Deutsche Lufthansa AG — Interim / Quarterly Report 2011

Aug 4, 2011

Vision

Lufthansa Group overview

Key fi gures Lufthansa Group

		Jan. – June 2011	Jan. – June 2010	Change in %	April – June 2011	April – June 2010	Change in %
Revenue and result
Total revenue	€m	14,063	12,625	11.4	7,624	6,867	11.0
of which traffi c revenue	€m	11,597	10,203	13.7	6,373	5,627	13.3
Operating result	€m	3	– 171		230	159	44.7
EBIT	€m	– 128	64		450	370	21.6
EBITDA	€m	739	876	– 15.6	880	777	13.3
Net profi t / loss for the period	€m	– 206	– 104	– 98.1	301	194	55.2
Key balance sheet and cash fl ow statement fi gures
Total assets	€m	29,517	29,532	– 0.1	–	–	–
Equity ratio	%	26.5	24.3	2.2 pts	–	–	–
Net indebtedness	€m	1,427	1,754	– 18.6	–	–	–
Cash fl ow from operating activities	€m	1,740	1,420	22.5	961	856	12.3
Capital expenditure (gross)	€m	1,437	974	47.5	693	440	57.5
Key profi tability and value creation fi gures
Adjusted operating margin 1)	%	0.4	– 1.0	1.4 pts	3.5	2.7	0.8 pts
EBITDA margin	%	5.3	6.9	– 1.6 pts	11.5	11.3	0.2 pts
Lufthansa share
Share price at the quarter-end	€	15.03	11.39	32.0	–	–	–
Earnings per share	€	– 0.45	– 0.23	– 95.7	0.66	0.42	57.1
Traffi c fi gures
Passengers	thousands	50,234	45,627	10.1	28,147	24,983	12.7
Passenger load factor	%	75.4	77.3	– 1.9 pts	78.0	79.3	– 1.3 pts
Freight and mail	thousand tonnes	1,070	939	13.9	542	493	9.8
Cargo load factor	%	66.6	68.9	– 2.3 pts	65.9	69.1	– 3.2 pts
Available tonne-kilometres	millions	20,624	18,558	11.1	10,812	9,719	11.2
Revenue tonne-kilometres	millions	14,752	13,666	7.9	7,863	7,290	7.9
Overall load factor	%	71.5	73.6	– 2.1 pts	72.7	75.0	– 2.3 pts
Flights	number	557,760	526,934	5.9	291,299	271,997	7.1
Employees
Employees as of 30.6.	number	118,766	116,844	1.6	118,766	116,844	1.6

1) Performance indicator to enable comparison with other airlines: (operating result + write-backs of provisions) / revenue. Date of publication: 28 July 2011.

Contents

• 1 To our shareholders
• 35 Further information
• 3 Interim management report
• 37 Credits/Contact
• 24 Interim fi nancial statements

Financial calendar 2011/2012

Ladies and gentlemen, Credits

While the outlook was thoroughly positive for the global economy and the aviation industry at the beginning of 2011, prospects have become much more differentiated since the outbreak of political unrest in North Africa and the Middle East and the earthquake in Japan. Thanks to our operating flexibility, we were able to react relatively quickly to the new conditions and adjust our flight plans and workflows to the new business climate. At the same time, however, the increased oil price had an adverse effect on business. 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) Head of Investor Relations + 49 69 696 – 28001 Johannes Hildenbrock + 49 69 696 – 28003 Gregor Schleussner + 49 69 696 – 28012 Deutsche Lufthansa AG

In this operating climate, the Lufthansa Group succeeded in considerably growing its revenue for the first half of 2011 and breaking even with an operating result of EUR 3m. This is a significant improvement on last year's figure, which was also affected by one-off factors. Christian Schmidt Deutsche Lufthansa AG, Investor Relations Concept, design and realisation HGB Hamburger Geschäftsberichte GmbH LAC, Airportring 60546 Frankfurt am Main Germany Phone: + 49 69 696 – 28008 Fax: + 49 69 696 – 90990 E-mail: investor.relations@dlh.de

This development was largely driven by the Passenger Airline Group, which was able to clearly improve its result. Developments differed at the various airlines, however. Lufthansa Passenger Airlines and, even more, SWISS succeeded in recovering at least in part from the impact of the uprisings in the Middle East and Africa and the disasters in Japan, experiencing clear year-on-year improvements. However, these unresolved issues continued to have a severe effect on Austrian Airlines and British Midland. Demand at Germanwings was particularly affected by the air traffic tax levied in Germany since January. In the second quarter, we realigned our strategy for the Italian market. Within the long-haul network, we established an important joint venture with the Japanese airline ANA for services between Europe and Japan. It is due to start operating when the forthcoming winter flight timetable is introduced. & Co. KG, Hamburg, Germany Translation by EnglishBusiness GbR, Hamburg, Germany Printed by Broermann Druck + Medien GmbH, Troisdorf, Germany Printed on Circlesilk Premium White (100 per cent recycled paper bearing the EU Ecolabel, registration number FR/011/003) Printed in Germany ISSN 1616-0258 translation of the original German Lufthansa Zwischenbericht 2/2011. Please note that only the German version is legally binding. You can order the Annual and Interim Reports in German or English via our website – www.lufthansa.com/investor-relations – or from the address above. www.lufthansa.com/investor-relations

The Logistics segment succeeded in finishing the first six months of 2011 with operating profits only slightly below the previous year's record result. Lufthansa Technik also posted a clear profit for the first half, although this fell short of last year's figure. Lufthansa Systems is continuing with its restructuring programme. The segment's operating profit was slightly lower than in the previous year. The Catering segment, which further increased its operating profit, developed extremely positively. 27 Oct. Press Conference and Analysts' Conference on interim result January – September 2011 2012 15 March Press Conference and Analysts' Conference on 2011 results 3 May Release of Interim Report

The results posted show that the Lufthansa Group is able to maintain its charted course even in turbulent times. Demand on the Japanese routes has begun to recover, which we see as grounds for optimism. Nevertheless, improving our competitiveness remains a constant challenge and the subject of our undivided attention. We kept pursuing the respective programmes in all business segments and, where necessary, further stepped up or supplemented our efforts. This is designed to safeguard our path of profitable, sustainable growth. The Lufthansa 2nd Interim Report is a 8 May Annual General Meeting in Cologne 2 Aug. Release of Interim Report January – June 2012 31 Oct. Press Conference and Analysts' Conference on interim result January – September 2012

In addition to economic sustainability, we take climate and environmental responsibility very seriously, which is why Lufthansa started using biofuel on the Frankfurt – Hamburg route in mid-July. This is the first long-term test of its kind in the world. As well as reducing CO2 emissions, it is hoped that it will supply important research findings. The latest fi nancial information on the internet:

Ladies and gentlemen, our goal of posting an increase in operating profits for the 2011 financial year remains unchanged. To achieve this, we are building on the quality of our products and services, our flexibility – which also enables us to react promptly to crises – and, last but not least, the expertise and dedication of our staff.

We thank you for your trust.

Christoph Franz Chairman of the Executive Board and CEO Disclaimer in respect of forward-looking statements

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 Information published in the 2nd Interim Report 2011, with regard to the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of defi nitive historical facts. Its purpose is exclusively informational identifi ed by the use of such cautionary terms as "believe", "expect", "forecast", "intend", "project", "plan", "estimate" or "intend". These forward-looking statements are based on all discernible information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication. Since forward-looking statements are by their nature subject to uncertainties and imponderable risk factors – such as changes in underlying economic

Carsten Spohr Member of the Executive Board Chief Officer Lufthansa German Airlines

Lufthansa share

Overall, the German share index (DAX) continued to climb in the second quarter, closing at 7,376 points on 30 June 2011. This meant it gained 6.7 per cent on year-end 2010. During the first quarter, stock exchanges around the world were unsettled by the natural and nuclear disasters in Japan and unrest in the Arab world. In the second quarter, share prices were mainly dampened by the crisis in Greece, which prompted concerns about the Euro.

In combination with economic uncertainty and the still-high oil price, airline shares in particular came under substantial pressure. They did not benefit from the positive overall market trend seen since the beginning of the year. At EUR 15.03 as of 30 June, the Lufthansa share also fell short of its price at year-end 2010, by 8.1 per cent. However, this represented a much less dramatic loss than that experienced by many of our competitors.

Although the macroeconomic environment remains challenging, analysts still believe the Lufthansa share has good development potential. Based on its low current valuation and the expectation of improved profitability at the Company, the majority of analysts recommend the share as a buy. At the end of the first half, the average target price was EUR 18.50.

Shareholder structure by nationality in % (as of 30.6.2011)

German investors continue to dominate the shareholder structure. As of 30 June 2011, they held 62.3 per cent of Lufthansa shares. Institutional investors held 68.0 per cent and private individuals 32.0 per cent of share capital. The US-investor BlackRock Inc. continued to be the largest single shareholder with a stake of 5.08 per cent. The free float came to 100 per cent.

Information on analyst recommendations and the shareholder structure is updated regularly and published on our website at i www.lufthansa.com/investor-relations.

Performance of the Lufthansa share, indexed as of 31.12.2010, compared with the DAX and competitors

Interim management report

Economic environment and sector performance

GDP growth 2011 compared with previous year

in %	Q11)	Q22)	Q32)		Q42) Full year 2)
World	3.5	3.0	3.3	3.5	3.3
Europe	2.8	2.0	1.9	1.9	2.1
Germany	4.8	3.3	2.8	3.0	3.5
North America	2.4	2.4	2.6	2.6	2.5
South America	4.7	4.2	4.7	4.7	4.6
Asia/Pacific	4.8	3.9	4.4	5.3	4.6
China	9.7	9.5	9.3	9.1	9.4
Middle East	5.7	5.6	5.8	5.7	5.7
Africa	2.0	1.6	1.6	2.1	1.9

Source: Global Insight World Overview as of 15.7.2011.

1) Partially forecast. 2) Forecast.

Macroeconomic situation The global economic upswing continued in the first six months of 2011. However, it lost pace somewhat in the second quarter. There are also a number of significant regional differences in economic dynamism.

In the USA expansion has slowed tangibly. By contrast, Europe has seen strong expansion in export-driven economies such as Germany and Finland, while the economic climate in peripheral states such as Greece, Portugal, Spain and Ireland has darkened substantially following harsh austerity measures. At a global level, economic growth of 3.0 per cent is nevertheless projected for the second quarter of 2011.

There are several main reasons for the slowdown in economic growth. The effects of the earthquake disaster in Japan are still being felt, and other key factors include the dampening effect of rising commodity prices and economic policy measures undertaken in emerging markets to prevent economic growth from overheating.

The oil price stopped uptrending for the time being in May. After peaking at USD 126.25, a barrel of Brent Crude cost USD 112.48 at the end of the first six months. This still corresponded to a year-on-year increase of 50 per cent, however. Including the jet crack (price difference between crude oil and kerosene) the cost of kerosene also fell towards the end of the second quarter. However, it remained 48.6 per cent up on the previous year (see table). Given the impact of fuel costs on profits at Lufthansa, the Group pursues an ongoing hedging policy (see p. 140 of the Annual Report 2010). These steps reduced the effects of the price rise to 21.5 per cent in the first half of the year.

Development of crude oil, kerosene and currency

		Minimum	Maximum	Average	30.6. 2011
ICE Brent	in USD/bbl	93.33	126.65	111.2	112.48
Kerosene	in USD/t	827.5	1,133	1,009.43	1,018.75
USD	1 EUR/USD	1.2907	1.483	1.4036	1.4502
JPY	1 EUR/ JPY	107.12	122.76	114.96	116.84
GBP	1 EUR/GBP	0.8302	0.9034	0.8682	0.9034
CHF	1 EUR/CHF	1.1826	1.3186	1.2688	1.2188

In the first six months of 2011, the US dollar depreciated by 9 per cent against the euro. Compared with one year earlier, this still represents an average appreciation of 6 per cent. Euro exchange rates for pound sterling and the Chinese renminbi remained virtually unchanged, while the Japanese yen recorded average appreciation of around 5 per cent. All in all, currency movements had a slight negative impact of EUR 9m on the Group's operating result.

Sector developments The general economic developments are also reflected in sales trends within the aviation industry. Global passenger and freight traffic continued to grow in the first half of 2011. However, the pace of growth has been slower since the fourth quarter of 2010. According to IATA, sales in passenger traffic grew by 6.8 per cent in the first five months of 2011 and sales in cargo traffic by 2.0 per cent.

Trends here still differ widely in different regions. Strong growth continued in Latin America, where sales soared by some 17 per cent in the first five months. Due to the airspace closures last year, Europe also recorded growth of 11 per cent. In both Asia/Pacific and North America, sales were up some 4 per cent. Asia continued to be affected by a weak Japanese market following the disasters earlier in the year. Sales grew by 8 per cent at airlines in the Middle East and fell by 1.6 per cent at the African airlines.

The premium segment also grew compared with the same period of the previous year. Figures provided by IATA show an 8.7 per cent increase in sales for the first five months of 2011. However, adjusted for the effects of the airspace closures, growth levelled off here too.

Since 2011, flights departing from Germany have been subject to a one-sided air traffic tax based on the distance flown. International transfers and cargo flights are exempt from the tax.

Course of business

Overview The Lufthansa Group continued to develop positively in the first half of 2011. Business developments were hallmarked by a recovery in demand, which triggered clear sales growth in almost all segments. This was offset in the second quarter by the one-off impact of the crisis-hit regions in Japan, North Africa and the Middle East along with the oil price, which remained high. In this environment, the Lufthansa Group succeeded in substantially boosting both its revenue and its operating result in the first half of 2011 compared with the same period of 2010, which was also negatively affected by one-off effects.

Overall, the Passenger Airline Group posted a much improved operating result, although developments at the different airlines varied. The operating profits generated by the Logistics business segment fell only slightly short of the previous year's record level. Revenue rose further at the MRO segment. However, provisions weighed on the result, which therefore remained below the previous year's figure. The IT Services segment was also unable to match its 2010 result in full. By contrast, the Catering business segment was able to build on its good performance from the first quarter 2011 and further improved its operating profits year on year.

We believe that the different factors that affected results in the first half confirm that it is prudent to continuously examine our competitiveness and strengthen it where necessary. For this reason, we will keep pursuing the respective programmes in all business segments. A number of further initiatives was also added in the second quarter.

Staff and management Lufthansa and the Vereinigung Cockpit pilots' union agreed on a new wage settlement on 29 June 2011. This comprises a pay rise of around 3.5 per cent for the circa 4,500 pilots at Lufthansa Passenger Airlines, Lufthansa Cargo and Germanwings. This is equivalent to an annual pay increase of 3.2 per cent. The contract is valid until the end of April 2012.

At the end of the first half, the Lufthansa Group employed a total of 118,766 people; this is 1.6 per cent more than in the previous year.

Changes in the group of consolidated companies and in reporting standards There were no significant changes to the group of consolidated companies compared with the same period last year. The individual changes compared with year-end 2010 and 30 June 2010 are shown in the table on p. 30 – 31 . These changes had no significant effect on the consolidated balance sheet and income statement in comparison with the same period last year.

The standards and interpretations mandatory for the first time as of 1 January 2011 also did not have a significant effect on the Group's net assets, financial and earnings position. For further details, see the notes to the consolidated financial statements from p. 30 .

Earnings position

Revenue and income Traffic at the Lufthansa Group improved considerably in the first half of 2011 compared with the same period last year. The number of passengers transported rose to 50.2 million (+10.1 per cent) in the first two quarters of 2011, while the volume of freight and mail increased to a total of 1.1 million tonnes (+13.9 per cent). These performance figures include the traffic figures for Germanwings for the first time, although this does not have a significant effect on overall performance. Last year's figures have been adjusted to facilitate comparison. The individual performance data for the separate segments is presented in the respective chapters.

Traffic figures of the Lufthansa Group's airlines

		Jan.–June 2011	Jan. –June 2010	Change in %
Passengers carried	thousands	50,234	45,627	10.1
Available seat-kilometres	millions	129,098	115,394	11.9
Revenue seat-kilometres	millions	97,337	89,219	9.1
Passenger load factor	%	75.4	77.3	–1.9
Freight/mail	thousand tonnes	1,070	939	13.9
Available cargo tonne-kilometres	millions	8,238	7,307	12.8
Revenue cargo tonne-kilometres	millions	5,487	5,037	8.9
Cargo load factor	%	66.6	68.9	– 2.3 pts
Total available tonne-kilometres	millions	20,624	18,558	11.1
Total revenue tonne-kilometres	millions	14,752	13,666	7.9
Overall load factor	%	71.5	73.6	– 2.1 pts
Flights	number	557,760	526,934	5.9

The increased traffic led to a growth of 13.7 per cent in traffic revenue to EUR 11.6bn in the first half. Higher volumes accounted for 9.1 per cent of the additional income and higher prices (including fuel surcharge and air traffic tax) for 4.5 per cent. Exchange rates had a negligible effect on income (+0.1 per cent). The Passenger Airlines Group accounted for EUR 9.9bn (+13.8 per cent) of traffic revenue and the Logistics segment for EUR 1.4bn (+17.6 per cent).

Course of business Earnings position To our shareholders Interim management report | Interim financial statements | Further information

External revenue share of the business segments in % (as of 30.6.2011)

At EUR 2.5bn, other revenue was 1.8 per cent up on the previous year. Of this, the MRO segment generated EUR 1.2bn (–0.5 per cent), IT Services EUR 110m (–6.0 per cent) and Catering EUR 819m (+2.5 per cent). The airborne companies in the Passenger Airline Group and Logistics segment contributed EUR 371m (+11.1 per cent) to other revenue.

Group revenue therefore climbed year on year by 11.4 per cent to EUR 14.1bn. The graph on p. 6 shows revenue for the last five years. The Passenger Airline Group's share of total revenue rose to 74.5 per cent (+1.1 percentage points). The distribution of revenue by segments and regions is shown in the segment reporting on p. 35 .

Other operating income fell by 8.0 per cent to EUR 1.3bn. This decrease was largely due to lower income from disposals of non-current assets (EUR –152m). Last year, this figure included profits from the transfer of shares in Fraport to the Lufthansa Pension Trust (EUR 94m) and book gains from the sale of 6.2 million shares in Amadeus IT Holding S.A. (EUR 67m). Furthermore, income from write-ups on capital assets dropped by EUR 40m principally due to the development of the US dollar. Exchange rate gains, which also shrank (EUR –25m), correspond with exchange rate losses in other operating expenses. Other income related partly to refunds received in the first quarter of air traffic control charges paid in prior years and to compensation received for the delayed delivery of Airbus A380 aircraft. Other items did not vary significantly compared with the previous year.

Total operating income therefore went up by EUR 1.3bn or 9.0 per cent to EUR 15.4bn.

Expenses Operating expenses rose by a total of EUR 1.0bn (+7.3 per cent) to EUR 15.3bn. This was primarily due to a 14.3 per cent rise in the cost of materials and services, which came in at EUR 8.4bn. This increase stemmed above all from the EUR 598m (24.6 per cent) climb in fuel costs to EUR 3.0bn. In addition to the 21.5 per cent increase in fuel prices (after hedging), volumes also contributed 9.6 per cent to expenses. By contrast, the US dollar's performance reduced costs by 6.5 per cent. Fuel expenses include a positive result from price hedging of EUR 434m. Other raw materials, consumables and supplies were up by 8.5 per cent to EUR 1.3bn.

Expenses

	Jan. –June 2011	Jan. –June 2010	Change
	in €m	in €m	in %
Cost of materials and services	8,353	7,305	14.3
of which fuel	3,029	2,431	24.6
of which fees and charges	2,549	2,163	17.8
of which operating lease	95	134	–29.1
Staff costs	3,393	3,193	6.3
Depreciation	836	798	4.8
Other operating expenses	2,689	2,931	–8.3
Total operating expenses	15,271	14,227	7.3

Fees and charges rose by 17.8 per cent, primarily due to greater traffic. Key factors here were increases in air traffic control charges (+12.7 per cent), take-off and landing fees (+13.1 per cent) and passenger fees (+18.1 per cent). The new air traffic tax accounted for expenses of EUR 162m. Other purchased services totalled EUR 1.5bn, 2.6 per cent less than last year, due primarily to lower expenses for external MRO services.

Staff costs rose by 6.3 per cent in conjunction with a 0.7 per cent increase in the average annual number of employees to 118,109. The rise stemmed from higher performance-related pay, additional expenses due to exchange rate movements and higher additions to pension provisions. The latter went up as a result of the lower discount rate and an additional funding obligation towards pension funds.

Depreciation and amortisation rose by 4.8 per cent to EUR 836m. Depreciation of aircraft, mainly new purchases from last year and this year, accounted for EUR 42m (6.6 per cent) of the increase. Of total impairment losses of EUR 7m, EUR 6m related to two Boeing B737-500s and eight Canadair Regional Jet 200s, which were decommissioned in the first quarter or are held for disposal.

Other operating expenses include additional impairment of EUR 10m relating in particular to five Boeing B737-500s, two Airbus A330-200s and four Canadair Regional Jet 200s held for sale. All in all, however, other operating expenses dropped to EUR 2.7bn (–8.3 per cent). This change was brought about by lower exchange rate losses (EUR –398m). Of this sharp drop, EUR 178m is attributable to a fall in expenses from the valuation of financial liabilities. The exchange rate losses correspond with exchange rate gains in other operating income. Expenses were driven up by factors including higher staff-related costs (EUR +42m) and rises in both credit card commissions (EUR +13m) and computerised distribution systems (EUR +10m). The individual other items did not vary significantly compared with last year.

Earnings development After the Group posted a loss from operating activities in the first half of 2010, it was able to improve on this in the first half of 2011 and post a profit of EUR 164m (an increase of EUR 230m) for the first six months of 2011 despite the above-mentioned difficulties.

Following regular adjustments for the items listed in the table on p. 7 , the operating result also improved by EUR 174m to come in at a positive EUR 3m. As a result, the adjusted operating margin went up by 1.4 percentage points to 0.4 per cent. This is calculated as operating result plus write-backs of provisions divided by revenue.

In the reporting period, the result from equity investments was EUR 5m down on the previous year's figure at EUR 17m. This decrease is attributable to the lower result of investments accounted for using the equity method (EUR –18m), largely caused by SN Airholding, Sun Express and Jade Cargo (see comments under Passenger Airline Group and Logistics). Net interest fell by EUR 6m to EUR –153m.

The result from other financial items slumped by EUR 417m to EUR –309m. Of this total, expenses of EUR 131m were accounted for by negative changes in the value of hedging instruments classed as held for trading as per IAS 39. Last year, the valuation of these financial derivatives generated income of EUR 170m. In addition to this, changes in the fair values of options used for hedging (primarily fuel hedges) amounting to EUR –157m (previous year: EUR –64m) were also recognised in the financial result in line with IAS 39. However, expenses arising from changes in the fair value of options must be viewed in connection with the hedging gains and losses realised and changes to the intrinsic value of hedging transactions, which are recognised directly in equity. As a result, the positive result of hedging considerably alleviated fuel costs by EUR 434m in the first half-year. Even after the deduction of these derivatives that had become due, the intrinsic value of the fuel hedging transactions rose by EUR 265m.

Earnings before interest and taxes (EBIT) reflect developments in the operating result, the result from equity investments and other financial items. The figure came to EUR –128m (previous year: EUR 64m).

Earnings before income taxes (EBT) fell by EUR 198m to EUR –281m at the end of the first six months. As the pre-tax result was negative, income taxes improved the result by EUR 82m.

Earnings position Cash flow and capital expenditure

After deducting minority interests (EUR 7m), the Group posted a net loss for the period of EUR –206m. This was EUR 102m down on the previous year's figure of EUR –104m. Earnings per share were therefore EUR –0.45 (previous year: EUR –0.23). Adjusted for the effect on earnings of the above-mentioned changes in the fair value of options, earnings per share would have improved to EUR –0.17 (previous year adjusted: EUR –0.12).

reduced the figure by EUR 135m compared with last year. Despite increased business volume, the change in the working capital remained at the previous year's level due to negative exchange rate effects.

In the first half of the 2011 financial year, the Lufthansa Group increased its cash flow from operating activities by EUR 320m to EUR 1.7bn. Based on a EUR 198m drop in the profit/loss before income taxes, non-cash expenses of EUR 288m from changes in the market value of financial derivatives (previous year: income of EUR 122m) were eliminated when calculating cash flow because they do not affect the cash flow from operating activities. Eliminating non-cash depreciation and amortisation resulted in a further increase of EUR 95m in cash flow, whereas income tax payments

Reconciliation of results

		Jan. – June 2011	Jan. – June 2010
in €m	Income statement	Reconciliation with operating result	Income statement	Reconciliation with operating result
Total revenue	14,063		12,625
Changes in inventories	24		70
Other operating income	1,348		1,466
of which book gains and current financial investments		–62		–211
of which income from reversal of provisions		–53		–44
of which write-ups on capital assets		–3		–43
of which period-end valuation of non-current financial liabilities		–131		–26
Total operating income	15,435	–249	14,161	–324
Cost of materials and services	–8,353		–7,305
Staff costs	–3,393		–3,193
of which past service cost		20		–2
Depreciation, amortisation and impairment	–836		–798
of which impairment losses		7		7
Other operating expenses	–2,689		–2,931
of which impairment losses on assets held for sale – non-operating		10		0*
of which expenses incurred from book losses and current financial investments		27		12
of which period-end valuation of non-current financial liabilities		24		202
Total operating expenses	–15,271	88	–14,227	219
Profit / loss from operating activities	164		–66
Total from reconciliation with operating result		–161		–105
Operating result		3		–171
Result from equity investments	17		22
Other financial items	–309		108
EBIT	–128		64
Write-downs (included in profit from operating activities)	836		798
Write-downs on financial investments, securities and assets held for sale	31		14
EBITDA	739		876

* Rounded below EUR 1m.

Lufthansa 2nd Interim Report January – June 2011 7

Gross capital expenditure came to EUR 1.4bn, of which EUR 1.2bn was for a total of 28 aircraft (three Airbus A380s, two A330s, seven A321s, two A320s, two Boeing B737s, two B767s, seven Bombardier CRJ 900s, two Embraer 195s and one ATR 700) as well as for aircraft overhauls and down payments. An additional EUR 103m was invested in other property, plant and equipment. Intangible assets accounted for EUR 41m of the remaining capital expenditure. Financial investments of EUR 78m related mainly to loans. Disposals of repairable spare parts for aircraft generated inflows of EUR 18m. The funding requirement was partly covered by interest and dividend income (EUR 248m in total) and proceeds of EUR 287m from the disposal of assets – in particular aircraft and non-current securities. Cash proceeds of EUR 662m were generated by the acquisition and disposal of current securities and funds. Net cash totalling EUR 221m was therefore used for the Group's investing and cash management activities (previous year: EUR 1.1bn).

Free cash flow was once again generated in the first half of 2011. This is defined as cash flow from operating activities less net capital expenditure and came to a solid EUR 857m.

The balance for financing activities was a net cash outflow of EUR 1.4bn. A minor amount of new fundraising (EUR 113m) was outweighed by dividend payments (EUR 286m), regular debt repayments (EUR 547m) and interest payments of EUR 269m. Moreover, the good liquidity position of the financial structure was used and five borrower's note loan tranches in total worth EUR 407m were paid back early.

Cash and cash equivalents rose by EUR 135m to EUR 1.2bn. This includes appreciation of EUR 4m due to exchange rate movements.

The internal financing ratio was 121.1 per cent (previous year: 145.8 per cent). Overall, cash including securities at the end of the first half fell to EUR 4.6bn (previous year: EUR 5.4bn). The detailed cash flow statement can be found on p. 29 .

Assets and financial position

At EUR 29.5bn, the consolidated balance sheet total at the end of the first half-year 2011 was EUR 197m more than at year-end 2010. Non-current assets rose by EUR 125m, while current assets grew by EUR 72m.

Within non-current assets, the item aircraft and reserve engines increased by EUR 618m to EUR 11.8bn due to additions.

The decline of EUR 76m in other equity investments is largely due to the changes in the market value of the shares in Amadeus IT Holding S.A. (EUR –42m) and in JetBlue (EUR –32m). Derivative financial instruments fell by a total of EUR 162m, principally due to currency and interest rate hedges, offset by an increase in fuel hedges.

Non-current securities sank by EUR 119m due in large part to the disposal of the borrower's note loans.

Within current assets, receivables increased by EUR 820m for seasonal and billing reasons and due to the greater volume of business. The rise in current financial derivatives (+ EUR 131m) was largely attributable to fuel hedges, which were offset by a fall in the market value of currency hedges. Cash and cash equivalents – consisting of current securities, bank balances and cashin-hand – went down by a total of EUR 748m to EUR 4.6bn. Non-current assets continued to account for 64.7 per cent of total assets, as at year-end 2010.

Shareholders' equity (including minority interests) was reduced by EUR 506m (–6.1 per cent) to EUR 7.8bn as of the reporting date. This decline stems primarily from the negative after-tax result of EUR 199m and dividend payments of EUR 286m to shareholders in Deutsche Lufthansa AG and minority interests. Negative changes in the market value of financial assets prompted a further fall of EUR 53m. EUR 12m of this resulted from the higher intrinsic value of financial derivatives used to hedge fuel price, exchange rate and interest rate risks. Due to positive currency translation differences, shareholders' equity rose by EUR 36m. The equity ratio dropped to 26.5 per cent (year-end 2010: 28.4 per cent).

Non-current liabilities and provisions fell by EUR 1.0bn to EUR 10.1bn, while current borrowing went up by EUR 1.7bn. Under non-current liabilities, financial borrowing fell by a total of EUR 959m, largely thanks to the early repayment of the borrower's note loans and to maturities, while the negative market value of derivative financial instruments (principally used for currency and interestrate hedging) rose by EUR 213m. Pension provisions shrank by EUR 79m to EUR 2.5bn in line with further funding of commitments via external pension funds.

Cash flow and capital expenditure Assets and financial position

Within current liabilities, financial borrowing went down by EUR 87m. This increase was due to maturities and was offset in the reporting period by capital repayments. Trade liabilities and other financial liabilities climbed (EUR +469m) as did liabilities from unused flight documents (EUR +1.3bn). This was attributable to seasonal and billing factors and also to the greater volume of business.

At the end of the first half of 2011, net indebtedness (including non-current liquidity reserves of EUR 110m) went down to EUR 1.4bn. At year-end 2010 the figure had still been at EUR 1.6bn. Gearing including pension provisions was virtually unchanged on year-end 2010 at 50.0 per cent and was therefore still in the middle of the target range of 40 to 60 per cent.

Calculation of net indebtedness and gearing

	Jan. – June 2011 in €m	31 Dec. 2010 in €m	Change as of 31 Dec. 2010 in %
Liabilities to banks	1,152	1,925	–40.2
Bonds	2,121	2,177	–2.6
Other non-current borrowing	2,865	3,082	–7.0
	6,138	7,184	–14.6
Other bank borrowing	31	23	34.8
Group indebtedness	6,169	7,207	–14.4
Cash and cash equivalents	1,232	1,097	12.3
Securities	3,400	4,283	–20.6
Non-current securities (liquidity reserve)*	110	231	–52.4
Net indebtedness	1,427	1,596	–10.6
Pension provisions	2,492	2,571	–3.1
Net indebtedness and pensions	3,919	4,167	–6.0
Gearing in %	50.0	50.0	0.0 pts

* Realisable at any time.

Group fleet – Number of commercial aircraft

Deutsche Lufthansa AG (LH), SWISS (LX), Austrian Airlines (OS), British Midland (bmi), Germanwings (4U), Lufthansa CityLine (CLH), Air Dolomiti (EN), Eurowings (EW) and Lufthansa Cargo (LCAG) as of 30.6.2011

Manufacturer/type	LH	LX	OS	bmi	4U	CLH	EN	EW	LCAG	Group fleet	of which finance lease	of which operating lease	Change as of 31.12.10	Change as of 30.6.10
Airbus A300										0			–	–2
Airbus A310	23)									2			–	–1
Airbus A319	30	7	7	11	30					85	4	21	–	+2
Airbus A320	46	25	9	7						87	11	6	+3	+4
Airbus A321	51	7	6	7						71	5	5	+7	+8
Airbus A330	15	17		2						34		6	–	+1
Airbus A340	50	13	22)							65	2	2	–1	–2
Airbus A380	7									7			+3	+6
Boeing 737	63		11	14						88	3	11	–	–
Boeing 747	30									30			–	–
Boeing 767			6							6	2		–	–
Boeing 777			4							4			–	–
Boeing MD-11F									18	18			–	–1
Bombardier CRJ	311)		2			36		8		77		8	–	–8
Bombardier C-Series										0			–	–
Bombardier Q-Series			14							14			–5	–4
ATR	51)						6	2		13		7	–3	–9
Avro RJ		20				14				34		15	–2	–4
BAe 146										0			–	–2
Embraer	261)	43)	33)	19						52	3	9	+3	+8
Fokker F70			9							9	1		–	–
Fokker F100			15							15			–	–
Cessna Citation										0			–4	–4
Total aircraft	356	93	88	60	30	50	6	10	18	711	31	90	1	–8

1) Let to Lufthansa regional airlines.

2) Let to SWISS.

3) Leased to company outside the Group.

Passenger Airline Group business segment

Key figures Passenger Airline Group

Key figures Passenger Airline Group					Passenger Airlines 3)
		Jan. –June 2011	Jan. –June 2010	Change in %	April –June 2011	April –June 2010	Change in %	Jan. –June 2011	Jan. – June 2010	Change in %
Revenue	€m	10,851	9,567	13.4	6,002	5,244	14.5	7,394	6,377	15.9
of which with companies of the Lufthansa Group	€m	373	301	23.9	194	162	19.8
Operating result	€m	–239	–342	30.1	152	31	390.3	–100	–203	50.7
Segment result	€m	–248	–308	19.5	183	73	150.7
EBITDA1)	€m	571	175	226.3	581	312	86.2	425	115	269.6
Segment capital expenditure	€m	1,250	891	40.3	622	407	52.8
Employees as of 30.6.	number	58,687	57,207	2.6	58,687	57,207	2.6	38,842	37,022	4.9
Passengers 2)	thousands	50,234	45,627	10.1	28,147	24,983	12.7	31,225	27,190	14.8
Available seat-kilometres 2)	millions	129,098	115,394	11.9	68,763	60,863	13.0	87,978	76,865	14.5
Revenue seat-kilometres 2)	millions	97,337	89,219	9.1	53,603	48,280	11.0	66,621	59,815	11.4
Passenger load factor 2)	%	75.4	77.3	–1.9 pts	78.0	79.3	–1.3 pts	75.7	77.8	–2.1 pts

1) Before profit/loss transfer from other companies.

2) Lufthansa Passenger Airlines, SWISS, bmi, Austrian Airlines and Germanwings.

3) Including regional partners.

Course of business In the first half of 2011, the Passenger Airline Group was able to maintain the positive trend recorded at the beginning of the year and improved on its 2010 result. The halfyear figures reflect the positive ongoing macroeconomic trend, especially in Germany. However, profits were also curbed by the consequences of the disasters in Japan and the unrest in North Africa and the Middle East. High fuel prices also continued to have an adverse effect.

Segment structure The segment includes Lufthansa Passenger Airlines, SWISS, Austrian Airlines, bmi and Germanwings, as well as the equity investments in Brussels Airlines, JetBlue and SunExpress. Our aim of becoming Europe's leading airline group is supported by means of extensive cooperations within the group, which generate significant synergies and competitive advantages.

Operating performance Since the beginning of 2011, the traffic data for Germanwings has been included in the Passenger Airline Group's figures for the first time. The figures for the previous year have been adjusted accordingly. The inclusion had no significant effect on the development of the traffic figures for the segment.

In the reporting period, passenger figures rose by 10.1 per cent to 50.2 million. While the number of flights increased by 5.7 per cent, the available seat kilometres climbed by 11.9 per cent as a result of the ongoing fleet rollover, which introduced larger aircraft, and the new Europa cabin. Sales went up by 9.1 per cent. On top of this sales growth came a 4.3 per cent increase in average yields. The passenger load factor came to 75.4 per cent (–1.9 percentage points). Traffic revenue went up by 13.8 per cent.

of which Lufthansa

Sales were up considerably in all traffic regions, with average yields rising simultaneously. The passenger load factor also improved somewhat in European traffic (see table on p. 11 ).

In the European traffic region, capacity was expanded significantly by installing new seats in the short-haul fleet. This additional capacity was sold in full. At the same time average yields increased by 2.2 per cent on last year; traffic revenue climbed by 14.2 per cent.

In America, sales growth of 9.8 per cent was recorded. Here too, the volume growth was accompanied by a positive trend in average yields (+ 4.3 per cent). Traffic revenue went up by 14.6 per cent.

In the Asia/Pacific traffic region, the segment was able to increase sales by 6.9 per cent despite the disasters in Japan. The segment also recorded pleasing growth in both average yields (+7.4 per cent) and traffic revenue (+14.8 per cent).

Sales were also up 6.0 per cent in the Middle East/Africa region. However, political unrest had an adverse effect on traffic. Average yields nevertheless rose by 2.1 per cent, traffic revenue improved by 8.3 per cent on last year.

Revenue and earnings development Increased traffic meant that the segment's traffic revenue climbed year on year to EUR 9.9bn (+13.8 per cent). Higher sales volumes accounted for 9.1 per cent of the increase, with higher prices contributing 4.4 per cent and positive exchange rate effects a further 0.3 per cent. In total, revenue grew to EUR 10.9bn (+13.4 per cent).

Other operating income fell by 3.6 per cent to EUR 639m. This was because lower exchange rate gains (EUR –104m) offset additional income from refunds of air traffic control charges paid in prior years and compensation payments received for the delayed delivery of Airbus A380 aircraft in the first quarter.

Total operating income went up by 12.3 per cent to EUR 11.5bn.

Operating expenses increased at a slower rate year on year, rising by 10.9 per cent to EUR 11.7bn. The main reason was the sharp rise in the cost of materials and services to EUR 7.3bn (+14.6 per cent), of which the main driver was a 22.5 per cent increase in fuel costs to EUR 2.8bn.

Fees and charges climbed by a total of 17.4 per cent to EUR 2.4bn, largely as a result of greater traffic and the first-time levy of the air traffic tax (EUR 162m). Alongside higher air traffic control charges (+12.1 per cent), steep rises were seen above all in passenger fees (+18.1 per cent) and take-off and landing fees (+12.6 per cent).

Trends in traffic regions Passenger Airline Group

	Net traffic revenue in €m external revenue		Number of passengers in thousands		Available seat-kilometres in millions		Revenue seat-kilometres in millions		Passenger load factor in %
	Jan. –June 2011	Change in %	Jan. –June 2011	Change in %	Jan. –June 2011	Change in %	Jan.–June 2011	Change in %	Jan.–June 2011	Change in pts
Europe	4,676	14.2	40,075	11.0	45,570	11.6	31,539	11.7	69.2	0.1
America	2,342	14.6	4,212	9.5	38,143	12.4	31,265	9.8	82.0	–1.9
Asia/Pacific	1,886	14.8	2,942	8.3	28,640	13.1	22,655	6.9	79.1	–4.6
Middle East/Africa	963	8.3	2,488	1.6	14,860	10.4	10,468	6.0	70.4	–2.9
Total scheduled services	9,867	13.8	49,717	10.2	127,214	12.0	95,927	9.3	75.4	–1.9
Charter	82	16.8	518	3.3	1,884	3.8	1,410	–2.6	74.9	–4.9
Total	9,949	13.8	50,234	10.1	129,098	11.9	97,337	9.1	75.4	–1.9

While the average annual workforce expanded by 1.6 per cent, staff costs rose by 8.6 per cent. Higher additions to pension provisions, higher performance-related pay, and cost increases due to exchange rate movements were all responsible.

Depreciation and amortisation was up by 9.7 per cent to a total of EUR 670m mainly due to new aircraft deliveries this year and last.

At EUR 1.8bn, other operating expenses remained virtually on a par with last year (+0.5 per cent). Higher credit card commissions and indirect staff costs were offset by lower exchange rate losses and agency commissions.

The operating result for the first six months was 30.1 per cent higher than that for the same period last year (EUR –342m) at EUR –239m. Lufthansa Passenger Airlines and SWISS were the driving forces behind this improved result. Comments on the earnings contributions from the individual airlines can be found on the following pages.

Other segment income came in at EUR 67m (previous year: EUR 75m) and was attributable above all to book gains on the disposal of non-current assets (EUR 30m) and income from the write-back of provisions (EUR 34m).

Other segment expenses came to EUR 41m (previous year: EUR 11m). Past service costs in connection with additional funding obligations towards pension funds accounted for EUR 20m of this. Of total impairment losses of EUR 17m, EUR 16m related to seven Boeing B737-500s, two Airbus A330-200s and twelve Bombardier CRJ 200s, which have been decommissioned or are held for disposal. The result of the equity valuation of EUR –35m (previous year: EUR –30m) relates particularly to SN Airholding (EUR – 27m) and SunExpress (EUR – 8m). The segment result improved overall by EUR 60m to EUR –248m.

Segment capital expenditure increased to EUR 1.3bn, 40.3 per cent above last year's figure. This rise was driven by capital expenditure on new aircraft. In the first six months, this expenditure related to three Airbus A380s, two A330s, seven A321s, two A320s, two Boeing B737s, two B767s, seven Bombardier CRJ 900s, two Embraer 195s and one ATR 700.

Forecast In the first half of 2011, many regions experienced an ongoing recovery in demand and sales. However, these positive effects were dampened by the impact of the above-mentioned crises in North Africa and Japan and the considerably higher oil price. These factors affect the business segment's various companies to different extents.

In the second half of the year, both the oil price and demand will remain prone to fluctuations, especially in the crisis-hit areas. All the companies in the Passenger Airline Group are therefore continuing with their individual restructuring measures and programmes to safeguard earnings. As regards capacity, all the companies are revising their plans for the winter flight timetable and adjusting them to the new demand climate. Lufthansa Passenger Airlines is continuing unabated with its Climb 2011 programme and the restructuring at Austrian Airlines and bmi is being stepped up further.

All in all, the Passenger Airline Group is still expected to post year-on-year improvements in its revenue and operating result in the 2011 financial year.

Lufthansa Passenger Airlines

The result for the first six months of 2011 at Lufthansa Passenger Airlines was also adversely affected by the events in Japan, North Africa and the Middle East. In addition to this, cost pressure remains high for European traffic. Lufthansa Passenger Airlines is countering this by taking action within its Climb 2011 programme, such as installing new seats in the Europa cabin and pushing forward with the fleet rollover (see p. 85 of the Annual Report 2010). Clear reductions in unit costs in the first two quarters are testimony to the effectiveness of these measures. Lufthansa Passenger Airlines successfully sold the associated higher capacity on European routes and even managed to increase average yields slightly.

Lufthansa Passenger Airlines transported a total of 31.2 million passengers in the first six months of 2011. This corresponds to an increase of 14.8 per cent on last year. Capacity grew by 14.5 per cent as a result of the above-mentioned measures. Sales rose by 11.4 per cent. At 75.7 per cent, the passenger load factor was therefore 2.1 percentage points down on 2010. At the same time, average yields developed positively, climbing by 4.3 per cent. All in all, Lufthansa Passenger Airlines increased its traffic revenue by 16.1 per cent on the previous year to EUR 6.8bn. Revenue saw a comparable improvement, rising 15.9 per cent to EUR 7.4bn.

As regards costs, EUR 834m in additional expenses had to be recouped compared with the same period in 2010. These largely related to greater expenses for fuel (EUR +356m), along with fees and charges (EUR +290m). Nevertheless, the segment improved its operating result by EUR 103m compared with last year, taking it to EUR –100m.

Lufthansa Passenger Airlines wants to further gear itself towards market requirements. Therefore, a new organisational structure has been introduced on 1 April 2011 and important decisions concerning the future set-up have been taken (for details see p. 97 of the Annual Report 2010).

Lufthansa Passenger Airlines also decided to change its strategy for the Italian market. The Lufthansa Italia brand introduced in 2008 will cease flight operations at the end of the summer flight timetable. To compensate for this, Lufthansa Passenger Airlines will significantly step up its capacity on services to Italy. The more streamlined structure on the Italian market shall help to focus Lufthansa's strong market position.

At the beginning of June, the newly established joint venture for Lufthansa Passenger Airlines with ANA, Japan's largest airline, was given antitrust clearance by the Japanese competition authorities. The strategic partnership, to be realised on the routes between Europe and Japan in the coming winter flight timetable, includes sales activities combining the interests of both companies and the introduction of joint flight plans. This will offer passengers seamless connections.

Since the second quarter, Lufthansa Passenger Airlines has been serving two new Airbus A380 destinations: San Francisco and Miami. Singapore has already been named as a new A380 destination for the winter flight timetable. Four new destinations were also added to the flight timetable for departures from Munich, namely Antalya, Ibiza, Malta and Palermo. In its 2011 summer flight timetable, Lufthansa Passenger Airlines flies to 211 destinations in 84 countries.

Flight prices were adjusted worldwide for the long-haul network on 5 April. With the exception of special offers, Economy fares were increased by between EUR 20 and EUR 40, while Business Class fares went up by between EUR 50 and EUR 100. Customers have also been able to book new, good-value tickets for one-way flights within Germany since 1 April.

Lufthansa was named "Best Transatlantic Airline" at the World Airline Awards 2011 in late June. Lufthansa Passenger Airlines was also voted first place in the categories "Best Business Class in German and European Traffic" and "Best Airline Website for Business Travellers" by the readers of the magazine Business Traveller Deutschland. Lufthansa FlyNet was also picked as "Product of the Year 2011" by the computer magazine Chip.

Lufthansa Passenger Airlines will continue to concentrate on selling its structural increases in capacity in line with market requirements and will also keep pursuing the other measures entailed in its Climb 2011 programme. This initiative is expected to reduce unit costs considerably, especially in European traffic. In the long-haul regions, the crises are expected to ease – at least in Japan – with a positive effect on business. Lufthansa Passenger Airlines therefore still expects to post a year-on-year increase in its revenue and operating result for the full twelve months.

Other Group airlines

	Jan. –June 2011	Jan. – June 2010	Change in %
€m	1,870	1,583	18.1
€m	104	54	92.6
€m	242	157	54.1
thousands	7,774	7,032	10.6
number	7,820	7,609	2.8

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

The first half of 2011 went well for SWISS. The company succeeded in increasing revenue to EUR 1.9bn and raised its operating result to EUR 104m, thereby almost doubling it compared with the previous year. In particular, the second quarter of 2011 was a vast improvement on that of 2010, when business was hit by airspace closures. Thanks to growing demand, especially in the intercontinental sector, the airline was largely able to compensate for the persistently negative trend in fuel prices and currencies. European traffic continues to be impacted by the ongoing pressure on average yields.

Compared with the first six months of 2010, passenger figures rose by over 10 per cent to 7.8 million in the same period of 2011. SWISS extended its capacity by 11.8 per cent. The passenger load factor remained virtually unchanged at 79.3 per cent.

SWISS is expanding its fleet, from 2012 adding five Airbus A330- 300s, three A320s and two A321s. From 2014, it will replace its Avro-RJ regional fleet completely by more environmentally friendly aircraft from the Bombardier C-Series. In total, SWISS is expecting 40 new aircraft over the next few years. Edelweiss Air also developed successfully. It added a second long-haul plane to its fleet in the form of a new Airbus A330-300.

SWISS was voted "Best Airline Western Europe" as part of the Skytrax World Airline Award in June. As of September, it will have a uniform, refurbished Business Class on all long-haul flights. SWISS will also start offering a First Class service on all intercontinental routes.

In 2011, SWISS intends to take on some 500 new employees. It will create around 600 new jobs with its announced further fleet expansion commencing in 2012. In early July, SWISS signed a memorandum of understanding for a new general employment contract with the Airbus pilots' trade union, Aeropers. This is valid for five years.

Given the difficult environment, 2011 remains a challenging year. However, the management team still aims to match last year's good result.

Austrian Airlines

		Jan. –June 2011	Jan. – June 2010	Change in %
Revenue	€m	949	964	–1.6
Operating result	€m	–64	–70	8.6
EBITDA	€m	39	7	457.1
Passengers carried	thousands	5,094	5,001	1.9
Employees as of 30.6.	number	6,898	7,557	–8.7

Further information on Austrian Airlines can be found at www.aua.com.

The operating environment was much more difficult for Austrian Airlines in the first half of 2011 than originally anticipated. The high oil price depressed the airline's result. In addition to this, another two of Austrian Airlines' strategic pillars – the Middle East and Japan – were hit by negative one-off factors. This came after another key region, Central and Eastern Europe, felt the impact of the financial markets crisis.

Despite the above-mentioned negative effects, Austrian Airlines succeeded in nudging up its passenger numbers by 1.9 per cent to a total of approximately 5.1 million in the first six months of 2011. The passenger load factor fell by 3.4 percentage points compared with last year to 70.8 per cent as a 4.2 per cent increase in capacity coincided with a drop of 0.6 per cent in sales.

Revenue also declined in the first half of 2011 by 1.6 per cent to EUR 949m. However, the operating result improved year on year to EUR –64m (EUR +6m).

One of Austrian Airlines' priorities is to constantly improve quality and cater for customers' needs. Its efforts were rewarded with two prizes – "Best Business Class Catering" and "Staff Service Excellence Europe" – at the World Airline Awards in the second quarter. Medium-haul aircraft will be fitted with the new Europa cabin by autumn 2011; in winter 2012/2013, the long-haul fleet's cabins will then be completely renewed.

The company is currently working hard to achieve its earnings target of a positive operating result despite the unfavourable circumstances described above. It is implementing a raft of measures to do this, some of which have been intensified. Alongside flexible adjustments to the flight plan, these include a hiring ban as well as freezing staff costs. The management team expects business on the Tokyo – Vienna route to pick up again in summer. In addition to this, the steps initiated to counteract the crises in the Middle East will take full effect in the third quarter.

British Midland

		Jan. –June 2011	Jan. – June 2010	Change in %
Revenue	€m	396	417	–5.0
Operating result	€m	–120	–93	–29.0
EBITDA	€m	–103	–82	–25.6
Passengers carried	thousands	2,753	2,947	–6.6
Employees as of 30.6.	number	3,851	3,772	2.1

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

The crises in North Africa and the Middle East continued to have a severe impact on the second quarter result posted by British Midland. At EUR 396m, revenue was down 5.0 per cent on last year. The operating result came in at EUR –120m (previous year: EUR –93m).

British Midland consistently upheld its strategy of replacing lossmaking routes on its domestic market with profitable services to neighbouring countries and medium-haul routes, therefore closing its base in Glasgow in the second quarter. In addition to this, the decision was taken to close bmibaby's bases in Manchester and Cardiff when the 2011 winter flight timetable comes into effect. Instead, new services from London Heathrow to Casablanca, Marrakesh, Bergen, Stavanger and Basel will be included in the flight plan. Flights to Tripoli remain suspended throughout the summer flight timetable. It has also been necessary to cancel some flights to Damascus due to the unrest in Syria.

In the UK home market, the new set of fees introduced by the operator of London Heathrow Airport will further drive up expenses for flights in the future. British Midland has filed a complaint against the new regulations with the Civil Aviation Authority.

An additional project has been initiated as part of the strategy process to achieve the airline's goal of medium-term profitability. This aims to sharpen the company's focus and thereby improve its earnings position. A sales and marketing initiative was also launched. However, a negative operating result is still expected for 2011. Alongside negative market conditions, this is due to high anticipated fuel costs based on forecast price trends and British Midland's relatively low level of hedging by Group standards. In the light of the ongoing difficulties in British Midland's key markets, an improvement on last year's operating result looks unlikely at present.

Germanwings

		Jan. –June 2011	Jan. – June 2010	Change in %
Revenue	€m	293	266	10.2
Operating result	€m	–46	–39	–17.9
EBITDA	€m	–26	–27	3.7
Passengers carried	thousands	3,388	3,457	–2.0
Employees as of 30.6.	number	1,276	1,247	2.3

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

Germanwings carried a total of 3.4 million passengers in the first half of 2011 (–2.0 per cent). The company reduced its capacity as planned, due in part to the air traffic tax. This enabled it to improve its load factor to 74.2 per cent (+0.2 percentage points) on last year.

Germanwings posted a significant increase in revenue, which rose by 10.2 per cent on the 2010 figure to EUR 293m. However, the expenses associated with the air traffic tax and the persistently high oil price led to an operating loss of EUR 46m (previous year: EUR –39m).

By contrast, a number of factors boosted revenue, especially the airline's more in-depth cooperation with Lufthansa. Germanwings became a member of Miles & More at the end of 2010. Since January 2011, it has been possible to book Germanwings flights in combination with Lufthansa via global distribution systems. The scope of collaboration in corporate customer business was also extended.

At the same time, Germanwings further improved its in-flight product and boosted revenue as a result. Since the beginning of June, customers travelling in the first ten rows of any aircraft in the fleet can enjoy a larger seat pitch. Passengers can either book this additional leg-room by choosing the "Best Seat" option or as part of the "Best Price" package. The "Best Price" category comprises the larger seat, one item of luggage, a snack and a drink. It is particularly popular with business travellers.

Germanwings ramped up its services to Italy in the summer flight timetable 2011 and now offers flights to Pisa, Naples, Bari, Cagliari (Sardinia) and Catania (Sicily).

The air traffic tax and the high oil price will continue to present challenges for Germanwings throughout the 2011 financial year. Nevertheless, the company expects to improve on last year's operating result.

Logistics business segment

Key figures Logistics

		Jan. –June 2011	Jan. – June 2010	Change in %	April –June 2011	April –June 2010	Change in %
Revenue	€m	1,503	1,283	17.1	761	720	5.7
of which with companies of the Lufthansa Group	€m	13	12	8.3	7	7	0.0
Operating result	€m	133	144	–7.6	69	109	–36.7
Segment result	€m	137	156	–12.2	75	117	–35.9
EBITDA	€m	184	216	–14.8	99	145	–31.7
Segment capital expenditure	€m	35	4		21	3
Employees as of 30.6.	number	4,542	4,422	2.7	4,542	4,422	2.7
Freight and mail	thousand tonnes	953	830	14.8	484	439	10.3
Available cargo tonne-kilometres	millions	6,902	5,765	19.7	3,547	3,033	16.9
Revenue cargo tonne-kilometres	millions	4,768	4,170	14.3	2,424	2,209	9.7
Cargo load factor	%	69.1	72.3	–3.3 pts	68.3	72.8	–4.5 pts

Course of business The first six months of 2011 were dominated by positive developments both within the global airfreight market and at Lufthansa Cargo. Growth rates normalised in the course of the reporting period, however. In the first half of 2011, Lufthansa Cargo's revenue soared to EUR 1.5bn. The operating result was high at EUR 133m, falling just short of last year's record figure.

Segment structure In addition to Lufthansa Cargo AG, the Logistics segment includes Lufthansa Cargo Charter Agency GmbH, the airfreight container specialist Jettainer GmbH and the equity investments in the cargo airlines Jade Cargo International Ltd. and AeroLogic GmbH. Lufthansa Cargo also markets freight capacities on passenger aircraft operated by Lufthansa and Austrian Airlines. Furthermore, Lufthansa Cargo holds equity interests in sales support and handling companies.

Since 1 January 2011 Karl Ulrich Garnadt has been Chairman of the Executive Board and CEO of Lufthansa Cargo AG. Dr Karl-Rudolf Rupprecht was appointed to the Executive Board of Lufthansa Cargo on 1 April 2011. He is responsible for Operations and succeeds Karl-Heinz Köpfle, who has retired after 42 years with the Lufthansa Group. Prior to this appointment, Dr Rupprecht was in charge of the Frankfurt hub management at Lufthansa Passenger Airlines.

Product and route network The first half of 2011 was hallmarked by a significant, structural increase in capacity compared with the first half-year 2010. This additional capacity came mainly from the MD11 cargo aircraft reactivated following the crisis, the 777 freighters delivered to AeroLogic in the course of last year and Austrian Airlines' capacity, which has been integrated since July 2010. Lufthansa Cargo's focus was on the flexible, demand-orientated management of both its capacity and the route network.

The company actively capitalised on growth potential and tapped new markets. A number of new destinations was added, including Shenzhen (China), Lahore (Pakistan), Houston (USA), Kolkata (India) and Dhaka (Bangladesh). This means the company links more than 20 cities in Asia alone with its comprehensive route network.

The company has been named best cargo airline several times in recent months, winning prizes at events including the well-known Cargo Airline of the Year Awards.

Operating performance Traffic developed on a high level in the first half of 2011. The volume transported increased by 14.8 per cent. Tonne-kilometres transported were up 14.3 per cent on last year. In conjunction with a 19.7 per cent rise in capacity, the load factor dropped by 3.3 percentage points to 69.1 per cent (see also the table on p. 17 ).

The volume transported within Europe rose by 13.4 per cent. This volume growth stemmed mainly from shuttle services for the Americas and Asia/Pacific traffic regions.

The largest volume growth of 19.5 per cent was once again seen in the Americas. This development was driven primarily by traffic towards the Americas, South America in particular.

With an increase of 12.5 per cent, volume growth in the Asia/Pacific region was slightly below average. This is attributable to Japan's sluggish recovery following the environmental disasters there and slower growth in export volumes from China. In addition, the load factor was impaired by significant increases in capacity among the competitors, especially in China.

In the Middle East/Africa traffic region, cargo tonnage rose by 11.0 per cent compared with the first half of 2010.

Revenue and earnings development Lufthansa Cargo's revenue rose by 17.1 per cent to EUR 1.5bn in the reporting period. Traffic revenue was chiefly responsible for this growth, up 17.6 per cent on the first half of 2010 at EUR 1.4bn.

Other revenue came to EUR 64m (+8.5 per cent) and consisted largely of income from ad hoc aircraft chartering and freight handling.

Other operating income was 14.3 per cent down on the year at EUR 36m.

Total operating income therefore climbed to EUR 1.5bn overall. That is a rise of 16.2 per cent.

Operating expenses rose by 19.1 per cent to EUR 1.4bn in the period under review.

This increase was largely driven by the higher cost of materials and services, which were up 26.1 per cent at EUR 1.0bn. Fuel expenses rose by EUR 87m to EUR 249m as a result of escalating kerosene prices. Meanwhile, fees and charges climbed by 21.4 per cent to EUR 153m, primarily due to larger volumes. Charter expenses went up by 19.8 per cent to EUR 532m in conjunction with higher costs for belly capacities. MRO expenses also increased because greater use of the fleet prompted more frequent maintenance inspections. They were up 9.1 per cent at EUR 60m.

Staff costs rose by 8.7 per cent compared with last year to EUR 175m as reduced working hours were ended and performancerelated bonuses increased. Pilot capacities were expanded following the reactivation of laid-up aircraft. The segment employed a total of 4,524 people in the first half-year (+2.7 per cent).

Depreciation and amortisation was 25.0 per cent lower than the previous year at EUR 45m. This was due above all to the end of the depreciation period in 2010 for the cargo aircraft purchased in 1998.

Other operating expenses were 8.0 per cent up on the year at EUR 148m. This stems from higher travel expenses, Group services, rental and maintenance expenses, and write-downs on receivables.

Lufthansa Cargo posted an operating result of EUR 133m in the first half of 2011 (previous year: EUR 144m), thus falling just short of the record result generated in 2010.

The subsidiaries accounted for using the equity method contributed earnings of EUR 7m (previous year: EUR 10m). By contrast, the accrued losses at Jade Cargo International Ltd. were realised in connection with an equity investment, meaning the equity result fell to EUR 0m (previous year: EUR 10m). There was nothing notable about the other segment income and expenses, which resulted on balance in net income of EUR 4m (previous year: EUR 2m).

The segment result for the first half was EUR 137m, compared with EUR 156m in the previous year.

Segment capital expenditure soared to EUR 35m (previous year: EUR 4m) and related principally to the above-mentioned equity investment at Jade and investments in operating and office equipment.

Forecast After a good first half, Lufthansa Cargo remains optimistic for the full year 2011. The company expects to see a stable development in demand, which will lead to good sales growth and rising revenue. Lufthansa Cargo remains confident that it can generate a substantially positive operating result in 2011. However, as the record result posted for 2010 was due in large measure to catch-up effects following the global economic crisis, it cannot be expected to reach the figures of last year's levels again.

	Net traffic revenue in €m external revenue*		Freight/mail in thousand tonnes		Available cargo tonne kilometres in millions		Revenue cargo tonne kilometres in millions		Cargo load factor in %
	Jan. –June 2011	Change in %	Jan.–June 2011	Change in %	Jan. –June 2011	Change in %	Jan. –June 2011	Change in %	Jan. –June 2011	Change in pts
Europe	123	30.9	318	13.4	420	17.4	191	14.4	45.5	–1.2
America	533	37.4	290	19.5	2,802	22.0	2,004	17.2	71.5	–3.0
Asia/Pacific	661	5.9	271	12.5	3,037	18.7	2,194	12.1	72.2	–4.3
Middle East/Africa	113	1.8	74	11.0	643	16.3	378	12.5	58.8	–1.9
Total	1,430	17.5	953	14.8	6,902	19.7	4,768	14.3	69.1	–3.2

Trends in traffic regions Lufthansa Cargo

* Excluding extra charter.

MRO business segment

Key figures MRO

		Jan. –June 2011	Jan. –June 2010	Change in %	April –June 2011	April – June 2010	Change in %
Revenue	€m	2,047	1,974	3.7	1,020	975	4.6
of which with companies of the Lufthansa Group	€m	881	802	9.9	436	389	12.1
Operating result	€m	106	145	–26.9	37	74	–50.0
Segment result	€m	131	164	–20.1	53	86	–38.4
EBITDA	€m	201	178	12.9	81	80	1.3
Segment capital expenditure	€m	51	28	82.1	36	13	176.9
Employees as of 30.6.	number	19,584	20,270	–3.4	19,584	20,270	–3.4

Course of business Although global demand for maintenance, repair and overhaul (MRO) services is growing once more in a number of regions, it is recovering at a slower rate than the passenger and cargo business. The Middle East, North Africa and Japan are all important markets for Lufthansa Technik, and the consequences of the political unrest and natural disasters there are prompting revenue to slump and delaying contract negotiations. Cost pressure on airlines, aggressive new players and growing MRO capacities around the world mean that margin pressure in the MRO business has risen further. The volume and structure of additional business reflect this trend.

Despite the challenges posed by the market and the competition, Lufthansa Technik grew its revenue vis-à-vis 2010 in the first half of the year. However, it was unable to match the previous year's very good operating result. Provisions and revenue losses associated with clients from the crisis-hit parts of North Africa had a severe impact on the result. Against this backdrop, Lufthansa Technik is working on a number of projects to further improve its cost base and its competitive position. The company is also preparing to enter into new aircraft models to serve additional markets and customers.

Segment structure The Lufthansa Technik group includes 32 technical maintenance operations around the world, including the main site. Lufthansa Technik holds direct and indirect stakes in 56 companies, of which 23 are in Germany, 15 in other parts of Europe, ten in America, and eight in Asia and Australia. There were no changes in Lufthansa Technik's group of consolidated companies compared with 2010.

Lufthansa Technik is expanding its market presence further with the construction of a new hangar for the maintenance of short and medium-haul aircraft at the future Berlin Brandenburg International Airport.

Lufthansa Technik Philippines, a joint venture between Lufthansa Technik and MacroAsia, is also investing in the construction of a new maintenance and overhaul hangar for wide-bodied aircraft in Manila. It will have room for one long-haul or two medium-haul aircraft and is due to be completed in 2012.

Products Lufthansa Technik is the world market leader in the field of civil aircraft, with a portfolio ranging from the total technical support of whole customer fleets to individual completion programmes for VIP aircraft. It was named "Best MRO Provider in Europe" earlier this year.

As well as installing the new Europa cabin – which entails overhauling 167 aircraft from throughout the Lufthansa short-haul fleet at various sites in Europe – Lufthansa Technik is supporting the product innovations launched by Lufthansa Passenger Airlines, such as the First Class product for the intercontinental fleet and FlyNet.

Intensive preparations are currently under way at Lufthansa Technik to roll out products for new aircraft types, such as the Boeing B787, B747-8i and Airbus A320neo. In the field of completion, several B747-8i VIP refits will be conducted over the coming years. One contract has already been signed; others are in the pipeline. The maintenance division is also preparing for the launch of the Boeing B747-8i at Lufthansa Passenger Airlines next year. The Boeing B787 market launch will also take place very soon when the first aircraft is delivered to the Japanese airline ANA. The segment also plans to start supplying components for the new models this year; negotiations will soon be concluded with potential clients and component manufacturers. On top of all this, the engines division will expand its portfolio to include the new engine used in the Airbus A320neo, which will commence operations in 2015. This means that all of Lufthansa Technik's divisions are very well prepared for the new aircraft models.

Operating performance In the first six months, Lufthansa Technik succeeded in securing almost 200 new contracts with a total volume of EUR 345m for the full year 2011. This meant it expanded its customer base and also serviced more aircraft and engines than in 2010.

Lufthansa Technik was able to close important new contracts, such as a total technical support agreement with Meridiana Fly to maintain and overhaul the entire fleet, a contract with Virgin Atlantic to overhaul the landing gear on its Airbus A340-300 fleet, and an agreement to supply components for the LAN Airlines Bombardier Q400 and Boeing B737 fleets. The company also signed contracts with Thai Airways for cabin modifications and with a VIP client for an Airbus A319 completion project. JetBlue will also have some of its Embraer fleet's engines serviced at the Lufthansa Technik site in Alzey.

A large number of clients have also extended or expanded their contracts, such as bmi. Under this agreement, Lufthansa Technik will overhaul the airline's entire Airbus and Boeing fleet at sites in Ireland, Bulgaria and Malta, and provide bmi with partner services for maintenance at London Heathrow Airport. The company will also service the whole Spanair fleet's landing gear, thrust reversers and auxiliary power units by 2019.

On 29 June, ownership of the second Airbus A340-300 was transferred on schedule to the German Federal Office of Defence Technology. This followed a complete overhaul of the plane by Lufthansa Technik, which also included installing a VIP cabin. The aircraft is due to be delivered to the client following a C check in the second half of 2011.

Revenue and earnings development Lufthansa Technik's revenue from Group companies rose by 9.9 per cent to EUR 881m. This was mainly thanks to more modification programmes, such as the new Europa cabin and the new First Class for Lufthansa Passenger Airlines, along with new engine contracts with various Group companies. At EUR 1.2bn, external revenue was down marginally on the previous year (0.5 per cent). This was because revenue growth in engine and component servicing was eclipsed by slower customer business at a number of subsidiaries and the negative impact of the dollar's performance. Revenue climbed by 3.7 per cent overall and totalled EUR 2.0bn.

Other operating income went up by EUR 17m to EUR 111m, largely due to exchange-rate movements relating to the reporting date.

All in all, the MRO segment reported operating income of EUR 2.2bn (+4.4 per cent).

Operating expenses increased by 6.7 per cent to EUR 2.1bn. This rise was driven in part by higher expenses for materials and external services (+9.0 per cent) for aircraft idle time and engine maintenance in conjunction with revenue growth.

Due to a rise in pension provisions and one-off expenses at several subsidiaries, staff costs edged up by 1.3 per cent to EUR 553m. The average number of employees fell by 721 to 19,710 in the first six months. The workforce was particularly reduced at plants – such as Hawker Pacific, Lufthansa Technik Switzerland or Shannon Aerospace – currently carrying out restructuring programmes to ensure their long-term competitiveness.

Depreciation and amortisation was down 4.3 per cent at EUR 44m. Other operating expenses rose by 10.1 per cent to EUR 403m. This was primarily attributable to the increase in provisions for long-term engine contracts.

In total, Lufthansa Technik posted an operating result of EUR 106m for the first half of 2011, meaning it was unable to match the previous year's very good result (EUR 145m).

At EUR 11m, the result of investments accounted for using the equity method was up slightly on last year (EUR +1m). Thanks to higher other segment income, up EUR 5m to EUR 14m, Lufthansa Technik posted a segment result of EUR 131m (previous year: EUR 164m).

Compared with the previous year (EUR 28m), the segment's capital expenditure soared to EUR 51m. Important items of capital expenditure were the purchase of reserve engines and the procurement of a Pratt & Whitney licence at Lufthansa Technik Aero Alzey. Equity of EUR 3.8m was provided for Lufthansa Technik Milan and the newly established joint venture with Panasonic IDAIR.

Forecast Lufthansa Technik expects to post an increase in revenue and a substantial operating profit for the full year 2011. Even so, the segment will be unable to match last year's result, considering the above-mentioned negative factors in the first half year. However, steps have been taken to ensure that the operating result improves again in the second half of 2011 and in 2012. These include strict cost and efficiency management measures as part of a new programme to safeguard earnings at Lufthansa Technik, the focussed further development of the sites and the simultaneous use of cost synergies.

By rolling out products for new aircraft models and technologies at an early stage, Lufthansa Technik is also in a good position to participate in the further growth of the MRO industry and thereby secure the company's long-term prospects.

IT Services business segment

Key figures IT Services

		Jan. –June 2011	Jan. –June 2010	Change in %	April –June 2011	April – June 2010	Change in %
Revenue	€m	289	291	–0.7	142	148	–4.1
of which with companies of the Lufthansa Group	€m	179	174	2.9	89	90	–1.1
Operating result	€m	6	8	–25.0	3	5	–40.0
Segment result	€m	4	7	–42.9	1	4	–75.0
EBITDA	€m	22	24	–8.3	11	13	–15.4
Segment capital expenditure	€m	16	16	0.0	9	8	12.5
Employees as of 30.6.	number	2,870	2,991	–4.0	2,870	2,991	–4.0

Course of business Although the business climate remained difficult, Lufthansa Systems held its ground in the period under review. Revenue was on a par with last year. However, the first-half result fell somewhat short of the 2010 figure. This was due primarily to higher restructuring costs.

Segment structure Lufthansa Systems offers solutions for all business processes in the airline sector as well as consultancy and IT services for selected industries such as transport and logistics, industry, energy, media and publishing, and the healthcare sector. Lufthansa Systems has several offices in Germany and now also has overseas sites in 16 countries after opening additional offices in London and Dubai.

Products Lufthansa Systems constantly adds innovative new developments to its portfolio. With BoardConnect, Lufthansa Systems presented the world's first wireless in-flight entertainment system at the beginning of this year. In addition to this, the company has launched Lido/iRouteManual, a fully featured solution for navigation charts based on an app for tablet computers. Another innovation is the NetLine/Hub solution, which enables airlines to operate more efficiently at their hubs.

Operating performance A number of new clients chose solutions from Lufthansa Systems in the first half of the year. For instance, Thomas Cook hired the company to operate its Europewide IT infrastructure. Lufthansa Passenger Airlines extended a number of key contracts. Lufthansa Systems also secured a major contract to take over the Malaysia Airlines global data network, thereby strengthening its position in Asia. Condor became the first client to choose BoardConnect. In the field of logistics, Lufthansa Systems ramped up its collaboration with Hamburg Süd, Schenker Deutschland and the Hamburg Port Authority. Volkswagen also commissioned the segment with the introduction of a new company portal.

The Jetzt! programme launched in 2010 continued throughout the reporting period with the aim to realign the company. After five individual companies were merged into Lufthansa Systems AG in March, a settlement of interests and a social redundancy scheme were agreed at the end of June, paving the way to initiate the reorganisation.

Revenue and earnings development Lufthansa Systems generated revenue of EUR 289m in the first half-year (previous year: EUR 291m). The revenue with Lufthansa Group companies rose by EUR 5m to EUR 179m. As a result of portfolio adjustment, revenue with external clients dropped by EUR 7m to EUR 110m. Other operating income shrank to EUR 11m (previous year: EUR 16m). Total operating income therefore decreased by EUR 7m to EUR 300m.

Total operating expenses were down 1.7 per cent at EUR 294m although the cost of materials and services remained stable year on year at EUR 39m. The average monthly headcount declined by 4.2 per cent to 2,875 employees. Accordingly, staff costs dropped to EUR 116m (previous year: EUR 120m). Depreciation was stable year on year at EUR 16m. Other operating expenses amounted to EUR 123m (previous year: EUR 124m).

The operating result for Lufthansa Systems sank to EUR 6m (previous year: EUR 8m). The effects of adjusting the industry portfolio had an adverse effect on the segment result, which fell by EUR 3m to EUR 4m. As in 2010, segment capital expenditure came to EUR 16m.

Forecast Lufthansa Systems will be reorganised in the third quarter of 2011 as part of the Jetzt! programme. The programme aims to give the company a clear, customer-orientated alignment, create a much simpler structure, strengthen sales and reduce the costs involved in cross-divisional functions. These steps will help the segment to generate an operating result which exceeds last year's, despite a slight fall in revenue being anticipated.

IT Services To our shareholders Interim management report | Interim financial statements | Further information

Catering

Catering business segment

Key figures Catering

	Jan. –June 2011	Jan. –June 2010	Change in %	April –June 2011	April –June 2010	Change in %
Revenue	€m 1,089	1,056	3.1	569	563	1.1
of which with companies of the Lufthansa Group	€m 270	257	5.1	144	135	6.7
Operating result	€m 21	13	61.5	19	15	26.7
Segment result	€m 25	20	25.0	21	20	5.0
EBITDA	€m 59	152	–61.2	32	97	–67.0
Segment capital expenditure	€m 30	17	76.5	16	8	100.0
Employees as of 30.6.	number 29,210	28,264	3.3	29,210	28,264	3.3

Course of business In spite of the burdening factors, passenger figures developed positively overall in the first half of 2011. As a result, LSG Sky Chefs was also able to post revenue growth and significantly boost its operating profits for the first-half year on year.

Segment structure The LSG Sky Chefs group consists of 136 companies with approximately 200 sites in 50 countries. The parent company for the group, LSG Lufthansa Service Holding AG, is based in Neu-Isenburg. Compared with the first half of last year, the group of consolidated companies grew by five firms. Since 1 January 2011, Erdmann Rauer serves as Chief Sales Officer on the Executive Board.

Products The lightweight "Quantum" trolley developed by LSG Sky Chefs is gradually being introduced on all long-haul services operated by Lufthansa Passenger Airlines and will enable a reduction in annual fuel consumption of about 9,000 tonnes. LSG Sky Chefs has also started producing and marketing tailor-made meal boxes in Europe, having already successfully introduced them in North America.

Operating performance LSG Sky Chefs attracted a number of new clients in the first half of 2011. In addition to this, the company's contracts with United Airlines, TAM and Germanwings were successfully extended. The joint venture with Nanjing Airport was prolonged until 2026. Since June, LSG Sky Chefs has once again been present at Chicago Airport. In May, the company launched a joint venture with First Catering Schweiz AG. The initiative Upgradeplus is also still progressing successfully. In the second quarter, the pilot phase of the programme to realign production processes was concluded and implementation began at the company's 25 most important strategic sites.

Revenue and earnings development Revenue for the Catering segment continued to develop positively in the first half-year. Compared with the previous year, it rose by 3.1 per cent (adjusted for exchange rates: +5.7 per cent) to EUR 1.1bn. This development is largely attributable to higher passenger numbers.

External revenue amounted to EUR 819m (+2.5 per cent), while internal revenue with Lufthansa Group companies climbed to EUR 270m (+5.1 per cent). Other operating income dropped by EUR 14m to EUR 25m, mainly due to lower exchange rate gains. Total operating income went up by 1.7 per cent to EUR 1.1bn altogether.

Also coming in at EUR 1.1bn, total operating expenses were 1.0 per cent up on the previous year. The cost of materials and services increased by 3.2 per cent to EUR 481m. On average, LSG Sky Chefs employed a workforce of 28,847 in the first six months (+1.9 per cent). Staff costs nevertheless remained unchanged at EUR 395m. Depreciation and amortisation totalled EUR 28m. This was 9.7 per cent less than in the previous year. Other operating expenses remained virtually unchanged at EUR 189m (–0.5 per cent).

LSG Sky Chefs posted an operating profit of EUR 21m for the first six months of 2011. This is EUR 8m higher than last year's figure and reflects both higher income and the successful implementation of cost management projects. At EUR –2m, the balance of other segment income and expenses was lower than the previous year's figure of EUR 1m. However, the result of the equity valuation was stable year-on-year at EUR 6m. The segment result was therefore ultimately EUR 25m (previous year: EUR 20m). Segment capital expenditure was EUR 13m above last year's at EUR 30m. While investments in 2010 were kept to a minimum as part of the activities to safeguard earnings, LSG Sky Chefs has now started investing in expanding its business again.

Forecast As regards passenger numbers, the prospects for the aviation industry in the second half of 2011 are cautiously optimistic. LSG Sky Chefs therefore expects revenue to keep rising in the future and still anticipates a year-on-year improvement in its operating profits for 2011 as a whole.

Other

Other

		Jan. –June 2011	Jan. – June 2010	Change in %
Total operating income	€m	650	705	–7.8
Operating result	€m	0	–129	100.0
Segment result	€m	8	–107
EBITDA	€m	69	275	–74.9
Segment capital expenditure	€m	12	7	71.4
Employees as of 30.6.	number	3,873	3,690	5.0

Structure The segment Other includes the service and financial companies which incorporate the Lufthansa Group's financial and service activities. They include AirPlus, Lufthansa Flight Training and Lufthansa Commercial Holding. The central Group functions of Deutsche Lufthansa AG are also assigned to this segment.

Companies' performance The international business travel markets continued to develop positively in the first half of 2011. As a consequence, AirPlus billed 20 per cent more flights worldwide than in the same period in 2010. Billing revenue was 23 per cent higher than a year ago. Due to lower foreign exchange gains, total income was 19.7 per cent down on last year, coming in at EUR 159m. However, AirPlus grew its operating result by EUR 6m to EUR 18m.

Developments at Lufthansa Flight Training were also pleasing. Simulator training made the largest contribution to this, with higher capacity utilisation than in the previous year. The company also enjoyed higher demand from Lufthansa Passenger Airlines for basic flight attendant training courses. Lufthansa Flight Training raised its revenue contribution to EUR 90m (+13.9 per cent). The operating result came in at EUR 21m (previous year: EUR 16m).

In the first half-year, developments in Group functions continued to be shaped by changes in exchange rates. The net result of exchange rate movements here was positive, as in the first quarter. This enabled the Group functions to improve their contribution towards the operating result – despite a 7.6 per cent fall in total income to EUR 379m – to EUR –46m (previous year: EUR –162m).

Revenue and earnings development The segment Other generated total operating income of EUR 650m in the first half of 2011 (–7.8 per cent). Operating expenses fell by 22.1 per cent – due primarily to exchange rates – and also came in at EUR 650m. This meant the segment broke even in the first half of 2011 (previous year: EUR –129m). The segment result also improved substantially by EUR 115m to EUR 8m.

Risk and opportunities report

Lufthansa is an international aviation company and therefore exposed to macroeconomic, sector-specific and Company risks. These are primarily market and competition risks which affect capacity and load factors. They are flanked by political risks, operational and collective bargaining risks, legal risks and contingencies, procurement risks, IT risks and financial and treasury risks.

However, our permanently updated management systems make it possible to identify both risks and opportunities at an early stage and to act accordingly. For detailed information on the opportunity and risk management system and the Group's risk situation, please see the Annual Report 2010 from p. 132 .

In the first half of 2011 the opportunities and risks for the Group described in detail in the Annual Report 2010 have become more concrete or developed as follows:

The global economic upswing is still being largely sustained by the momentum in the emerging markets. However, further economic developments are surrounded by a great deal of uncertainty. In the Euro area, it also depends on the debt crisis at various member countries being resolved. In the aviation industry, global capacity is exceeding demand again for the first time. Although Lufthansa is in a position to be able to sell most of the capacity that has increased since last year, there is still immense price pressure in the current competitive environment, especially in European traffic.

The political situation in the Arab world remains equally tense, which is also reflected in traffic developments. This particularly affects Austrian Airlines and bmi as a result of their route structures, and they have had to adjust capacities. The disaster situation in Japan is also ongoing. In operational terms, the flight programmes of all companies in the Group have been adjusted in line with the change in demand.

Fuel prices have stabilised at a high level as further global economic developments remain dogged by uncertainty. Thanks to its proven hedging policy, the Lufthansa Group has not yet felt the full effect of these on earnings. However, as the market remains highly competitive, it is unlikely that the additional costs can be recouped in full from customers.

Altogether, however, and even considering the particular macroeconomic situation and all other known issues and circumstances, there are currently no identifiable developments which could endanger the Company's continued existence.

To our shareholders Interim management report | Interim financial statements | Further information

Other Risk and opportunities report Supplementary report Forecast

Supplementary report

Since 1 July 2011 no events of particular importance have occurred that the Lufthansa Group would expect to have a significant influence on its net assets, financial and earnings position.

Forecast

GDP development

	2011*	2012*	2013*	2014*	2015*
in %
World	3.3	4.0	4.0	4.2	4.2
Europe	2.1	2.0	2.1	2.3	2.4
Germany	3.5	2.0	1.8	1.8	1.5
North America	2.5	2.6	2.8	3.3	3.3
South America	4.6	4.6	4.5	4.8	4.4
Asia/Pacific	4.6	6.5	6.0	6.0	6.0
China	9.4	8.5	8.9	8.8	8.5
Middle East	5.7	5.3	4.8	4.8	4.4
Africa	1.9	5.2	5.3	5.3	5.2

Source: Global Insight World Overview as of 15.7.2011. * Forecast.

General economy and sector The global economic recovery will continue in the light of ongoing dynamic developments in the emerging markets. However, considering the dampening factors, expectations regarding the rate of this growth have now been corrected downwards. Growth of 3.3 per cent is now anticipated, as opposed to the 3.7 per cent forecast at the beginning of this year.

The US economy is expected to grow 2.5 per cent on the year – much less than was projected at the beginning of 2011. The Asian markets will also continue to grow strongly at around 4.6 per cent year on year, although this represents a decline on the growth rates previously seen. According to the latest estimates, the Japanese economy will shrink by 0.9 per cent in 2011 due to the impact of the disasters there. Experts expect the Chinese economy to expand by 9.4 per cent in 2011 and the Indian economy by 7.9 per cent. The economy in Europe can be expected to keep growing moderately as the year progresses; GDP is forecast to increase by 2.1 per cent compared with 2010. Based on strong domestic demand twinned with rising employment levels and robust demand from abroad, the growth expectations for the German economy have been raised to 3.5 per cent in the course of recent months.

Further growth will also affect commodity prices. The oil price is expected to remain high, for example. Futures contracts for delivery in December 2011 are currently trading at around USD 112/barrel.

In the remainder of this year, the political unrest in the Middle East and the uncertain situation in Japan will continue to prompt uncertainty and volatility on the aviation market. Furthermore, the potential profits in the airline industry will be threatened by growing overcapacity on the market and substantially higher fuel prices. Against this backdrop, in June IATA once again cut its 2011 profit forecast for the global airline industry, this time from USD 8.6bn to USD 4.0bn. This means the profit projection has been halved since March and is much lower than it was last year, when profits of USD 18bn were generated.

Lufthansa Group For Lufthansa, too, business developments have been marked by sales growth to date, although this was impaired by the negative impact of the above-mentioned crises and the high oil price. These negative factors naturally also have an effect on the full-year result potential.

As the year progresses, we expect to see ongoing positive developments in demand and sales, in which the growth rates in a number of business segments will continue to normalise. At the same time, we expect the climate in the crisis-hit regions – at least in Japan – to recover further, which will have a positive effect on the Group's revenue and earnings position. The Group will continue to face challenges as a result of the high oil price and the ongoing competitive pressure in many markets. However, the Group companies are preparing to face these by adjusting capacity and taking steps to increase efficiency. New cost-cutting projects have been implemented in several business segments, which will bear fruit later in the year. Where necessary, extensive restructuring will also be used.

The business segments will be supported by the tried and tested risk management system and the solid financial profile of the Lufthansa Group.

Based on the improved result posted for the first half of the year and the overall positive outlook for the remainder of 2011, we confirm our prognosis for the current financial year. Even after taking the negative factors from the first six months into account, we continue to anticipate a year-on-year increase in our revenue and operating result.

Consolidated income statement

January – June 2011

in €m	Jan. – June 2011	Jan. – June 2010	April – June 2011	April– June 2010
Traffic revenue	11,597	10,203	6,373	5,627
Other revenue	2,466	2,422	1,251	1,240
Total revenue	14,063	12,625	7,624	6,867
Changes in inventories and work performed by entity and capitalised	24	70	–5	7
Other operating income	1,348	1,466	622	911
Cost of materials and services	–8,353	–7,305	–4,392	–3,843
Staff costs	–3,393	–3,193	–1,700	–1,636
Depreciation, amortisation and impairment	–836	–798	–419	–395
Other operating expenses	–2,689	–2,931	–1,391	–1,634
Profit / loss from operating activities	164	–66	339	277
Result of equity investments accounted for using the equity method	–18	–4	9	10
Result of other equity investments	35	26	22	18
Interest income	96	107	52	57
Interest expenses	–249	–254	–121	–126
Other financial items	–309	108	80	65
Financial result	–445	–17	42	24
Profit / loss before income taxes	–281	–83	381	301
Income taxes	82	–15	–77	–103
Profit / loss after income taxes	–199	–98	304	198
Profit/loss attributable to minority interests	–7	–6	–3	–4
Net profit / loss attributable to shareholders of Deutsche Lufthansa AG	–206	–104	301	194
Basic earnings per share in €	–0.45	–0.23	0.66	0.42
Diluted earnings per share in €	–0.45	–0.23	0.66	0.42

Statement of comprehensive income

Statement of comprehensive income

January – June 2011

in €m	Jan.– June 2011	Jan. – June 2010	April– June 2011	April – June 2010
Profit / loss after income taxes	–199	–98	304	198
Other comprehensive income
Differences from currency translation	36	210	136	113
Subsequent measurement of available-for-sale financial assets	–65	362	30	–153
Subsequent measurement of cash flow hedges	–13	655	–535	292
Other comprehensive income from investments accounted for using the equity method	2	–6	0	2
Other expenses and income recognised directly in equity	–6	24	0	7
Income taxes on items in other comprehensive income	25	–174	112	–79
Other comprehensive income after income taxes	–21	1,071	–257	182
Total comprehensive income	–220	973	47	380
Comprehensive income attributable to minority interests	–1	–13	–3	–10
Comprehensive income attributable to shareholders of Deutsche Lufthansa AG	–221	960	44	370

Consolidated balance sheet

as of 30 June 2011

Assets
in €m	30.6.2011	31.12.2010	30.6.2010
Intangible assets with an indefinite useful life*	1,580	1,582	1,581
Other intangible assets	338	329	334
Aircraft and reserve engines	11,771	11,153	10,790
Repairable spare parts for aircraft	853	877	866
Property, plant and other equipment	2,070	2,120	2,161
Investment property	–	–	3
Investments accounted for using the equity method	348	385	356
Other equity investments	1,052	1,128	1,008
Non-current securities	131	250	248
Loans and receivables	605	620	418
Derivative financial instruments	188	350	769
Deferred charges and prepaid expenses	23	26	29
Effective income tax receivables	62	61	71
Deferred claims for income tax rebates	67	82	28
Non-current assets	19,088	18,963	18,662
Inventories	625	662	665
Trade receivables and other receivables	4,221	3,401	4,084
Derivative financial instruments	615	484	402
Deferred charges and prepaid expenses	169	146	174
Effective income tax receivables	82	98	107
Securities	3,400	4,283	3,942
Cash and cash equivalents	1,232	1,097	1,424
Assets held for sale	85	186	72
Current assets	10,429	10,357	10,870

Total assets	29,517	29,320	29,532

* Including goodwill.

To our shareholders | Interim management report Interim financial statements | Further information

Shareholders' equity and liabilities

in €m	30.6.2011	31.12.2010	30.6.2010
Issued capital	1,172	1,172	1,172
Capital reserve	1,366	1,366	1,366
Retained earnings	3,800	2,944	2,955
Other neutral reserves	1,614	1,629	1,665
Net profit/loss	–206	1,131	–104
Equity attributable to shareholders of Deutsche Lufthansa AG	7,746	8,242	7,054
Minority interests	88	98	108
Shareholders' equity	7,834	8,340	7,162
Pension provisions	2,492	2,571	2,563
Other provisions	578	643	623
Borrowings	5,268	6,227	6,440
Other financial liabilities	112	110	95
Advance payments received, deferred income and other non-financial liabilities	1,129	1,087	1,047
Derivative financial instruments	324	111	24
Deferred income tax liabilities	225	405	796
Non-current provisions and liabilities	10,128	11,154	11,588
Other provisions	931	881	1,025
Borrowings	870	957	826
Trade payables and other financial liabilities	4,662	4,193	4,548
Liabilities from unused flight documents	3,651	2,389	3,110
Advance payments received, deferred income and other non-financial liabilities	1,118	1,066	1,041
Derivative financial instruments	224	103	50
Effective income tax obligations	99	237	182
Current provisions and liabilities	11,555	9,826	10,782
Total shareholders' equity and liabilities	29,517	29,320	29,532

Consolidated statement of changes in shareholders' equity

as of 30 June 2011

in €m	Issued capital	Capital reserve	Fair value measure ment of financial instru ments	Currency differ ences	Reva luation reserve (due to business combi nations)	Other neutral reserves	Total other neutral reserves	Retained earnings	Net pro fit/loss	Equity attrib utable to share holders of Deutsche Lufthansa AG	Minority interests	Total share holders' equity
As of 31.12.2009	1,172	1,366	118	–70	193	333	574	3,094	–112	6,094	108	6,202
Changes in accounting policies	–	–	44	–	–	–	44	–122	78	–	–	–
Adjusted as of 31.12.2009	1,172	1,366	162	–70	193	333	618	2,972	–34	6,094	108	6,202
Capital increases/reductions	–	–	–	–	–	–	–	–	–	–	–	–
Reclassifications	–	–	–	–	–	–2	–2	–34	34	–2	2	–
Dividends to Lufthansa shareholders /minority interests	–	–	–	–	–	–	–	–	–	–	–13	–13
Net profit/loss attributable to share holders of Deutsche Lufthansa AG/ attributable to minority interests	–	–	–	–	–	–	–	–	–104	–104	6	–98
Other expenses and income recognised directly in equity	–	–	843	210	–	–4	1,049	17	–	1,066	5	1,071
As of 30.6.2010	1,172	1,366	1,005	140	193	327	1,665	2,955	–104	7,054	108	7,162
As of 31.12.2010	1,172	1,366	856	241	193	339	1,629	2,944	1,131	8,242	98	8,340
Capital increases/reductions	–	–	–	–	–	–	–	–	–	–	–	–
Reclassifications	–	–	–	–	–	–	–	856	–856	–	–	–
Dividends to Lufthansa shareholders /minority interests	–	–	–	–	–	–	–	–	–275	–275	–11	–286
Net profit/loss attributable to share holders of Deutsche Lufthansa AG/ attributable to minority interests	–	–	–	–	–	–	–	–	–206	–206	7	–199
Other expenses and income recognised directly in equity	–	–	–53	36	–	2	–15	–	–	–15	–6	–21
As of 30.6.2011	1,172	1,366	803	277	193	341	1,614	3,800	–206	7,746	88	7,834

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

Consolidated cash flow statement

January – June 2011

in €m	Jan. – June 2011	Jan. – June 2010	April – June 2011	April – June 2010
Cash and cash equivalents 1.1. 1)	1,097	1,136	1,210	1,203
Net profit/loss before income taxes	–281	–83	381	301
Depreciation, amortisation and impairment losses on non-current assets (net of reversals)	854	772	421	398
Depreciation and impairment losses on repairable spare parts for aircraft (net of reversals)	–2	–15	–12	–20
Net proceeds from disposal of non-current assets	–34	–184	–21	–180
Result of equity investments	–17	–22	–31	–28
Net interest	153	147	69	69
Income tax payments /reimbursements	–172	–37	–36	–28
Measurement of financial derivatives through profit and loss	288	–122	–83	–77
Change in working capital 2)	951	964	273	421
Cash flow from operating activities	1,740	1,420	961	856
Capital expenditure for property, plant and equipment and intangible assets	–1,359	–940	–685	–416
Capital expenditure for financial investments	–58	–24	–	–18
Increase/decrease in repairable spare parts for aircraft	18	–18	20	8
Proceeds from disposal of non-consolidated equity investments	1	109	–	107
Proceeds from disposal of consolidated equity investments	–	–	–	–
Cash outflows for acquisitions of non-consolidated equity investments	–20	–8	–8	–6
Cash outflows for acquisitions of consolidated equity investments	–	–2	–	–
Proceeds from disposal of intangible assets, property, plant and equipment and other financial investments	287	261	95	99
Interest income	195	167	77	64
Dividends received	53	37	39	30
Net cash from/used in investing activities	–883	–418	–462	–132
Purchase of securities /fund investments	–636	–889	–134	–743
Disposal of securities /fund investments	1,298	194	511	–
Net cash from/used in investing and cash management activities	–221	–1,113	–85	–875
Capital increase	–	–	–	–
Non-current borrowing	113	396	38	380
Repayment of non-current borrowing	–954	–318	–555	–127
Other financial debt	8	20	1	–1
Dividends paid	–286	–13	–278	–
Interest paid	–269	–148	–86	–38
Net cash from/used in financing activities	–1,388	–63	–880	214
Net increase/decrease in cash and cash equivalents	131	244	–4	195
Changes due to currency translation differences	4	44	26	26
Cash and cash equivalents 30.6.	1,232	1,424	1,232	1,424
Securities	3,400	3,942	3,400	3,942
Total liquidity	4,632	5,366	4,632	5,366
Net increase/decrease in total liquidity	–748	927	–534	952

1) Presented for the individual quarter, cash and cash equivalents as of 1 April.

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

Notes

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

The consolidated financial statements of Deutsche Lufthansa AG and its subsidiaries have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), taking account of interpretations by the IFRS Interpretations Committee (IFRIC) as applicable in the European Union (EU). This interim report as of 30 June 2011 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 2011 have been applied. The standards and interpretations mandatory for the first time as of 1 January 2011 did not have a significant effect on the Group's net assets, financial and earnings position. The changes to the group of consolidated companies also had no significant influence on the Group's net assets, financial and earnings position.

Changes in the group of consolidated companies in the period 1.7.2010 to 30.6.2011

Name, registered office	Additions	Disposals	Reason
Passenger Airline Group segment
Global Brand Management AG, Basel, Switzerland	15.11.10		Established
Jour Leasing Co., Ltd., Tokyo, Japan	16.7.10		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 2, Salzburg, Austria	6.7.10		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 3, Salzburg, Austria	6.7.10		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 4, Salzburg, Austria	6.7.10		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 5, Salzburg, Austria	6.7.10		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 6, Salzburg, Austria	6.7.10		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 7, Salzburg, Austria	6.7.10		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 8, Salzburg, Austria	6.7.10		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 9, Salzburg, Austria	6.7.10		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 10, Salzburg, Austria	6.7.10		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 11, Salzburg, Austria	24.3.11		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 12, Salzburg, Austria	24.3.11		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 14, Salzburg, Austria	24.3.11		Established
GOAL Verwaltungsgesellschaft mbH & Co. Projekt Nr. 5 KG, Grünwald, Germany		31.12.10	Liquidation
Lufthansa Leasing GmbH & Co. Fox-Bravo oHG, Grünwald, Germany		15.7.10	Liquidation
Lufthansa Leasing GmbH & Co. Fox-Charlie oHG, Grünwald, Germany		15.7.10	Liquidation
Lufthansa Leasing GmbH & Co. Fox-Quebec oHG, Grünwald, Germany		1.1.11	Abandonment of a business purpose
Lufthansa Leasing GmbH & Co. Fox-Romeo oHG, Grünwald, Germany		1.1.11	Abandonment of a business purpose
Lufthansa Leasing GmbH & Co. Fox-Sierra oHG, Grünwald, Germany		1.1.11	Abandonment of a business purpose
Lufthansa Leasing GmbH & Co. Fox-Tango oHG, Grünwald, Germany		1.1.11	Abandonment of a business purpose
Lufthansa Leasing GmbH & Co. Fox-Uniform oHG, Grünwald, Germany		1.1.11	Abandonment of a business purpose
Lufthansa Leasing GmbH & Co. Fox-Victor oHG, Grünwald, Germany		1.1.11	Abandonment of a business purpose
Lufthansa Leasing GmbH & Co. Fox-Yankee oHG, Grünwald, Germany		1.1.11	Abandonment of a business purpose
Lufthansa Leasing GmbH & Co. Golf-Lima oHG, Grünwald, Germany		1.1.11	Abandonment of a business purpose
Lufthansa Leasing GmbH & Co. Golf-Mike oHG, Grünwald, Germany		1.1.11	Abandonment of a business purpose
Segment IT Services
Lufthansa Systems Aeronautics GmbH, Raunheim, Germany		24.3.11	Merger
Lufthansa Systems Airline Services GmbH, Kelsterbach, Germany		24.3.11	Merger
Lufthansa Systems Berlin GmbH, Berlin, Germany		24.3.11	Merger
Lufthansa Systems Infratec GmbH Kelsterbach, Germany		24.3.11	Merger
Lufthansa Systems Passenger Services GmbH, Kelsterbach, Germany		24.3.11	Merger

Changes in the group of consolidated companies in the period 1.7.2010 to 30.6.2011

Name, registered office	Additions	Disposals	Reason
Segment Catering
Charm Food Service Co. Ltd., Incheon, South Korea	1.1.11		Established
LSG Sky Chefs – First Catering Schweiz AG, Basserdorf, Switzerland	24.5.11		Established
LSG Sky Chefs Argentina S.A., Buenos Aires, Argentina	1.6.11		Consolidated for the first time
Oakfield Farms Solutions Europe Ltd., Feltham, Great Britain	1.4.11		Consolidated for the first time
Starfood Antalya Gida Sanayi ve Ticaret A.S., Istanbul, Turkey	10.8.10		Established

Assets held for sale

in €m	Group 30.6.2011	Financial statements 31.12.2010	Group 30.6.2010
Assets
Aircraft and reserve engines	73	184	72
Financial assets	9	2	–
Other assets	3	–	–
Equity / liabilities associated with assets held for sale
Shareholders' equity	–	–	–
Liabilities	–	–	–

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 p. 3 – 23 .

3) Seasonality

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

4) Contingencies and events after the balance sheet date

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 208m for subsequent years. As of the year-end 2010 reporting date the figure came to EUR 210m.

Contracts signed at the end of 2010 for the sale of four Canadair Regional Jet 200s resulted in profits in the first half of 2011 of EUR 2m and cash inflows of EUR 11m. Signed contracts for the sale of four Canadair Regional Jet 200s and two ATR 42-500s are expected to give rise to cash inflows of EUR 14m by the end of 2011 and EUR 3m by the end of 2012. At the end of June 2011, there were order commitments of EUR 6.2bn for capital expenditure on property, plant and equipment and intangible assets. As of 31 December 2010, the order commitments came to EUR 6.8bn.

Contingent liabilities

in €m	30.6.2011	31.12.2010
From guarantees, bills of exchange and cheque guarantees	829	883
From warranty contracts	951	960
From providing collateral for third-party liabilities	37	14

We refer to the comments on p. 23 of the management report for events after the balance sheet date.

5) Earnings per share

		30.6.2011	30.6.2010
Basic earnings per share	€	–0.45	–0.23
Consolidated net profit/loss	€m	–206	–104
Weighted average number of shares		457,937,567	457,937,572
Diluted earnings per share	€	–0.45	–0.23
Consolidated net profit/loss	€m	–206	–104
+ interest expenses on the convertible bonds	€m	0	0
– current and deferred taxes	€m	0	0
Adjusted net profit/loss for the period	€m	–206	–104
Weighted average number of shares		458,273,971	458,273,976

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 3 May 2011 the distributable profit of EUR 275m shown in the financial statements for Deutsche Lufthansa AG for 2010 was paid out as dividends. This corresponds to a dividend of EUR 0.60 per share for the financial year 2010.

Notes

7) Segment reporting

Segment information by operating segment January – June 2011

in €m	Passenger Airline Group	Logistics	MRO	IT Services	Catering	Total reportable operating segments	Other	Reconciliation	Group
External revenue	10,478	1,490	1,166	110	819	14,063	–	–	14,063
of which traffic revenue	9,949	1,431	–	–	–	11,380	–	217	11,597
Inter-segment revenue	373	13	881	179	270	1,716	–	–1,716
Total revenue	10,851	1,503	2,047	289	1,089	15,779	–	–1,716	14,063
Other operating income	639	36	111	11	25	822	650	–348	1,124
Total operating income	11,490	1,539	2,158	300	1,114	16,601	650	–2,064	15,187
Operating expenses	11,729	1,406	2,052	294	1,093	16,574	650	–2,040	15,184
of which cost of materials and services	7,292	1,038	1,052	39	481	9,902	44	–1,593	8,353
of which staff costs	2,002	175	553	116	395	3,241	138	–7	3,372
of which depreciation and amortisation	670	45	44	16	28	803	22	4	829
of which other operating expenses	1,765	148	403	123	189	2,628	446	–444	2,630
Operating result 1)	–239	133	106	6	21	27	0	–24	3
Other segment income	67	5	14	0*	0*	86	27	135	248
Other segment expenses	41	1	0*	2	2	46	19	22	87
of which impairment losses	17	0*	–	–	0*	17	–	–	17
Result of investments accounted for using the equity method	–35	0*	11	–	6	–18	0*	–	–18
Segment result 2)	–248	137	131	4	25	49	8	89	146
Other financial result									–427
Profit/loss before income taxes									–281
Segment assets 3)	15,874	802	2,944	227	1,202	21,049	1,727	6,741	29,517
of which from investments accounted for using the equity method	78	40	156	0	68	342	6	–	348
Segment liabilities 4)	11,083	453	1,263	196	461	13,456	1,584	6,643	21,683
Segment capital expenditure 5)	1,250	35	51	16	30	1,382	12	43	1,437
of which on investments accounted for using the
equity method	–	8	1	–	–	9	0*	–	9
Employees on balance sheet date	58,687	4,542	19,584	2,870	29,210	114,893	3,873	–	118,766

* Rounded below EUR 1m.

1) See page 7 of the interim management report for reconciliation between operating result and profit from operating activities.

2) Profit from operating activities including result of investments shown at equity.

3) Intangible assets, property, plant and equipment, investments accounted for using the equity method, inventories, trade receivables

and other assets constitute assets. Under the heading "Group" all assets are shown.

4) All liabilities with the exception of financial debt, liabilities to Group companies, derivative financial instruments,

other deferred income and tax obligations. Under the heading "Group" all liabilities are shown.

5) Capital expenditure for intangible assets, property, plant and equipment, and investments accounted for using the equity method.

Segment information by operating segment January – June 2010

in €m	Passenger Airline Group	Logistics	MRO	IT Services	Catering	Total reportable operating segments	Other	Reconciliation	Group
External revenue	9,266	1,271	1,172	117	799	12,625	–	–	12,625
of which traffic revenue	8,742	1,217	–	–	–	9,959	–	244	10,203
Inter-segment revenue	301	12	802	174	257	1,546	–	–1,546
Total revenue	9,567	1,283	1,974	291	1,056	14,171	–	–1,546	12,625
Other operating income	663	42	94	16	39	854	705	–347	1,212
Total operating income	10,230	1,325	2,068	307	1,095	15,025	705	–1,893	13,837
Operating expenses	10,572	1,181	1,923	299	1,082	15,057	834	–1,883	14,008
of which cost of materials and services	6,361	823	965	39	466	8,654	46	–1,395	7,305
of which staff costs	1,844	161	546	120	395	3,066	131	–2	3,195
of which depreciation and amortisation	611	60	46	16	31	764	21	6	791
of which other operating expenses	1,756	137	366	124	190	2,573	636	–492	2,717
Operating result 1)	–342	144	145	8	13	–32	–129	–10	–171
Other segment income	75	2	9	0*	2	88	25	211	324
Other segment expenses	11	0*	0*	1	1	13	3	203	219
of which impairment losses	7	–	–	–	0*	7	–	–	7
Result of investments accounted for using the equity method	–30	10	10	–	6	–4	0*	–	–4
Segment result 2)	–308	156	164	7	20	39	–107	–2	–70
Other financial result									–13
Profit/loss before income taxes									–83
Segment assets 3)	14,753	842	3,033	264	1,287	20,179	1,668	7,685	29,532
of which from investments accounted for using the equity method	91	37	157	0	66	351	5		356
Segment liabilities 4)	10,511	470	1,283	202	505	12,971	1,470	7,929	22,370
Segment capital expenditure 5)	891	4	28	16	17	956	7	11	974
of which on investments accounted for using the equity method	–	–	–	–	–	–	–	–	–
Employees on balance sheet date	57,207	4,422	20,270	2,991	28,264	113,154	3,690	–	116,844

* Rounded below EUR 1m.

1) See page 7 of the interim management report for reconciliation between operating result and profit from operating activities.

2) Profit from operating activities including result of investments shown at equity.

3) Intangible assets, property, plant and equipment, investments accounted for using the equity method, inventories, trade receivables

and other assets constitute assets. Under the heading "Group" all assets are shown.

4) All liabilities with the exception of financial debt, liabilities to Group companies, derivative financial instruments,

other deferred income and tax obligations. Under the heading "Group" all liabilities are shown.

5) Capital expenditure for intangible assets, property, plant and equipment, and investments accounted for using the equity method.

Figures by region January – June 2011

Other operating revenue	1,147	417	571	490	43	431	162	112	2,466
Traffic revenue*	7,691	3,194	1,556	1,360	258	1,555	320	217	11,597
in €m		Germany	America	U.S.A.	and South America
	Europe	thereof	North	thereof	Central	Asia/Pacific	Middle East	Africa	Total

* Traffic revenue is allocated according to the original location of sale.

Figures by region January – June 2010

in €m	Europe	thereof Germany	North America	thereof U.S.A.	Central and South America	Asia/Pacific	Middle East	Africa	Total
Traffic revenue*	6,595	2,623	1,392	1,215	256	1,452	316	192	10,203
Other operating revenue	1,109	351	476	422	79	474	159	125	2,422
Total revenue	7,704	2,974	1,868	1,637	335	1,926	475	317	12,625

* Traffic revenue is allocated according to the original location of sale.

8) Related party disclosures

As stated in Note 48 to the consolidated financial statements for 2010 beginning on p. 208 , the operating segments in the Lufthansa Group render numerous services to related parties within the scope of their ordinary business activities and also receive services from them. These extensive supply and service relationships take place unchanged on the basis of market prices. There have been no significant changes in comparison with the balance sheet date. The contractual relationships with the group of related parties described in Note 49 starting on p. 210 of the 2010 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.

Executive Board, 27 July 2011

Christoph Franz Chairman of the Executive Board and CEO

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

Carsten Spohr Member of the Executive Board Chief Officer Lufthansa German Airlines

Review report Key fi gures Lufthansa Group

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 2011 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. Revenue and result Total revenue €m 14,063 12,625 11.4 7,624 6,867 11.0 of which traffi c revenue €m 11,597 10,203 13.7 6,373 5,627 13.3 Operating result €m 3 – 171 230 159 44.7 EBIT €m – 128 64 450 370 21.6 EBITDA €m 739 876 – 15.6 880 777 13.3 Net profi t / loss for the period €m – 206 – 104 – 98.1 301 194 55.2 Key balance sheet and cash fl ow statement fi gures Net indebtedness €m 1,427 1,754 – 18.6 – – – Cash fl ow from operating activities €m 1,740 1,420 22.5 961 856 12.3 Capital expenditure (gross) €m 1,437 974 47.5 693 440 57.5 Key profi tability and value creation fi gures Adjusted operating margin 1) % 0.4 – 1.0 1.4 pts 3.5 2.7 0.8 pts EBITDA margin % 5.3 6.9 – 1.6 pts 11.5 11.3 0.2 pts Lufthansa share

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 Earnings per share € – 0.45 – 0.23 – 95.7 0.66 0.42 57.1 Traffi c fi gures Passengers thousands 50,234 45,627 10.1 28,147 24,983 12.7 Passenger load factor % 75.4 77.3 – 1.9 pts 78.0 79.3 – 1.3 pts Freight and mail thousand Cargo load factor % 66.6 68.9 – 2.3 pts 65.9 69.1 – 3.2 pts Available tonne-kilometres millions 20,624 18,558 11.1 10,812 9,719 11.2 Revenue tonne-kilometres millions 14,752 13,666 7.9 7,863 7,290 7.9 Overall load factor % 71.5 73.6 – 2.1 pts 72.7 75.0 – 2.3 pts Flights number 557,760 526,934 5.9 291,299 271,997 7.1 Employees

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. Total assets €m 29,517 29,532 – 0.1 – – – Equity ratio % 26.5 24.3 2.2 pts – – –

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. Share price at the quarter-end € 15.03 11.39 32.0 – – –

Düsseldorf, 28 July 2011

PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft tonnes 1,070 939 13.9 542 493 9.8

Frank Hübner Dr. Bernd Roese Wirtschaftsprüfer Wirtschaftsprüfer (German Public Auditor) (German Public Auditor)

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) Claudio Rizzo Christian Schmidt

Deutsche Lufthansa AG, Investor Relations

Concept, design and realisation

HGB Hamburger Geschäftsberichte GmbH & Co. KG, Hamburg, Germany

Translation by

EnglishBusiness GbR, Hamburg, Germany

Printed by

Broermann Druck + Medien GmbH, Troisdorf, Germany Printed on Circlesilk Premium White (100 per cent recycled paper bearing the EU Ecolabel, registration number FR/011/003)

Printed in Germany ISSN 1616-0258

Contact

Frank Hülsmann

Head of Investor Relations + 49 69 696 – 28001

Johannes Hildenbrock + 49 69 696 – 28003

Gregor Schleussner + 49 69 696 – 28012

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

The Lufthansa 2nd Interim Report is a translation of the original German Lufthansa Zwischenbericht 2/2011. Please note that only the German version is legally binding.

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

The latest fi nancial information on the internet: www.lufthansa.com/investor-relations

Financial calendar

2011

27 Oct.	Press Conference and Analysts' Conference on interim result January – September 2011
	2012
15 March	Press Conference and Analysts' Conference on 2011 results
3 May	Release of Interim Report January – March 2012
8 May	Annual General Meeting in Cologne
2 Aug.	Release of Interim Report January – June 2012
31 Oct.	Press Conference and Analysts' Conference on interim result January – September 2012

Disclaimer in respect of forward-looking statements

Information published in the 2nd Interim Report 2011, with regard to the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of defi nitive historical facts. Its purpose is exclusively informational identifi ed by the use of such cautionary terms as "believe", "expect", "forecast", "intend", "project", "plan", "estimate" or "intend". These forward-looking statements are based on all discernible information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication.

Since forward-looking statements are by their nature subject to uncertainties and imponderable risk factors – such as changes in underlying economic conditions – and rest on assumptions that may not or divergently occur, it is possible that the Group's actual results and development may differ materially from those implied by the forecasts. 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.

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