around USD 72/bbl, while for December 2010 the price is already USD 77/bbl.

According to IATA forecasts, airlines are only to carry 2.1bn passengers in 2009, 8 per cent down on 2008. A total freight volume of 33.3 million tonnes is predicted, down 17 per cent. This year, revenue is expected to shrink by 15 per cent. This would be a much larger contraction than after the terrorist attacks on 11 September 2001, which caused a fall of 7 per cent. The collapse in revenue is also due to dwindling average yields, which are expected to shrink by 11 per cent in the cargo segment and 7 per cent for passenger traffic in 2009. As a result of these developments IATA, too, has revised its forecast results for the industry substantially. After predicting a loss of USD 4.7bn at the end of March, a loss of USD 9bn is now forecast for 2009. IATA does not see the aviation industry recovering properly until 2010 at the earliest.

Supplementary report Outlook

Lufthansa Group The weak demand visible in the first half-year and described in the preceding chapters is expected to continue in the second half-year. There is also no sign of a respite from pricing pressure. This is compounded by the severe volatility on oil markets, where the most recent spikes bore no relation to the state of the real economy. The future course of business therefore remains exposed to considerable risks. The Lufthansa Group is expecting the remainder of the financial year to remain difficult.

It will therefore primarily be flexibility and speed of reaction in short-term capacity and cost management which will decide the competitiveness and ensure profitability. All the segments in the Lufthansa Group have these capabilities. Their approaches as explained in the preceding chapters are to be continued and stepped up. In light of the observed particular forces at work in its core business passenger transportation, Lufthansa Passenger Airlines, for example, therefore established another cost-cutting programme in July 2009, on top of existing measures. Its goal is to achieve EUR 1bn in sustainable earnings improvements by 2011 at the latest, by means of structural measures – principally cost reductions.

The Lufthansa Group benefits in this environment also from its strong business segments, which in some cases have different business cycles. This has a considerable stabilising effect on the earnings performance of the Group. All segments make a major contribution to its continued success thanks to their position in the market and their steps to safeguard earnings. They also contribute to further distinguishing the Lufthansa Group from its competitors. In this still challenging environment, with a substantial fall in revenue expected and the new companies in the airline group weighing on earnings, the Group's efforts remain directed at earning an operating profit for the full year of 2009. The achievement of this goal is nevertheless subject to considerable risks from future developments in demand and fuel prices. It also depends on the additional measures being successfully implemented in the near future.

Consolidated income statement January –June 2009

in €m	Jan.– June 2009	Jan. – June 2008	April– June 2009	April– June 2008
Traffic revenue	7,846	9,722	4,033	5,255
Other revenue	2,380	2,335	1,178	1,214
Total revenue	10,226	12,057	5,211	6,469
Changes in inventories and work performed by the enter prise and capitalised	121	86	52	12
Other operating income	1,246	753	542	208
Cost of materials and services	– 5,770	– 6,512	– 2,899	– 3,464
Staff costs	– 2,848	– 2,818	– 1,413	– 1,426
Depreciation, amortisation and impairment	– 674	– 608	– 355	– 311
Other operating expenses	– 2,281	– 2,215	– 1,054	– 970
Profit/loss from operating activities	20	743	84	518
Result of equity investments accounted for using the equity method	– 9	– 15	2	– 3
Result from other equity investments	29	32	18	24
Interest income	81	94	41	51
Interest expense	– 219	– 180	– 111	– 97
Net interest	– 138	– 86	– 70	– 46
Other financial items	– 238	– 196	– 97	– 69
Financial result	– 356	– 265	– 147	– 94
Profit/loss before income taxes	– 336	478	– 63	424
Income taxes	126	– 93	105	– 86
Profit/loss after income taxes	– 210	385	42	338
Minority interests	– 6	– 4	– 2	– 1
Net profit/loss attributable to shareholders of Deutsche Lufthansa AG	– 216	381	40	337
Basic earnings per share in €	– 0.47	0.83	0.09	0.74
Diluted earnings per share in €	– 0.47	0.83	0.09	0.73

Consolidated income statement Consolidated statement of comprehensive income

Consolidated statement of comprehensive income

in €m	30.6.2009	30.6.2008
Profit/loss after income taxes	– 210	385
Expenses and income without effect on profit and loss
Currency translation differences	– 58	– 1
Changes in accounting principles	0	– 354
Subsequent measurement of available-for-sale financial assets	68	– 116
Subsequent measurement of cash flow hedges	– 43	344
Expenses and income without effect on profit and loss from financial investments accounted for using the equity method	– 6	5
Other expenses and income without effect on profit and loss	– 3	– 3
Income taxes relating to components of other comprehensive income	28	14
= Other comprehensive income after income taxes	– 14	– 111
= Total comprehensive income	– 224	274
Total comprehensive income attributable to minority interests	– 5	– 1
= Total comprehensive income attributable to shareholders of Deutsche Lufthansa AG	– 229	273

Consolidated balance sheet of 30 June 2009

Assets
in €m	30.6.2009	31.12.2008	30.6.2008
Intangible assets with indefinite useful life	813	821	796
Other intangible assets	252	261	236
Aircraft and spare engines	9,065	8,764	8,277
Repairable spare parts for aircraft	720	669	586
Property, plant and other equipment	1,982	1,931	1,824
Investment property	3	3	3
Investments accounted for using the equity method	336	298	289
Other equity investments	695	790	804
Non-current securities	392	509	277
Loans and receivables	400	475	322
Derivative financial instruments	221	339	413
Deferred income and advance payments	14	15	18
Effective income tax receivables	80	72	78
Deferred claims for income tax rebates	38	28	4
Non-current assets	15,011	14,975	13,927
Inventories	591	581	536
Trade receivables and other receivables	3,151	3,015	3,789
Derivative financial instruments	200	213	937
Accrued income and advance payments	138	119	108
Effective income tax receivables	75	130	35
Securities	3,260	1,834	1,947
Cash and cash equivalents	1,029	1,444	1,770
Assets held for sale	19	97	583
Current assets	8,463	7,433	9,705
Total assets	23,474	22,408	23,632

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

Shareholders' equity and liabilities
in €m	30.6.2009	31.12.2008	30.6.2008
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	566	579	750
Net profit/loss for the period	– 216	542	381
Equity attributable to shareholders of Deutsche Lufthansa AG	5,982	6,531	6,547
Minority interests	60	63	49
Shareholders' equity	6,042	6,594	6,596
Pension provisions	2,491	2,400	2,542
Other provisions	302	291	339
Borrowings	4,562	3,161	2,890
Other financial liabilities	65	51	34
Advance payments received, accruals and deferrals and other non-financial liabilities	1,003	1,024	956
Derivative financial instruments	121	118	563
Deferred income tax liabilities	539	710	745
Non-current provisions and liabilities	9,083	7,755	8,069
Other provisions	968	847	701
Borrowings	427	420	388
Trade payables and other financial liabilities	3,415	3,626	3,788
Liabilities from unused flight documents	2,157	1,693	2,346
Advance payments received, deferred income and other non-financial liabilities	991	882	857
Derivative financial instruments	310	492	374
Actual income tax liabilities	81	99	49
Liabilities included in disposal groups	0	0	464
Current provisions and liabilities	8,349	8,059	8,967

Total shareholders' equity and liabilities 23,474 22,408 23,632

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	– 7	– 579
Consolidated net profit/ loss attributable to minority interest	–	–	–	–	–	–	–	–	381	381	5	386
Other neutral changes	–	–	156	3	–	2	161	–	–	161	– 4	157
Adjusted amount as of 30.6.2008	1,172	1,366	296	– 177	237	394	750	2,878	381	6,547	49	6,596
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	–	–	–	–	–	–	–	–	–	–	–	–
Reclassifications	–	–	–	–	–	–	–	222	– 222	–	–	–
Dividends	–	–	–	–	–	–	–	–	– 320	– 320	– 8	– 328
Consolidated net profit/ loss attributable to minority interest	–	–	–	–	–	–	–	–	– 216	– 216	6	– 210
Other neutral changes	–	–	53	– 59	–	– 7	– 13	–	–	– 13	– 1	– 14
As of 30.6.2009	1,172	1,366	54	– 111	237	386	566	3,094	– 216	5,982	60	6,042

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

Consolidated cash flow statement

in €m	Jan.– June 2009	Jan.– June 2008	April – June 2009	April– June 2008
Cash and cash equivalents 1.11)	1,444	2,079	979	2,004
Net profit/loss before income taxes	– 336	478	– 63	424
Depreciation, amortisation and impairment losses on non-current assets (net of reversals)	809	723	355	366
Depreciation on repairable spare parts for aircraft and on current assets	62	28	7	8
Net proceeds on disposal of non-current assets	– 36	– 18	– 8	2
Result of equity investments	– 20	– 17	– 20	– 21
Net interest	138	86	70	46
Income tax payments	2	– 52	– 50	– 23
Changes in working capital 2)	411	525	31	210
Cash flow from operating activities	1,030	1,753	322	1,012
Capital expenditure for property, plant and equipment and intangible assets	– 1,067	– 953	– 453	– 384
Capital expenditure for financial assets	– 7	– 31	– 1	– 16
Additions to repairable spare parts for aircraft	– 113	– 47	– 17	– 21
Income from sales of non-consolidated equity investments	90	7	0	0
Income from sales of consolidated equity investments	0	17	0	6
Expenses from acquisitions of non-consolidated equity investments	– 88	– 244	– 47	– 20
Expenses from acquisitions of consolidated equity investments 3)	– 3	– 3	0	– 3
Income on disposal of intangible assets, property, plant and equip ment and other financial assets	184	50	53	24
Interest income	70	96	37	63
Dividends received	44	51	32	42
Net cash from/for investing activities	– 890	– 1,057	– 396	– 309
Purchase of securities/fund investments	– 2,246	– 488	– 260	– 308
Sale of securities/fund investments	792		792
Net cash from/for investing and cash management activities	– 2,344	– 1,545	136	– 617
Capital increase	–	–	–	–
Long-term borrowings	1,595	287	15	83
Repayment of long-term borrowings	– 213	– 129	– 43	– 42
Other financial debt	7	1	23	– 5
Dividends paid	– 328	– 579	– 320	– 574
Interest paid	– 149	– 110	– 84	– 60
Net cash from/for financing activities	912	– 530	– 409	– 598
Net change in cash and cash equivalents	– 402	– 322	49	– 203
Changes due to exchange rate differences	– 13	13	1	– 31
Cash and cash equivalents 30.6 4)	1,029	1,770	1,029	1,770
Securities	3,260	1,947	3,260	1,947
Total liquidity	4,289	3,717	4,289	3,717
Net change in total liquidity	1,011	110	– 496	41

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

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

3) 2008 less EUR 1m cash sold.

4) In 2009 includes restricted cash in connection with share purchases: EUR 261m.

Notes

1) Standards applied and changes

in the group of consolidated companies This interim report as of 30 June 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

1. 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. 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 June 2008, the net profit before

Changes in the group of consolidated companies in the period 1.7.2008 to 30.6.2009

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
Segment Logistics
cargo counts GmbH, Hattersheim		1.1.09	Merger
Segment MRO
Lufthansa Technik Switzerland GmbH, Basle, Switzerland	1.10.08		Established
Segment Catering
ZAO AeroMEAL, Russia	1.7.08		Acquisition
CLS Catering Services Ltd., Richmond, Canada	22.7.08		Increased Shareholding
LSG-Airport Gastronomiegesellschaft mbH, Neu-Isenburg		1.7.08	Disposal
Caterair International Corporation, Dover, USA		31.12.08	Merger
Caterair Holdings Corporation, Wilmington, USA		31.12.08	Liquidation
International Food Services Ltd., Hong Kong, Hong Kong	1.1.09		Consolidated for the first time
CNAC-LSG Sky Chefs (Qingdao) Food Services Co., Ltd., Laixi City, China	1.1.09		Consolidated for the first time
LSG Sky Chefs Culinary Service GmbH, Neu-Isenburg	1.1.09		Consolidated for the first time
LSG Sky Chefs Gulf Solutions W.L.L., Manama, Bahrain	1.1.09		Consolidated for the first time
Fortaleza Serviços de Bordo Ltda., Fortaleza, Brazil	1.1.09		Acquisition
Belém Serviços de Bordo Ltda., Belém, Brazil	7.1.09		Acquisition
Natal Catering Ltda., Natal, Brazil	7.1.09		Acquisition
Service and Financial Companies
Société d'investissement à capital variable Fonds d'investissement spécialisé,
Luxembourg, Luxembourg	5.12.08		Established
AirPlus Payment Management Co., Ltd., Shanghai, China	1.1.09		Consolidated for the first time
Lufthansa Training & Conference Center GmbH, Seeheim-Jugenheim	1.1.09		Consolidated for the first time

income taxes would have been EUR 28m lower and the net profit after income taxes EUR 21m 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 Airlines Group, without the centralised Group functions. The operating result for the new segment adjusted accordingly was therefore shown as being EUR 42m 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

Income statement
in €m	Group Jan.–June 2009	of which from changes in the group of consolidated companies	Group Jan. –June 2008	of which from changes in the group of consolidated companies
Revenue	10,226	1	12,057	1,559
Operating income	11,593	2	12,896	1,609
Operating expenses	– 11,573	– 6	– 12,153	– 1,423
Profit from operating activities	20	– 4	743	186
Financial result	– 356	– 5	– 265	– 65
Income taxes	126	1	– 93	– 16
Result after taxes	– 210	– 8	385	105

Balance sheet
in €m	Group 30.6.2009	of which from changes in the group of consoli dated companies of the year 2009	Group 31.3.2008	of which from changes in the group of consoli dated companies of the year 2008
Non-current assets	15,011	15	13,927	3
Current assets	8,463	– 8	9,705	– 2
Total assets	23,474	7	23,632	1
Equity	6,042	11	6,596	0*
Non-current provisions and liabilities	9,083	0*	8,069	0*
Current provisions and liabilities	8,349	– 4	8,967	1

* Rounded below EUR 1m.

Assets held for sale
	Jan.– June 2009	Financial Statements	Jan.– June 2008
in €m		2008
Assets
Aircraft and spare engines	19	18	380
Financial assets	–	79	16
Other assets	–	–	187
Equity/liabilities from assets held for sale
Equity	–	–	15
Liabilities	–	–	464

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 interim financial statements and management report have been reviewed by the auditors. The table on page 34 shows the companies which have joined or left the group of consolidated companies compared with year-end 2008 and 30 June 2008. The effects these changes had on the consolidated balance sheet and income statement in comparison with this quarter of the previous year are shown in the tables on page 35.

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 27.

3) Seasonality

The Group's business is mainly exposed to seasonal effects via the Passenger Airlines Group segment. As such, revenue in the 1st and 4th quarters is generally lower as people travel less, and higher revenue and operating profits are normally earned in the 2nd and 3rd 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 194m 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 one Airbus A300-600 and six Canadair Regional Jet 200s will result in a total cash inflow of EUR 6m in 2009 and EUR 13m 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 June 2009, there were order commitments of EUR 7.1bn for capital expenditure on property, plant and equipment and intangible assets. As of 31 December 2008 the order commitments came to EUR 7.2bn.

Contingent liabilities

in €m	30.6.2009	31.12.2008
From guarantees, bills of exchange and cheque guarantees	877	861
From warranty contracts	923	901
From providing collateral for third-party liabilities	4	3

5) Earnings per share

		30.6.2009	30.6.2008
Basic earnings per share	€	– 0.47	0.83
Consolidated net profit/loss	€m	– 216	381
Weighted average number of shares			457,937,427 457,918,376
Diluted earnings per share	€	– 0.47	0.83
Consolidated net profit/loss	€m	– 216	381
+ interest expenses on the convertible bonds	€m	1	1
– current and deferred taxes	€m	0*	0*
Adjusted net profit/loss for the period	€m	– 215	382
Weighted average number of shares			460,462,049 460,453,320

* 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

Business segment information Jan. –June 2009

	Passenger Airline Group	Logistics	MRO	IT Services	Catering	Reportable operating	Other	Recon ciliation	Group
in €m						segment total
External revenue	7,183	904	1,236	125	778	10,226	–	–	10,226
- of which traffic revenue	6,834	873				7,707	–	139	7,846
Inter-segment revenue	289	12	838	177	246	1,562	–	– 1,562	–
Total revenue	7,472	916	2,074	302	1,024	11,788	–	– 1,562	10,226
Other operating income	709	52	63	22	82	928	610	– 272	1,266
Total operating income	8,181	968	2,137	324	1,106	12,716	610	– 1,834	11,492
Operating expenses	8,146	1,102	1,993	317	1,081	12,639	671	– 1,826	11,484
- of which cost of materials	4,789	743	1,075	38	459	7,104	44	– 1,378	5,770
- of which staff costs	1,528	156	540	119	401	2,744	125	– 3	2,866
- of which amortisation and depreciation (on schedule)	468	61	42	18	29	618	21	3	642
- of which other operating expenses	1,361	142	336	142	192	2,173	481	– 448	2,206
Operating result**	35	– 134	144	7	25	77	– 61	– 8	8
Other segment income	71	6	3	0	0	80	7	14	101
Other segment expenses	30	1	– 1	– 1	– 13	16	1	72	89
- of which impairment charge	32	–	–	–	–	32	–	–	32
Result of investments accounted for using the equity method	– 10	– 3	– 1	–	5	– 9	1	8	–
Segment result (profit from operating activities)**	66	– 132	147	8	43	132	– 54	– 58	20
Segment assets***	11,090	853	2,824	266	1,212	16,245	1,383	5,846	23,474
- of which from investments accounted for using the equity method	122	21	116	0	63	322	14	–	336
Segment liabilities	8,126	504	1,274	199	448	10,551	1,178	5,703	17,432
- of which from investments accounted for using the equity method	–	–	–	–	–	–	–	–	–
Segment capital expenditure	976	11	48	30	32	1,097	45	23	1,165
- of which from investments accounted for using the equity method	65	4	–	–	–	69	–	–	69
Other significant non-cash items	126	10	26	5	11	178	1	–	179
Employees at the balance sheet date	46,179	4,598	19,657	3,039	28,420	101,893	3,606	–	105,499
Average staff numbers	46,135	4,623	19,724	3,053	29,041	102,576	3,647	–	106,223

* Rounded below EUR 1m.

** See page 9 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.

Business segment information Jan. –June 2008

	Passenger Airline Group	Logistics	MRO	IT Services	Catering	Reportable operating	Other	Recon ciliation	Group
in €m						segment total
External revenue	8,589	1,408	1,088	132	840	12,057	–	–	12,057
- of which traffic revenue	8,176	1,360	–	–	–	9,536	–	186	9,722
Inter-segment revenue	310	13	724	183	278	1,508	–	– 1,508	–
Total revenue	8,899	1,421	1,812	315	1,118	13,565	–	– 1,508	12,057
Other operating income	175	41	94	17	19	346	554	– 177	723
Total operating income	9,074	1,462	1,906	332	1,137	13,911	554	– 1,685	12,780
Operating expenses	8,711	1,348	1,748	314	1,106	13,227	555	– 1,679	12,103
- of which cost of materials	5,444	942	893	37	499	7,815	39	– 1,342	6,512
- of which staff costs	1,520	162	500	113	406	2,701	120	– 3	2,818
- of which amortisation and depreciation (on schedule)	438	61	40	18	27	584	18	3	605
- of which other operating expenses	1,309	183	315	146	174	2,127	378	– 337	2,168
Operating result**	363	114	158	18	31	684	– 1	– 6	677
Other segment income	30	5	3	0*	11	49	1	66	116
Other segment expenses	3	0*	0*	1	2	6	0*	44	50
- of which impairment charge	3	–	–	–	–	3	–	–	3
Result of investments accounted for using the equity method	– 28	7	3	–	3	– 15	0*	15
Segment result (profit from
operating activities)**	362	126	164	17	43	712	0*	31	743
Segment assets ***	10,998	1,096	2,476	244	1,215	16,029	1,517	6,086	23,632
- of which from investments accounted for using the equity method	103	20	104	–	59	286	3	–	289
Segment liabilities	8,429	619	1,231	201	535	11,015	1,632	4,100	16,747
- of which from investments accounted for using the equity method	–	–	–	–	–	–	–	–	–
Segment capital expenditure	703	9	40	26	51	829	82	320	1,231
- of which from investments accounted for using the equity method	–	–	1	–	–	1	–	– 1	–
Other significant non-cash items	124	9	26	5	12	176	1	–	177
Employees at the balance sheet date	46,610	4,589	18,881	2,987	31,403	104,470	3,603	–	108,073
Average staff number	46,258	4,582	18,887	2,980	30,986	103,693	3,587	–	107,280

* Rounded below EUR 1m.

** See page 9 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.

Geographical segment information Jan. –June 2009

in €m		Europe North America	Central and South America	Asia/Pacific	Middle East	Africa	Other	Segment Total
Traffic revenue**	5,373	1,075	153	920	178	147	–	7,846
Other operating revenue	1,176	465	63	428	129	119	0*	2,380
Total revenue	6,549	1,540	216	1,348	307	266	0*	10,226

* Rounded below EUR 1m.

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

Geographical segment information Jan. –June 2008

in €m		Europe North America	Central and South America	Asia/Pacific	Middle East	Africa	Other	Segment Total
Traffic revenue**	6,759	1,291	172	1,174	172	154	–	9,722
Other operating revenue	1,224	465	58	369	137	82	0*	2,335
Total revenue	7,983	1,756	230	1,543	309	236	0*	12,057

* 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 business 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, 29 July 2009

Wolfgang Mayrhuber Chairman of the Executive Board and CEO

Christoph Franz Member of the Executive Board 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

To Deutsche Lufthansa AG, Cologne

We have reviewed the condensed consolidated interim financial statements – comprising the condensed statement of financial position, condensed statement of comprehensive income, condensed statement of cash flows, condensed statement of changes in equity and selected explanatory notes – and the interim group management report of Deutsche Lufthansa AG, Cologne, for the period from 1 January to 30 June 2009, which are part of the half-year financial report pursuant to § (Article) 37w WpHG ("Wertpapierhandelsgesetz": German Securities Trading Act). The preparation of the condensed consolidated interim financial statements in accordance with the IFRS applicable to interim financial reporting as adopted by the EU and of the interim group management report in accordance with the provisions of the German Securities Trading Act applicable to interim group management reports is the responsibility of the parent Company's Board of Managing Directors. Our responsibility is to issue a review report on the condensed consolidated interim financial statements and on the interim group management report based on our review.

We conducted our review of the condensed consolidated interim financial statements and the interim group management report in accordance with German generally accepted standards for the review of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW) and additionally observed the International Standard on Review Engagements "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" (ISRE 2410). Those standards require that we plan and perform the review so that we can preclude through critical evaluation, with moderate assurance, that the condensed consolidated interim financial statements have not been prepared, in all material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU and that the interim group management report has not been prepared, in all material respects, in accordance with the provisions of the German Securities Trading Act applicable to interim group management reports. A review is limited primarily to inquiries of company personnel and analytical procedures and therefore does not provide the assurance attainable in a financial statement audit. Since, in accordance with our engagement, we have not performed a financial statement audit, we cannot express an audit opinion.

Based on our review, no matters have come to our attention that cause us to presume that the condensed consolidated interim financial statements have not been prepared, in all material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU, nor that the interim group management report has not been prepared, in all material respects, in accordance with the provisions of the German Securities Trading Act applicable to interim group management reports.

Dusseldorf, 30 July 2009 PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft

Dr Norbert Vogelpoth Frank Hübner (German Public Auditor) (German Public Auditor)

Disclaimer in respect of forward-looking statements

Information published in the 2nd 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.

To the extent that the interim Group management report refers to sources other than the interim Group management report or the interim consolidated financial statements (e.g. Internet sites), the contents of these sources are not part of the interim Group management report and are solely for informational purposes.

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 2nd Interim Report 2009 is a translation of the original German Lufthansa 2. Zwischenbericht. Please note that only the German version is legally binding.

Contact

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

Sebastian Steffen +49 69 696-28010

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

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

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

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

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