Deutsche Lufthansa AG — Interim / Quarterly Report 2017

May 18, 2017

1st Interim Report January – March 2017

Lufthansa Group reports best first quarter earnings since 2008 for the first quarter of 2017 / Adjusted EBIT up by EUR 78m to EUR 25m / Earnings improvement driven by service companies Lufthansa Technik and Lufthansa Cargo / Non-operating results amplify positive earnings trend / Revenues up by 11.2 per cent to EUR 7.7bn through consolidation of Brussels Airlines and higher traffic revenue

Key figures Lufthansa Group		Jan. – March 2017	Jan. – March 2016	Change in %
Revenue and result
Total revenue	€m	7,691	6,916	11.2
of which traffic revenue	€m	5,808	5,235	10.9
EBIT	€m	16	–49
Adjusted EBIT	€m	25	–53
EBITDA	€m	438	343	27.7
Net profit/loss for the period	€m	–68	–8	–750.0
Key balance sheet and cash flow statement figures
Total assets	€m	37,946	33,311	13.9
Equity ratio	%	17.9	14.5	3.4 pts
Net indebtedness	€m	1,925	2,746	–29.9
Cash flow from operating activities	€m	1,648	1,102	49.5
Capital expenditure (gross)	€m	557	640	–13.0
Free cash flow	€m	1,094	578	89.3
Key profitability and value creation figures
EBIT margin	%	0.2	–0.7	0.9 pts
Adjusted EBIT margin	%	0.3	–0.8	1.1 pts
EBITDA margin	%	5.7	5.0	0.7 pts
Lufthansa share
Share price at the quarter-end	€	15.20	14.21	7.0
Earnings per share	€	–0.15	–0.02	–650.0
Traffic figures*
Passengers	thousands	25,233	22,320	13.0
Available seat-kilometres	millions	68,756	62,791	9.5
Revenue seat-kilometres	millions	52,346	47,021	11.3
Passenger load factor	%	76.1	74.9	1.2 pts
Available cargo tonne-kilometres	millions	3,558	3,435	3.6
Revenue cargo tonne-kilometres	millions	2,499	2,308	8.3
Cargo load factor	%	70.2	67.2	3.0 pts
Total available tonne-kilometres	millions	10,003	9,733	2.8
Total revenue tonne-kilometres	millions	7,347	6,934	6.0
Overall load factor	%	73.4	71.2	2.2 pts
Flights	number	246,283	232,410	6.0
Employees
Employees as of 31.3.	number	128,541	121,894	5.5

* Previous year's figures have been adjusted. Date of publication: 27 April 2017.

Contents

1 Interim management report

• 1 Course of business
• 1 Significant events
• 1 Financial performance
• 6 Business segments
• 11 Opportunities and risk report
• 11 Supplementary report
• 11 Forecast

12 Interim financial statements

• 12 Consolidated income statement
• 13 Statement of comprehensive income
• 14 Consolidated balance sheet
• 16 Consolidated statement of changes in shareholders' equity
• 17 Consolidated cash flow statement
• 18 Notes

25 Further information

• 25 Declaration by the legal representatives
• 26 Credits /Contact
• Financial calendar 2017/2018

Course of business Significant events Financial performance

Course of business

Positive performance overall in first quarter of financial year

• Revenue up by 11.2 per cent to EUR 7.7bn, in particular due to first-time consolidation of Brussels Airlines and to higher traffic revenue at the airlines
• EBIT improves by EUR 65m to EUR 16m, Adjusted EBIT improves by EUR 78m to EUR 25m
• Positive earnings performance, especially in the Logistics and MRO segments
• Overall decline in earnings at Network Airlines and Point-to-Point Airlines due to higher fuel costs and positive non-recurring effect at Austrian Airlines in the previous year
• Cash flow from operating activities up by 49.5 per cent, free cash flow by 89.3 per cent
• Net indebtedness down on year-end 2016 by 28.7 per cent to EUR 1.9bn

Significant events

Remaining shares in Brussels Airlines group acquired

• Deutsche Lufthansa AG takes over the remaining 55 per cent of the shares in SN Airholding SA/NV as of 9 January 2017
• Acquisition is based on the purchase and option agreement dating from 2008
• Strike price for the remaining shares of EUR 2.6m
• Brussels Airlines to be fully consolidated in the new Point-to-Point segment

Wet-lease agreement with Air Berlin approved

• German Federal Cartel Office unconditionally approves the wet lease of 38 aircraft agreed between the Lufthansa Group and Air Berlin on 30 January 2017
• In the course of the transaction, the Lufthansa Group will acquire or lease up to 25 Airbus A320s from Air Berlin's lessors and will, in turn, itself lease them to Air Berlin for operation at market prices, in order to realise cost reductions for the wet lease

Cooperation with Cathay Pacific Airways agreed

• Lufthansa Group and Cathay Pacific Airways sign code-share and frequent flyer agreement on 27 March 2017
• Successful marketing of joint capacities at the freight airlines since February 2017

Development of collective bargaining structures pushed forward

• Lufthansa Group and the Vereinigung Cockpit pilots' union reach agreement in principle on all main collective bargaining topics on 15 March 2017
• Declaration of intent includes forward-looking rules on pay and productivity gains as well as retirement and transitional benefits for pilots at Lufthansa German Airlines, Lufthansa Cargo and Germanwings
• Collective agreements to be drafted by mid-year
• High three-digit million euro reduction in pension liabilities and significant positive one-off effect on EBIT expected in the current year from settlement with pilots

Financial performance Earnings position

Revenue and income up significantly

• Increased traffic in both the Lufthansa Group's passenger and freight business
• Revenue, expenses and income are affected by the first-time inclusion of SN Airholding in the group of consolidated companies of the Lufthansa Group

Revenue and income

	Jan. – March	Jan.– March	Change
	2017 in €m	2016 in €m	in %
Traffic revenue	5,808	5,235	10.9
Other revenue	1,883	1,681	12.0
Total revenue	7,691	6,916	11.2
Changes in inventories and work performed by the entity and capitalised	55	31	77.4
Other operating income	506	622	–18.6
Total operating income	8,252	7,569	9.0

• Traffic revenue rises by 10.9 per cent in total to EUR 5.8bn, of which 4.9 percentage points are due to the first-time consolidation of SN Airholding
• In addition to the larger group of consolidated companies, the change in traffic revenue is due to higher volumes (+5.8 per cent), positive exchange rate effects (+1.4 per cent) and lower prices (–1.2 per cent)

• Other revenue up by 12.0 per cent to EUR 1.9bn, largely due to volumes

• Revenue up by a total of 11.2 per cent to EUR 7.7bn

• Other operating income down by 18.6 per cent to EUR 506m, mainly due to lower exchange rate gains
• Total operating income increases by 9.0 per cent to EUR 8.3bn, of which 3.9 percentage points are due to the first-time consolidation of SN Airholding

External revenue share of the business segments in % (as of 31.3.2017)

Expenses also increase

• Operating expenses up by 8.6 per cent to EUR 8.2bn, of which 4.2 percentage points are due to the first-time consolidation of SN Airholding
• Cost of materials and services up by 11.4 per cent to EUR 4.4bn, of which 4.3 percentage points are due to the first-time consolidation of SN Airholding; fuel costs, which are included in the cost of materials and services, are up by 13.0 per cent (5.5 per cent due to the change in the group of consolidated companies); change in fuel expenses also due to price increases (+2.4 per cent), exchange rates (+ 3.5 per cent) and higher volumes (+1.6 per cent); fees and charges up by 8.6 per cent overall to EUR 1.4bn (of which +4.8 per cent due to consolidation changes)
• Staff costs up by 6.3 per cent to EUR 2.1bn; adjusted for changes in the group of consolidated companies, the average headcount increased by 2.3 per cent to 124,707 (128,541 including SN Airholding); without the first-time consolidation of SN Airholding, the increase would have been 4.0 per cent
• Depreciation and amortisation up by 7.7 per cent to EUR 422m, of which 5.7 percentage points are due to the first-time consolidation of SN Airholding; depreciation of aircraft up by 7.6 per cent to EUR 338m, in particular due to the first-time consolidation of SN Airholding
• Other operating expenses up by 3.7 per cent to EUR 1.4bn

Expenses

	Jan.– March 2017 in €m	Jan. – March 2016 in €m	Change in %
Cost of materials and services	4,386	3,936	11.4
of which fuel	1,210	1,071	13.0
of which fees and charges	1,396	1,285	8.6
of which operating lease	23	15	53.3
Staff costs	2,081	1,957	6.3
Depreciation	422	392	7.7
Other operating expenses	1,353	1,305	3.7
Total operating expenses	8,242	7,590	8.6

Positive earnings performance

• Result from operating activities improves by EUR 31m to EUR 10m; without SN Airholding, the result from operating activities would have been EUR 22m higher
• Result from equity investments up by EUR 34m to EUR 6m
• EBIT improves by EUR 65m to EUR 16m, Adjusted EBIT improves by EUR 78m to EUR 25m

Reconciliation with net profit / loss for the period

• Decline of EUR 85m in other financial items to EUR 6m is primarily due to lower (previous year: higher) market values of derivative financial instruments
• Net interest down by 14.9 per cent to EUR –77m
• Result from operating activities (EUR 10m) and financial result (EUR –65m) add up to a loss before income taxes of EUR 55m (previous year: loss of EUR 25m)
• Income tax expense (EUR 4m) and earnings attributable to minority interests (EUR 9m) result in a net loss for the period of EUR 68m (previous year: loss of EUR 8m)

Financial position

• Financial position is affected by the first-time consolidation of SN Airholding
• Cash flow from operating activities up by EUR 546m to EUR 1.6bn, mainly due to the positive change in trade working capital (EUR +387m)
• Change in trade working capital driven by positive business performance; liabilities from unused flight documents – not including SN Airholding – up by 53.0 per cent on the same quarter of the previous year; changes in other assets and liabilities not recognised in profit or loss also improve cash flow from operating activities by EUR 121m
• Gross capital expenditure down by EUR 83m to EUR 557m, capital expenditure on aircraft up by EUR 201 to EUR 678m; cash outflows of EUR 757m are offset by cash and cash equivalents of EUR 200m acquired in the course of the first-time consolidation of SN Airholding
• Net capital expenditure down by EUR 30m to EUR –554m
• Cash outflows of EUR 1.1bn from the purchase and sale of non-current securities and funds
• Net cash outflows from investing and cash management activities up by EUR 878m to EUR 1.6bn
• Free cash flow (cash flow from operating activities less net capital expenditure) up by EUR 516m to EUR 1.1bn
• Net cash inflows from financing activities of EUR 352m relate largely to the issue of a borrower's note loan (EUR 660m) as well as to scheduled capital repayments (EUR 262m) and interest payments (EUR 71m)
• Cash and cash equivalents up by EUR 395m in total to EUR 1.5bn since the beginning of the year
• Internal financing ratio up from 172.2 per cent to 295.9 per cent

Secondary investments

Primary investments

Net assets

• Net assets are affected by the first-time consolidation of SN Airholding
• Total assets up on year-end 2016 by 9.4 per cent to EUR 37.9bn
• Non-current assets rise by 3.9 per cent to EUR 25.5bn; this includes aircraft and reserve engines, up by 3.9 per cent to EUR 15.4bn, of which EUR 273m, or 1.8 per cent, stems from the first-time consolidation of SN Airholding; intangible assets such as goodwill, brand and customer base valued at a total of EUR 163m are also recognised in the course of consolidating SN Airholding
• Derivative financial instruments down by 10.6 per cent to EUR 1.3bn; decline largely due to lower market values of fuel and currency hedges
• Deferred tax assets up by 18.3 per cent to EUR 1.7bn, partly due to higher pension obligations as a result of interest rates
• Current assets up by 22.5 per cent to EUR 12.5bn; alongside the acquisition of SN Airholding (+3.2 per cent), receivables included here up by 20.1 per cent to EUR 5.5bn for seasonal and billing reasons
• Derivative financial instruments fall by 32.2 per cent to EUR 362m, principally due to lower market values of fuel and currency hedges
• Cash and cash equivalents, consisting of current securities and cash-in-hand, up by 36.9 per cent to EUR 5.4bn due to positive free cash flow and to the first-time consolidation of SN Airholding; of this, EUR 1.6bn has already been invested as part of the change to the system of transitional benefits for cabin crew at Lufthansa German Airlines, but it has not yet been transferred to the trust fund
• Non-current assets as proportion of total assets down by 3.5 percentage points to 67.1 per cent

Calculation of net indebtedness

	31 March 2017	31 Dec. 2016	Change
	in €m	in €m	in %
Liabilities to banks	2,339	1,775	31.8
Bonds	1,006	1,009	–0.3
Other non-current borrowing	3,938	3,791	3.9
	7,283	6,575	10.8
Other bank borrowing	31	63	–50.8
Group indebtedness	7,314	6,638	10.2
Cash and cash equivalents	1,657	1,256	31.9
Securities	3,732	2,681	39.2
Net indebtedness	1,925	2,701	–28.7
Pension provisions	8,656	8,364	3.5
Net indebtedness and pensions	10,581	11,065	–4.4

• Equity down by 4.7 per cent overall to EUR 6.8bn due to the lower market values of hedging transactions as well as to the higher valuation of pension provisions, recognised directly in equity, compared with year-end 2016 and despite a net result close to zero
• Equity ratio down by 2.7 percentage points to 17.9 per cent as total assets rose significantly at the same time
• Non-current liabilities and provisions up by 6.7 per cent on year-end 2016 to EUR 17.6bn, of which 2.2 percentage points are due to the first-time consolidation of SN Airholding
• Pension provisions up by 3.5 per cent to EUR 8.7bn, mainly due to fall in discount rate from 2.1 per cent to 2.0 per cent

Financial performance

• Borrowing increases by 11.5 per cent to EUR 6.5bn due to a new borrower's note loan (EUR 660m); additional debt from SN Airholding is offset by reclassifications due to maturities
• Current liabilities and provisions up by 22.6 per cent on year-end 2016 to EUR 13.5bn, of which 5.1 percentage points are due to the first-time consolidation of SN Airholding
• Other provisions down by 7.1 per cent to EUR 990m
• Liabilities from unused flight documents increase due to higher advance bookings, as well as for seasonal and billing reasons, by 61.9 per cent to EUR 4.9bn, of which 9.2 percentage points are due to the first-time consolidation of SN Airholding
• Net debt down on year-end 2016 by 28.7 per cent to EUR 1.9bn

Reconciliation of results

	Jan. – March 2017		Jan. – March 2016
in €m	Income statement	Reconciliation Adjusted EBIT	Income statement	Reconciliation Adjusted EBIT
Total revenue	7,691	–	6,916	–
Changes in inventories	55	–	31	–
Other operating income	506	–	622	–
of which book gains		–24		–6
of which write-ups on capital assets		0*		0*
of which badwill		0*		0*
Total operating income	8,252	–24	7,569	–6
Cost of materials and services	–4,386	–	–3,936	–
Staff costs	–2,081	–	–1,957	–
of which past service costs / settlement		32		0*
Depreciation	–422		–392
of which impairment losses		0*		1
Other operating expenses	–1,353		–1,305
of which impairment losses on assets held for sale		0*		0*
of which expenses incurred from book losses		1		1
Total operating expenses	–8,242	33	–7,590	2
Profit / loss from operating activities	10	–	–21	–
Result from equity investments	6	–	–28	–
EBIT	16		–49
Total amount of reconciliation Adjusted EBIT		9		–4
Adjusted EBIT		25		–53
Write-downs (included in profit from operating activities)	422	–	392	–
Write-downs on financial investments, securities and assets held for sale	0*	–	0*	–
EBITDA	438	–	343	–

* Rounded below EUR 1m.

Business segments

• Changes in the group of consolidated companies at business segments implemented at the beginning of financial year 2017 in line with new internal organisation; now divided according to strategic pillars into the Network Airlines, Point-to-Point and Aviation Services business segments
• Eurowings, Brussels Airlines and the equity investment in SunExpress removed from Passenger Airline Group segment and integrated into separate Point-to-Point segment
• Lufthansa Passenger Airlines renamed Lufthansa German Airlines
• Operating segments in Aviation Services unchanged; Lufthansa Aviation Training, which was consolidated in the Passenger Airline Group segment, was allocated to the Additional Businesses and Group Functions
• Figures for the previous year adjusted accordingly

Network Airlines

• Cooperation with Cathay Pacific Airways agreed
• Traffic revenue up by 4.3 per cent to EUR 4.5bn due to higher volumes (+3.3 per cent), positive exchange rate effects (+1.4 per cent) and lower prices (–0.4 per cent)
• Other operating income down by 34.9 per cent overall to EUR 194m, mainly due to lower exchange rate gains (–53.1 per cent)
• Operating expenses up by 4.3 per cent to EUR 5.2bn
• Cost of materials and services up by 4.6 per cent to EUR 3.1bn, mainly due to greater fuel expenses as a result of pricing (+3.3 per cent) and to higher costs for purchased MRO services (+14.4 per cent)
• At a 4.7 per cent lower headcount, staff costs fall by 2.7 per cent to EUR 1.0bn; the main driver is the reallocation of staff to the Additional Businesses and Group Functions segment; in turn, other operating expenses also increase

Key figures Network Airlines

		Jan. – March 2017	Jan. – March 20162)	Change in %
Revenue	€m	4,929	4,705	4.8
of which with companies of the Lufthansa Group	€m	145	161	–9.9
EBIT	€m	–53	38
Adjusted EBIT	€m	–40	36
EBITDA1)	€m	264	340	–22.4
Segment capital expenditure	€m	564	473	19.2
Employees as of 31.3.	number	49,294	51,708	–4.7
Passengers	thousands	19,684	19,017	3.5
Flights	number	188,889	193,983	–2.6
Available seat-kilometres	millions	58,831	58,121	1.2
Revenue seat-kilometres	millions	45,009	43,567	3.3
Passenger load factor	%	76.5	75.0	1.5 pts
Yields	€ Cent	10.0	9.9	1.0

1) Before profit/loss transfer from other intra-Group companies.

2) Previous year's figures have been adjusted, in particular due to the restructuring of business segments.

• Depreciation and amortisation stable year on year at EUR 301m
• Other operating expenses up by a total of 15.4 per cent to EUR 818m, partly due to the process services provided by Central Group Functions to the Lufthansa German Airlines, SWISS and Austrian Airlines Network Airlines in the course of reallocating staff; personnel costs fall in turn
• EBIT down by EUR 91m to EUR –53m, Adjusted EBIT down by EUR 76m to EUR –40m
• Segment capital expenditure up by 19.2 per cent to EUR 564m, primarily for new aircraft

Development of traffic regions

Network Airlines

		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 2017	Change in %	Jan.– March 2017	Change in %	Jan.– March 2017	Change in %	Jan.– March 2017	Change in %	Jan.– March 2017	Change in pts
Europe	1,813	3.7	14,903	3.6	16,191	0.4	11,367	3.2	70.2	1.9
America	1,434	5.0	2,199	1.7	21,951	2.3	16,885	2.0	76.9	–0.3
Asia/Pacific	854	6.1	1,507	3.8	14,543	–0.2	12,066	4.4	83.0	3.7
Middle East/ Africa	381	0.8	1,075	5.9	6,146	3.2	4,691	5.9	76.3	1.9
Total	4,482	4.3	19,684	3.5	58,831	1.2	45,009	3.3	76.5	1.5

Business segments

Lufthansa German Airlines

Key figures Lufthansa German Airlines1)

		Jan. – March 2017	Jan. – March 20162)	Change in %
Revenue	€m	3,482	3,350	3.9
EBIT	€m	–34	54
Adjusted EBIT	€m	–12	45
EBITDA	€m	168	268	–37.3
Employees as of 31.3.	number	33,210	36,657	–9.4
Passengers	thousands	13,711	13,338	2.8
Flights	number	123,579	127,348	–3.0
Available seat-kilometres	millions	41,237	41,568	–0.8
Revenue seat-kilometres	millions	31,842	31,248	1.9
Passenger load factor	%	77.2	75.2	2.0 pts

1) Including regional partners.

2) Previous year's figures have been adjusted, in particular due to the restructuring of business segments.

• Airbus A350 fleet at Munich hub grows to two aircraft
• Terminal 2 at Munich Airport voted best terminal in the world at the World Airport Awards 2017 organised by the Skytrax Institute in London
• Revenue up by 3.9 per cent to EUR 3.5bn
• Operating expenses up by 4.2 per cent to EUR 3.7bn
• Key drivers were MRO expenses, which rose by 16.9 per cent to EUR 374m; fuel costs go up by 2.2 per cent to EUR 693m
• EBIT down by EUR 88m to EUR –34m, Adjusted EBIT down by EUR 57m to EUR –12m; EBIT includes valuation effects for pensions for cabin crew that are eliminated in the reconciliation to Adjusted EBIT

Key figures SWISS1)

		Jan. – March 2017	Jan. – March 20162)	Change in %
Revenue	€m	1,061	984	7.8
EBIT	€m	37	21	76.2
Adjusted EBIT	€m	35	21	66.7
EBITDA	€m	106	83	27.7
Employees as of 31.3.	number	9,499	8,902	6.7
Passengers	thousands	3,928	3,697	6.3
Flights	number	37,560	38,924	–3.5
Available seat-kilometres	millions	12,594	11,665	8.0
Revenue seat-kilometres	millions	9,749	8,845	10.2
Passenger load factor	%	77.4	75.8	1.6 pts

1) Including Edelweiss Air. Further information on SWISS can be found at www.swiss.com. 2) Previous year's figures have been adjusted, in particular due to the restructuring of business segments.

• Fleet renewal continues; first of a total of eight Bombardier C Series 100s stationed in Geneva; remaining options for five Bombardier C Series 100s converted to larger C Series 300s; SWISS will therefore get ten C Series 100s and 20 C Series 300s altogether
• Revenue up due to volumes by 7.8 per cent to EUR 1.1bn
• Operating expenses up by 5.4 per cent to EUR 1.1bn
• MRO expenses down by 14.5 per cent to EUR 71m; fuel costs up by 8.0 per cent to EUR 216m
• EBIT up by 76.2 per cent to EUR 37m, Adjusted EBIT up by 66.7 per cent to EUR 35m

Austrian Airlines

Key figures Austrian Airlines1)

		Jan. – March 2017	Jan. – March 2016	Change in %
Revenue	€m	440	400	10.0
EBIT	€m	–55	–29	–89.7
Adjusted EBIT	€m	–59	–30	–96.7
EBITDA	€m	–25	–2	–1,150.0
Employees as of 31.3.	number	6,585	6,149	7.1
Passengers	thousands	2,189	2,053	6.6
Flights	number	29,808	28,909	3.1
Available seat-kilometres	millions	5,087	4,926	3.3
Revenue seat-kilometres2)	millions	3,486	3,502	–0.5
Passenger load factor2)	%	68.5	71.1	–2.6 pts

1) Further information on Austrian Airlines can be found at www.austrian.com.

2) Previous year's figures have been adjusted.

• Austrian parliament votes to halve ticket tax from 2018
• Three out of five A320s on wet lease from Air Berlin put into service
• Revenue up by 10.0 per cent to EUR 440m, partly due to higher traffic revenue
• Operating expenses up by 6.7 per cent to EUR 527m
• Key drivers were MRO expenses, which rose by 62.2 per cent to EUR 60m; fuel costs of EUR 80m are at the same level as last year
• EBIT down by 89.7 per cent to EUR –55m, Adjusted EBIT down by 96.7 per cent to EUR –59m
• Decline mainly due to positive one-off effect of new, long-term tenancy agreement at Vienna Airport in the previous year

Point-to-Point

Key figures Point-to-Point

		Jan. – March 2017	Jan. – March 2016	Change in %	of which SN Group
Revenue	€m	683	377	81.2	261
of which with companies of the Lufthansa Group	€m	–	–	–	–
EBIT	€m	–133	–124	–7.3	–43
Adjusted EBIT	€m	–132	–124	–6.5	–43
EBITDA1)	€m	–89	–111	19.8	–22
Segment capital expenditure	€m	121	109	11.0	31
Employees as of 31.3.	number	7,048	3,221	118.8	3,549
Passengers	thousands	5,548	3,303	68.0	1,745
Flights	number	55,169	36,346	51.8	17,981
Available seat-kilometres	millions	9,925	4,670	112.5	3,888
Revenue seat-kilometres	millions	7,337	3,454	112.4	2,806
Passenger load factor	%	73.9	74.0	–0.1 pts	72.2 pts
Yields	€ Cent	9.0	10.9	–17.6	8.6

1) Before profit/loss transfer from other intra-Group companies.

• Deutsche Lufthansa AG takes over the remaining 55 per cent of the shares in SN Airholding SA/NV as of 9 January 2017
• 20 out of a total of 33 aircraft on wet lease from Air Berlin put into service
• Fuel costs included here up by 123.4 per cent to EUR 143m
• EBIT down by 7.3 per cent to EUR –133m, Adjusted EBIT down by 6.5 per cent to EUR –132m

• Operating expenses up by 74.2 per cent to EUR 838m

• Earnings partly burdened by the first-time full consolidation of SN Airholding and project costs
• Revenue up by 81.2 per cent to EUR 683m, largely due to higher volumes and the consolidation of Brussels Airlines

Development of traffic regions

Point-to-Point

		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 2017	Change in %	Jan.– March 2017	Change in %	Jan.– March 2017	Change in %	Jan.– March 2017	Change in %	Jan.– March 2017	Change in pts
Short-haul	487	45.3	4,994	58.2	6,040	68.3	4,118	69.1	68.2	0.3
Long-haul	172	319.5	554	277.0	3,885	259.0	3,220	215.9	82.9	–11.3
Total	659	75.3	5,548	68.0	9,925	112.5	7,337	112.4	73.9	–0.1

Business segments

Aviation Services

Logistics

Key figures Logistics

		Jan. – March 2017	Jan.– March 2016	Change in %
Revenue	€m	569	480	18.5
of which with companies of the
Lufthansa Group	€m	7	7	0.0
EBIT	€m	33	–19
Adjusted EBIT	€m	33	–19
EBITDA1)	€m	53	2	2,550.0
Segment capital expenditure	€m	6	6	0.0
Employees as of 31.3.	number	4,500	4,543	–0.9
Available cargo tonne-kilometres2)	millions	2,920	2,839	2.9
Revenue cargo tonne-kilometres2)	millions	2,046	1,925	6.3
Cargo load factor2)	%	70.1	67.8	2.3 pts

1) Before profit/loss transfer from other intra-Group companies.

2) Previous year's figures have been adjusted.

Development of traffic regions

Development of traffic regions Lufthansa Cargo
		Net traffic revenue in €m external revenue		Available cargo tonne kilometres in millions		Revenue cargo tonne kilometres in millions		Cargo load factor in %
	Jan.– March 2017	Change in %	Jan.– March 2017	Change in %	Jan.– March 2017	Change in %	Jan.– March 2017	Change in pts
Europe	46	9.5	156	–1.5	81	1.0	51.6	1.3
America	226	17.1	1,304	2.3	894	6.2	68.5	2.6
Asia/Pacific	218	19.8	1,161	5.8	932	9.4	80.2	2.7
Middle East/Africa	44	0.0	298	–2.8	140	–7.8	47.1	–2.5

Total 534 15.8 2,920 2.9 2,046 6.3 70.1 2.3

• Successful start of partnership with Cathay Pacific Cargo
• Expansion of Lufthansa Cargo Cool Center begins
• Strategic cost-cutting programme underway; first activities successfully completed
• Revenue up by 18.5 per cent to EUR 569m, largely due to volumes and pricing
• Other operating income up by 15.4 per cent to EUR 15m
• Total operating income up by 18.5 per cent to EUR 584m
• Operating expenses up by 6.9 per cent to EUR 555m, primarily due to volumes and fuel-driven increase in cost of materials and services
• EBIT and Adjusted EBIT both up by EUR 52m to EUR 33m
• Segment capital expenditure stable year on year at EUR 6m

MRO

Key figures MRO

		Jan. – March 2017	Jan. – March 2016	Change in %
Revenue	€m	1,455	1,290	12.8
of which with companies of the Lufthansa Group	€m	477	406	17.5
EBIT	€m	138	87	58.6
Adjusted EBIT	€m	137	87	57.5
EBITDA*	€m	166	113	46.9
Segment capital expenditure	€m	47	35	34.3
Employees as of 31.3.	number	21,051	20,574	2.3

* Before profit/loss transfer from other intra-Group companies.

• New customer contracts signed with total volume of EUR 940m
• Number of aircraft serviced under exclusive contracts up on year-end 2016 by 0.6 per cent to 4,155
• Revenue up by 12.8 per cent to EUR 1.5bn due to volumes and exchange rates
• Other operating income up by 67.4 per cent to EUR 77m
• Total operating income up by 14.7 per cent to EUR 1.5bn
• Operating expenses up by 11.7 per cent to EUR 1.4bn due to higher volumes and expenses for product developments, growth projects and expansion of group structure
• EBIT up by 58.6 per cent to EUR 138m, Adjusted EBIT up by 57.5 per cent to EUR 137m
• The increase is due to stronger demand for aircraft overhauls, successful cost-cutting measures and exchange rate movements
• Segment capital expenditure up by 34.3 per cent to EUR 47m

Catering

Key figures Catering

		Jan. – March 2017	Jan.– March 2016	Change in %
Revenue	€m	769	719	7.0
of which with companies of the Lufthansa Group	€m	149	146	2.1
EBIT	€m	–2	0*
Adjusted EBIT	€m	–2	–4	50.0
EBITDA*	€m	14	18	–22.2
Segment capital expenditure	€m	13	13	0.0
Employees as of 31.3.	number	35,482	35,120	1.0

* Before profit/loss transfer from other intra-Group companies.

• Pilot plant for centralised production in the Czech Republic launched as core element of transformation
• Successful start for new in-flight sales model at LATAM in South America
• Revenue up by 7.0 per cent to EUR 769m due to volumes and exchange rates
• Other operating income down by 47.6 per cent to EUR 11m, mainly as a result of lower exchange rate gains and a positive one-off effect in the previous year
• Total operating income up by 5.4 per cent to EUR 780m
• Operating expenses up by 5.9 per cent to EUR 784m, mainly due to volumes and exchange rates
• EBIT down by EUR 2m to EUR 2m, largely due to higher transformation expenses, Adjusted EBIT improves by EUR 2m to EUR –2m
• Segment capital expenditure remains stable year on year at EUR 13m

Interim management report

Business segments Opportunities and risk report Supplementary report Forecast

Additional Businesses and Group Functions

Key figures Additional Businesses and Group Functions

		Jan. – March 2017	Jan.– March 20162)	Change in %
Revenue	€m	107	104	2.9
of which with companies of the Lufthansa Group	€m	43	39	10.3
EBIT	€m	0*	–19
Adjusted EBIT	€m	–6	–18	66.7
EBITDA1)	€m	21	28	–25.0
Segment capital expenditure	€m	5	8	–37.5
Employees as of 31.3.	number	11,166	6,728	66.0

1) Before profit/loss transfer from other intra-Group companies.

2) Previous year's figures have been adjusted due to the restructuring of business segments.

• Operating income up by 13.2 per cent to EUR 684m, mainly due to exchange rates
• Operating expenses up by 9.6 per cent to EUR 684m, mainly due to exchange rates
• EBIT improves by EUR 19m to EUR 0m, Adjusted EBIT up by EUR 12m to EUR –6m
• Exchange rate gains improve earnings for Group Functions

Opportunities and risk report

Compared with the detailed description in the Annual Report 2016, the opportunities and risks for the Group have materialised and developed as follows, particularly concerning macroeconomic opportunities and risks due to the uncertain environment:

• Uncertain outcome of Brexit negotiations may impede access to UK market; traffic rights between the EU and UK may have to be completely renegotiated, which may lead to stronger growth and competition from UK airlines; however, there is also a chance that companies and institutions increasingly move from Britain to Germany, accompanied by stronger demand from the Lufthansa Group's home markets
• Increasing protectionism and efforts by various governments to regulate or restrict free markets, may lead to slower growth or even to contraction scenarios
• The Lufthansa Group has drawn up comprehensive, detailed plans and tests for pandemics, appointed a new Pandemic Officer and is well prepared for any such scenarios, meaning that the risks resulting from pandemic diseases have been reduced

Supplementary report

Since 31 March 2017, no events of particular importance have occurred that would be expected to have a significant influence on the net assets, financial and earnings position that have not already been reported.

Forecast

After a positive performance in the first quarter, the Lufthansa Group is still expecting revenue to be significantly higher and Adjusted EBIT to be slightly lower in financial year 2017 as compared with the previous year.

There have been no significant changes in the main earnings variables and parameters since the original forecast was published in the Annual Report. However, the Executive Board does not currently see a risk of strikes with a potential adverse effect on earnings.

There have been no changes to the forecasts for the operating segments or to the joint operating performance indicators for the Network Airlines and Point-to-Point segments compared with the disclosures in the Annual Report 2016.

Consolidated income statement January – March 2017

in €m	Jan. – March 2017	Jan.– March 2016
Traffic revenue	5,808	5,235
Other revenue	1,883	1,681
Total revenue	7,691	6,916
Changes in inventories and work performed by entity and capitalised	55	31
Other operating income	506	622
Cost of materials and services	–4,386	–3,936
Staff costs	–2,081	–1,957
Depreciation, amortisation and impairment	–422	–392
Other operating expenses	–1,353	–1,305
Profit / loss from operating activities	10	–21
Result of equity investments accounted for using the equity method	5	–31
Result of other equity investments	1	3
Interest income	17	9
Interest expenses	–94	–76
Other financial items	6	91
Financial result	–65	–4
Profit / loss before income taxes	–55	–25
Income taxes	–4	22
Profit / loss after income taxes	– 59	– 3
Profit/loss attributable to minority interests	–9	–5
Net profit / loss attributable to shareholders of Deutsche Lufthansa AG	–68	–8
Basic/diluted earnings per share in €	–0.15	–0.02

Interim financial statements

Consolidated income statement Statement of comprehensive income

Statement of comprehensive income January – March 2017

in €m	Jan.– March 2017	Jan.– March 2016
Profit /loss after income taxes	–59	–3
Other comprehensive income
Other comprehensive income with subsequent reclassification to the income statement
Differences from currency translation	–9	–54
Subsequent measurement of available-for-sale financial assets	56	1
Subsequent measurement of cash flow hedges	–333	48
Other comprehensive income from investments accounted for using the equity method	2	–3
Other expenses and income recognised directly in equity	–4	–2
Income taxes on items in other comprehensive income	69	–5
Other comprehensive income without subsequent reclassification to the income statement
Revaluation of defined-benefit pension plans	–129	–1,355
Income taxes on items in other comprehensive income	76	351
Other comprehensive income after income taxes	–272	–1,019
Total comprehensive income	–331	–1,022
Comprehensive income attributable to minority interests	–11	–3
Comprehensive income attributable to shareholders of Deutsche Lufthansa AG	–342	–1,025

Consolidated balance sheet as of 31 March 2017

Assets
in €m	31.3.2017	31.12.2016	31.3.2016
Intangible assets with an indefinite useful life*	1,379	1,265	1,255
Other intangible assets	518	472	438
Aircraft and reserve engines	15,382	14,798	14,697
Repairable spare parts for aircraft	1,715	1,604	1,367
Property, plant and other equipment	2,199	2,199	2,191
Investments accounted for using the equity method	519	516	502
Other equity investments	211	212	181
Non-current securities	25	23	14
Loans and receivables	508	513	506
Derivative financial instruments	1,318	1,474	1,112
Deferred charges and prepaid expenses	12	11	15
Effective income tax receivables	6	4	19
Deferred tax assets	1,672	1,413	1,602
Non-current assets	25,464	24,504	23,899
Inventories	857	816	750
Trade receivables and other receivables	5,490	4,570	4,732
Derivative financial instruments	362	534	293
Deferred charges and prepaid expenses	213	167	184
Effective income tax receivables	38	37	61
Securities	3,732	2,681	2,179
Cash and cash equivalents	1,657	1,256	1,208
Assets held for sale	133	132	5
Current assets	12,482	10,193	9,412
Total assets	37,946	34,697	33,311

* Including goodwill.

Interim financial statements

Consolidated balance sheet

Shareholders' equity and liabilities

in €m	31.3.2017	31.12.2016	31.3.2016
Issued capital	1,200	1,200	1,189
Capital reserve	222	222	187
Retained earnings	3,272	1,549	2,306
Other neutral reserves	2,092	2,313	1,069
Net profit/loss	–68	1,776	–8
Equity attributable to shareholders of Deutsche Lufthansa AG	6,718	7,060	4,743
Minority interests	92	89	76
Shareholders' equity	6,810	7,149	4,819
Pension provisions	8,656	8,364	8,076
Other provisions	594	503	508
Borrowings	6,482	5,811	4,784
Other financial liabilities	125	124	124
Advance payments received, deferred income and other non-financial liabilities	1,271	1,246	1,211
Derivative financial instruments	56	54	239
Deferred tax liabilities	456	437	357
Non-current provisions and liabilities	17,640	16,539	15,299
Other provisions	990	1,066	1,011
Borrowings	801	764	1,296
Trade payables and other financial liabilities	5,133	4,689	4,852
Liabilities from unused flight documents	4,922	3,040	4,020
Advance payments received, deferred income and other non-financial liabilities	972	875	946
Derivative financial instruments	220	185	957
Effective income tax obligations	458	390	111
Liabilities related to assets held for sale	–	–	–
Current provisions and liabilities	13,496	11,009	13,193
Total shareholders' equity and liabilities	37,946	34,697	33,311

Consolidated statement of changes in shareholders' equity as of 31 March 2017

in €m	Issued capital	Capital reserve	Fair value measure ment of financial instru ments	Currency differ ences	Reva luation reserve (due to business combina tions)	Other neutral reserves	Total other neutral reserves	Retained earnings	Net profit/ loss	Equity attrib utable to share holders of Deutsche Lufthansa AG	Minority interests	Total share holders' equity
As of 31.12.2015	1,189	187	–76	604	236	318	1,082	1,612	1,698	5,768	77	5,845
Capital increases /reductions	–	–	–	–	–	–	–	–	–	–	1	1
Reclassifications	–	–	–	–	–	–	–	1,698	–1,698	–	–	–
Dividends to Lufthansa shareholders / minority interests	–	–	–	–	–	–	–	–	–	–	–5	–5
Transactions with minority interests	–	–	–	–	–	–	–	–	–	–	–	–
Consolidated net profit/loss attributable to Lufthansa shareholders / minority interests	–	–	–	–	–	–	–	–	–8	–8	5	–3
Other expenses and income recognised directly in equity	–	–	44	–54	–	–3	–13	–1,004	–	–1,017	–2	–1,019
As of 31.3.2016	1,189	187	–32	550	236	315	1,069	2,306	–8	4,743	76	4,819
As of 31.12.2016	1,200	222	1,081	670	236	326	2,313	1,549	1,776	7,060	89	7,149
Capital increases /reductions	–	–	–	–	–	–	–	–	–	–	–	–
Reclassifications	–	–	–	–	–	–	–	1,776	–1,776	–	–	–
Dividends to Lufthansa shareholders / minority interests	–	–	–	–	–	–	–	–	–	–	–8	–8
Transactions with minority interests	–	–	–	–	–	–	–	–	–	–	–	–
Consolidated net profit/loss attributable to Lufthansa shareholders / minority interests	–	–	–	–	–	–	–	–	–68	–68	9	–59
Other expenses and income recognised directly in equity	–	–	–208	–9	–	–4	–221	–53	–	–274	2	–272
As of 31.3.2017	1,200	222	873	661	236	322	2,092	3,272	–68	6,718	92	6,810

Interim financial statements

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

Consolidated cash flow statement January – March 2017

in €m	Jan.– March 2017	Jan. – March 20162)
Cash and cash equivalents 1.1.	1,138	996
Net profit/loss before income taxes	–55	–25
Depreciation, amortisation and impairment losses on non-current assets (net of reversals)	421	392
Depreciation, amortisation and impairment losses on current assets (net of reversals)	7	25
Net proceeds on disposal of non-current assets	–23	–5
Result of equity investments	–6	28
Net interest	77	67
Income tax payments /reimbursements	–27	–15
Significant non-cash-relevant expenses /income	–12	–123
Change in trade working capital	1,154	767
Change in other assets / shareholders' equity and liabilities	112	–9
Cash flow from operating activities	1,648	1,102
Capital expenditure for property, plant and equipment and intangible assets	–747	–637
Capital expenditure for financial investments	–8	–1
Additions /loss to repairable spare parts for aircraft	–110	–8
Proceeds from disposal of non-consolidated equity investments	0*	0*
Proceeds from disposal of consolidated equity investments	0*	0*
Cash outflows for acquisitions of non-consolidated equity investments	0*	–2
Cash outflows for acquisitions of consolidated equity investments	198	0*
Proceeds from disposal of intangible assets, property, plant and equipment and other financial investments	53	64
Interest income	57	57
Dividends received	3	3
Net cash from/used in investing activities	–554	–524
Purchase of securities /fund investments	–1,083	–276
Disposal of securities /fund investments	27	68
Net cash from/used in investing and cash management activities	–1,610	–732
Capital increase	–	–
Transactions by minority interests	–	1
Non-current borrowing	693	5
Repayment of non-current borrowing	–262	–204
Dividends paid	–8	–5
Interest paid	–71	–57
Net cash from/used in financing activities	352	–260
Net increase/decrease in cash and cash equivalents	390	110
Changes due to currency translation differences	5	–10
Cash and cash equivalents 31.3.1)	1,533	1,096
Securities	3,732	2,179
Liquidity	5,265	3,275
Net increase/decrease in total liquidity	1,446	285

* Rounded below EUR 1m.

1) Excluding fixed-term deposits with terms of three to twelve months (2017: EUR 124m, 2016: EUR 112m).

2) Previous year's figures have been adjusted.

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 2017 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 2017 have been applied. The interim financial statements as of 31 March 2017 have been prepared using the same accounting policies as those on which the preceding consolidated financial statements as of 31 December 2016 were based. The standards and interpretations mandatory for the first time as of 1 January 2016 did not have a significant effect on the Group's net assets, financial and earnings position.

Changes in the group of consolidated companies in the period 1.4.2016 to 31.3.2017

Name, registered office	Additions	Disposals	Reason
Network Airlines segment
Lufthansa Leasing Austria GmbH & Co. OG Nr. 31, Salzburg, Austria1)	4.4.16		Established
Sylvaner Leasing Co. Ltd., Tokyo, Japan	20.4.16		Established
SMFL Y Lease Nin-i-Kumiai Two, Tokyo, Japan	20.4.16		Established
Yamasa Aircraft LH 13 Kumiai, Okayama, Japan	26.4.16		Established
Dunkel Leasing Co., Ltd., Tokyo, Japan	27.7.16		Established
Helles Leasing Co., Ltd, Tokyo, Japan	27.7.16		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 33, Salzburg, Austria	20.9.16		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 32, Salzburg, Austria	20.9.16		Established
TI DC Leasing Co., Ltd., Tokyo, Japan	20.10.16		Established
TI DD Leasing Co., Ltd., Tokyo, Japan	20.10.16		Established
Lufthansa Aviation Training GmbH, Hallbergmoos2)	27.10.16		Established
Auslese Leasing Co., Ltd., Tokyo, Japan	9.12.16		Established
Eifel Leasing Co., Ltd. Tokyo, Japan	9.12.16		Established
Schloss Leasing Co., Ltd., Tokyo, Japan	9.12.16		Established
NBB Harz Lease Co., Ltd., Tokyo, Japan	15.12.16		Established
NBB Saxon Lease Co., Ltd., Tokyo, Japan	15.12.16		Established
Evans Leasing Co., Ltd., Tokyo, Japan	20.12.16		Established
Lufthansa Leasing Austria GmbH & Co. OG Nr. 6, Salzburg, Austria		13.6.16	Merger
A319 LDA-LDB-LDC Ltd., George Town, Grand Cayman, Cayman Islands		30.6.16	Liquidation
Lufthansa Leasing Austria GmbH & Co. OG Nr. 7, Salzburg, Austria		18.7.16	Merger
SBL Beta Co. Ltd., Tokyo, Japan		29.11.16	Liquidation
SBL Gamma Co. Ltd, Tokyo, Japan		29.11.16	Liquidation
Crossbow Finance Limited, Grand Cayman, Cayman Islands		7.12.16	Liquidation
LHAMIS LIMITED, Dublin, Ireland		26.1.17	Merger
LHAMIW LIMITED, Dublin, Ireland		26.1.17	Merger
Common Ground CGN GmbH, Frankfurt/Main		24.2.17	Discontinuation of business activities
Lufthansa Leasing Austria GmbH & Co. OG Nr. 4		17.3.17	Merger
Point-to-Point segment
Brussels Airlines NV/SA, Brussels, Belgium	9.1.17		Acquisition of shares
SN Airholding SA/NV, Brussels, Belgium	9.1.17		Acquisition of shares

Interim financial statements

Notes

Changes in the group of consolidated companies in the period 1.4.2016 to 31.3.2017

Name, registered office	Additions	Disposals	Reason
Logistics segment
time:matters Holding GmbH, Neu-Isenburg	8.8.16		Acquisition of shares
time:matters GmbH, Neu-Isenburg	8.8.16		Acquisition of shares
time:matters Spare Parts Logistics GmbH, Neu-Isenburg	8.8.16		Acquisition of shares
LHAMIC LIMITED, Dublin, Ireland		26.1.17	Merger
Catering segment
LSG Sky Chefs Czechia spol. s.r.o., Bor, Czech Republic	10.11.16		Established
Retail in Motion Latin America SpA, Santiago de Chile, Chile	1.3.17		Established
41/42 Bartlett (Pty) Ltd., Johannesburg, South Africa		26.8.16	Liquidation
Caterair Taiwan In-Flight Services, Inc., Taipei, Taiwan		30.9.16	Liquidation
Additional Businesses and Group Functions segment
Lufthansa Malta Finance Holding Limited, St. Julians, Malta	14.4.16		Established
Lufthansa Malta Corporate Finance Limited, St. Julians, Malta	14.4.16		Established
Lufthansa Malta Working Capital Solutions Limited, St. Julians, Malta	14.4.16		Established

1) As part of the Lufthansa Group's restructuring, the company will be assigned to the Point-to-Point segment from 2017.

2) As part of the Lufthansa Group's restructuring, the company will be assigned to the Additional Businesses and Group Functions segment from 2017.

Deutsche Lufthansa AG acquired the remaining 55 per cent of the shares in SN Airholding SA/NV with effect from 9 January 2017, and is therefore the sole shareholder of the Brussels Airlines group. From this point onwards, the company will be fully consolidated in the Lufthansa Group. The acquisition is based on the purchase and option agreement dating from 2008. The option was exercised on the basis of a new agreement between the previous shareholders and Lufthansa, dated 15 December 2016, which set the strike price for the remaining shares at EUR 2.6m. The acquisition of SN Airholding will strengthen the new Point-to-Point operating segment from 2017, see also "Segment information chapter 8" on p. 23. The following table shows the main assets and liabilities of SN Airholding immediately before and after the acquisition date: Since the acquisition took place in the current quarter, these amounts are based on a provisional valuation as of the acquisition date. All of the assets and liabilities as well as the calculation of goodwill are therefore only provisional.

Balance sheet SN group

Before acquisition	After acquisition
351	486
	73
	37
	21
364	366
211	211
154	155
715	852
–101	3
391	411
247	244
425	438
81	80
715	852

* Or purchase price.

Goodwill is determined as the difference between the acquisition costs incurred of EUR 2.6m (the shares acquired in the past were already measured with a market value of EUR 0, which corresponded to the former carrying amount) and the net worth according to purchase price allocation of EUR –70.8m.

SN Airholding's contribution from first-time consolidation to net profit/ loss for the period is EUR –60,2m.

The other changes to the group of consolidated companies had no significant effects on the Group's net assets, financial and earnings position. The individual changes compared with year-end 2016 and 31 March 2016 are shown in the table on p. 18.

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

Assets held for sale

in €m	31.3.2017	31.12.2016	31.3.2016
Assets
Aircraft and reserve engines	128	127	–
Financial assets	–	–	–
Other assets	5	5	5
Equity / liabilities associated with assets held for sale
Equity	–	–	–
Liabilities	–	–	–

Detailed comments on the income statement, the balance sheet, the cash flow statement and the segment reporting can also be found in the interim Group management report on p. 1–11.

3) Seasonality

The Group's business is mainly exposed to seasonal effects via the Network Airlines and Point-to-Point segments. 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

Contingent liabilities

in €m	31.3.2017	31.12.2016
From guarantees, bills of exchange and cheque guarantees	899	909
From warranty contracts	658	733
From providing collateral for third-party liabilities	36	35
	1,593	1,677

Provisions for other contingent liabilities were not made because an outflow of resources was not sufficiently probable. The potential financial effect of these provisions on the result would have been EUR 111m (as of 31.12.2016: EUR 103m).

At the end of March 2017, there were order commitments of EUR 15.2bn for capital expenditure on property, plant and equipment and intangible assets. As of 31 December 2016, the order commitments came to EUR 15.1bn.

Contracts for the sale of aircraft signed as of 31 December 2016 yielded profits of EUR 5m and cash receipts of EUR 6m by 31 March 2017.

5) Financial instruments and financial liabilities

Financial instruments

The following table shows financial assets and liabilities held at fair value by level of fair value hierarchy. The levels are defined as follows:

Level 1: Financial instruments traded on active markets, the quoted prices for which are taken for measurement unchanged.

Level 2: Measurement is made by means of valuation methods with parameters derived directly or indirectly from observable market data.

Level 3: Measurement is made by means of valuation methods with parameters not based exclusively on observable market data.

Interim financial statements

Notes

Assets 31.3.2017

in €m	Level 1	Level 2	Level 3	Total
Financial assets at fair value through profit and loss
Financial derivatives classified as held for trading	–	324	–	324
Total financial assets through profit and loss	–	324	–	324
Derivative financial instruments which are an effective part of a hedging relationship	–	1,356	–	1,356
Available-for-sale financial assets
Equity instruments	224	106	–	330
Debt instruments	–	3,421	–	3,421
Total available-for-sale financial assets	224	3,527	–	3,751
Total assets	224	5,207	–	5,431

Liabilities 31.3.2017

in €m	Level 1	Level 2	Level 3	Total
Derivative financial instruments at fair value through profit or loss	–	56	–	56
Derivative financial instruments which are an effective part of a hedging relationship	–	220	–	220
Total liabilities	–	276	–	276

As of 31 December 2016, the fair value hierarchy for assets and liabilities held at fair value was as follows:

Level 1	Level 2	Level 3	Total
–	341	–	341
–	341	–	341
–	1,667	–	1,667
576	10	0	586
–	2,113	–	2,113
576	2,123	0	2,699
576	4,131	0	4,707

Liabilities 31.12.2016

in €m	Level 1	Level 2	Level 3	Total
Derivative financial instruments at fair value through profit or loss	–	54	–	54
Derivative financial instruments which are an effective part of a hedging relationship	–	185	–	185
Total liabilities	–	239	–	239

The fair values of interest rate derivatives correspond to their respective market values, which are measured using appropriate mathematical methods, such as discounting expected future cash flows. Discounting takes market standard interest rates and the residual term of the respective instruments into account. Forward currency transactions and swaps are individually discounted to the balance sheet date based on their respective futures rates and the appropriate interest rate curve. The market prices of currency options and the options used to hedge fuel prices are determined using acknowledged option pricing models.

The fair values of debt instruments correspond to their respective market values, which are measured using appropriate mathematical methods, such as discounting expected future cash flows. Discounting takes market standard interest rates and the residual term of the respective instruments into account.

The carrying amount for cash, trade receivables and other receivables, trade payables and other liabilities is assumed to be a realistic estimate of fair value.

Financial liabilities

The following table shows the carrying amounts and market values for individual classes of financial liabilities. Market values for bonds are equal to the listed prices. The market values for other types of financial liability have been calculated using the applicable interest rates for the remaining term to maturity and repayment structures at the balance sheet date based on available market information (Reuters).

Financial liabilities

	31.3.2017		31.12.2016
in €m	Carrying amount	Market value	Carrying amount	Market value
Bonds	1,006	1,053	1,009	1,037
Liabilities to banks	2,339	2,373	1,775	1,775
Leasing liabilities and other loans	3,938	3,983	3,791	3,820
Total	7,283	7,409	6,575	6,632

6) Earnings per share

		31.3.2017	31.3.2016
Basic earnings per share	€	–0.15	–0.02
Consolidated net profit/loss	€m	–68	–8
Weighted average number of shares		468,817,760	462,772,161
Diluted earnings per share	€	–0.15	–0.02
Consolidated net profit/loss	€m	–68	–8
Weighted average number of shares		468,817,760	462,772,161

7) Issued capital

A resolution passed at the Annual General Meeting on 29 April 2014 authorised the Executive Board until 28 April 2019, subject to approval by the Supervisory Board, to increase the Company's issued capital by up to EUR 29,000,000, by issuing new registered shares to employees (Authorised Capital B) for payment in cash. Existing shareholders' subscription rights are excluded.

A resolution passed at the Annual General Meeting authorised the Executive Board pursuant to Section 71 Paragraph 1 No. 8 Stock Corporation Act (AktG) to purchase treasury shares until 29 April 2019. The authorisation is limited to 10 per cent of current issued capital. According to the resolution of the Annual General Meeting held on 29 April 2015, the Executive Board is also authorised to purchase treasury shares by means of derivatives and to conclude corresponding derivative transactions.

A resolution passed at the Annual General Meeting on 29 April 2015 authorised the Executive Board until 28 April 2020, subject to approval by the Supervisory Board, to increase the Company's issued capital on one or more occasions by up to EUR 561,160,092 by issuing new registered shares on one or more occasions for payment in cash or in kind (Authorised Capital A). In certain cases, the shareholders' subscription rights can be excluded with the approval of the Supervisory Board.

Interim financial statements Notes

8) Segment reporting

In the course of restructuring the Lufthansa Group, an organisational realignment was decided with the creation of a new segment for direct traffic as of 1 January 2017. Segment reporting was adapted to the new structure with effect from 1 January 2017. The new Point-to-Point operating segment comprises the Eurowings, Germanwings and Brussels Airlines group airlines. The former Passenger Airline Group segment will be known as the Network

Airlines segment in future, and consists of the airlines Lufthansa German Airlines, SWISS and Austrian Airlines. In addition, the training activities that previously formed part of the Passenger Airline Group (largely Lufthansa Flight Training and SWISS Aviation Training) will be merged in the Lufthansa Aviation Training group as of 2017 and reported in the Additional Businesses and Group Functions segment. The figures for the previous year have been adjusted in accordance with the new segment reporting structure.

Segment information by operating segment January – March 2017

in €m	Network Airlines	Point-to Point	Logistics	MRO	Catering	Total reportable operating segments	Additional Businesses and Group Functions	Recon ciliation	Group
External revenue	4,784	683	562	978	620	7,627	64	–	7,691
of which traffic revenue	4,482	659	534	–	–	5,675	–	133	5,808
Inter-segment revenue	145	0*	7	477	149	778	43	–821	–
Total revenue	4,929	683	569	1,455	769	8,405	107	–821	7,691
Other operating income	194	29	15	77	11	326	577	–342	561
Total operating income	5,123	712	584	1,532	780	8,731	684	–1,163	8,252
Operating expenses	5,179	838	555	1,398	784	8,754	684	–1,196	8,242
of which cost of materials and services	3,055	565	369	814	330	5,133	53	–800	4,386
of which staff costs	1,005	114	102	332	306	1,859	224	–2	2,081
of which depreciation and amortisation	301	44	20	28	16	409	13	0*	422
of which other operating expenses	818	115	64	224	132	1,353	394	–394	1,353
Results of equity investments	3	–7	4	4	2	6	0*	–	6
of which result of investments accounted for using the equity method	2	–7	4	4	2	5	–	–	5
EBIT	–53	–133	33	138	–2	–17	0*	33	16
of which reconciliation items
Impairment losses /gains	1	–1	–	1	–	1	1	–2	0*
Past service costs / settlement	–32	–	–	–	–	–32	–	–	–32
Results of disposal of assets	18	0*	0*	0*	0*	18	5	–	23
Adjusted EBIT1)	–40	–132	33	137	–2	–4	–6	35	25
Total adjustments									–9
Other financial result									–71
Profit/loss before income taxes									–55
Capital employed2)	9,500	1,491	1,073	4,014	1,356	17,434	3,684	–21	21,097
of which from investments accounted for using the equity method	14	92	55	218	132	511	6	2	519
Segment capital expenditure3)	564	121	6	47	13	751	5	–199	557
of which from investments accounted for using the equity method	–	–	–	–	–	–	–	–	–
Number of employees at end of period	49,294	7,048	4,500	21,051	35,482	117,375	11,166	–	128,541

* Rounded below EUR 1m.

1) For detailed reconciliation from EBIT to Adjusted EBIT, please see page 5 of the interim Group management report.

2) The capital employed results from total assets adjusted for non-operating items (deferred taxes, positive market values,

derivatives) less non-interest bearing liabilities (including trade payables and liabilities from unused flight documents).

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

Under the heading "Group" all investments (excluding capitalised borrowing costs) are shown.

Segment information by operating segment January – March 2016

in €m	Network Airlines	Point-to Point	Logistics	MRO	Catering	Total reportable operating segments	Additional Businesses and Group Functions	Recon ciliation	Group
External revenue	4,544	377	473	884	573	6,851	65	–	6,916
of which traffic revenue	4,297	376	461	–	–	5,134	–	101	5,235
Inter-segment revenue	161	0*	7	406	146	720	39	–759	–
Total revenue	4,705	377	480	1,290	719	7,571	104	–759	6,916
Other operating income	298	18	13	46	21	396	500	–243	653
Total operating income	5,003	395	493	1,336	740	7,967	604	–1,002	7,569
Operating expenses	4,965	481	519	1,252	740	7,957	624	–991	7,590
of which cost of materials and services	2,921	341	330	717	308	4,617	54	–735	3,936
of which staff costs	1,033	68	101	322	289	1,813	147	–3	1,957
of which depreciation and amortisation	302	13	21	26	18	380	14	–2	392
of which other operating expenses	709	59	67	187	125	1,147	409	–251	1,305
Results of equity investments	0*	–38	7	3	0*	–28	1	–1	–28
of which result of investments accounted for using the equity method	–	–38	6	3	–1	–30	–	–1	–31
EBIT	38	–124	–19	87	0*	–18	–19	–12	–49
of which reconciliation items
Impairment losses /gains / badwill	–	–	–	–	–	–	–1	–	–1
Past service costs / settlement	–	–	–	–	–	–	–	–	0*
Results of disposal of assets	2	–	–	–	4	6	–	–1	5
Adjusted EBIT1)	36	–124	–19	87	–4	–24	–18	–11	–53
Total adjustments									4
Other financial result									24
Profit/loss before income taxes									–25
Capital employed2)	10,097	950	733	3,449	1,325	16,554	1,919	–41	18,432
of which from investments accounted for using the equity method	21	93	60	205	117	496	6	0*	502
Segment capital expenditure3)	473	109	6	35	13	637	8	–5	640
of which from investments accounted for using the equity method	–	–	–	–	–	–	–	–	–
Number of employees at end of period	51,708	3,221	4,543	20,574	35,120	115,166	6,728	–	121,894

* Rounded below EUR 1m.

1) For detailed reconciliation from EBIT to Adjusted EBIT, please see page 5 of the interim Group management report.

2) The capital employed results from total assets adjusted for non-operating items (deferred taxes, positive market values,

derivatives) less non-interest bearing liabilities (including trade payables and liabilities from unused flight documents).

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

Under the heading "Group" all investments (excluding capitalised borrowing costs) are shown.

legal representatives

Figures by region January – March 2017

in €m	Europe	thereof Germany	North America	thereof USA	Central and South America	Asia/Pacific	Middle East	Africa	Total
Traffic revenue*	3,950	1,775	881	805	125	607	144	101	5,808
Other operating revenue	725	199	527	436	77	406	98	50	1,883
Total revenue	4,675	1,974	1,408	1,241	202	1,013	242	151	7,691

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

Figures by region January – March 2016

in €m	Europe	thereof Germany	North America	thereof USA	Central and South America	Asia/Pacific	Middle East	Africa	Total
Traffic revenue*	3,531	1,636	792	722	131	553	141	87	5,235
Other operating revenue	648	218	480	363	72	329	86	66	1,681
Total revenue	4,179	1,854	1,272	1,085	203	882	227	153	6,916

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

9) Related party disclosures

As stated in "Note 46" to the consolidated financial statements from p. 165 in the Annual Report 2016, 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 the "Remuneration report" from p. 79 and in "Note 47" from p. 167 of the 2016 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 assets, liabilities, financial position and profit or loss of the Group, and the interim management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the financial year.

Dr Bettina Volkens Member of the Executive Board Corporate Human Resources and Legal Affairs

Frankfurt, 26 April 2017 Executive Board

Karl Ulrich Garnadt Member of the Executive Board Eurowings and Aviation Services

Ulrik Svensson Member of the Executive Board and Chief Financial Officer

Harry Hohmeister Member of the Executive Board Hub Management

Carsten Spohr Chairman of the Executive Board and CEO

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

Andreas Hagenbring (Editor) Anne Katrin Brodowski Patrick Winter

Concept, design and realisation

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

ISSN 1616-0231

Contact

Andreas Hagenbring +49 69 696–28001

Frédéric Depeille +49 69 696–28013

Phuc-Thi Thai +49 69 696–28003

Deutsche Lufthansa AG Investor Relations LAC, Airportring 60546 Frankfurt am Main Germany Phone: +49 69 696–28001 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 1/2017. Please note that only the German version is legally binding.

You can order the Annual Report in German or English via our website – www.lufthansagroup.com/investor-relations – or from the address above.

The latest financial information on the internet: www.lufthansagroup.com/investor-relations

Financial calendar 2017/2018

2017

5 May	Annual General Meeting in Hamburg
2 Aug.	Release of Interim Report January – June 2017
25 Oct.	Release of Interim Report January – September 2017

2018

	15 March Release of Annual Report 2017
26 April	Release of Interim Report January – March 2018
8 May	Annual General Meeting in Hamburg
31 July	Release of Interim Report January – June 2018
30 Oct.	Release of Interim Report January – September 2018

Disclaimer in respect of forward-looking statements

Information published in the 1st Interim Report 2017, with regard to the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of definitive facts. Its purpose is exclusively informational, and can be identified by the use of such cautionary terms as "believe", "expect", "forecast", "intend", "project", "plan", "estimate", "anticipate", "can", "could", "should" or "endeavour". These forward-looking statements are based on discernible information, facts and expectations available at the time that the statements were made. They are therefore subject to a number of risks, uncertainties and factors, including, but not limited to, those described in disclosures, in particular in the Opportunities and risk report in the Annual Report. Should one or more of these risks occur, or should the underlying expectations or assumptions fail to materialise, this could have a significant effect (either positive or negative) on the actual results.

It is possible that the Group's actual results and development may differ materially from the results forecast in the forward-looking statements. Lufthansa does not assume any obligation, nor does it intend, 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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