Deutsche Lufthansa AG

XETRA:LHA

Ladies and gentlemen, welcome to the Lufthansa Group Q1 2025 Results Analyst Conference Call and Live Webcast. I'm Moriti, Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Marc-Dominic Nettesheim, Head of Investor Relations. Please go ahead, sir.

Thanks a lot, and also from my end a very warm welcome, ladies and gentlemen, to the presentation of our first quarter results 2025 on this sunny Tuesday here in Frankfurt. With me are today, our CEO, Carsten Spohr; and our CFO, Till Streichert, they will present both our results for the last quarter, discuss our commercial outlook for the remaining 9 months of this year. And afterwards, you will have the opportunity to ask questions. And like always, I want to ask you to limit yourselves to 2 questions per person, so that everybody has a chance to participate in the Q&A session.

Thanks a lot in advance. And with that, Carsten, I hand over to you.

Yes. Thank you, Marc, and a warm welcome from my side as well to our analyst conference, obviously, reporting our first quarter results, which, as you all know, in our industry, are the weakest of the year. However, for this year, I think we have started quite strongly with record sales for the first time going above EUR 8 billion with a 10% growth in the first quarter. But what truly matters for us more than the volatility of the year is the significant progress we are making on our key strategic initiatives, which, in the end, position us for the future. And there without doubt, the turnaround of our core brand, Lufthansa, remains our highest priority. We are fully committed to reestablish Lufthansa Airlines as the proud flagship of our group, and we are really moving in that direction.

At the heart of this transformation is and remains operational excellence. Knowing that in our industry, strong operational performance is the key to also sustainable financial success. And with the Easter wave now successfully behind us, manage smoothly and efficiently our confidence heading into the summer season continues to build. While underscoring our determination to deliver best-in-class performance, we successfully invested in recruiting, training and qualifying additional operational staff even further expanding our reserve capabilities on the fleet side, and maybe that's most important, further intensifying our cooperation and coordination with our system partners at the airports, mainly and also at least we're trying to do the same with air traffic control.

These efforts are delivering results. Lufthansa Airlines operational performance, which we measure in regularity and punctuality, is now not only stable, but on the highest levels of the last 10 years. And at the same time, obviously, as we have stabilized operations, we are witnessing less and less stable or more volatile global political environments. And as always in turbulent times, the question is how will these developments impact our industry? And for us, at the Lufthansa Group at least, our structural setup and the various strategic initiatives of the last years have significantly enhanced our resilience, providing us with valuable buffers when it comes to the volatility of the current environment.

And there are indeed several good news. In the first quarter, we continue to benefit from robust sustained demand. Our airlines increased capacity by 5% compared to the same quarter last year, and we successfully translated that growth into higher yields, while even increasing our load factors as well. And that momentum has carried into the second quarter. Pre-booking levels across all traffic regions are at least in line and in some cases, above last year's already strong figures. And as a result, we expect the positive trend to continue at least throughout the first half of the year.

That said, we're beginning to see early signs of some softness in the third quarter, though. Bookings have slightly softened in the U.S. destinations to and from. However, mainly in the lower fare classes. But however, we have often observed in the past that customers booking windows become shorter in volatile times. So I think we will see some of these bookings probably surfacing over the next weeks rather than disappearing for good.

Moreover, we are seeing continued growth in demand from the United States, driving a further shift of booking towards the point of sale U.S. This is also a positive development for us given the higher yields by selling tickets on the other side of the Atlantic compared to Europe, even though the weak dollar is somewhat reducing this effect but not making it disappear. And in this context, our combined sales force with our long-standing joint venture partners, United and Air Canada are once again proving to be key to that strategy.

And don't forget, we expect strong demand also from the short and medium-haul leisure travel this summer, which is as strong as expected. Nevertheless, we remain vigilant regarding our geopolitical and macroeconomic environment. Airlines have always been exposed to unforeseen developments, sometimes more than other industries. But I think it's also fair to say that this time we are, after all the crisis we have passed in the last years, well prepared in terms of increasing our flexibility. In case of potential further slowdown of the global economy, we would be able to react quickly. We have, for example, already reduced our growth for the winter by reducing it from 6% to 3%, and we would be able to reduce that growth further if needed by retiring all the aircraft.

Nevertheless, let's not forget that these current developments also bring advantages for our business. The combination of lower oil prices, lower fuel prices and the effect of investment packages and the stimulus in the military and infrastructure announced by the incoming German government plus the intended tax relief for our airline industry in Germany should result in clear positive effects for us. So even in this very intense time of daily news flows, you find myself fairly confident without, of course, being naive, we are fully prepared to adjust if the global situation requires us to do so.

So with that in mind, let's look at the first quarter figures. Our passenger airlines carried 34 million passengers, which is matching last year's figures, even though Easter moved, as you know, from the first quarter to the second. We improved our adjusted EBIT by EUR 127 million to minus EUR 722 million, having in mind that the Q1 result was negatively impacted by the Easter effect, which amounted to roughly EUR 80 million.

Our significantly improved operating performance led us to less so-called irregularity events and also allowing us to reduce the financial impact of these irregularities by 40%. In the first quarter, the group's revenue increased by EUR 735 million, revising for the first time to over EUR 8 billion in Q1, and this positive development is primarily driven by the strong performance of Lufthansa Technik and Lufthansa Cargo on top, of course, of the growth of the passenger airlines.

We have seen strong demand for tickets in the new Allegris cabin with targeted bookings and a high readiness to pay for the differentiated business class seats we offer. And until this day, over 500,000 passengers have enjoyed a trip with Allegris seat on more than 2,200 flights. At the same time, we have further developed our digital sales channels to allow additional services, and that's why we are seeing a pleasing overall trend in flight-related additional revenues, which has risen 18% year-over-year.

Ladies and gentlemen, for the North Atlantic traffic region, our booking outlook remains strong. In the first quarter alone, the number of passengers on flights to and from North America increased by over 7%. At the same time, we were able to improve our high load factors further and create a 7% rise in average yields. Given this, we remain confident for our planned 6% growth for the North Atlantic for this summer. However, as mentioned, we are prepared to reduce that growth already before the winter if market developments required, which we don't see at the time.

In Asia, we remain cautious due to the longer detours we must fly not using the Russian airspace. So we keep on focusing on protecting our earning quality there rather than growing, but of course, also there, in the other direction, we are ready to adjust and grow our network if geopolitical conditions improve/if the Russian airspace opens up.

In our core market of Europe, we have planned a capacity increase of over 5% for this summer. And we, as mentioned, expecting another strong European summer travel season, especially to the Mediterranean, but also to new cooler destinations in the Scandinavians. And obviously, as Europe's largest aviation group, we will take advantage of that healthy travel environment in Europe.

Also, Eurowings in this context, grew disproportionately in the first quarter, increase of capacity by around 12%. We will see the financial upside of that, of course, mainly in Q2 and Q3. All these figures I mentioned today are not including ITA Airways, which, of course, adds more or less the capacity volume of double digit, 10% to 11% to 12%, depending on the traffic region to the Lufthansa Group as it exists today. And that volume will probably grow beyond what we see in other parts of the group due to the fact that Italy enjoys the so-called Holy Year '25, which creates additional travel, especially to Italy, which we will then see in our numbers later on.

But for now, let's look at the financial details, handing over to Till.

Thank you. Thank you, Carsten, and hello also from my side. Thank you for joining us today to discuss our Q1 2025 results in more detail and, of course, also the financial outlook for the rest of the year.

I'm pleased to present you a first quarter that reflects progress in a challenging environment. For Q1, we can see a notable top line improvement since revenues increased by 9.9% compared to the previous year. This was mainly driven by a healthy demand environment and a 4.6% increase in production. Revenues have also been positively influenced by rising ancillary sales that mainly originate from an enhanced digital customer experience leading to additional online purchases.

At the same time, we faced some counter effects with impact on our bottom line. Among those were the lacking Easter business in Q1, accounting for lower earnings of around EUR 80 million, which we expect to see in the second quarter. Disruptions such as strikes by Verdi at German airports, resulting in approximately EUR 30 million of extra cost as well as general cost inflation amounting to about EUR 280 million of additional cost.

This increase in expenses, while largely anticipated, represented a headwind in Q1. While fuel prices have been quite favorable, the remaining material cost increased by almost 16%. This increase was also driven by fees and charges, which rose by 14% compared to the previous year. Personnel expenses grew by 5%, just like depreciation did mainly due to new incoming aircraft. We will have a closer look at cost increases in a moment. All in all, we reported an adjusted EBIT of minus EUR 722 million in the first quarter, and this represents a 15% improvement compared to last year. At the same time, our net income was below last year's level. And the reason is the temporary tax accounting effect in relation to loss carryforwards this year.

Adjusted free cash flow amounted to EUR 835 million, significantly above last year's level. Main reasons were the improved earnings situation as well as lower net investments. As we have said during our full year results presentation in March, we see the year 2025 as a year of transition. The main reason is that the measures we have initiated to improve productivity and efficiency, we'll build up gradually and thus only partially into financial improvements to fully absorb the existing cost increases this year.

Let me now show you a breakdown of our operating expenses to shed some light on that matter. When leaving out fuel and emission cost, the material cost increase for the passenger airlines in Q1 was mainly driven by price and less by volume effects. For fees and charges, the year-on-year additional cost amounted to EUR 136 million, of which more than EUR 90 million can be attributed to price escalation of our service partners. Handling charges at airports, as the biggest building block in this cost category, rose by 12%, followed by ATC charges, which even grew by 19%.

Further material cost increases were driven by maintenance and catering expenses, although partially mitigated by lower irreg-related cost. Personnel costs rose by 8%, of which around 1/3 was driven by headcount and 2/3 by wage increases. Depreciation increased based on the 30 new aircraft we have received since Q1 last year. And all these cost impacts combined led to a CASK increase of 3.1% versus prior year.

Apart from the passenger airlines, our other business segments also faced cost headwinds, but they were able to manage them effectively. Lufthansa Technik implemented further contractual guardrails to pass on price inflation to customers. Lufthansa Cargo was able to mitigate the cost pressure, thanks to high volume growth. The other segment was roughly stable on a like-for-like basis, the apparent reduction stems from the nonadjustment for AirPlus in last year's figures.

Ladies and gentlemen, the cost inflation, which we have anticipated and seen in Q1 will remain throughout the rest of the year. For Q2, we expect a higher year-on-year CASK increase compared to the one we've seen in Q1. The main driver for this are labor cost effects in the second quarter as planned as planned tariff increases come into effect in the prior year comparison, which is lowered by one-off savings also in 2024. In Q3 and Q4 of this year, we expect this to level off again mainly due to lower irreg cost and the increasing contribution of the cost measures of the turnaround program towards the second half of 2025.

Now let's walk through the results for our Passenger Airline business. In Q1, we grew our capacity by 4.6%, which was moderate enough to stabilize operations as well as yields. Our overall yield was slightly above the previous year's level, with intra-European yields being most impacted by the Easter shift. Meanwhile, intercont yields were strong, mainly driven by a 6.7% increase on the transatlantic.

The seat load factor declined by 1 percentage point versus prior year, which again mainly reflects the Easter shift, and RASK, on the other hand, increased by 2.7%, also driven by a soft comparison base given the impact of last year's strikes on revenue. As mentioned before, unit cost increased by 3.1% and thereby outweighed the increase in unit revenues. In total, the Passenger Airlines operating result amounted to minus EUR 934 million in the first quarter, which is roughly on prior year's level. However, bear in mind, that the Easter shift effect of approximately EUR 80 million distorted the year-on-year comparison.

Looking at our individual airlines results, it becomes clear that Eurowings and SWISS have been impacted by the leisure carriers within their respective segments, namely SunExpress and Edelweiss, which have both been disproportionately affected by the Easter shift.

Now let's shift our focus to our business -- to our other business segments, Lufthansa Cargo and Lufthansa Technik. Starting with Cargo in the Logistics segment, the positive operating and financial performance already evident in the second half of last year continued in 2025. Lufthansa Cargo achieved an adjusted EBIT of EUR 62 million, an increase of EUR 84 million. This growth was driven by both volume and yield effects.

Capacity increased by 7% year-on-year due to additional freighter capacity from a Boeing 777F and expanded passenger flight operations. On average, across all traffic regions, yields increased by 11.9% versus previous year. Despite the increase in capacity, the load factor increased by 1 percentage point versus prior year, indicating that Lufthansa Cargo is well positioned to benefit from an overall strong demand environment. Demand in Q1 was still predominantly driven by Asian e-commerce and additionally by current buildup of inventories in the U.S. ahead of anticipated tariff escalations.

Operational expenses rose by 7% to EUR 787 million, mainly due to higher charter costs, fees and charges as well as personnel expenses, but effective cost management resulted in a slight reduction in unit cost compared to the previous year. The current global uncertainties provide both opportunities and risks for the airfreight industry. Lufthansa Cargo's flexibility and capacity deployment due to its dedicated freighter fleet will enable us to adapt relatively quickly to any demand shift -- or shift in demand flows.

Moving on now to Lufthansa Technik. I'm delighted to present an outstanding performance for the first year of 2025. Revenue reached an impressive EUR 2 billion, reflecting an increase of EUR 249 million compared to Q1 2024, which is a growth rate of 14%. Lufthansa Technik's adjusted EBIT amounted to EUR 161 million marking an increase of EUR 53 million from the previous year. And we continue the expansion part, including new Technik facilities in Portugal for components and engine parts which will employ up to 700 people. And in Calgary, Canada, with up to 160 employees working in engine services. Additionally, Lufthansa Technik is growing in Malta with a new hunger for 787 modernizations. And also on our Hamburg side, this is also undergoing modernization to enhance our service offerings.

Also on the product side, Lufthansa Technik has set the course for a successful future. Lufthansa Technik is a digital powerhouse already today with a comprehensive digital ecosystem. And as a global leader, our platform, AVIATAR, which provides predictive maintenance already covers over 4,000 aircraft worldwide, and its growth continues.

Let's now discuss the cash flow development in Q1. The operating cash flow was supported by a significant increase in ticket prepayments totaling EUR 2.5 billion, surpassing last year's EUR 2.3 billion. This growth is attributable to three key factors: increased summer capacity resulting in higher booking volumes and stable load factors and yields; the shift of Easter bookings to Q2, leading to the full Easter prebookings being reflected in liabilities at the end of Q1; and the negative impact of strike uncertainties in 2024 on prebookings, which did not reoccur this year.

At the same time, the trade working capital was limited due to counter effects like an increase in trade receivables from airlines, lower trade payables due to seasonally low activity and increased prepaid expenses due to charter activities. Lower gross investment compared to last year since we did not receive any long-haul aircraft in the first quarter of this year, reduced our net CapEx, respectively. In total, the improved operating results combined with a higher operating cash flow and lower net investments led to materially improved adjusted free cash flow of EUR 835 million in the first quarter of 2025.

Driven by our strong adjusted free cash flow performance, which more than offset the EUR 325 million payment for ITA, our total liquidity increased by approximately EUR 350 million. And during the first quarter of the year, we made use of the favorable market conditions and successfully placed a hybrid bond in several promissory notes, securing refinancing for about EUR 1 billion maturities in Q1. In total, net debt decreased by 8% to EUR 5.3 billion compared to the end of 2024.

Our net pension liability reduced by roughly EUR 400 million due to slightly higher interest rates. Overall, this resulted in a net debt-to-EBITDA leverage of 1.7x at the end of March, an improvement from the 2x at the end of 2024. This clearly demonstrates the continued strength of our balance sheet, which is also reflected in the full set of investment-grade ratings we currently hold.

On fuel, I'm pleased to share the positive developments regarding our fuel cost expectations for 2025 driven by a favorable pricing momentum. So as of April '24, so with the view forward as of April '24, our fuel bill -- for the full year 2025 is now projected to be EUR 7.3 billion. This is about EUR 600 million below our previous guidance, which was based on calculations from end of February.

At the same time, it is EUR 500 million below last year's fuel cost despite higher production capacity and additional staff cost. Of course, it goes without saying that this cost benefit will only fully materialize if fuel prices and exchange rates remain at the current level for the rest of the year. However, this reduction is a strong proof point for the success of our hedging strategy. Since our hedging strategy is option based, we are always able to benefit from declining fuel prices, while we are simultaneously hedged at a relatively high percentage against increasing fuel prices.

For 2025, we have already hedged 81% of our fuel requirements with our Passenger Airlines segment hedged at an even higher rate of 84%. This provides us with a robust field against fuel price volatility, ensuring greater financial stability and predictability. And additionally, the expected cost of sustainable aviation fuel remained stable at an additional EUR 0.2 billion as per our full year guidance.

Let me now talk about the outlook. We are reconfirming our full year 2025 guidance, which we communicated earlier this year. And let me explain our rationale. Clearly, the level of uncertainty has increased since we issued our guidance at the beginning of March, and the news flow on a daily basis remains dynamic. Nevertheless, I want to provide some comments on factors that could impact our financial outlook. In general, demand remained strong, and we see strong momentum for the second quarter. However, as Carsten has mentioned before, North Atlantic bookings for the third quarter have slowed down a bit.

There's limited visibility if this is due to lower demand or a shortening booking window, which has been quite typical and seen before during uncertain times. On the other hand, we see favorable developments in fuel prices and foreign exchange rates. And while these factors are beneficial today, of course, it remains to be seen whether or to what extent these effects will persist.

What does this combination of these risks and favorable factors mean? And just to illustrate, traffic revenues on transatlantic routes for the remaining 9 months could decline by more than 10% compared to the previous year and yet still be balanced by the favorable decline in fuel prices amounting to a tailwind of around EUR 600 million.

And please also keep in mind that other factors such as the potential reopening of the Russian airspace, peace in the Middle East and the financial stimulus resulting from the new German government could also present a tailwind for us towards the end of this year. With the increased uncertainties in mind and based on what we observed in our numbers at this point in time, we are reconfirming our guidance. As you can imagine, of course, we will continue to closely monitor the global macro developments and trends and make frequent assessments in case of changes.

And with that, let me hand back to Carsten who will provide you now with some more thoughts on the strategic outlook for this year.

Thank you, Till. And following your presentation, let me outline the key productivity improvements we are actively pursuing, driven by, of course, the arrival of long-awaited aircraft. We're currently still waiting for the overdue Boeing long-range aircraft. As a matter of fact, of the 100 aircraft we have on order, wide-bodies 41, all Boeing are missing, but the latest certification tests confirm that we can now expect those 787 deliveries at least this summer, and they will enter service at Lufthansa Airlines in Q3. Of course, 777X will be still not to be delivered until '26. .

We will use those 787s initially on medium-haul routes with some blocked seats in the business class, but however, this 787 operation will allow us to ramp up operations for our pilots, for our cabin crews, for our technicians because we are expecting an unheard number of 40 aircraft to be delivered to our airlines in '25 and '26, that's in just 20 months, so 2 per month in average.

And it's obvious that, that positive effect of this fleet renewal will finally be felt across our entire offering, that applies to all classes. We, as a matter of fact, also expect another 350 equipped with our new Allegris first class over the next weeks, I think setting somewhat new standards in our industry. And -- it's also all these 10 aircraft, a total of 33 even which are going to the Lufthansa core brand Lufthansa Airline. We are investing heavily into the core because we believe in the turnaround project and want to go back to be an icon of the industries, as we have said before.

But it's obvious that we're also investing in other airlines within our group. SWISS, for example, will receive its first 350 with the new SWISS census cabin in September. Edelweiss in Switzerland has already launched its first 350 this month and will receive 3 more by year-end. Austrian Airlines expecting 3 additional 787s by the end of '26. And also for Brussels and Discover Airlines, who just approved an upgrade of the 330 cabin, including a new business class with aisle access for every seat.

This fleet renewal is further enhanced by the cabin modernization. For example, for our Boeing 747-8, all 19 of them will be refitted starting this year. And the remaining 8 380s, which our customers love in and out of Munich will also receive a state-of-the-art cabin, featuring new business seats also starting this winter. And I think this, in total, demonstrates the extensive and far-reaching modernization of our long-haul fleet. At the same time, we are also enhancing comfort on short and medium haul routes, new seats in Lufthansa and SWISS, larger overhead bins and a significant catering upgrade.

Coming to an end and coming to questions, let me highlight also the process of the ITA integration into our group. Just 4 weeks ago, we successfully relocated our new group airline to Frankfurt and Munich into our own terminals. Already, we have now more than 40,000 passengers to and from ITA, connecting and benefiting from these better connections on the ground. As you might know, the membership of ITA into Star Alliance is underway, and we are actively integrating flight schedules already done for the neighborhood traffic, short haul and then long haul to come throughout the rest of the year.

Soon, we'll be announcing first joint activities on cargo, air cargo and also IT systems are underway. And for me, I've been around for some of these integrations before, the positive sentiment in Italy, in Germany, in the other airlines, in ITA, in Lufthansa remains, and we are convinced this integration will be a success.

In the end, ladies and gentlemen, let me say a few words about the political situation. As you might know, Germany is about to elect a new chancellor. The coalition agreement outlines key plans for transport aviation. We are confident that these plans will be implemented. In a world that is becoming increasingly complex, but at the same time, richer opportunities and possibilities, our claim had not lost any of its significance. Connecting people, cultures and economies in a sustainable way. And our sustainable multi-hub, multi-brand, multi-AOC strategy as well as our more balanced portfolio, including value-creating subsidiaries like Lufthansa Cargo, Lufthansa Technik, ensure stability and long-term profitability even under the current uncertain geopolitical and macroeconomic conditions.

With that, let me finish here after half an hour of monologue, we now look forward to the dialogue with you and your questions. Thank you.

[Operator Instructions] And the first question comes from Jaime Rowbotham from Deutsche Bank.

Two questions from me. Apologies if the first one is probably a bit predictable. But on Slide 9, you flagged that without Easter timing, the airlines loss would have been about EUR 850 million, not EUR 930 million. So an improvement on last year at EUR 920 million. But without the strike last year, wouldn't the loss have been about EUR 300 million lower at more like EUR 620 million. So is it unfair to suggest that on a truly underlying basis, you've still got quite some year-on-year profit degradation in the Passenger Airline business despite the decent revenue trends? And with that in mind, I wonder how you're thinking about the 2Q trajectory for the Passenger Airlines profit?

Second question is just regards the concerns about the North Atlantic. So Slide 5, where you say looking out to Q3, there are some volume gaps in terms of nonpremium demand, but at the same time, yield stable. I appreciate the discussion about deciding whether it's demand or just a shorter booking window, I just wonder at what point might you start to see the need to discount the fares to protect load factors still the economy cabin and presumably then you won't be telling us that the yields are stable. Any thoughts on that?

Let me start off with the first question, Jaime. And in terms of the airline business, as such -- so first, you have identified the Easter effect. Clearly, that would have improved and turned to positive in the year-over-year comparison. Let me remind you, however, that between last year, Q1 2024, where indeed we had a substantial strike effect. Obviously, a number of cost increases did take place, largely at the system partner, supplier side, we reflect them and we've equally anticipated them and catered for them also in our plan and outlook for 2025. .

In that regard, the first quarter is on track with what we had expected in terms of cost. That's the main point I would add here. In terms of the second element, just evolution going forward as we progress through the year. Obviously, I do expect, and that's what we've got in the plan that the step-by-step ramp-up of the Lufthansa Airlines turnaround will contribute more in the second half than in the first half. But let me give you one just kind of idea or proof point also on the success of executing one pillar of the Lufthansa Airlines turnaround program, which was the focus on operational stability.

Q1 has been, you've seen it in the KPIs that Carsten has shown, a real success. That directly resulted into substantially lower irreg cost, which are already -- which we are already benefiting from in the first quarter. And there, with thinking of our confirmation in terms of guidance, obviously, throughout the year, I expect progression in the airline business, also from the contribution to EBIT point of view.

And the next question comes from James Hollins from -- I'm sorry.

There was another question on yields. Jamie, let's be honest, those people, families on the lower booking classes who didn't book out of Europe to go to the U.S. in the last 4 weeks, probably due to the news flow from Washington. They wouldn't have booked for a 5% better prices either. So in our view, it would be not value creating to bring down yields and try to convince those people who didn't want to go to the U.S. to do it for less yields.

You would rather bring the overall yield situation down for those who are willing to travel anyway. So I think this is not a time to bring down prices in our view. And as you said, some of these bookings might well come over the last weeks when maybe the news flow has somewhat become less exciting, which we currently experience. Let's see. There are no need to rush, to get nervous, as we said before.

And the next question comes from James Hollins from BNP Paribas.

Till, if I could please just push you a bit on that cost cadence, as I like to say, in the U.S. as we go through the quarters. Now clearly, Q1 CASK [ gets fuel ] up 3%. You flagged Q2 higher than that. Maybe you could -- if my thinking is plus 3% goes to plus 4% and then it levels out in H2, would it be right in thinking maybe plus 3% for the full year is a good start point or maybe you can tell me what's going on there?

And then probably for Carsten and again, talking of the U.S. names, they say pretty much apart from government travel, the U.S. has not seen any business travel weakness. We all know that German business travel isn't quite what it was. Perhaps you could just run us through any trends you've seen either on the negative effect from tariffs or that business or maybe on the positive effect on German politics?

Let me take the first question, James, on the CASK evolution, let me just shed some light on Q2 specifically. Q2 year-over-year comparison, I expect to be higher, largely driven by a onetime effect in two directions, literally. One that took place in prior year in 2024 when we started to release variable compensation provision after seeing the full year results and adjusting for that or the expected full year results last year. This helped the basis, the comps. On the other hand side, in the second quarter 2025, labor cost, personnel cost will also in line with the tariff agreements increase. So that's the next step that was contractually already agreed.

And this is why numerically, the second quarter will see a higher CASK growth. After that, indeed, in the third and fourth quarter, I expect normalization in that regard due to, on the one hand side, step-by-step kicking in the turnaround program effect, but also supported by more effective fixed cost degression. And bear in mind, when you put all elements together, we are obviously confirming here our full year guidance and therefore, also the second quarter evolution which I've been hinting to, is planned and anticipated, so fully reflected in our plan.

James, it's Carsten. Indeed, we don't see anything different than our U.S. peers. Corporate travel remains stable. We actually have seen a slight increase in Q1 '25 versus last year, '24, driven by the North Atlantic and Asia Pacific, which I also think makes sense. Even the tariff situation rather requires more corporate travelers to go and fix supply chains or find new supply chains than staying at home. And at the same time, if you believe in the German stimulus package, which hopefully will drive the German economy out of its development of 0 should even create some corporate travel. But that's too early to say, but indeed, answering your question, no weakness to be seen there yet and not expected either.

The next question comes from Ruxandra Haradau-Doser from HSBC.

First, on intra-European traffic. Some recent surveys point to lower willingness year-over-year to travel to the Mediterranean hot spots during peak summer this year, but higher willingness to travel to less popular destinations, Carsten pointed to Scandinavia. Surveys highlight also particularly Eastern Europe. You have a strong exposure both to Spain and Eastern Europe. Are you noticing these trends in your Q3 bookings?

And second, you had the network group with the strongest presence in Eastern Europe. Could you please talk about the relevance of this region for you medium term? Several key airports in Eastern Europe start to be congested? Do you see the need to increase capacities in the region to secure additional slots at the airports?

Ruxandra, indeed, I kind of answered your question, I think already in my opening remarks. We see this undisturbed strong demand to the Mediterranean, but indeed also our new northern-bound Scandinavian routes show very nice load factors. So I would say we are seeing the best of both worlds. .

Travel strong towards Mediterranean, additional leisure and tourism towards colder parts of Europe, and we try to take advantage of both. And don't forget there's a strong -- in the Lufthansa element of Americans, Latin Americans going via our hubs to the Mediterranean also Scandinavian destinations. It's a big trend, both directions from -- coming from the Americas, which we take advantage of as a hub carrier. Eastern Europe has always been relevant for us. I think the two biggest questions for Eastern Europe is when is Ukraine opening up?

We had 104 flights per week to Ukraine before. The war started, and we had 110, so almost the same. Flights to Russia before the war started. And we believe we can be ready within the 100 days to reopen operations. And when it comes to slots, of course, we are looking at those airports where slots become scarce and rather put in another frequency or keep a frequency with a long-term strategy in our mind than giving that up to others, but that's the 300 destinations we are serving, of course, daily business.

And the next question comes from Stephen Furlong from Davy.

Yes. Maybe more for Till. Can you just talk about the turnaround plan again in just a bit more high level, because I certainly felt that it was more going to have an effect incrementally from next year onwards. I thought even at the full year, so this year would be pretty minimal as it kind of gears up. And for example, maybe just talk about Discover in that or Lufthansa City. I saw you got, for example, A320neos just delivered. And then maybe just reiterate there what you said about the North Atlantic would actually have to -- I think traffic declines were 10% for the rest of the year to offset if the fuel bill tailwind was still EUR 600 million.

So I mean, as you rightfully said, turnaround plan. We -- it's gradually building up. Just as a reminder, again, target is EUR 2.5 billion gross contribution in 2028, EUR 1.5 billion in 2026. As I said before, we are making good progress. Overall, a lot of -- over 700 measures identified, and to the largest extent as well fully defined. Of course, the implementation is ramping up step by step as we speak. And I've given you one example with a big focus on ops stability, where we have seen already quite a bit of good improvement. Clearly, what belongs to the overall objective is to increase productivity. We've spoken about that. That means -- that implies as well that we need to increase at, of course, at crew level, at cockpit level, productivity.

Of course, it belongs as well to that strategy that we continue to make use of more productive platforms that we are using. And as we said as well at the beginning of the year, we do plan to ramp up this year, another 13 aircraft into City Airlines in order to support this. We're seeing good growth at Discover and at City Airlines both. So in that regard, all in all, Lufthansa Airlines turnaround program, as we stand now, I'm confident in terms of the progress that we are making so far.

And just on the 10%, you made that comment. I just wanted to get that right again.

Yes, this is just to illustrate basically a bit of the sensitivity that we see between basically North Atlantic revenue decline versus what we see at the moment. Just looking forward in terms of benefit from the fuel price decline. And again, this obviously it doesn't correlate strictly, but obviously, it belongs to a similar context in that regard. And I think you did the math probably on your own. We just wanted to highlight the dimension of the tailwind from fuel on the basis of the hedging strategy that we've got in place and also the unhedged element, which is obviously floating with vis-a-vis sensitivity at the revenue level.

And if you just think of a revenue decline of 10% at North Atlantic, that obviously would be a very sizable decline compared to also anything that we've seen in the past during pretty severe crisis actually. And this is why we are saying in combination with the hedging strategy, which gives us an element of taking benefit, we feel able to confirm our guidance.

Then the next question comes from Jarrod Castle from UBS.

Carsten, you spoke about fleet delivery. I just wanted to get your views on what tariffs could mean for deliveries? I mean we've had a lot of news coming out of China. U.S., obviously, some airlines talking about maybe pushing deliveries out even. But what do you see the impact is on tariffs? Can you mitigate it? And also if there is a tariff, you guys obviously are very focused on return on invested capital. I mean for the whole industry, does this possibly mean increased pricing given CapEx is seeing upward pressure? .

And then secondly, just in terms of ITA, and I know it's early days, but how should we be thinking about that airline's performance during the course of the year? Is it, I guess, in your books, possible that it generates some profitability this year and obviously, you're going to record it as an associate? Or should we be thinking a lot of costs this year as things get integrated and no profit to be had?

Jarrod, on fleet, I think -- and you know this as well as I do, in our industry, there is no room to increase the prices of aircraft by 20% on tariffs. So I think some of my competitors have made that statement. I'm happy to repeat that. So we're not just going to see airlines paying the additional 20% and take aircraft as planned. That's why one reason that on all these talks going on, I think the risk of those tariffs has come down, especially since there's a very asymmetrical risk for Boeing, whether it's European competitor, Airbus, because the export level is much higher from Boeing.

And as you all know, Airbus is producing in the U.S. already, which Boeing is not in Europe and other parts of the world. So I think the people who deal with this, including us, talking to people in the administration, both in Brussels and in Washington are doing their best that these tariffs will not come. If they ever would materialize, I think all airlines will find or try to find their ways around them, including us. But that's for me, almost a Plan B scenario than currently plan A is that these tariffs, as were announced or threatened to be implied, will not come. Just this morning, China already moved back a little bit on the airline side, willing to talk to the United States.

We see similar messages from the administration in Washington, be it towards Europe, be it towards China that these things will end up in a deal one way or another. So I think that risk has come down. ITA will announce its own numbers, I think, next week already on their own. Of course, the full year with full synergies, as you well know, will be '27 because we have an 18-month period. So of course, in '25, we have both, some of the integration costs but also some initial upsides.

So I think you will not be disappointed when you hear their numbers. But I think the focus is the full integration following '26. And there, as I said, we still believe that beyond the short-term topics like the Holy Year and the strong inbound traffic to Italy, we currently see the strategic move to buy, invest into an airline in our strongest European market outside our home markets to have an airport, as you well know, which has room for growth and cost advantages to our existing 5 hubs will pay off, and it will not be long before we can show those upsides in numbers as well.

Just one additional point. So indeed, we account for it as an associate. Obviously, we've got 41%, and up until that would change to control, we would also not consolidate in full.

And the next question comes from Harry Gowers from JPMorgan.

Just two questions, if I can. The first one, I mean, just on your comments on limited visibility into Q3, can you just confirm that you're finding that people are booking later because of the uncertainty compared to previous years? And if so, how much later have booking curves moved generally or how much less visibility do you now have? And then just second question, when thinking about the EBIT guidance for the year and all the moving parts, can I ask what you're baking in or what you're thinking about high level in terms of the group RASK percentage change for both Q2 and Q3? .

Let me start maybe with the second question. Just look, we -- with today's Q3 -- Q1 announcement, we obviously are confirming our full year expectation that EBIT is going to be significantly above to 2024. That is a factor of everything that is happening on the RASK and on the CASK side, ultimately, but please remember that we have stayed away from providing detailed RASK and CASK guidance for 2025. So that's what I can say.

On the first question in terms of limited visibility for Q3, I mean, first of all, obviously, even at any point in time, this year, there would be limited visibility in terms of the Q3 bookings because it's just the way it is that people actually start booking for summer rather after Easter than during or before. So that, as such, is kind of similar to what we've seen before. But of course, it's true if you now ask the question, where do we see a little bit of a slower element that is largely on the seat load factor side. But as we said before, we've seen in periods of uncertainty, and Carsten has commented on that in his part as well in terms of behavior, customer sentiment. We've seen that before that people wait until things are clearer, and therefore, it is a question of a booking window or booking timing ultimately. And that we will see over the next few weeks how it will evolve.

And the next question comes from Antonio Duarte from Goodbody.

Two for me, if I may. One of them is regarding costs. So you mentioned the material costs, excluding fuel, rose by about 16% year-on-year. My question is here, what can you do? Or how could you possibly mitigate these costs in case of a slowdown in demand, also considering that you mentioned that was more price than volume focused?

And my second question is regarding cargo demand. You mentioned a strong Q1 in cargo and also in yields, partially due to the front-loading to the U.S. How are you -- how can we see cargo yields moving onwards considering the rising uncertainty comparing to the front loading? And also in situation that some data regarding cargo yields across the world has been declining in the previous couple of weeks.

So first of all, your first question in terms of demand -- in the case of demand slowdown, first of all, any costs that will be variable, so that is directly demand related, we're also going to flow with that, i.e., will be reduced. Of course, it's true. And that is what we flagged that the first quarter has seen significant increases in certain cost categories.

Here, once again, as we've spoken before, because those cost increases are not new, we knew about them. They haven't surprised us. Here, we've got a strategic set up or strategic approach with the Lufthansa Airlines turnaround plan and of, obviously, also cost-saving programs across the entire group to counter that and build up measures to manage our cost structure in line with the targets that we have issued.

Short term, of course, if we were to face a slowdown in demand situation, we would also assess to what extent we can short-term flex cost savings with effect for 2025. So it would be less structural, but it would be more in the range of short-term measures that you do in order to secure a result.

Your second question in terms of cargo. Cargo demand in the first quarter in front loading. So first of all, we are seeing -- so the cargo business as such has got, by nature, lower visibility going forward. Bookings are taking place or reservations are basically taking place with a week or 2 weeks, everything that is beyond the base load that is booked through other contracts.

However, I would highlight that due to the fact that we've got a freighter fleet of size, we've got a high degree of also flexibility to manage and respond to where cargo streams were going to evolve and float. In the first quarter, we've seen indeed Chinese e-commerce- and Chinese e-commerce taking a large share of that. But at the moment, we are still seeing that this is relatively healthy in demand. And I would just conclude on it generally in a more volatile world, it's probably out of all freight options that are there, airfreight should benefit the most.

And the next question comes from Conor Dwyer from Morgan Stanley.

My first question is just on the cargo as well, which is -- it sounds like China is actually still doing reasonably well. But I'm wondering, in other regions if they have seen an acceleration in volumes basically since the announcement of tariffs on China? And then secondly, just on the CASK point. So obviously it's due to kick up and then improve in the back half of the year partly because of improved fixed cost spreading. But I'm just wondering around the North Atlantic demand and if you do indeed take the decision to start decelerating capacity to offset some of that pressure, is there a chance here that actually we get H2 unit cost inflation above Q1 as well and closer to actually what we're going to be seeing in Q2? And on that, will the trimming of capacity be down to the fact that bookings don't improve from here? Or if they just kind of remain as you're currently seeing them for Q3?

Conor, it's Carsten. On cargo, I think it's interesting to know that we, of course, are exactly on the right traffic flows to even take advantage of these tariffs. We are flying things from China, from Asia to Germany, to Europe, which is an increasing business, as Till mentioned. And we are flying, of course, strongly from Europe to the U.S., which is also due to the mentioned warehousing positive right now. So I think the traffic flow from China to the U.S., which for sure, I must imagine is going down, we are not present on. So I think at this point, what Till has said about the volatility of the global economy helping us, in general, in air cargo. In our case, we're even sitting on the soft spot, I think, of what's currently happening.

In terms of your question on cost CASK. So let me just remind you the context of what I highlighted for the second quarter was really about the kind of comparison to prior year as we've had two effects that were both in our own prior year release and this year, the tariff increase debt. This is why I wanted to give you a bit more visibility on what we see or what we expect for the second quarter. But we -- again, we expect this to normalize in the second half of the year in line with our plan. And this is an integrated part of our overall guidance buildup as it was 2 months ago and at the beginning of March, and it is the same now.

Perfect. And on that, just kind of the potential trimming of capacity, would that happen if you don't see improvement from here? Or would it need to worsen from here in Q3?

That we reduced capacity you were saying? I didn't hear that.

Yes. So when you're talking about the potential or the willingness to trim capacity growth on the North Atlantic, would bookings need to worsen from here or just remain as they currently are?

If they worsen, if the trend would not meet what we expected to happen, then of course, we would continue beyond, obviously, the revenue management initiatives that we've got in place now also start gradually to moderate capacity growth. But let me say again, this is moderating growth. This is still growth that we would do and we would obviously do that very carefully.

The next question comes from Jaina Mistry from Jefferies.

I've got three questions. The first one on your transatlantic business. What proportion of that is European point of sale versus U.S. point of sale? And so it was really helpful to hear your scenario, if revenues are down 10%, it could be offset by fuel. Is that currently what you're seeing on the transatlantic softness in Q3? Are revenues for transatlantic down 10%?

And second question, I might have missed your answer to this earlier, but I wondered if you could quantify the level of cost efficiencies that you've seen so far in Q1? And kind of what's left for the remainder of the year? Which buckets do you see the greatest savings potential? And then my last question, would you mind giving us some guidance for the tax rate for 2025?

So let me just be very clear in terms of the kind of equation that I've been talking about in terms of North Atlantic, potential revenue decline versus potential fuel upside. No, that's not what we are seeing at the revenue level there. This is purely a sensitivity, and this is why I said to illustrate by how much that could fall vis-a-vis the fuel price projection based upon current fuel prices. So to be very clear, that is not what we are seeing.

The second point is, if I have taken note of that correctly, just efficiency, what's left to be done. So to be very clear, across the entire portfolio of our Lufthansa Airlines turnaround plan and also the group efficiency programs, we are kind of 6 to 9 months into it. So there is still quite a lot to be done and implemented, and this is why I expect the ramp up as well to happen over the years to come. One component, which has already been in the first quarter, which I think you've been asking for, quite prominent was the result from much, much better operational stability.

It was very visible in terms of punctuality, regularity and that has directly translated as well into a 40% reduction in irreg cost, for example. This is an element tangible. It's there. We can see it and also, obviously, significantly improving our customers, our travelers experience with us.

And the third question on tax rate. Look, our mix of the different tax rates across our different destinations leads you to a statutory tax rate of a bit below 25%. Of course, we always have got some elements which alter this tax rate from time to time. So it would be probably a plus/minus 2, 3 percentage points with actually the expectation that it would be towards the lower side of that, i.e., below 25%.

That's very helpful one. And on the...

On your first question, that's a moving target depending on which destination in the U.S. and also which time of the year. So obviously, June, May, we've moved significantly towards the U.S. because that's when the Americans travel to Europe. In July, when Europeans go to the U.S., we shift to Europe. But as I said in my opening, we're seeing a shift towards the U.S., which will result in better yields for us because purchasing willingness is higher in the U.S. than it is in Europe. And also, we are seeing stronger growth from the U.S. than we're seeing it out of our home markets and even out of our non-home markets in Europe. And don't forget, we have a joint venture with United. So it also depends on which [indiscernible] you look at, the United airplane, and Lufthansa airplane. So there's not a single number we communicate on this one.

And the next question comes from Andrew Lobbenberg from Barclays.

I'm sorry, I was very late joining the call, so this may have been asked. And if so, I'm sorry. What's the latest on the stranded 787s in the U.S.? And how many might come back before the press reports about them potentially coming over in April, and we're rapidly running out of April. And my second question, again, sorry if it's been answered, is what is the status of the productivity negotiations with [indiscernible] Lufthansa?

Andrew, on the 787, I mentioned in the beginning that we are currently looking at 4 to 5 arriving as early as this summer to be operated in Q3 with some limited number of seats being blocked and another 4 to 5 ending up anywhere between 9 and 10 by the end of the year arriving late in the year without any blocked seats. That's the current status between Collins, Boeing and the FAA, we are looking at. And then, of course, those with blocked seats will also release the block seats by the end of the year. So we could be looking at 9 to 10 aircraft by the end of the year, fully usable. As long as we have blocked seats, we'll be using the airplanes on medium-haul routes, mainly to ramp up our operations in mechanics, cruise, cockpit and cabin. Productivity negotiation with -- sorry...

How many seats on the aircraft are blocked at this point?

We do not exactly know yet. It will depend on the FAA in the end, but it will surely be a significant part of the business class cabin, which is why usually the aircraft on long haul is out of questions for the first weeks, but the exact number will be determined by the authorities in the U.S. On productivity negotiations with the flying cockpit, I think it's worth to say already, we are seeing a significant contribution from [indiscernible] cockpit to the lowering of our crew cost because it's only the latest contract of '23, which allows us unlimited growth in Lufthansa City Airlines and in Discover.

With the contracts we had before that wouldn't have been possible but they decided in '23 to rather go for high salary increases. And on the other hand, for that, we got the freedom to use growth in those airlines I just mentioned. So there is already a contribution from the cockpit union towards lowering our crew cost but not in the main airline.

Now more and more pilots in the main airline indeed have been approaching us. And now formally also [indiscernible] Cockpit has approached us even though the contract is still running. Let's talk if we can find improvements which create a win-win situation. In that case, of course, we would be willing to do so. So far, these thoughts have led us nowhere. So we are continuously increasing the number of airplanes in City Airlines and in Discover.

And of course, continuously also on the other hand, pay the increased salaries at the main line, that's where we currently are. But there is a contribution on the cockpit side. For me, that's important. It would not be fair to say that we don't see a contribution from [indiscernible] cockpit. It's really the contract of '23 which allowed us the strategic options, which we are currently pursuing and Till also referred to.

And the next question comes from Alex Irving from Bernstein.

Good morning, two from me, please. First of all, I'd like to circle back on the North Atlantic. I have plenty discussion on the call about Q3, but given there's limited visibility, I'd like to focus closer in. How are your closing yields on the North Atlantic performing? Now that we're through Easter, what warning signs, if any, are you seeing there? .

My second question is on staff numbers. You've spoken today about coming aircraft deliveries and the need to increase labor productivity. Is it therefore accurate to conclude that you are over crewed your current level of production and therefore, staff numbers could be flat for an extended period if that growth comes in? I am looking at your reporting that was pre-pandemic, it looks like you've got more employees in the airlines now despite lower production?

I'll start with North Atlantic, zooming in a bit more into Q2. I mean the simple message is with what we are seeing, this is good. We've got more passengers than last year. We can see also business class -- business classes performing well. Point-of-sale U.S. is performing well. So in that regard, what also Carsten has commented on in terms of Q2 performance, we are looking at a strong second quarter.

Alex, it's Carsten, I cannot confirm the overstaff because when you introduce 40 aircrafts in 20 months, you need to ramp up in staff to be able to bring those airplanes on. Think about cockpit type ratings, which will take easily more than half a year to have one pilot train from one aircraft to the other. Now with the delays, of course, indeed, this effects last longer than we were hoping for. So we will be far -- or not far, we will be a way from going to the same efficiency levels we have seen before COVID with all these new aircraft entering.

That's why Till and I, at numerous occasions have called '25 for sure, a transition year to a certain degree, even '26 will have traditional elements before we go back to full efficiency when the whole rollover has been done. So yes, the numbers you are seeing are not showing the same efficiency. They cannot, with all the new aircraft coming in and different aircraft coming in. Of course, one 320 to another one doesn't make a difference. But the significant refleeting we are doing is causing this, not only in cockpit to a certain degree also in cabin and people always underestimate that also in maintenance.

It does take time to train a mechanic for a new airplane. We're doing that currently. And therefore, yes, there is an efficiency and cost impact, which is what Till referred to, the costs we are seeing now. We are very optimistic and it's not the trend we will have when this transition in the Lufthansa Airline turnaround project is over. .

Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Marc-Dominic Nettesheim for any closing remarks.

Yes. Thanks very much for all your questions. Carsten and Till, thanks for your answers and the lively discussion. We, from Investor Relations, are looking forward to continue this discussion over the next weeks. And with that, I wish you a lovely afternoon. Thanks, and goodbye.

Ladies and gentlemen, the conference is now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.