Deutsche Lufthansa AG — Interim / Quarterly Report 2011

May 12, 2011

Vision

Lufthansa Group overview

Key fi gures Lufthansa Group

		Jan. – March 2011	Jan. – March 2010	Change in %
Revenue and result
Total revenue	€m	6,439	5,758	11.8
of which traffi c revenue	€m	5,224	4,576	14.2
Operating result	€m	– 227	– 330	31.2
EBIT	€m	– 578	– 306	– 88.9
EBITDA	€m	– 141	99
Net profi t / loss for the period	€m	– 507	– 298	– 70.1
Key balance sheet and cash fl ow statement fi gures
Total assets	€m	30,005	27,982	7.2
Equity ratio	%	26.9	24.2	2.7 pts
Net indebtedness	€m	1,424	2,277	– 37.5
Cash fl ow from operating activities	€m	779	564	38.1
Capital expenditure (gross)	€m	744	534	39.3
Key profi tability and value creation fi gures
Adjusted operating margin 1)	%	– 3.3	– 5.4	2.1 pts
EBITDA margin	%	– 2.2	1.7	– 3.9 pts
Lufthansa share
Share price at the quarter-end	€	14.96	12.28	21.8
Earnings per share	€	– 1.11	– 0.65	– 70.8
Traffi c fi gures
Passengers	thousands	22,078	20,644	6.9
Passenger load factor	%	72.5	75.1	– 2.6 pts
Freight and mail	thousand tonnes	528	446	18.5
Cargo load factor	%	67.3	68.8	– 1.5 pts
Available tonne-kilometres	millions	9,825	8,839	11.2
Revenue tonne-kilometres	millions	6,890	6,376	8.1
Overall load factor	%	70.1	72.1	– 2.0 pts
Flights	number	266,433	254,937	4.5
Employees
Employees as of 31.3.	number	117,325	117,732	– 0.3

1) Performance indicator to enable comparison with other airlines: (operating result + write-backs of provisions) / revenue. Date of publication: 5 May 2011.

Contents

• 1 To our shareholders
• 35 Further information
• 3 Interim management report
• 36 Credits/Contact
• 24 Interim fi nancial statements
• Financial calendar 2011/2012

Ladies and gentlemen,

Even though the recovery in air traffic underway since 2010 is cause for great pleasure, the first quarter of the 2011 financial year also required our full attention right from the start. Demand in the air transport market is still developing well, but its momentum was repeatedly interrupted in the first three months of the year by negative factors. The political unrest in North Africa and the Middle East meant that flights to some cities in the countries affected were suspended temporarily and others remain off limits to this day. We also had to restrict our services to Tokyo as a result of the earthquake off the coast of Japan and the ensuing catastrophes. Thanks to our operating flexibility we were nevertheless able to offer a stable flight plan to Japan throughout.

In the face of these events and the further rising oil price, the Lufthansa Group reported an operating result of EUR –227m in the traditionally weak first quarter. This represents an improvement of one third compared with last year's result, which was also affected by exceptional factors.

The Passenger Airline Group business segment in particular was distinctly affected by these adversities in the first quarter. The operating result of the segment was down on last year, although the situation varied from one airline to another. Whereas Lufthansa Passenger Airlines, SWISS and Austrian Airlines were able to improve their results slightly year on year, one-off expenses meant that British Midland and Germanwings were not. The programmes to improve earnings are continuing unabated in all companies. At the same time we are taking strategic steps to develop the airline group. Cooperation between Lufthansa Passenger Airlines and Germanwings has become much closer since the first quarter, for instance.

Our Logistics business segment was able to maintain its momentum from 2010 in the new year, nearly doubling its operating profit in the first quarter. Lufthansa Cargo is benefiting both from the strategic decisions taken in recent years and the ongoing positive trend in freight traffic. Technik is a late-cycle player and was able to match last year's result, defending its leading position in the highly competitive MRO market. The operating result for the IT Services segment, which is currently undergoing restructuring, also reached with the figure for last year. The Catering segment performed well, already reporting a profit for the first quarter of 2011.

These results show that the Lufthansa Group is well prepared for responding to crises at short notice. We nevertheless have a long flight path ahead of us before we reach our targets. We are also equipped to deal with turbulence on the way and have the staff and management to reach our desired destination safely. In the long term we will be assisted by the order for 35 new fuel-saving passenger and cargo aircraft that the Supervisory Board approved in March.

Ladies and gentlemen, the Lufthansa Group's course remains set on profitable growth. For the full year 2011 we confirm our expectation of an increased operating profit. We intend to follow this course sustainably and to keep working assiduously on the quality and worth of our services and products. With hard work, persistence and the right blend of tradition and bold change we will get there, too.

We thank you for your trust.

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

Lufthansa share

The DAX closed at the end of the first quarter of 2011 at 7,041 points, marking an increase of 1.8 per cent during the first three months of the year. As on other exchanges worldwide, the generally positive share performance was dimmed by the natural disaster and atomic catastrophe in Japan and unrest in the Arab world.

In combination with the strongly rising oil price, airline shares in particular came under substantial pressure. In this environment the Lufthansa share shed 8.6 per cent from the start of the year to trade at EUR 14.96 as of 31 March 2011. Competitors' shares reacted even more severely, however: the share price of Air France-KLM contracted by 13.8 per cent and International Airlines Group (the holding company for British Airways and Iberia) lost 21.5 per cent since it began trading on 24 January 2011.

Despite this difficult climate, Lufthansa's performance continues to receive positive reviews from analysts. The Lufthansa share is overwhelmingly recommended as a buy, partly because of the Group's financially solid and operationally healthy performance and partly due to the improved outlook compared with last year. At the end of the first quarter, the average target price from the analysts was EUR 18.68.

As of 31 March 2011, 72.8 per cent of Lufthansa shares were held by German investors. Institutional investors held 64.1 per cent and private individuals 35.9 per cent of share capital. The American investor BlackRock Inc. was again the largest single shareholder with a stake of 5.08 per cent. According to notification dated 27 April 2011 Janus Capital Management LLC reduced its shareholding to 2.94 per cent. The free float is 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 %	Q1	Q2	Q3	Q4	Full year
World	3.4	3.1	3.5	4.0	3.5
Europe	2.4	1.9	1.8	1.9	2.0
Germany	4.4	2.7	2.4	2.5	3.0
North America	2.5	2.7	3.0	3.2	2.8
South America	3.9	4.2	5.0	5.0	4.5
Asia/Pacific	4.9	4.0	5.0	6.2	5.0
China	10.1	9.4	9.0	9.0	9.3
Middle East	5.4	5.6	5.8	5.8	6.0
Africa	2.8	2.5	2.7	3.1	2.9

Source: Global Insight World Overview as of 15.4.2011.

* Forecast.

Macroeconomic situation Current economic data suggests that the global economy expanded strongly at the beginning of 2011. The pace of growth nevertheless still varies widely from one region to another (see table). The emerging markets in Latin America and Asia and the developing economies of Eastern Europe are driving the positive trend. Some emerging economies have already regained or exceeded their pre-crisis levels.

By contrast, the more developed markets are exhibiting moderate and differing growth. Whereas some countries, such as Germany, saw strong expansion in the first quarter, the upturn in other countries was rather hesitant. The positive global trend is bolstered by an expansionary monetary policy in some states, such as the USA. Overall, global economic growth of 3.4 per cent is forecast for the first quarter of 2011.

The positive performance was marred by the terrible earthquake and tsunami in Japan on 11 March 2011. These also led to serious problems in several reactors of the Fukushima nuclear power plant. All this comes at a time when not only Japan is in a critical economic situation. Given that Japan accounts for around 9 per cent of global gross domestic product and due to production processes based on the division of labour, effects on the entire global economy are to be expected.

The strong worldwide economic growth to date, but also the unrest in several Arab states, caused oil prices to climb further to USD 118.70/bbl by the end of the quarter. The jet crack (price difference between crude oil and kerosene) and therefore the price for kerosene rose significantly over the first quarter of 2011 against the backdrop of the global events (see table).

In terms of expenses the Lufthansa Group benefited in the first quarter from a fall in the US dollar of 5.6 per cent against the euro, although it was still an average of 1 per cent higher than a year ago. The income column showed a similar picture. The Japanese yen, British pound sterling and Chinese renminbi all fell against the euro in the first quarter of 2011. Their average values were all still higher than last year, however.

Development of crude oil, kerosene and currency

		Minimum	Maximum	Average	31.3. 2011
ICE Brent	in USD/bbl	93.30	118.70	105.70	118.70
Kerosene	in USD/t	840.50	1 073.80	968.90	1 073.80
USD	1 EUR/USD	1.2907	1.4226	1.3688	1.4158
JPY	1 EUR/ JPY	107.12	117.69	112.59	117.69
GBP	1 EUR/GBP	0.8302	0.8833	0.8541	0.8833
CHF	1 EUR/CHF	1.2471	1.3186	1.2876	1.3012

Sector developments Growth in global passenger and freight traffic continued at the start of 2011. In January the air transport sector registered an upturn in demand, with an 8 per cent increase in international passenger numbers and 9 per cent higher freight volumes. This was well above the growth rate at the end of 2010.

However, the political unrest in the Middle East and North Africa caused a sharp fall in this growth rate in February. According to IATA calculations global passenger demand in February rose by 6 per cent and freight volumes by just 2 per cent compared with 2010, which was also a year characterised by strong catch-up effects. The ongoing political conflicts and the events in Japan, a country which accounts for 6.5 per cent of global traffic flows, continued weighing on international air transport results in March too.

From a geographical perspective the industry's worldwide recovery continues to take very different forms: whereas strong sales growth of over 11 per cent continued in Latin America and the Middle East over the first two months, growth in Asia at 5 per cent lost a great deal of momentum. European and North American airlines reported comparatively strong growth by contrast, with sales rising by 7 or 8 per cent.

Demand in the premium segment also continued to rise worldwide on the back of an upturn in global trade, growing by 8 per cent in the first two months of 2011 according to current IATA estimates. This means it is 20 per cent above the low point of mid-2009.

In March the European Commission allocated emission rights for the airline industry in the years ahead as part of the emission trading system. In 2012 emission certificates for a total of 213 million tonnes of CO2 are to be issued to aircraft operators arriving at or departing from European airports. From 2013 certificates are to be issued for less than 209 million tonnes of CO2 .

Course of business

Overview The first quarter of 2011 was again eventful for the Lufthansa Group and its business segments. The familiar challenges, like climbing oil prices, were compounded by political unrest in North Africa and the Middle East and finally by the series of catastrophes in Japan. Depending on the company, this meant that the positive underlying demand trend effective since last year was sometimes severely disrupted.

Under these conditions the Lufthansa Group increased revenue in the first quarter of 2011 and improved earnings compared with the previous year. The Passenger Airline Group was able to keep growing. However, it could not quite match last year in terms of its operating result. Business continued to go well at the Logistics segment, which reported very satisfying improvements in revenue and earnings. MRO and IT Services put in a stable performance, with earnings contributions similar to last year. The Catering segment improved its results and began the year 2011 with an operating profit.

Short-term steps in response to higher costs remain a priority in all business segments, as do ongoing structural measures to improve competitiveness.

Significant events The first quarter of 2011 was marked especially by the political turmoil in North Africa and the Middle East. The tense security situation meant that flights to some cities in the countries affected were temporarily suspended. Also the natural disasters in Japan in mid-March and the ensuing serious nuclear incident had an adverse impact on the traffic figures and the result for the Lufthansa Group.

On 1 January 2011 an air traffic tax was introduced in Germany. The tax is levied on flights leaving Germany and depends on the distance flown. A flight of up to 2,500 km is charged at EUR 8, a flight of up to 6,000 km pays EUR 25, and long-haul flights above 6,000 km cost EUR 45. International transfers and cargo flights are exempt from the tax. The air traffic tax has resulted in higher prices for air travel from Germany since the beginning of the year. The expectation is therefore that passengers, especially from border regions, will increasingly choose to fly from airports abroad.

The Supervisory Board of the Lufthansa Group approved orders for 35 new aircraft in March. They are made up of 30 aircraft from the Airbus A320neo family for the Passenger Airline Group and five Boeing 777 freighters for deployment in the Logistics segment. The passenger planes are to be delivered from 2016 and the freighters from as early as 2013.

Staff and management The first quarter saw significant changes in the make-up of the Executive Board and the executive boards of some of the business segments. On 1 January 2011 Christoph Franz took over the position of Chairman of the Executive Board and CEO of the Lufthansa Group from Wolfgang Mayrhuber. Carsten Spohr, the former CEO of Lufthansa Cargo AG, was appointed to succeed him as the CEO of Lufthansa German Airlines. The other new appointments to the executive boards of the segments are discussed in the relevant chapters.

Lufthansa and the trade union Unabhängige Flugbegleiter Organisation (UFO) agreed on a wage settlement on 19 January 2011 by accepting the recommendation of arbitration. The arbitration settlement includes rules on extending the wage agreement and revising the framework agreement, both of which apply to around 16,000 Lufthansa flight attendants. The wage settlement was extended unchanged until 31 December 2011. The new framework agreement runs until 28 February 2014. The agreements also include further improvements in working conditions.

At the end of the quarter the Lufthansa Group had a total of 117,325 employees, around 0.3 per cent down on last 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 31 March 2010 respectively 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 quarter 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 .

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

Course of business Earnings position

Earnings position

Revenue and income Traffic figures for the Lufthansa Group swelled considerably in the first quarter of 2011 compared with the same period last year. The following performance figures include the traffic figures of Germanwings for the first time, although this does not have a significant effect on overall development. Last year's figures have been adjusted to facilitate comparison. In the first quarter of 2011 the companies in the Lufthansa Group increased the number of passengers transported to 22.1 million (+6.9 per cent) and the volume of freight and mail to a total of 528 thousand tonnes (+18.5 per cent). The individual performance data for the separate segments is presented in the respective chapters.

Traffic figures of the Lufthansa Group's airlines

		Jan. –March 2011	Jan. –March 2010	Change in %
Passengers carried	thousands	22,078	20,644	6.9
Available seat-kilometres	millions	60,326	54,531	10.6
Revenue seat-kilometres	millions	43,726	40,939	6.8
Passenger load factor	%	72.5	75.1	–2.6 pts
Freight/mail	thousand tonnes	528	446	18.5
Available cargo tonne-kilometres	millions	4,012	3,475	15.5
Revenue cargo tonne-kilometres	millions	2,702	2,390	13.1
Cargo load factor	%	67.3	68.8	–1.5 pts
Total available tonne-kilometres	millions	9,825	8,839	+11.2
Total revenue tonne-kilometres	millions	6,890	6,376	+8.1
Overall load factor	%	70.1	72.1	–2.0 pts
Flights	number	266,433	254,937	+4.5

The increased traffic figures led to growth of 14.2 per cent in traffic revenue to EUR 5.2bn in the first quarter. Volumes accounted for 7.7 per cent of the additional income and higher prices for 3.9 per cent. Foreign exchange effects added another 2.6 per cent to income. The Passenger Airline Group accounted for EUR 4.4bn (+12.3 per cent) of traffic revenue and the Logistics segment for EUR 704m (+32.6 per cent).

Other revenue was up year on year at EUR 1.2bn (+2.8 per cent). Of this, the MRO segment generated EUR 582m (–0.7 per cent), IT Services EUR 57m (–3.4 per cent) and Catering EUR 394m (+6.2 per cent). The airborne companies in the Passenger Airline Group and Logistics segments contributed EUR 182m (+9.6 per cent) to other revenue.

External revenue share of the business segments in % (as of 31.3.2011)

Group revenue therefore climbed year on year by 11.8 per cent to EUR 6.4bn. The graph on p. 6 shows revenue for the last five years. The Passenger Airline Group's share of total revenue dropped slightly to 72.5 per cent (–0.2 percentage points). The distribution of revenue by segments and regions is shown in the segment reporting on p. 33 – 35 .

Other operating income rose by 30.8 per cent to EUR 726m, largely due to higher exchange rate gains (EUR +126m). They are offset by corresponding exchange rate losses in other operating expenses. The disposal of non-current assets gave rise to higher book gains of EUR 17m (EUR +12m). EUR 12m of these were realised on the disposal of commercial space that had previously been used under a finance lease. Other income related to refunds 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 818m or 12.8 per cent to EUR 7.2bn.

Expenses Operating expenses rose overall by EUR 650m (+9.7 per cent) to EUR 7.4bn. This increase is largely attributable to the 14.4 per cent rise in the cost of materials and services to EUR 4.0bn. This stemmed from the EUR 297m (+27.8 per cent) climb in fuel costs to EUR 1.4bn. In addition to the 17.6 per cent increase in fuel prices (after hedging), volumes also contributed 9.4 per cent to expenses. The US dollar exchange rate, on the other hand, only had a minor influence on fuel costs (+0.8 per cent). Fuel expenses include a positive result from price hedging of EUR 177m. Other raw materials, consumables and supplies were up by 3.9 per cent to EUR 658m.

Expenses

	Jan. –March 2011	Jan. –March 2010	Change
	in €m	in €m	in %
Cost of materials and services	3,961	3,462	14.4
of which fuel	1,366	1,069	27.8
of which fees and charges	1,201	1,031	16.5
of which operating lease	49	64	–23.4
Staff costs	1,693	1,557	8.7
Depreciation	417	403	3.5
Other operating expenses	1,298	1,297	0.1
Total operating expenses	7,369	6,719	9.7

Fees and charges rose by 16.5 per cent, primarily due to greater traffic. Driving forces here were increases in air traffic control charges (+14.1 per cent), take-off and landing fees (+12.9 per cent) and passenger fees (+16.8 per cent). The air traffic tax recently introduced accounted for expenses of EUR 69m.

Other purchased services were roughly unchanged year on year at EUR 736m (+1.0 per cent).

Staff costs rose by 8.7 per cent against a 0.3 per cent drop in the average annual number of employees to 117,325. The rise stems principally from higher costs for variable performance-related pay, currency-related cost increases 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 to EUR 417m (+3.5 per cent). Depreciation of aircraft, mainly due to new purchases from last year and this year, accounted for EUR 19m (+6.0 per cent) of the increase. Of total impairment losses of EUR 8m, EUR 7m related to two Boeing B737-500s and eight Canadair Regional Jet 200s, which have been decommissioned or are held for disposal.

Other operating expenses remained stable year on year at a total of EUR 1.3bn (+  0.1 per cent). Lower exchange rate losses (EUR –100m) were partly offset by higher advertising and sales promotion expenses (EUR +12m) and expenses for computerised distribution systems (EUR +11m). The individual other items did not vary significantly compared with last year.

Earnings development The result from operating activities improved by EUR 168m to EUR –175m.

The operating result is regularly adjusted for the items shown in the table on p. 7 and came to EUR –227m in the first quarter (previous year: EUR –330m). As a result, the adjusted operating margin went up by 2.1 percentage points to –3.3 per cent. This is calculated as operating result plus write-backs of provisions divided by revenue.

The result from equity investments fell in the reporting period to EUR –14m (previous year: EUR –6m), largely due to SN Airholding and Jade Cargo (see comments on Passenger Airline Group and Logistics). Net interest declined by EUR 6m to EUR –84m.

The result from miscellaneous financial items slumped by EUR 432m to EUR –389m. This was triggered in particular by changes in the time values of options used for hedging (primarily fuel hedges) amounting to EUR – 292m (previous year: EUR – 18m), which since 1 January 2010 have to be recognised in the financial result according to IAS 39. These expenses must be viewed in connection with the sharp increase in the intrinsic values of hedging transactions (EUR +435m), however, which are recognised in equity without effect on profit and loss. Changes in the value of hedging instruments deemed as trading under the definition of IAS 39 gave rise to further expenses of EUR 79m (previous year: income of EUR 65m).

Earnings position Cash flow and capital expenditure

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

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 –578m (previous year: EUR –306m).

Earnings before taxes (EBT) fell by EUR 278m to EUR –662m at the end of the first quarter. As the pre-tax result was negative, income taxes improved the result by EUR 159m.

After deducting minority interests (EUR 4m), the Group posted a net loss for the period of EUR –507m. This was EUR 209m down on the previous year's figure of EUR –298m. Earnings per share were therefore EUR – 1.11 (previous year: EUR – 0.65). Adjusted for the effect on earnings of the changes in the fair value of options mentioned above, earnings per share would have improved to EUR – 0.59 (previous year adjusted: EUR – 0.61).

Cash flow and capital expenditure

In the first three months of 2011, the Lufthansa Group generated cash flow from operating activities of EUR 779m (previous year: EUR 564m). As earnings before income taxes were down by EUR 278m, this is due partly to the positive change in working capital (EUR +135m), which results largely from the higher volume of business. Furthermore, the loss before income taxes includes non-cash expenses of EUR 371m from changes in the market value of financial derivatives (previous year: income of EUR 45m), which have no effect on cash flow from operating activities. Adjusting for non-cash depreciation and amortisation resulted in an increase of EUR 64m in cash flow, whereas income tax payments reduced the figure by EUR 127m compared with last year.

Reconciliation of results

		Jan.– March 2011	Jan. – March 2010
in €m	Income statement	Reconciliation with operating result	Income statement	Reconciliation with operating result
Total revenue	6,439		5,758
Changes in inventories	29		63
Other operating income	726		555
of which book gains and current financial investments		–32		–17
of which income from reversal of provisions		–16		–19
of which write-ups on capital assets		–2		–32
of which period-end valuation of non-current financial liabilities		–85
Total operating income	7,194	–135	6,376	–68
Cost of materials and services	–3,961		–3,462
Staff costs	–1,693		–1,557
of which past service cost		27		–1
Depreciation, amortisation and impairment	–417		–403
of which impairment losses		8		13
Other operating expenses	–1,298		–1,297
of which impairment losses on assets held for sale – non-operating		2		0*
of which expenses incurred from book losses and current financial investments		12		2
of which period-end valuation of non-current financial liabilities		34		67
Total operating expenses	–7,369	83	–6,719	81
Profit / loss from operating activities	–175		–343
Total from reconciliation with operating result		–52		13
Operating result		–227		–330
Result from equity investments	–14		–6
Other financial items	–389		43
EBIT	–578		–306
Write-downs (included in profit from operating activities)	417		403
Write-downs on financial investments, securities and assets held for sale	20		2
EBITDA	–141		99

* Rounded below EUR 1m.

Primary investments

Gross capital expenditure came to EUR 744m, of which EUR 606m was for a total of 20 aircraft (two Airbus A380s, two A330s, four A321s, two A320s, one Boeing B737, two Bombardier CRJ 900s, two Embraer 195s and one ATR 700) as well as for aircraft overhauls and down payments. An additional EUR 48m was invested in other property, plant and equipment. Intangible assets accounted for EUR 20m of the remaining capital expenditure. Financial investments of EUR 70m related mainly to loans. The funding requirement was partly covered by interest and dividend income (EUR 132m in total) and proceeds of EUR 192m from the disposal of assets – in particular aircraft and non-current securities. Cash proceeds of EUR 285m were generated by the disposal and acquisition of current securities and funds. Net cash totalling EUR 136m was therefore used for the Group's investing and cash management activities (previous year: EUR 238m).

Free cash flow, defined as cash flow from operating activities less net capital expenditure, came to EUR 358m and was therefore EUR 80m higher than last year.

The balance for financing activities was a net cash outflow of EUR 508m. A minor amount of new fundraising (EUR 75m) was outweighed in particular by regular debt repayments of EUR 399m and interest payments of EUR 183m.

Cash and cash equivalents rose in aggregate by EUR 113m to EUR 1.2bn. This includes a decline of EUR 22m due to exchange rate movements.

The internal financing ratio was 104.7 per cent (previous year: 105.6 per cent). Overall, cash including securities at the end of the first quarter rose to EUR 5.2bn (previous year: EUR 4.4bn). The detailed cash flow statement can be found on p. 29 .

Assets and financial position

The consolidated balance sheet total amounted to EUR 30.0bn as of 31 March 2011, or EUR 685m more than at year-end 2010. Non-current assets fell by EUR 239m, while current assets grew by EUR 924m.

Within non-current assets, the item aircraft and reserve engines increased by EUR 176m to EUR 11.3bn due to additions.

The decline of EUR 95m in other equity investments is largely due to the changes in the market value of the shares in Amadeus IT Holding S.A. (EUR –74m) and in JetBlue (EUR –24m). Derivative financial instruments fell by a total of EUR 71m, principally due to interest-rate and currency hedges, offset by an increase in fuel hedges. Non-current securities declined by EUR 119m due in large part to the disposal of a borrower's note loan.

Within current assets the item receivables increased by EUR 839m for seasonal and billing reasons and due to the greater volume of business. Current financial derivatives also rose by EUR 295m largely from fuel hedging. Cash and cash equivalents – consisting of current securities, bank balances and cash-in-hand – went down by a total of EUR 214m to EUR 5.2bn. Non-current assets as a proportion of total assets declined from 64.7 per cent at year-end 2010 to their current level of 62.4 per cent.

Shareholders' equity (including minority interests) was reduced by EUR 275m (–3.3 per cent) to EUR 8.1bn as of the reporting date. This decline stems primarily from the negative after-tax result of EUR 503m, partly offset by positive net changes of EUR 340m in the market values of financial assets. EUR 435m of these resulted from higher intrinsic values of financial derivatives used to hedge fuel price, exchange rate and interest rate risks. These amounts are recognised in equity without effect on profit and loss, whereas expenses of EUR –292m from declines in time values are recognised in the financial result in line with IAS 39. Negative currency translation differences reduced equity by EUR 100m. The equity ratio came down to 26.9 per cent (year-end 2010: 28.4 per cent).

Non-current liabilities and provisions fell by EUR 666m to EUR 10.5bn, while current borrowing went up by EUR 1.6bn. Under non-current liabilities, financial borrowing decreased by EUR 738m, largely due to maturities, while the negative market values of derivative financial instruments (principally from currency and interest rate hedging) went up by EUR 119m. Pension provisions increased by EUR 43m to EUR 2.6bn.

Within current liabilities financial borrowing rose by EUR 224m. This increase due to maturities was offset in the reporting period by capital repayments. In addition, trade liabilities and other financial liabilities climbed sharply (EUR + 481m) as did liabilities from unused flight documents (EUR +917m). This is due to seasonal and billing reasons and above all to the greater volume of business.

As of 31 March 2011, net indebtedness (including non-current liquidity reserves of EUR 110m) went down further to EUR 1.4bn. At year-end 2010 the figure had still been at EUR 1.6bn. Gearing including pension provisions was virtually unchanged at 50.1 per cent (year-end 2010: 50.0 per cent) and was still in the middle of the target range of 40 to 60 per cent.

Calculation of net indebtedness and gearing

	Jan. –March 2011 in €m	31. Dec. 2010 in €m	Change Jan.–March 2010 in %
Liabilities to banks	1,596	1,925	–17.1
Bonds	2,168	2,177	–0.4
Other non-current borrowing	2,906	3,082	–5.7
	6,670	7,184	–7.2
Other bank borrowing	30	23	30.4
Group indebtedness	6,700	7,207	–7.0
Cash and cash equivalents	1,210	1,097	10.3
Securities	3,956	4,283	–7.6
Non-current securities (liquidity reserve)*	110	231	–52.4
Net indebtedness	1,424	1,596	–10.8
Pension provisions	2,614	2,571	1.7
Net indebtedness and pensions	4,038	4,167	–3.1
Gearing in %	50.1	50.0	0.1 pts

* Realisable at any time.

Group fleet – Number of commercial aircraft and fleet orders

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 31.3.2011

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 31.3.10
Airbus A300	0									0			–	–5
Airbus A310	23)									2			–	–1
Airbus A319	30	7	7	11	30					85	4	21	–	+4
Airbus A320	46	24	8	7						85	10	5	+1	+3
Airbus A321	48	7	6	7						68	5	5	+4	+5
Airbus A330	15	17		2						34		6	–	+2
Airbus A340	51	13	22)							66	2	2	–	–1
Airbus A380	6									6			+2	+6
Boeing 737	63		11	13						87	2	11	–1	–2
Boeing 747	30									30			–	–
Boeing 767			6							6		2	–	–
Boeing 777			4							4			–	–
Boeing MD-11F									18	18			–	–1
Bombardier CRJ	261)		3			37		8		74		8	–3	–16
Bombardier C-Series										0			–	–
Bombardier Q-Series			18							18			–1	–1
ATR	51)						7	3		15		7	–1	–9
Avro RJ		20				15				35		16	–1	–3
BAe 146										0			–	–5
Embraer	261)	43)	33)	19						52	3	9	+3	+10
Fokker F70			9							9	1		–	–
Fokker F100			15							15			–	–
Cessna Citation	42)									4			–	–
Total aircraft	352	92	92	59	30	52	7	11	18	713	27	92	3	–14

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 of which Lufthansa

					Passenger Airlines 3)
		Jan.–March 2011	Jan. –March 2010	Change in %	Jan. –March 2011	Change in %
Revenue	€m	4,849	4,323	12.2	3,304	15.1
of which with companies of the Lufthansa Group	€m	179	139	28.8
Operating result	€m	–391	–373	–4.8	–234	0.8
Segment result	€m	–431	–381	–13.1
EBITDA1)	€m	–10	–137	92.7	44
Segment capital expenditure	€m	628	484	29.8
Employees as of 31.3.	number	57,880	57,551	0.6	38,375	3.7
Passengers 2)	thousands	22,078	20,644	6.9	13,777	12.5
Available seat-kilometres 2)	millions	60,326	54,531	10.6	41,410	13.5
Revenue seat kilometres 2)	millions	43,726	40,939	6.8	30,049	9.5
Passenger load factor 2)	%	72.5	75.1	–2.6	72.6	–2.7

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 The Passenger Airline Group business segment profited from the still positive macroeconomic development in the first quarter of 2011 and increased sales year on year. This was offset by the critical situation in Japan, the unrest in North Africa and the hard winter at the beginning of the year – as well as the further leap in fuel prices. The operating result for the Passenger Airline Group thus sank in the first quarter to EUR –391m, despite revenue growth.

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. Essential synergies are realised by means of collaboration within this airline group. Its declared goal is to make the airline group the leading alliance of European airlines.

Operating performance In the first quarter the traffic figures for Germanwings were consolidated in the Passenger Airline Group 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.

The number of passengers in the reporting period rose by 6.9 per cent in total to 22.1 million. Available seat kilometres increased by 10.6 per cent, mainly as a result of the ongoing fleet rollover and the additional capacity provided by larger aircraft. By contrast, the number of flights only rose by some 4.5 per cent compared with the same period a year ago. As sales climbed less steeply at 6.8 per cent, the passenger load factor shrank by 2.6 percentage points. Average yields rose by 5.1 per cent and traffic revenue grew by 12.3 per cent.

At the same time, all traffic regions reported dwindling load factors, particularly as a result of poor traffic performance in March (see table on p. 11 ).

In the Europe traffic region the installation of new seats in the short-haul fleet made a major contribution to capacity growth. Average yields were on last year's level (–0.1 per cent), whereas traffic revenue was up 8.2 per cent.

The Americas region recorded the highest sales growth of all traffic regions at 9.3 per cent. Good progress was made in average yields (+ 7.3 per cent) and traffic revenue (+17.3 per cent) too.

Sales were increased in Asia/Pacific, despite the catastrophes in Japan. Compared with the other regions it also reported the largest growth in average yields and traffic revenue, with rates of 13.4 per cent and 18.1 per cent respectively.

The additional capacity in the Middle East/Africa region could not be sold. However, this traffic region also registered improvements in average yields (+5.1 per cent) and traffic revenue (+11.1 per cent).

Progress continues on expanding the scope of cooperation within the airline group. Since January 2011 it has been possible to combine flights from Lufthansa and Germanwings. In early February Germanwings was also integrated as an airline partner in the Lufthansa corporate programmes. This enables corporate customers to benefit from a wider choice of flights and from the other advantages of the corporate programmes. Miles & More welcomed its 20 millionth member in February. It is Europe's largest frequent flyer programme.

Revenue and earnings development Increased traffic meant that the segment's traffic revenue climbed year on year to EUR 4.4bn (+12.3 per cent). Higher sales volumes accounted for 6.8 per cent of the increase, with higher prices contributing 2.9 per cent and positive exchange rate effects a further 2.6 per cent.

In total, revenue grew to EUR 4.8bn (+12.2 per cent).

Other operating income was up by 19.7 per cent to EUR 352m, partly due to refunds of air traffic control charges paid in prior years and compensation payments received for the delayed delivery of Airbus A380 aircraft.

Total operating revenue went up 12.6 per cent to EUR 5.2bn.

Operating expenses grew by 12.1 per cent compared with a year ago to EUR 5.6bn. The main reason was the sharp rise in the cost of materials and services to EUR 3.4bn (+14.6 per cent), of which the main driver was a 25.5 per cent increase in fuel costs to EUR 1.2bn.

Fees and charges climbed by a total of 15.4 per cent to EUR 1.1bn, largely as a result of increased traffic and the first-time levy of the air traffic tax (EUR 69m). Alongside higher air traffic control charges (+13.2 per cent), this included above all passenger fees (+16.8 per cent) and take-off and landing fees (+12.9 per cent).

	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.–March 2011	Change in %	Jan.–March 2011	Change in %	Jan.–March 2011	Change in %	Jan.–March 2011	Change in %	Jan.–March 2011	Change in pts
Europe	2,012	8.2	17,430	7.5	20,670	10.0	13,213	8.3	63.9	–1.0
America	1,010	17.3	1,822	8.8	17,647	13.8	13,715	9.3	77.7	–3.2
Asia/Pacific	876	18.1	1,411	4.9	13,574	8.8	10,887	4.1	80.2	–3.6
Middle East/Africa	474	11.1	1,212	2.5	7,607	11.6	5,252	5.7	69.0	–3.9
Total scheduled services	4,372	12.4	21,875	7.2	59,498	11.0	43,067	7.2	72.4	–2.5
Charter	39	–3.4	203	–11.3	829	–10.9	659	–14.6	79.5	–3.4
Total	4,411	12.3	22,078	6.9	60,326	10.6	43,726	6.8	72.5	–2.6

Trends in traffic regions Passenger Airline Group

Staff costs were up 10.3 per cent at EUR 984m, whereas the number of employees rose only slightly to 57,880 (+0.6 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 329m mainly due to new aircraft deliveries this year and last year.

Other operating expenses rose by 5.6 per cent to EUR 855m, principally driven by higher expenses for computerised distribution systems, credit card commissions and indirect staff costs.

The operating result for the first quarter of EUR –391m was 4.8 per cent below that for the same period last year (EUR –373m). Comments on the earnings contributions from the individual airlines can be found on the following pages.

Other segment income was unchanged at EUR 30m and was attributable above all to book gains on the disposal of aircraft (EUR 16m) and income from higher write-backs of provisions (EUR 12m).

Other segment expenses came to EUR 38m (previous year: EUR 13m). Past service costs in connection with additional funding obligations towards pension funds accounted for EUR 27m. A further EUR 7m related to impairment losses on two Boeing B737-500s and eight Bombardier CRJ 200s, which have been decommissioned or are held for disposal. The result of the equity valuation of EUR –32m (previous year: EUR –25m) was largely due to SN Airholding (EUR –22m) and SunExpress (EUR –12m). The segment result fell by EUR 50m to EUR –431m.

Segment capital expenditure increased to EUR 628m, 29.8 per cent above last year's figure. In the first quarter the segment invested in two Airbus A380s, two A330s, four A321s, two A320s, one Boeing B737, two Bombardier CRJ 900s, two Embraer 195s and one ATR 700.

Forecast Revenue growth in the Passenger Airline Group has not yet delivered the expected effects on earnings. The reasons for this are the crises in North Africa and Japan mentioned earlier and the leap in the oil price. Depending on the company, these effects dampened or outweighed the positive underlying trend in demand.

The assumption is that demand will remain subject to fluctuations, especially in the crisis areas. The oil price will also continue to depress results. All the companies in the Passenger Airline Group are therefore continuing their restructuring measures and programmes to safeguard earnings and are preparing for new challenges, if necessary by means of short-term adjustments. All in all, for the full year the expectation is still to increase revenue and operating result compared with last year.

Lufthansa Passenger Airlines

The course of business at Lufthansa Passenger Airlines, too, was increasingly marred by the developments in the crisis regions in the first quarter of 2011. The ongoing steps taken as part of the Climb 2011 programme to safeguard earnings, however, had the opposite effect (see the Annual Report 2010 on p. 85 for a full description). The continued fleet rollover and new seats in the Europa cabin led to a further reduction of unit costs in highly competitive European traffic. The capacity expansion this brought about was largely translated into sales. Fuel surcharges were increased in January and March in response to higher fuel prices.

Altogether, Lufthansa Passenger Airlines carried 13.8 million passengers in the first three months of the year, which represents year-on-year growth of 12.5 per cent. Capacity was extended by 13.5 per cent and the number of flights by 7.3 per cent. Sales rose by just 9.5 per cent, causing the passenger load factor to go down to 72.6 per cent (–2.7 percentage points).

Thanks to positive overall developments in average yields (+5.0 per cent), traffic revenue also went up to EUR 3.0bn (+14.9 per cent). Revenue climbed by a comparable margin (+15.1 per cent) to EUR 3.3bn.

Key cost items went up at the same time. This particularly affected fuel, fees and charges (including the air traffic tax), which meant that more than EUR 300m in additional expenses were borne in the first quarter of 2011. Lufthansa Passenger Airlines was therefore only able to improve its operating result slightly compared with last year to EUR –234m (EUR +2m).

As of 1 January 2011 Carsten Spohr took over the post of CEO Lufthansa German Airlines. The organisational structure of Lufthansa Passenger Airlines was also adjusted as of 1 April 2011 to meet new market demands (see Annual Report 2010 on p. 87 for details).

In its 2011 summer flight timetable Lufthansa Passenger Airlines flies to 211 destinations in 84 countries. In addition to the new A380 routes to New York and San Francisco, the airline is to offer Miami as the sixth A380 destination from 10 June. Furthermore, it can offer daily A380 services to Beijing from 10 April thanks to extended air traffic rights. Since 4 May the Lufthansa fleet includes seven A380s.

With effect from 5 April Lufthansa Passenger Airlines raised its prices for long-haul flights. With the exception of special offers, Economy fares were raised by between EUR 20 and EUR 40 and Business Class fares by between EUR 50 and EUR 100, for both outbound and return legs.

Since 1 April Lufthansa has offered particularly attractive oneway prices on inner-German routes. For a total price starting at EUR 59 per flight segment, passengers can benefit from the lowest Lufthansa fare for one-way flights on 41 routes in Germany.

As last year, Lufthansa Passenger Airlines was again voted into top places 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, the in-flight internet system for long-haul flights, was selected "Product of the Year 2011" by the computer magazine Chip in March.

Lufthansa Passenger Airlines will continue their Climb 2011 initiative as planned. The measures taken will improve the unit cost structure sustainably. This is already visible in the trend over recent months. At the same time, the aim is to respond effectively to the current challenges in terms of both costs and revenue. In the first quarter of 2011 this was only partially achieved; while the operating result improved slightly, it still remained below expectations. For the full year 2011 Lufthansa Passenger Airlines is still aiming to improve revenue and the operating result compared with last year.

Other Group airlines

	Jan. –March 2011	Jan. –March 2010	Change in %
€m	871	746	16.8
€m	17	1
€m	84	56	50.0
thousands	3,590	3,403	5.5
number	7,696	7,519	2.4

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

Business at SWISS is also exposed to substantial challenges. The persistently strong Swiss franc, high raw materials prices and the events in North Africa and Japan dampened the result. In the first quarter SWISS (including Edelweiss) was nevertheless able to lift the operating result considerably to EUR 17m compared with a weak first quarter last year (EUR 1m). Revenue climbed 16.8 per cent to EUR 871m.

Current global developments will continue to weigh on the operating performance. However, SWISS benefits from its good cost structure and great flexibility in reacting to fluctuations in demand. In the first quarter SWISS was able to increase passenger numbers by 5.5 per cent to 3.6 million. Robust demand from the domestic Swiss market, the intercontinental business and freight earnings proved a vital support for the business.

In the first quarter capacity in European traffic was extended by 9.7 per cent and on intercontinental routes by 12.9 per cent compared with the same period last year. SWISS now serves 72 destinations in 39 countries with 89 aircraft. Since March, connections from Basel have served London-Heathrow rather than London-City thanks to a joint venture with bmi. Consequently seating capacity to the UK has been more than doubled. The freed up capacities at SWISS are to be redeployed from Basel to the new destinations Rome and Copenhagen.

SWISS, as a premium airline, is pursuing its product offensive. In January an Airbus A330-300 and an Airbus A320 were added to the fleet. SWISS again won the Business Traveller Award as the best airline on routes within Europe and to North and South America. Edelweiss put a new A330-300 into service in March on the occasion of its fifteenth company anniversary. This is its second wide-bodied jet and takes the total number of aircraft in its fleet to five.

Looking to the full year, SWISS management has taken steps to repeat last year's very good operating result, despite the difficult circumstances.

Austrian Airlines

		Jan. –March 2011	Jan. –March 2010	Change in %
Revenue	€m	411	427	–3.7
Operating result	€m	–64	–66	3.0
EBITDA	€m	–23	–23	0.0
Passengers carried	thousands	2,131	2,153	–1.0
Employees as of 31.3.	number	6,943	7,939	–12.5

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

The worldwide developments in the course of the first quarter made the market situation for Austrian Airlines much more difficult than expected at the start of the year. The EU's limits on capacity act as an additional restriction on growth.

In the first quarter of 2011 passenger numbers were 1.0 per cent down on the year at around 2.1 million. The load factor sank by 4.2 percentage points to 68.6 per cent, as the already modest capacity increase of 1.3 per cent was eclipsed by a 4.5 per cent fall in sales.

Revenue also declined in the first quarter by 3.7 per cent to EUR 411m. By contrast, the operating result improved modestly year on year to EUR –64m (EUR +2m).

To ensure that the company achieves its earnings target for 2011 – a positive operating result – despite the crises in Japan and the Middle East, the Executive Board has adopted a further package of activities. It consists of short-term measures to adjust costs flexibly in line with market developments and medium-term initiatives intended to deliver further improvements to the company's cost structure.

As Thierry Antinori has left the Lufthansa Group, the Executive Board of Austrian Airlines will consist of two members until a succession plan has been adopted.

Austrian Airlines is sharpening its focus on customers needs and is making specific investments to improve quality: until September 2011 a total of 32 aircraft consisting of Airbus A320s and Boeing 737s will be converted to a new interior design with the new Europa seats. In winter 2012/2013 the ten planes of the long-haul fleet will also be given a modified interior design with new seats.

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

British Midland

		Jan. –March 2011	Jan. –March 2010	Change in %
Revenue	€m	178	196	–9.2
Operating result	€m	–63	–45	–40.0
EBITDA	€m	–53	–41	–29.3
Passengers carried	thousands	1,234	1,406	–12.2
Employees as of 31.3.	number	3,645	3,924	–7.1

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

The negative economic development in the UK, public-sector savings, and the crises in North Africa and the Middle East, strained the result for British Midland in the first quarter of 2011 considerably. On the other hand, the restructuring carried out in 2010 began to have an effect: productivity was improved substantially, although revenue fell by EUR 18m to EUR 178m. Expenses were not able to compensate for the decline. The operating result fell accordingly to EUR –63m (previous year: EUR –45m).

The deteriorating economic situation in the UK made a major contribution to the fall in demand: bookings in short-haul traffic declined compared with last year. The political turmoil in North Africa and the Middle East is also having a particularly negative impact, as those routes account for a considerable share of revenue of around 25 per cent.

In 2010 British Midland had planned to replace loss-making routes in its home market with more lucrative routes to the Middle East. However the turmoil unfolding there has overshadowed the adoption of these new routes. At the beginning of 2011, and in view of the deteriorating economic situation and rising costs in its UK home market, British Midland decided to rapidly adjust its domestic flight network. Loss-making routes are to be replaced quickly by more profitable routes in North Africa and Europe.

A number of steps were taken to cut costs further in the short term. For instance, contracts have been renegotiated and the number of flight attendants reduced. British Midland is also tackling the rising price of kerosene by increasing fuel surcharges. However, due to its market position and the fact that its hedging position is still being built up, British Midland will not be able to offset all the additional costs.

A negative operating result is still expected for 2011. British Midland is nonetheless standing by its target of returning to profitability in the medium term.

Germanwings

		Jan. –March 2011	Jan. –March 2010	Change in %
Revenue	€m	107	102	4.9
Operating result	€m	–44	–34	–29.4
EBITDA	€m	–33	–28	–17.9
Passengers carried	thousands	1,347	1,435	–6.2
Employees as of 31.3.	number	1,221	1,167	4.6

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

Germanwings carried 1.3 million passengers in the first quarter of 2011 (–6.2 per cent). The passenger load factor came to 69.2 per cent, 3.0 percentage points down on last year. A sharp improvement in average yields more than made up for the negative effect of volumes. The introduction of the air traffic tax had an adverse effect on the operating result, however, as did the high oil price. After increasing revenue by 4.9 per cent to EUR 107m, Germanwings therefore registered an operating result of EUR – 44m (previous year: EUR –34m) for the first quarter.

In spite of increasingly tough competition, Germanwings was able to further extend its market leadership at its home base Cologne/Bonn. In the first quarter more than half of its 30 Airbus A319s were stationed there.

In January 2011 the new sales cooperation with Lufthansa started. It is the second stage of a closer collaboration that began in September 2010 when Germanwings joined Miles & More. Fares from Germanwings and Lufthansa can now be combined and booked via global distribution systems. Furthermore, the scope of collaboration in corporate customer business was also extended. This connection to other distribution channels already made a positive earnings contribution in the first quarter.

In the course of 2011 Germanwings is to make further improvements to its route network and product: the attractive destinations Pisa, Naples, Bari, Cagliari (Sardinia) and Catania (Sicily) will supplement the connections to Italy on offer in the summer flight timetable. Passengers from the area bordering the Netherlands can fly cheaply to Berlin from Maastricht. The installation of new seats in part of the fleet will also bring sustainable improvements in comfort on board Germanwings flights.

The operating result for the financial year 2011 is still expected to be higher than last year.

Logistics business segment

Key figures Logistics

		Jan. –March 2011	Jan. –March 2010	Change in %
Revenue	€m	742	563	31.8
of which with companies of the Lufthansa Group	€m	6	5	20.0
Operating result	€m	64	35	82.9
Segment result	€m	62	39	59.0
EBITDA	€m	85	71	19.7
Segment capital expenditure	€m	14	1
Employees as of 31.3.	number	4,503	4,437	1.5
Freight and mail	thousand tonnes	469	391	19.9
Available cargo tonne-kilometres	millions	3,354	2,731	22.8
Revenue cargo tonne-kilometres	millions	2,343	1,960	19.5
Cargo load factor	%	69.9	71.8	–1.9 pts

Course of business Lufthansa Cargo was able to bring the first quarter of 2011 to a very successful close. The course of business was dominated by a steep rise in sales. Revenue similarly went up to EUR 742m and the operating result came to EUR 64m.

Segment structure In addition to Lufthansa Cargo AG, the Logistics segment includes Lufthansa Cargo Charter Agency GmbH, the airfreight container logistics specialist Jettainer GmbH and the equity investments in the cargo airlines Jade Cargo International Ltd. and AeroLogic GmbH. In addition, Lufthansa Cargo markets the freight capacities of Lufthansa's passenger aircraft and since 2010 also those of Austrian Airlines. Lufthansa Cargo also holds equity interests in sales support and handling companies.

Since 1 January Karl Ulrich Garnadt has been Chairman of the Executive Board and CEO of Lufthansa Cargo AG. He succeeds Carsten Spohr, who was appointed a Member of the Executive Board of Deutsche Lufthansa AG.

Product and route network Last year part of the freighter fleet was still in storage because of the recession, but now all 18 MD11 freight aircraft are back in service operations. The AeroLogic fleet, which grew to eight Boeing 777 freighters during 2010, is also available for cargo flights at weekends. Under these circumstances, Lufthansa Cargo expanded its route network substantially in the first quarter of 2011. Now that the new freighter station has been opened in Manaus (Brazil), the summer flight timetable will include Shenzhen (China), Kolkata (India), Barcelona (Spain) and from April Dhaka (Bangladesh) as new destinations. Since the end of March AeroLogic has linked Lahore (Pakistan) and Houston (USA) to the global Lufthansa Cargo network.

Operating performance In the first quarter of 2011 the positive performance continued in the business segment. Tonnage was up by 19.9 per cent and tonne-kilometres transported by 19.5 per cent compared with last year. As capacity was increased by 22.8 per cent at the same time, the load factor contracted moderately by 1.9 percentage points.

The Americas traffic region reported the fastest volume growth at 25.4 per cent. Available tonne-kilometres rose by 23.4 per cent and sales by 22.5 per cent. As a result, the load factor stayed almost stable (–0.5 percentage points).

Tonnage growth in Asia/Pacific was brisk at 19.2 per cent: exports from China went up again, even though growth was less pronounced than in prior years. Capacity rose overall by 24.9 per cent. Substantial additions to capacity by competitors had a negative impact on load factors. Compared with 2010 the load factor fell by 4.2 percentage points, but still remained at a comparatively high level of 71.3 per cent.

Flight traffic in Japan, especially to the capital Tokyo, was disrupted for several weeks after the earthquake. Flights were diverted to Osaka in a special flight plan, so that cargo demand to and from Japan could still be served. As with other natural disasters in the past, Lufthansa Cargo again supplied swift, straightforward assistance. At the end of March the company put on a special relief flight free of charge and transported 70 tonnes of emergency aid supplies to Tokyo.

Freight volumes in the Middle East/Africa traffic region rose year on year by 16.4 per cent. As capacity went up in line with sales, the load factor remained constant.

Tonnage within Europe rose by 16.8 per cent. This volume growth stems mainly from shuttle services for the Americas and Asia/Pacific traffic regions.

Revenue and earnings development Lufthansa Cargo's revenue soared by 31.8 per cent to EUR 742m in the reporting period. The driver of this growth was traffic revenue, which was 32.6 per cent higher than the previous year at EUR 704m. Alongside unbroken volume growth, an improvement of 10.9 per cent in average yields also contributed to this pleasing performance.

Other revenue came to EUR 34m (+17.2 per cent) and consisted largely of income from ad hoc aircraft chartering and freight handling.

Other operating income was down on last year at EUR 17m (2010: EUR 21m), largely due to exchange rate movements.

This took total operating revenue up to EUR 759m (+30.0 per cent).

Operating expenses climbed by 26.6 per cent in the reporting period to EUR 695m, but were still well behind the increase in revenue.

This was largely caused by the 34.6 per cent rise in the cost of materials and services to EUR 514m. Fuel expenses sharply inreased by 58.9 per cent to EUR 116m as a result of the steep rise in the price of kerosene. Fees and charges went up, mostly due to greater volumes, to EUR 76m (+26.7 per cent). Charter expenses rose by 30.6 per cent to EUR 269m as a result of higher costs for the belly capacities of Lufthansa Passenger Airlines aircraft and since July 2010 those of Austrian Airlines too. MRO expenses also increased year on year by 7.1 per cent to EUR 30 million. The rise stems from more intensive use of the fleet and the subsequent increase in the number of maintenance inspections.

Staff costs rose by 14.3 per cent to EUR 88m, mainly due to the suspension of reduced working hours and higher performancerelated bonuses. Furthermore, in-flight staff capacities received a boost following the reactivation of stored aircraft. On average over the first quarter the Logistics segment had 4,503 employees (+1.5 per cent).

Depreciation and amortisation was 26.7 per cent lower than the previous year at EUR 22m. This was due to the end of the depreciation period in 2010 for the cargo aircraft purchased in 1998.

Other operating expenses were +18.3 per cent up on the year at EUR 71m. This comes from higher exchange rate losses and an increase in travel expenses, agency commissions, expenses for internal Group services, rental and maintenance expenses.

Overall, Lufthansa Cargo achieved an operating result of EUR 64m in the first quarter (previous year: EUR 35m). This is nearly double last year's already strong result.

Other segment income and expenses remain negligible. The subsidiaries accounted for using the equity method contributed earnings of EUR 4m (previous year: EUR 4m). By contrast, the accrued losses at Jade Cargo International Ltd. were realised in connection with a capital injection, so that the equity result fell to EUR –2m (previous year: EUR +4m). The segment result climbed in the first quarter of 2011 to EUR 62m (previous year: EUR 39m).

Segment capital expenditure was up at EUR 14m, principally for the capital injection at Jade and for investments in operating and office equipment.

Forecast After a good first quarter Lufthansa Cargo remains optimistic for the full year 2011. As demand is expected to develop positively, the company anticipates higher revenue. A potential risk exists from the increased transport costs resulting from a higher oil price, as this trend could have a negative effect on demand in the medium term. Lufthansa Cargo nevertheless remains confident of generating a substantially positive operating result in 2011. A repeat of the record result in 2010 should not be expected, however, as this was due in large measure to catch-up effects following the global economic crisis.

Trends in traffic regions Lufthansa Cargo

	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.–March 2011	Change in %	Jan.–March 2011	Change in %	Jan.–March 2011	Change in %	Jan.–March 2011	Change in %	Jan.–March 2011	Change in pts
Europe	60	31.4	156	16.8	197	14.6	93	15.3	47.2	0.3
America	265	50.7	143	25.4	1,330	23.4	988	22.5	74.3	–0.5
Asia/Pacific	320	19.9	133	19.2	1,497	24.9	1,067	17.9	71.3	–4.2
Middle East/Africa	59	35.8	38	16.4	332	16.9	195	16.0	58.8	–0.5
Total	704	32.6	469	19.9	3,354	22.8	2,343	19.5	69.9	–1.9

MRO business segment

Key figures MRO

		Jan. –March 2011	Jan. –March 2010	Change in %
Revenue	€m	1,027	999	2.8
of which with companies of the Lufthansa Group	€m	445	413	7.7
Operating result	€m	69	71	–2.8
Segment result	€m	78	78	0.0
EBITDA	€m	120	98	22.4
Segment capital expenditure	€m	15	15	0.0
Employees as of 31.3.	number	19,823	20,542	–3.5

Course of business Maintenance, repair and overhaul (MRO) services are in greater demand again worldwide. The demand trend is nevertheless behind that for the passenger and cargo businesses. Cost pressure on airlines and aggressive new players also mean that margin pressure in the MRO business continues to rise, even in the current economic recovery.

In this environment Lufthansa Technik increased revenue slightly over the first quarter of 2010 and was nearly able to match last year's very good operating result.

Segment structure The Lufthansa Technik group includes 32 technical maintenance operations around the world, including the main site and the Chinese joint venture Ameco. The company holds direct and indirect stakes in 54 companies, of which 22 are in Germany, 15 in Europe, ten in America, and seven in Asia and Australia. There were no changes in Lufthansa Technik's group of consolidated companies compared with last year.

In order to secure its long-term growth prospects, Lufthansa Technik is to upgrade the Sofia site to carry out base maintenance work and thereby make the entire overhaul network even more competitive.

Products Lufthansa Technik is the MRO-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.

The entry into new aircraft types, such as the Boeing B787, B747-8i or Airbus A320neo, offer Lufthansa Technik opportunities to access new markets and customers. Numerous projects are currently under negotiation and are expected to be signed in 2011.

At the end of March the VIP unit delivered the first of two Airbus A340-300 aircraft to the Special Air Mission Wing of the German Federal Ministry of Defence. During an idle period of 21 months the plane was completely overhauled and fitted with a VIP cabin. The second aircraft is due to be handed over in August 2011.

Lufthansa Technik successfully expanded its range of Total Support Service products with Total Base Maintenance Support. The product offers tailor-made individual solutions and reduces customers' administrative expenses. This enabled the existing contract with Privat Air to be renewed and expanded.

The installation of the new Europa cabin for Lufthansa Passenger Airlines is a particular challenge for the Lufthansa Technik sites. Within one year all aircraft in the Lufthansa short-haul fleet will receive a full cabin conversion at eight sites in Europe – including Sofia, Budapest, Shannon, Malta and Berlin – with more than 27,000 new seats being fitted.

Operating performance In the reporting period Lufthansa Technik was able to win some 150 new contracts with a volume of EUR 254m for the full year 2011.

The segment also managed to sign an important contract for the VIP completion of a Boeing 747-8i; idle time will begin in 2012. Other important new orders were received from Emirates Airlines for overhauling the landing gear on its A340-300 fleet and from Oman Air for C checks. Lufthansa Technik also signed Total Component Support contracts with Aeromexico, Air New Zealand, USA3000 and Camair-Co from Cameroon. In addition the scope of the contract with Air Asia X was broadened considerably.

Various cost-cutting and restructuring programmes were launched at the companies in the Lufthansa Technik group which should secure competitiveness and play an important role in Lufthansa Technik's long-term success.

Revenue and earnings development Revenue from Group companies rose by 7.7 per cent to EUR 445m, mainly thanks to more modification programmes, such as the new Europa cabin, and more base maintenance inspections.

Revenue from outside the Group decreased somewhat by EUR 4m to EUR 582m (– 0.7 per cent). The Innovation Center, on the other hand, made a positive contribution to the performance in customer business with new products. Overall, revenue was 2.8 per cent higher than last year at EUR 1.0bn. Customers from outside the Group accounted for around 57 per cent of total revenue.

Other operating income went up by 14.8 per cent to EUR 62m, largely due to exchange-rate movements relating to the reporting date.

The MRO segment reported operating income of EUR 1.1bn (+3.4 per cent).

In line with this increase in revenue, operating expenses also rose by 3.9 per cent to EUR 1.0bn, primarily as a result of higher expenses for materials and external services for aircraft idle time and engine maintenance (+3.1 per cent) and the increase in other operating expenses by EUR 23m to EUR 195m (+13.4 per cent).

Staff costs were unchanged at EUR 274m. The number of employees declined by 336 in the quarter (–1.7 per cent); compared with the same period last year the reduction amounted to as much as 3.5 per cent. Compared with the first quarter of 2010, more than 230 employees at Lufthansa Technik moved from partial to full retirement. The workforce was also particularly reduced at sites, such as Hawker Pacific, Lufthansa Technik Switzerland or Shannon Aerospace, currently carrying out restructuring programmes to ensure their long-term competitiveness.

Depreciation and amortisation fell by 4.3 per cent to EUR 22m.

In the first quarter of 2011 Lufthansa Technik was nearly able to match last year's very good operating result (EUR 71m), with an operating profit of EUR 69m.

Lufthansa Technik's equity result of EUR 5m was the same as last year. Higher other segment income (EUR +2m to EUR 4m) meant that the segment result also reached last year's figure of EUR 78m.

Segment capital expenditure was also stable year on year at EUR 15m. Important items of capital expenditure were the purchase of a reserve engine and an equity increase at Lufthansa Technik Services India.

Forecast Lufthansa Technik has adapted to the challenges of the new market environment with increasing competition and is well positioned with its modern product portfolio for new aircraft models, low-cost sites, and strict cost and efficiency management.

For 2011 Lufthansa Technik is anticipating revenue growth overall, and an operating result slightly higher than last year's. This is on the condition that the global economy continues to recover, leading to a tangible increase in demand in the MRO industry, and that the cost-cutting and restructuring programmes are implemented successfully.

IT Services business segment

Key figures IT Services

		Jan. –March 2011	Jan. –March 2010	Change in %
Revenue	€m	147	143	2.8
of which with companies of the Lufthansa Group	€m	90	84	7.1
Operating result	€m	3	3	0.0
Segment result	€m	3	3	0.0
EBITDA	€m	11	11	0.0
Segment capital expenditure	€m	7	8	–12.5
Employees as of 31.3.	number	2,876	3,002	–4.2

Course of business Airlines and industrial customers of Lufthansa Systems are still hesitant about committing to capital expenditure. Some significant contract wins nevertheless meant that revenue for the first quarter 2011 was higher than last year's. The result was on last year's level, despite additional expenses in connection with the restructuring programme Jetzt!.

Segment structure Lufthansa Systems offers consultancy and IT services for selected industries and has a leading position in the airline sector. In this sector the company offers solutions for all business processes. Lufthansa Systems is present in Germany with several offices and has overseas sites in 14 countries.

Products The core of the Lufthansa Systems product strategy is to offer innovative solutions and services with direct added value for the customer. In early 2011 the company presented the world premiere of BoardConnect, a wireless in-flight entertainment system. Also new is the solution for navigation charts, Lido/iRouteManual, as an app for tablet computers. The workplace model deskBase is offered in the area of virtualisation. In addition, Lufthansa Systems offers its extensive project management expertise to various industries.

Operating performance Lufthansa Systems was able to sign some important contracts in the first quarter despite the general market weakness, including the management of all European IT infrastructure for the Thomas Cook Group, as well as the operating extension to the IT environment for check-in and loadplanning processes at Lufthansa Passenger Airlines. Cathay Pacific selected the travel management solution myIDTravel, and Eurowings chose the flight path planning solution Lido/Flight and the electronic flight document solution Lido/FlightBag. The new state airline of Cameroon, Camair-Co, will be relying on several planning and navigation solutions from Lufthansa Systems when it begins operations. In the logistics sector the company was able to extend the scope of its collaboration with the shipping company Hamburg Süd and with Schenker Deutschland AG.

Alongside these sales successes, Lufthansa Systems is laying the foundations for sustainable, profitable growth with the Jetzt! programme launched in 2010 (for details see the Annual Report 2010 from p. 109 ). One important step was to merge five Lufthansa Systems companies with Lufthansa Systems AG in order to reduce complexity and thereby cut costs. Altogether, the measures implemented to date will lighten the cost base as early as this year by EUR 11m.

Revenue and earnings development Revenue rose by 2.8 per cent in the first quarter to EUR 147m. Revenue of EUR 90m (previous year: EUR 84m) was generated with companies in the Lufthansa Group. The increase was largely accounted for by additional infrastructure services and airline applications. Revenue from external customers came to EUR 57m, or EUR 2m less than last year.

Other operating revenue shrank to EUR 6m (previous year: EUR 9m) as customers invested less and projects were completed. Total operating income rose by EUR 1m to EUR 153m.

Total operating expenses also went up by EUR 1m to EUR 150m. The cost of materials and services stayed the same as last year at EUR 20m.

The headcount declined by 4.2 per cent to 2,876 employees. Staff costs fell correspondingly by 3.3 per cent to EUR 59m.

Depreciation and amortisation was stable year on year at EUR 8m.

Other operating expenses went up due to exchange rate effects by 5.0 per cent to EUR 63m.

The operating result for Lufthansa Systems in the first three months came to EUR 3m, the same as last year. The segment result was likewise unchanged at EUR 3m. Segment capital expenditure shrank from EUR 8m last year to EUR 7m.

Forecast Soft demand means that revenue for the current year is expected to decline again. However, the Jetzt! programme should lay the foundations for a return to sustainable, profitable growth. The steps taken so far are showing initial results. Follow-on orders are increasingly being generated from existing customer contracts, for instance, which deliver a corresponding earnings contribution. Overall, the result for the financial year 2011 is still expected to be higher than last year.

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IT Services Catering

Catering business segment

Key figures Catering

		Jan. –March 2011	Jan. –March 2010	Change in %
Revenue	€m	520	493	5.5
of which with companies of the Lufthansa Group	€m	126	122	3.3
Operating result	€m	2	–2
Segment result	€m	4	0
EBITDA	€m	27	55	–50.9
Segment capital expenditure	€m	14	9	55.6
Employees as of 31.3.	number	28,425	28,471	–0.2

Course of business Despite the crises mentioned earlier, passenger numbers continued to rise in the reporting period, albeit at a slower pace. LSG Sky Chefs' revenue was therefore higher than in the same period last year in all regions. A positive operating result was already generated in the first quarter of 2011.

Segment structure The LSG Sky Chefs group consists of 134 companies with operations at more than 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 quarter of 2010, the group of consolidated companies was enlarged by two companies, one in Turkey and one in Korea. At the beginning of 2011 the previously three-member Executive Board was expanded to four members with the appointment of Erdmann Rauer as Chief Sales Officer.

Products LSG Sky Chefs again won prizes from customers, industry associations and professional bodies for its outstanding services. United Airlines acknowledged the services of twelve facilities with its Caterer Award, IATA gave three facilities the IATA Catering Quality Assurance Award for safety and quality, and the International Quality and Productivity Center applauded the company for its exemplary process optimisation.

Operating performance LSG Sky Chefs confirmed important customer contracts in the first quarter of 2011. The contract with United Airlines affecting 24 sites was renewed for nearly 300 flights a day. The cooperation with long-established customer Germanwings is also to continue. A joint venture contract was renewed early in Nanjing, China. In February, LSG announced its intention to establish joint ventures with First Catering Produktion AG in Switzerland and with Alpha Flight Group Ltd. in the UK, which will take effect after clearance by the authorities and board approval. The activities in the Upgradeplus initiative launched in 2009 are continuing to plan. After successful completion of the pilot phase the new LSG Sky Chefs production system is now to be rolled out worldwide for the holistic optimisation of production and material flows.

Revenue and earnings development Revenue for the Catering segment again developed positively in the first quarter of 2011. It went up year on year, mainly due to higher passenger volumes, by 5.5 per cent to EUR 520m. External revenue came to EUR 394m (+6.2 per cent) and internal revenue rose by 3.3 per cent to EUR 126m.

Other operating income declined by EUR 7m to EUR 8m, mainly for exchange rate reasons. Overall, total operating income went up by 3.9 per cent to EUR 528m.

Total operating expenses were 3.1 per cent up on the previous year at EUR 526m. The cost of materials and services climbed by 8.8 per cent to EUR 235m, largely as a result of higher income and in some regions due to inflation.

The number of employees at LSG Sky Chefs in the first three months was nearly unchanged on the previous year level at 28,425. Staff costs nonetheless rose overall, due largely to exchange rate movements and inflation, by 2.6 per cent to EUR 196m.

Depreciation and amortisation was 6.7 per cent below last year's level at EUR 14m. Other operating expenses contracted by 8.0 per cent to EUR 81m, primarily owing to lower exchange rate losses.

Thanks to the gratifying revenue development and continued cost management LSG Sky Chefs increased its operating profit in the first quarter of 2011 by EUR 4m to EUR 2m. There were no other segment income or expenses in the reporting period. The result of the equity valuation was stable year on year at EUR 2m. Having reported a balanced segment result last year, LSG Sky Chefs increased the figure for the first quarter of 2011 to EUR 4m.

Segment capital expenditure of EUR 14m was substantially higher than in the same period last year (EUR +5m), in which it had been restricted to the amount necessary for maintenance and securing of operations as part of the ongoing activities to safeguard earnings.

Forecast LSG Sky Chefs is still expecting a modest increase in passenger numbers for the full year 2011. However, the cost pressure from airlines will rise too, driven by higher oil prices as well as the political unrest and natural disasters in important markets. The company therefore intends consistently to pursue its initiatives to standardise processes and increase efficiency. Another focus point is the modification of the collective bargaining structures in Germany and the USA. For the financial year 2011 LSG Sky Chefs is still expecting an increase in revenue and a higher operating result compared with last year.

Other

Other

		Jan. –March 2011	Jan. –March 2010	Change in %
Total operating income	€m	361	277	30.3
Operating result	€m	30	–59
Segment result	€m	38	–43
EBITDA	€m	56	29	93.1
Segment capital expenditure	€m	7	5	40.0
Employees as of 31.3.	number	3,818	3,729	2.4

Structure The segment Other includes the Service and Financial Companies in which the Lufthansa Group's financial and service activities are pooled. They include AirPlus, Lufthansa Flight Training and Lufthansa Commercial Holding among others. The central Group functions of Deutsche Lufthansa AG are also assigned to this segment.

Operating performance AirPlus again put in a positive performance in the first quarter of 2011. Billing revenue from business travel was 22 per cent higher than a year ago.

Lufthansa Flight Training started the year 2011 with higher load factors than last year for its simulator training. The company also enjoyed higher demand from Lufthansa Passenger Airlines for basic flight attendant training courses.

The performance of the Group functions was dominated by exchange rate movements in the first quarter. The net result of exchange rate movements was positive, as the US dollar exchange rate moved in the opposite direction to the first quarter last year.

Revenue and earnings development Total operating revenue for the companies presented in the segment Other rose to EUR 361m (+30.3 per cent), particularly due to the positive development at the Group functions. The Group functions accounted for EUR 232m (+62.2 per cent) and AirPlus for EUR 73m (–17.0 per cent). Higher credit card revenue was offset by lower exchange rate gains. Lufthansa Flight Training delivered EUR 45m (+21.6 per cent) of total operating income.

Operating expenses fell by 1.5 per cent to EUR 331m. The operating result of the segment Other climbed to EUR 30m (EUR +89m). This includes the Group functions with a positive earnings contribution of EUR 6m (previous year: EUR –73m). Air Plus and Lufthansa Flight Training also made positive earnings contributions of EUR 9m and EUR 11m respectively. The segment result in the first quarter of 2011 was also positive at EUR 38m (previous year: EUR –43m).

Risk and opportunities report

As an international aviation company Lufthansa is 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.

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

In the first three months of 2011 the opportunities and risks for the Group described in detail in the annual report have become more concrete or developed as follows:

The global economic upswing is being largely sustained by the momentum in the emerging markets. Lufthansa is in a position to be able to sell most of the capacity that has increased since last year, but in the current competitive environment, especially in European traffic, is still subject to price pressure.

The tense geopolitical situation, especially in the Arab regions, 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 political unrest has also caused another steep rise in fuel prices. Depending on developments in the crisis areas, further prices rises cannot be ruled out. Thanks to its proven hedging policy, Lufthansa has however not felt the full effect of these fuel price increases on earnings at this point of time. Nevertheless, as the market remains highly competitive, it is unlikely that the additional costs can be recouped in full from customers.

The threat potential of the catastrophic situation in Japan is currently difficult to judge. In operational terms the flight programmes of all companies in the Group have been adjusted in line with the change in traffic volumes.

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.

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Other Risk and opportunities report Supplementary report Forecast

Supplementary report

Since 1 April 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

in %	2011*	2012*	2013*	2014*	2015*
World	3.5	4.0	4.0	4.2	4.1
Europe	2.0	2.1	2.2	2.4	2.4
Germany	3.0	2.0	1.7	1.7	1.5
North America	2.8	2.9	2.8	3.3	3.0
South America	4.5	4.7	4.6	4.9	4.4
Asia/Pacific	5.0	6.2	5.9	6.0	6.0
China	9.3	8.6	8.8	8.8	8.5
Middle East	6.0	5.4	5.0	4.7	4.5
Africa	2.9	5.2	5.1	5.3	5.2

Source: Global Insight World Overview as of 15.4.2011. * Forecast.

General economy and sector Even if global economic growth experiences a moderate slowdown over the course of 2011, the upswing should continue around the world for the remainder of the year, going by current forecasts. After expanding by 4.1 per cent last year, global growth of 3.5 per cent is forecast for 2011. In addition to a strong increase in global trade, domestic demand should also pick up speed. It is as yet unclear what effects the earthquake, the tsunami and the ongoing nuclear crisis in Japan will have on global economic growth.

Judging by the current situation, in the USA the economy should grow year on year by 2.8 per cent in 2011. The Asian markets will continue to grow strongly at around 5.0 per cent, although this represents a decline compared with last year. Included here is an assumption of zero growth for the Japanese economy. Experts expect the Chinese economy to expand by 9.3 per cent in 2011, and the Indian economy by 8.3 per cent. For Europe a constant year-on-year growth rate of 2.0 per cent is estimated for gross domestic product. By contrast, the forecast for the German economy has been revised upwards to 3.0 per cent.

Oil prices are still expected to remain at high levels. Futures contracts for delivery in December 2011 were trading at around USD 123/bbl in mid-April.

In the remainder of this year the uncertain situations in North Africa and Japan will lead to lastingly high volatility both in commodities prices and in demand for air transport. Furthermore, the industry's profit outlook is depressed by overcapacities on the market. Against this backdrop, in March IATA cut its 2011 annual forecast for profits in the global airline industry from USD 9.1bn to USD 8.6bn. Of these total profits, European airlines are expected to account for around USD 0.5bn.

Lufthansa Group In 2010 Lufthansa did the necessary groundwork to continue its course of profitable growth. The Group's medium-term earnings potential has increased considerably. The positive underlying tendency from last year in demand development is still in evidence in 2011, but it must hold out against a variety of negative influences. Over the course of the first quarter, several exogenous shocks made adjustments necessary at short notice in order to keep the Group on its course of profitable growth. These developments confirm our belief that prudent management in the airline industry has to take into account the regular risks and volatility of the sector, just as much as the opportunities afforded by the growth market air transport. Recently, however, the exogenous challenges have become more the rule – be it natural disasters such as the earthquake and the tsunami in Japan, or intervention that distorts competition, such as the air traffic tax in Germany and Austria.

The companies in the Lufthansa Group are adjusting to these developments by means of a sharp focus on increasing their competitiveness. They are therefore pursuing the structural measures to secure their development prospects, as well as short-term adjustments to meet new challenges. Their operating flexibility helps them to cope with these tasks, as does the solid financial profile of the Group and its structural risk management. In 2011 Lufthansa benefits through its hedging transactions from an oil price of around USD 92/bbl and enjoys a price advantage compared with competitors that do not carry out price hedging.

Lufthansa's results for the first quarter show that the current challenges disrupt the course of business, but do not imperil the fundamental development of the Company. Under these circumstances we confirm our outlook for the 2011 financial year and continue to anticipate a year-on-year increase in revenue and operating result. However, in view of the uncertainty surrounding developments in Japan and North Africa and their effects, including on the developments of the oil price, it is not possible to quantify this assessment at the present time.

Consolidated income statement

January – March 2011

in €m	Jan. – March 2011	Jan. – March 2010
Traffic revenue	5,224	4,576
Other revenue	1,215	1,182
Total revenue	6,439	5,758
Changes in inventories and work performed by entity and capitalised	29	63
Other operating income	726	555
Cost of materials and services	–3,961	–3,462
Staff costs	–1,693	–1,557
Depreciation, amortisation and impairment	–417	–403
Other operating expenses	–1,298	–1,297
Profit / loss from operating activities	–175	–343
Result of equity investments accounted for using the equity method	–27	–14
Result of other equity investments	13	8
Interest income	44	50
Interest expenses	–128	–128
Other financial items	–389	43
Financial result	–487	–41
Profit / loss before income taxes	–662	–384
Income taxes	159	88
Profit / loss after income taxes	–503	–296
Profit/loss attributable to minority interests	–4	–2
Net profit / loss attributable to shareholders of Deutsche Lufthansa AG	–507	–298
Basic earnings per share in €	–1.11	–0.65
Diluted earnings per share in €	–1.11	–0.65

Consolidated income statement Statement of comprehensive income

Statement of comprehensive income

January – March 2011

in €m	31.3. 2011	31.3. 2010
Profit / loss after income taxes	–503	–296
Other comprehensive income
Differences from currency translation	–100	97
Subsequent measurement of available-for-sale financial assets	–95	515
Subsequent measurement of cash flow hedges	522	363
Other comprehensive income from investments accounted for using the equity method	2	–8
Other expenses and income recognised directly in equity	–6	17
Income taxes on items in other comprehensive income	–87	–95
Other comprehensive income after income taxes	236	889
Total comprehensive income	–267	593
Comprehensive income attributable to minority interests	2	–3
Comprehensive income attributable to shareholders of Deutsche Lufthansa AG	–265	590

Consolidated balance sheet

as of 31 March 2011

Assets
in €m	31.3.2011	31.12.2010	31.3.2010
Intangible assets with an indefinite useful life*	1,558	1,582	1,524
Other intangible assets	323	329	334
Aircraft and reserve engines	11,329	11,153	10,621
Repairable spare parts for aircraft	860	877	839
Property, plant and other equipment	2,076	2,120	2,168
Investment property	–	–	3
Investments accounted for using the equity method	350	385	336
Other equity investments	1,033	1,128	1,347
Non-current securities	131	250	303
Loans and receivables	617	620	432
Derivative financial instruments	279	350	420
Deferred charges and prepaid expenses	24	26	41
Effective income tax receivables	61	61	70
Deferred claims for income tax rebates	83	82	35
Non-current assets	18,724	18,963	18,473
Inventories	655	662	651
Trade receivables and other receivables	4,240	3,401	3,753
Derivative financial instruments	779	484	363
Deferred charges and prepaid expenses	150	146	134
Effective income tax receivables	144	98	107
Securities	3,956	4,283	3,211
Cash and cash equivalents	1,210	1,097	1,203
Assets held for sale	147	186	87
Current assets	11,281	10,357	9,509

Total assets	30,005	29,320	27,982

* Including goodwill.

Shareholders' equity and liabilities
--------------------------------------	--	--

in €m	31.3.2011	31.12.2010	31.3.2010
Issued capital	1,172	1,172	1,172
Capital reserve	1,366	1,366	1,366
Retained earnings	4,075	2,944	2,938
Other neutral reserves	1,871	1,629	1,506
Net profit/loss	–507	1,131	–298
Equity attributable to shareholders of Deutsche Lufthansa AG	7,977	8,242	6,684
Minority interests	88	98	98
Shareholders' equity	8,065	8,340	6,782
Pension provisions	2,614	2,571	2,752
Other provisions	634	643	617
Borrowings	5,489	6,227	5,991
Other financial liabilities	118	110	85
Advance payments received, deferred income and other non-financial liabilities	1,088	1,087	1,021
Derivative financial instruments	230	111	70
Deferred income tax liabilities	315	405	651
Non-current provisions and liabilities	10,488	11,154	11,187
Other provisions	843	881	1,055
Borrowings	1,181	957	848
Trade payables and other financial liabilities	4,674	4,193	4,237
Liabilities from unused flight documents	3,306	2,389	2,604
Advance payments received, deferred income and other non-financial liabilities	1,151	1,066	1,046
Derivative financial instruments	141	103	64
Effective income tax obligations	156	237	159
Current provisions and liabilities	11,452	9,826	10,013
Total shareholders' equity and liabilities	30,005	29,320	27,982

Consolidated statement of changes in shareholders' equity

as of 31 March 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	–	–	–	–	–	–3	–3	–34	34	–3	3	–
Dividends to Lufthansa shareholders /minority interests	–	–	–	–	–	–	–	–	–	–	–13	–13
Consolidated net profit/loss attributable to minority interests	–	–	–	–	–	–	–	–	–298	–298	2	–296
Other expenses and income recognised directly in equity	–	–	783	97	–	11	891	–	–	891	–2	889
As of 31.3.2010	1,172	1,366	945	27	193	341	1,506	2,938	–298	6,684	98	6,782
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	–	–	–	–	–	–	–	1,131	–1,131	–	–	–
Dividends to Lufthansa shareholders /minority interests	–	–	–	–	–	–	–	–	–	–	–8	–8
Net profit/loss attributable to share holders of Deutsche Lufthansa AG/ attributable to minority interests	–	–	–	–	–	–	–	–	–507	–507	4	–503
Other expenses and income recognised directly in equity	–	–	340	–100	–	2	242	–	–	242	–6	236
As of 31.3.2011	1,172	1,366	1,196	141	193	341	1,871	4,075	–507	7,977	88	8,065

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

Consolidated cash flow statement

January – March 2011

in €m	Jan.– March 2011	Jan. – March 2010
Cash and cash equivalents 1.1.	1,097	1,136
Net profit/loss before income taxes	–662	–384
Depreciation, amortisation and impairment losses on non-current assets (net of reversals)	433	374
Depreciation and impairment losses on repairable spare parts for engines (net of reversals)	10	5
Net proceeds from disposal of non-current assets	–13	–4
Result of equity investments	14	6
Net interest	84	78
Income tax payments /reimbursements	–136	–9
Measurement of financial derivatives through profit and loss	371	–45
Change in working capital*	678	543
Cash flow from operating activities	779	564
Capital expenditure for property, plant and equipment and intangible assets	–674	–524
Capital expenditure for financial investments	–58	–6
Increase/decrease in repairable spare parts for aircraft	–2	–26
Proceeds from disposal of non-consolidated equity investments	1	2
Proceeds from disposal of consolidated equity investments	0	0
Cash outflows for acquisitions of non-consolidated equity investments	–12	–2
Cash outflows for acquisitions of consolidated equity investments	0	–2
Proceeds from disposal of intangible assets, property, plant and equipment and other financial investments	192	162
Interest income	118	103
Dividends received	14	7
Net cash from/used in investing activities	–421	–286
Purchase of securities /fund investments	–502	–146
Disposal of securities /fund investments	787	194
Net cash from/used in investing and cash management activities	–136	–238
Capital increase	–	–
Non-current borrowing	75	16
Repayment of non-current borrowing	–399	–191
Other financial debt	7	21
Dividends paid	–8	–13
Interest paid	–183	–110
Net cash from/used in financing activities	–508	–277
Net increase/decrease in cash and cash equivalents	135	49
Changes due to currency translation differences	–22	18
Cash and cash equivalents 31.3.	1,210	1,203
Securities	3,956	3,211
Total liquidity	5,166	4,414
Net increase/decrease in total liquidity	–214	–25

* 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 31 March 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 net assets, financial and earnings position.

Changes in the group of consolidated companies in the period 1.4.2010 to 31.3.2011

Name, registered office	Additions	Disposals	Reason
Passenger Airline Group segment
AirNavigator Ltd., Tokyo, Japan	29.6.10		Established
Ellen Finance 2010 S.N.C., Paris, France	25.6.10		Established
FI Beauty Leasing Ltd., Tokyo, Japan	28.6.10		Established
First Valley Highway Kumiai, Tokyo, Japan	29.6.10		Established
Global Brand Management AG, Basel, Switzerland	15.11.10		Established
Ingrid Finance 2010 S.N.C., Paris, France	15.5.10		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
Second Valley Highway Kumiai, Tokyo, Japan	29.6.10		Established
Soir Leasing Co., Ltd., Tokyo, Japan	25.6.10		Established
Third Valley Highway Kumiai, Tokyo, Japan	29.6.10		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
Suriba Beteiligungsverwaltungs GmbH, Vienna, Austria		10.6.10	Merger
UIA Beteiligungsgesellschaft mbH, Vienna, Austria		1.4.10	Divestment

Changes in the group of consolidated companies in the period 1.4.2010 to 31.3.2011

Name, registered office	Additions	Disposals	Reason
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
Segment Catering
Charm Food Service Co. Ltd., Incheon, South Korea	1.1.11		Established
Starfood Antalya Gida Sanayi ve Ticaret A.S., Istanbul, Turkey	10.8.10		Established

Assets held for sale

in €m	Group 31.3.2011	Financial statements 31.12.2010	Group 31.3.2010
Assets
Aircraft and reserve engines	145	184	83
Financial assets	2	2	4
Other assets	–	–	–
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 182m for subsequent years. As of the year-end 2010 reporting date the figure also came to EUR 210m.

Contracts signed at the end of 2010 for the sale of three Canadair Regional Jet 200s resulted in profits in the first quarter 2011 of EUR 1m and cash inflows of EUR 9m. Signed contracts for the sale of two Canadair Regional Jet 200s, three AT 42-500s and four Cessna Citations are expected to give rise to cash inflows of EUR 34m by the end of 2011. At the end of March 2011, there were order commitments of EUR 6.1bn 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	31.3.2011	31.12.2010
From guarantees, bills of exchange and cheque guarantees	841	883
From warranty contracts	930	960
From providing collateral for third-party liabilities	35	14

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

5) Earnings per share

		31.3.2011	31.3.2010
Basic earnings per share	€	–1.11	–0.65
Consolidated net profit/loss	€m	–507	–298
Weighted average number of shares		457,937,562	457,937,572
Diluted earnings per share	€	–1.11	–0.65
Consolidated net profit/loss	€m	–507	–298
+ interest expenses on the convertible bonds	€m	1	–
– current and deferred taxes	€m	–	–
Adjusted net profit/loss for the period	€m	–506	–298
Weighted average number of shares		458,273,966	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 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.

7) Segment reporting

Segment information by operating segment January –March 2011

	Passenger Airline Group	Logistics	MRO	IT Services	Catering	Total reportable operating	Other	Reconciliation	Group
in €m						segments
External revenue	4,670	736	582	57	394	6,439	–	–	6,439
of which traffic revenue	4,411	704	–	–	–	5,115	–	109	5,224
Inter-segment revenue	179	6	445	90	126	846	–	–846
Total revenue	4,849	742	1,027	147	520	7,285	–	–846	6,439
Other operating income	352	17	62	6	8	445	361	–186	620
Total operating income	5,201	759	1,089	153	528	7,730	361	–1,032	7,059
Operating expenses	5,592	695	1,020	150	526	7,983	331	–1,028	7,286
of which cost of materials and services	3,424	514	529	20	235	4,722	20	–781	3,961
of which staff costs	984	88	274	59	196	1,601	68	–2	1,667
of which depreciation and amortisation	329	22	22	8	14	395	10	4	409
of which other operating expenses	855	71	195	63	81	1,265	233	–249	1,249
Operating result 1)	–391	64	69	3	2	–253	30	–4	–227
Other segment income	30	1	4	0*	0*	35	18	82	135
Other segment expenses	38	1	0*	0*	0*	39	10	34	83
of which impairment losses	9	0*	–	–	0*	9	–	1	10
Result of investments accounted for using the equity method	–32	–2	5	–	2	–27	0*	–	–27
Segment result 2)	–431	62	78	3	4	–284	38	44	–202
Other financial result									–460
Profit/loss before income taxes									–662
Segment assets 3)	15,571	822	3,041	221	1,181	20,836	1,666	7,503	30,005
of which from investments accounted for using the equity method	79	48	151	–	66	344	6	–	350
Segment liabilities 4)	10,755	479	1,435	212	449	13,330	1,551	7,059	21,940
Segment capital expenditure 5)	628	14	15	7	14	678	7	59	744
of which on investments accounted for using the equity method	–	6	–	–	–	6	–	–	6
Employees on balance sheet date	57,880	4,503	19,823	2,876	28,425	113,507	3,818	–	117,325

* 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 –March 2010

in €m	Passenger Airline Group	Logistics	MRO	IT Services	Catering	Total reportable operating segments	Other	Reconciliation	Group
External revenue	4,184	558	586	59	371	5,758	–	–	5,758
of which traffic revenue	3,929	531	–	–	–	4,460	–	116	4,576
Inter-segment revenue	139	5	413	84	122	763	–	–763
Total revenue	4,323	563	999	143	493	6,521		–763	5,758
Other operating income	294	21	54	9	15	393	277	–136	534
Total operating income	4,617	584	1,053	152	508	6,914	277	–899	6,292
Operating expenses	4,990	549	982	149	510	7,180	336	–894	6,622
of which cost of materials and services	2,988	382	513	20	216	4,119	23	–680	3,462
of which staff costs	892	77	274	61	191	1,495	64	–1	1,558
of which depreciation and amortisation	300	30	23	8	15	376	11	3	390
of which other operating expenses	810	60	172	60	88	1,190	238	–216	1,212
Operating result 1)	–373	35	71	3	–2	–266	–59	–5	–330
Other segment income	30	1	2	0*	1	34	17	33	84
Other segment expenses	13	1	0*	0*	1	15	1	81	97
of which impairment losses	13	–	–	–	–	13	–	–	13
Result of investments accounted for using the equity method	–25	4	5	–	2	–14	0*	–	–14
Segment result 2)	–381	39	78	3	–	–261	–43	–53	–357
Other financial result									–27
Profit/loss before income taxes									–384
Segment assets 3)	14,239	795	2,940	267	1,218	19,459	1,620	6,903	27,982
of which from investments accounted for using the
equity method	98	36	140	–	56	330	4	2	336
Segment liabilities 4)	9,855	389	1,341	202	473	12,260	1,488	7,452	21,200
Segment capital expenditure 5)	484	1	15	8	9	517	5	12	534
of which on investments accounted for using the equity method	–	–	–	–	–	–	–	–	–
Employees on balance sheet date	57,551	4,437	20,542	3,002	28,471	114,003	3,729	–	117,732

* 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 –March 2011

in €m Traffic revenue*	Europe 3,519	thereof Germany 1,451	North America 669	thereof U.S.A. 580	Central and South America 107	Asia/Pacific 679	Middle East 146	Africa 104	Total 5,224
Other operating revenue	556	223	259	219	35	231	75	59	1,215
Total revenue	4,075	1,674	928	799	142	910	221	163	6,439

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

Figures by region January –March 2010

in €m	Europe	thereof Germany	North America	thereof U.S.A.	Central and South America	Asia/Pacific	Middle East	Africa	Total
Traffic revenue*	3,105	1,220	559	491	94	594	134	90	4,576
Other operating revenue	578	253	221	203	44	205	70	64	1,182
Total revenue	3,683	1,473	780	694	138	799	204	154	5,758

* 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 from 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 from p. 210 to 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, 4 May 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

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

Jobst Honig +49 69 696–28011

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 1st Interim Report is a translation of the original German Lufthansa Zwischenbericht 1/2011. 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 financial information on the internet: www.lufthansa.com/investor-relations

Financial calendar 2011 / 2012

2011

• 28 July Release of Interim Report January – June 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 1st 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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