Lufthansa Group has announced a remarkable performance for the fiscal year 2023, with revenues soaring to €35.4 billion, marking a 15% increase from the previous year. The airline group not only achieved a record adjusted EBIT of €2.7 billion but also plans to invest significantly in fleet upgrades and pursue aggressive sustainability goals. With the first dividend payment since 2019 on the horizon, the company's financial health appears robust, supported by a stable liquidity position and a strong operating result from its Passenger Airlines segment.
Key Takeaways
- Lufthansa Group's revenue reached €35.4 billion in 2023, a 15% increase from the previous year.
- Adjusted EBIT hit a record €2.7 billion, with net income more than doubling to €1.7 billion.
- The group will invest €4.5 billion in new aircraft and cabin interiors in 2024.
- Aiming for a neutral carbon footprint by 2025 and a 50% reduction in CO2 emissions by 2030.
- Dividend payments to resume at €0.30 per share, proposed to the Annual General Meeting.
Company Outlook
- Lufthansa Group expects to operate at approximately 94% of its 2019 capacity in 2024.
- The company targets stable adjusted EBIT and unit costs for the upcoming year.
- Plans to close a 10% productivity gap by the end of 2025, with a return on capital employed around 13%.
- Anticipates adjusted free cash flow to reach at least €1.5 billion despite customer prepayments affecting cash flow performance.
- Net CapEx forecasted between €2.5 billion and €3 billion, balanced by sale and leaseback transactions.
Bearish Highlights
- Lufthansa Airlines faced operational bottlenecks and a slower recovery in business travel.
- The net pension liability has increased to €2.7 billion.
- Industrial actions have affected the company, though Lufthansa expects staff to prioritize operations over striking.
Bullish Highlights
- Passenger Airlines contributed €2 billion to the operating results, with load factors and yields on the rise.
- SWISS, Austrian Airlines, Brussels Airlines, and Eurowings achieved record results.
- Lufthansa Technik's MRO business generated an impressive adjusted EBIT of €628 million.
Misses
- Despite the strong results, Lufthansa incurred irregularity costs of nearly €500 million in 2023, which they aim to halve in a more normalized situation.
Q&A Highlights
- Executives expressed a positive outlook for leisure travel, especially to the Mediterranean and North Atlantic.
- Corporate demand is recovering, currently 30% below 2019 levels, with Asia being the slowest to recover.
- Lufthansa is focusing on routing Mediterranean traffic through Munich for cost efficiency.
- The company is working on labor relations challenges and expects disruption costs to decrease over the next 1.5 years.
- Lufthansa Holidays is performing well, with plans for expansion in the package tourism sector.
In conclusion, Lufthansa Group's strong financial performance and strategic investments position the company for continued growth and resilience. The group's commitment to sustainability and shareholder returns, coupled with the anticipated recovery in travel demand, underpin an optimistic outlook for the future. The market will be closely watching as Lufthansa works to maintain its momentum and navigate the challenges ahead.
Full transcript - None (DLAKF) Q4 2023:
Operator: Ladies and gentlemen, welcome to the Lufthansa Group Annual Report 2023 Conference Call. I'm Morris, the Chorus Call operator. I would like to remind you that all participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question-and-answer session. [Operator Instructions] The conference must not be rerecorded for publication or broadcast. At this time, it's my pleasure to hand over to Dennis Weber, Head of Investor Relations. Please go ahead, sir.
Dennis Weber: Yes. Thank you, and good afternoon ladies and gentlemen. Welcome to the presentation of our full year results 2023. With me on the call today are our CEO, Carsten Spohr; and our CFO, Remco Steenbergen, who will present you our results and discuss our commercial and strategic outlook for the year ahead. Afterwards, you will have the opportunity to ask your questions. Similar to prior quarters, I would like to ask you to limit your questions to two so that everybody has a chance to participate in the Q&A session. Thank you. Carsten, over to you.
Carsten Spohr: Thank you very much, Dennis, and a warm welcome from my side to all of you to a special day once again. And let me start by saying that after four very difficult years, today we are once again able to present an outstanding result. And honestly, even with all the years in the industry, I never thought we would reach this point again so quickly. Last year €1.5 billion were already a surprising achievement and the fact that we have now almost doubled this figure and are now back on solid economic grounds is an outstanding team effort by all the employees at the Lufthansa Group. We now again look to the future with confidence and focus on achieving the ambitious goals we have set ourselves. It's no secret that we would have liked and, especially, I personally would have liked to continue relying on Remco's expertise however he would like to move outside the Lufthansa Group and back to Switzerland again. Anyone as you know who masters the finances that Lufthansa is a top manager in high demand in many other industries and especially in pharma, as I learned and we have been through it before, and we take it just as a compliment. The analysts the investors today represent the most impressive proof that Lufthansa is back, the third best financial results in our company's history. For the first time, all our airlines with the exception of CityLine were profitable. Austrian Airlines, Brussels Airlines, Discover, Eurowings and Swiss even achieved record results as did Lufthansa Technik. Lufthansa Group's revenue reached €35.4 billion, 15% more than in the previous year. Group adjusted EBIT rose to €2.7 billion, equaling a margin of 7.6% very close to our margin target of 8%, which remained firmly focused. With an adjusted ROCE of 13.1%, we were able to achieve our target of a ROCE of over 10% a year earlier than planned. We will be able to pay a dividend for the first time since 2019 and are proposing €0.30 per share to the Annual General Meeting, which is equivalent to similar to the levels we had before COVID due to the number of shares obviously increased. In total, we were able to fly more than 123 million guests safely to the destinations last year 20% more than in 2022 and more than 98% of our flights took off as planned in terms of regularity. Our economic strength benefits everyone including our employees. Since mid 2022, we have increased remuneration for all professional groups at Deutsche Lufthansa (ETR:LHAG) by more than 10%. For the last year, we will pay our employees more than €0.5 billion in profit sharing agreed with the social partners and we will continue to offer everybody in the Lufthansa Group, the best working conditions in the industry. Now we urgently need to ensure that our guests also benefit further. For a variety of reasons, this is where we have the greatest need to catch up. For 2024 alone we are planning gross investment of €4.5 billion in new aircraft and our cabin interiors, lounges, ground processes and our personnel and digital services and in our colleagues. The analysts, the investors long before the crisis, we have undertaken adjustments to our strategy that now pay off. We have become more international and regionally diverse. We have expanded our route networks to include significantly more private travel destinations. We have realigned Eurowings, are growing with Edelweiss in Switzerland and offering new connections to popular holiday destinations with Discover Airlines. At the same time, we are executing our transformation from an aviation to an international airline group. We closed the sale of the catering business at the end of October and we expect to finalize the sale of our payment specialist AirPlus in the summer of 2024. This will allow us to focus even more on the core of our business. Our airlines and the aviation services, particularly, Lufthansa Technik and most importantly, our customers. With our newly founded Lufthansa City Airlines, we are strengthening our short-haul network and securing our planned growth on long-haul routes with competitive feeder services. Lufthansa City Airlines will take off for the first time in summer 2024. We're also making progress with the takeover of ITA Airways, even though slower than planned. We are continuing our intensive dialogue with the EU Commission to obtain approval for the transaction as soon as possible. Key to our success and the core of our strategy remains our multi-hub, multi-airline and multi-brand business model, which proved its success so strongly in the last year. Our group combines the strength of our various brands and business units with the power that lies in the interplay of our hubs, our networks and the overarching functions. That way, we can leverage valuable synergies, create added value and become even more attractive when it comes to the integration of other airlines. Three-form is all about premium for us. Premium is not only the guideline for the design of our offer. It is our attitude and nothing less than our right of existence. Others can also buy new aircraft, but it's our 100,000 colleagues who make our airlines unique, will make the difference for our guests every day. Last year, we recruited more than 13,000 new colleagues and we received over 300,000 applications in total. That is almost 25 applications per open position. We are planning to recruit a further 13,000 new colleagues in 2024. Staff turnover is low and according to recent surveys our employee satisfaction has returned to pre-crisis levels across the group. In the highly competitive labor market, there's probably no better proof of our attractiveness as an employer. We know that in some areas there are still higher workloads and that good work needs to be well paid. That's why we offer the best conditions in our industry which we are continuously improving. I don't want to say too much about the current negotiations at this point. But let me make one thing very clear. Every strike disappoints hundreds of thousands of our guests, whom we won and need to win in the face of international competition. Strike costs are personnel costs where there are strikes, there is no growth but rather shrinkage. Strikes, therefore, must not be the first but the last resort. And here investors and also owners and analysts, it's obvious that due to the long-term value creation, we can just not give in to have a few less days of strikes and endanger the future of this company. You rightly expect us to balance that and I promise to you we'll continuously do so. But when I talk about premium claims, it's also true that the stability and punctuality, which we offered our guests in 2023, were not yet satisfactory. We were able to significantly improve our operational stability compared to the previous year but 2023 was still characterized by major operational challenges, particularly at our hubs in Munich and Frankfurt. Our declared goal for 2024 is to consistently live up to our premium standards again in terms of operational, stability and punctuality, but also in terms of product and service quality. A particular focus here is on the continuous expansion of digital options for our guests and better customer communication. And with our new cabin product, Allegris at Lufthansa Airlines and SWISS Senses at SWISS, we’re once again setting premium standards in the industry. In seven weeks, at the beginning of May, our first long-haul aircraft with the new Allegris cabin on board will finally start its scheduled service. As part of the largest fleet modernization in our history, we expect to take delivery of more than 30 aircraft this year including more than 20 long-haul jets. In the past 12 months alone, we have ordered an additional 22 long haul and 80 short and medium haul aircraft. That means that our order book now comprises more than 250 aircraft of the latest generation, of which around 100 are for long-haul routes. This will enable us to harmonize the fleet, also by retiring 8 older sub-fleets ensure greater comfort for our guests and of course lower emissions further. We aim to achieve a neutral carbon footprint by 2025, and we want to half, our CO2 emissions by 2030 compared to 2019. In addition to modernizing, our fleet we are increasingly focusing on the use of sustainable aviation fuels. In more than 20 partnerships worldwide, we are working with research institutions and industry partners to drive forward their development and production ramp-up. However, we cannot take away this talk alone, not as individual company not even as an industry, they are still in urgent need of policy action, when it comes to the targeted promotion of the production and use of sustainable fuels and we need the support of our customers. Our Green Fares, which only include compensation for individual flight-related CO2 emissions are great success. In the first year of the offer, we already recorded more than 1 million bookings for short and medium haul flights. And since November 2023, we have also been testing them on selected long-haul flights. In total, around 4% of our passengers already use one of the various options for more sustainable flying and more than 1,500 corporate customers invested in SAF, with us last year. But we want to further increase these figures significantly, because only together we will be able to make air travel more environmentally friendly. I would like to take the opportunity to thank our customers for actively helping us to achieve this important goal. I would now like to hand over to Remco, who will explain our results for the past year in more detail and provide you with the financial outlook for 2024.
Remco Steenbergen: Thank you, Carsten, and a warm welcome to all of you. The year 2023 has been successful for the Lufthansa Group, as we once again delivered on our promises. At the beginning of the year, we projected a significant increase in adjusted EBIT. In August, we further detailed the forecast to be more than €2.6 billion. Now, we are pleased to report that actual result of €2.7 billion was exactly in line with our outlook. And this is the third highest earnings result in our history with an adjusted EBIT margin of 7.6% slightly below our medium target of 8% given in 2021. Net income more than doubled to €1.7 billion compared to 2022, driven by the higher EBIT lower financial expenses and effective tax management. Additionally, adjusted free cash flow amounted to €1.8 billion in line with our medium-term target of around €2 billion per year. I will provide further details on the contributing factors later in my presentation. Our Passenger Airlines contributed €2 billion to the group's operating results, despite operating at only 84% of pre-crisis capacity, an increase of 16% compared to 2022. The load factor increased by more than three percentage points and yields were 6% higher than in the prior year and 22% above 2019. Performance was driven by the Leisure segment, where demand was high in premium and in non-premium classes. This has offset the slower recovery in corporate travel, where passenger numbers continue to be around 30% lower compared to 2019 on average. Unit costs increased by 2% in 2023, despite much higher cost inflation, especially in the areas of fees and charges, as well as personnel, and continued investments in operational stability. The latter were necessary because of the various bottlenecks in the European aviation system, hampering our capacity ramp-up. Better fixed cost leverage, due to the increase in capacity and operational enhancement compensated for most of the increases. Looking at the individual airline results: SWISS, Austrian Airlines, Brussels Airlines and Eurowings all achieved record results. SWISS recorded a remarkable 13.7% operating margin, followed by Eurowings with an almost 8% margin including a strong SunExpress results. The performance of Austrian Airlines and Brussels Airlines underlines the structural improvements achieved in the airlines business models to make them future fit. Lufthansa Airlines continues to be impacted by the operational bottlenecks in the large German hubs, necessary investments in the improvement of product and customer experience and the slower recovery of business travel. The launch of City Airlines and its expansion plan for the coming years will be critical to improve profitability in Lufthansa's feeder network, especially in the German domestic market. The success of Discover Airlines, which has developed into a solidly profitable business with the higher operating margins than Lufthansa Airlines in just two years, shows that we have succeeded in supplementing the mainline operating model with concept specifically geared to individual subsegments of the market. We are determined to do the same with City Airlines. Turning to our other segments. Performance in our airfreight business around Lufthansa Cargo was characterized by the normalization after the corona pandemic and weak global trade. Encouragingly, the air cargo market seems to have bottomed out in the second half of 2023. In the fourth quarter, volumes were up year-on-year. In addition, yields continue to stabilize at levels of around 40% above 2019. Adjusted EBIT of €219 million in 2023 reflects an adjusted EBIT margin of 7.4%, a respectable result in a difficult market environment. Our MRO business around Lufthansa Technik continues to be record-breaking, generating an adjusted EBIT of €628 million, equaling a margin of 9.6% in 2023. Amount for maintenance services continue to be very high, as airlines worldwide expanded their capacities. The delays in delivery of the new aircraft force many airlines to fly older aircraft for longer, creating a shortage of MRO capacities and allowing Lufthansa Technik to pass through higher costs to customers. Carsten will talk about our future plans for Lufthansa Technik when he discusses the group outlook. I share his conviction that this is a business with great long-term prospects. In the segment containing our other businesses, which include AirPlus, Lufthansa Flight Training and Lufthansa Systems as well as the cost of the group overhead functions, the operating results improved to negative €206 million, mainly due to better performance at AirPlus. Adjusted free cash flow amounted to €1.8 billion in 2023, the operating cash flow of €4.9 billion is primarily due to the strong operating results, good working capital management and an increase in customer prepayments reflecting the positive booking situation also at year-end. These effects were partly offset by an inventory buildup at Lufthansa Technik to fuel growth and to safeguard material supply in a tight market. Net CapEx amounted to around €2.8 billion, gross investments of €3.6 billion were mainly related to the acquisition of 22 new aircraft prepayments for ordered aircraft as well as engine overhauls. They were compensated by inflows from aircraft divestitures amounting to €1 billion related to the sale of six A380s and the inflow from the sale and leaseback of 12 aircrafts announced in December. The IFRS 16 lease charge, which is also included in the group's free cash flow definition amounted to €319 million. The latter reflects a decline compared to the prior year caused by the discontinuation of various leases over the course of the year. Our financial position continued to improve also in 2023. The generation of free cash flow enabled us to repay maturing liabilities mainly with cash, which protected us from the market-wide increase in financing costs. Available liquidity remained stable year-on-year at €10.4 billion. Net financial debt increased to €5.7 billion, €1 billion below the level at the end of 2019. The net pension liability increased to €2.7 billion due to the decline in long-term interest rates. This is comparably a much smaller increase than in the past, reflecting the progress made in aligning the interest rate sensitivity of planned assets more closely to the sensitivity on the liability side. Our financial leverage has declined to 1.7% even when including the pension liability. Consequently, we are rated investment-grade by all four agencies in the market now. These ratings will clearly improve the conditions for new financing measures. This already became clear when we renewed and upsized our revolving credit facility last month to a volume of €2.5 billion. With this kind of balance sheet, we will keep our promise given at the beginning of 2023 with regard to dividend payments. For the year 2023, we will propose to the Annual General Meeting in May, the payment of a dividend of €0.30 per share. This represents a dividend payout of 21% of the group's consolidated net income. Considering the increase in the share count in the crisis, the total payout of €359 million is very close to pre-crisis levels. Based on our current share price, this represents a dividend yield of more than 4%. Let me conclude my discussion of the 2023 results with what I consider our biggest financial achievement since I joined the group at the beginning of 2021. When we gave medium term guidance in summer 2021, we focus not only on the operating profit, but also on the capital return. This was very important to me considering the asset-intensive nature of our industry and its challenges to create value for shareholders in the past. Now, with an adjusted ROCE of 13%, we documented that Lufthansa Group can do exactly that create value for its shareholders and we are committed to hold on to the levels achieved in 2023. In 2024, we expect the group ROCE to remain stable at this high level. In the past three years, I had the privilege to support the group to get out of the crisis and to be on a solid financial footing again. And this achievement is the result of the hard work of all the group's employees whom I would like to thank once again. I'm confident that also the next generation of management will pursue the part of profitable value-accretive growth. It's clear that an adjusted EBIT margin of 8% and more is necessary to ensure that the company is able to make the necessary investments in sustaining its premium position, in decarbonizing its operating model, and ensuring its attractiveness as an employer while remaining an attractive investment for shareholders. That is why the 8% target remains a firm goal. We will strive to get as close as possible to this target in 2024, with the aim of achieving it as quickly as possible should we not make it this year. Before discussing our financial outlook in more detail, let me update you on our fuel cost expectation for 2024. Based on the current spot and forward prices on the market, we expect only a relatively modest increase to €8.3 billion as the expected volume increase, is partly offset by the forecasted year-on-year decline in fuel unit cost. For the year 2024, we have hedged 80% of our exposure through a combination of options on oil and jet fuel. Considering both hedged and unhedged portion of fuel consumption, our mixed jet fuel rate for 2024 amounts to $926 per metric ton at current spot and forward prices. However, it should be noted that this estimate is subject considerably uncertainty given the early stage of the year and the potentially significant impact of geopolitical and macroeconomic developments on commodity prices, which we continue to be exposed to. We also expect EU-ETS related cost to increase in 2024 as the phaseout of free allocation has started. This effect will partly offset the expected decline in fuel unit cost. In 2024 we expect our airlines to operate around 94% of 2019 capacity, an increase of around 12% compared to 2023. We expect adjusted EBIT to remain stable compared to the €2.7 billion achieved in 2023. This is based on the expectation that unit revenue will remain stable or decline slightly compared to the previous year. Carsten will give you more color in this regard in a second. Unit costs excluding fuel and EU-ETS related expenses are expected to remain on par with the previous year. High levels of cost inflation, especially, again in the areas of fees and charges and personnel as well as the cost of strikes incurred in the first two months of the year which amounted to at least €100 million will be headwinds in this regard. However, a group-wide efficiency program will contribute to narrowing the current around 10% productivity gap to pre-crisis levels as far as the ongoing deficiencies in the system will allow with a target to fully close the gap by the end of 2025. In addition, we will benefit from the better fixed cost leverage due to expansion of capacity. Adjusted free cash flow is forecasted to reach at least €1.5 billion. As is the nature of an airline business customer prepayments will have a large effect on cash flow performance. The fact that we have no visibility on bookings made by customers in the second half of the year leaves this guidance with some forecasts and risk. However, as Carsten will highlight in a minute we have no reason to believe that the current positive demand trend will change. Net CapEx is expected to amount to €2.5 billion to €3 billion. Similar to 2023 gross investments of around €4.5 billion including €3 billion related to new aircraft will be partly offset by inflows from sale and leaseback transactions later in the year. And finally as indicated before, we expect return on capital employed to remain stable at the historical high levels of around 13%. Carsten, back to you.
Carsten Spohr: Remco, thanks. And towards the end let me come to the commercial outlook. The desire to travel obviously remains very strong. However, the strong demand continues to meet various bottlenecks that are limiting supply, delayed aircraft and feed deliveries unscheduled engine maintenance, ongoing staff shortages at system partners including airports other suppliers. Just a few examples to be mentioned. These bottlenecks limit capacity growth. Also in 2024, we will remain true to our approach quality before blind growth. Accordingly, we have continued to build in additional reserves and buffers for stability and punctuality and slightly reduce the originally planned growth. Nevertheless, we will grow above average compared to our competition. For 2024, we are planning capacity growth to around 94% compared to 2019. Compared to the previous year, this would be an increase of around 12%. Asia with a pace of recovery after the pandemic was significantly slower will account for a significant proportion of this growth. In addition, growth within our Atlantic Plus-Plus joint venture on the Lufthansa Atlantic will shift us -- sorry will shift towards us in 2024. Our partner United, which has grown strongly in previous years will only grow very slightly. We will benefit from our leading market position wherein expanding capacity. With Lufthansa Technik, we have clear advantages in terms of the availability of maintenance and overhaul capacities. And as a large airline group, we benefit from better access to new aircraft spare parts and personnel. By 2025 we expect our capacity to be at pre-crisis levels. We are already expanding our flight program significantly in response to the continued growth in demand. We are very well booked for the coming months and expect a very strong Easter travel season. The initial indications for the summer are also quite good. Destinations in the Mediterranean are particularly popular. On the transatlantic demand from both North America and Europe remained very strong. Premium cabins are still in high demand, especially, among private travelers. We're assuming that prices will remain at roughly the same level as in 2023. Overall, we expect average unit cost to remain stable or decline slightly in 2023. In air cargo, the industry has declined in the past year following the special economic situation caused by the coronavirus. Recently, however, it has stabilized. Lufthansa Cargo is ideally positioned to benefit from both the cyclical upturn and structural growth, for example, in the e-commerce sector. Especially, large e-commerce companies from China currently need extensive freight capacities to secure their growth. This also holds true for European short-haul routes, which we now serve with four freighters. In addition, geopolitical uncertainties, the effect of which we are currently seeing above all on the sea routes through the Red Sea are driving short-term demand for airfreight in the right direction. The environment remains challenging for the foreseeable future. Nevertheless, Lufthansa Cargo has all the prerequisites to make a decent contribution to our results in 2024. The continuous rise in flights across the industry is also leading to significantly higher demand for maintenance, overhaul and repair services, which brings me to Lufthansa Technik, which currently services around one in five commercial aircraft worldwide. Despite strained supply chains, rising material and personnel cost, Lufthansa Technik once again achieved a record result in 2023. With Ambition 2030, the company has launched a growth program to further expand its leading global position in the technical support of aircraft fleet under its own steam and with confidence in its own strength. By 2030 we aim to further improve the margin and generate significantly higher cash flow than the past. The program provides for extensive investments in the expansion of the core business in the coming years. We're also working on expanding our locations and international presence potentially also through acquisitions. For example, another European plant is planned. The company's presence in America and Asia is also to be strengthened further. And in the defense sector, Lufthansa Technik can make an even greater contribution in Europe and the world towards industry becoming more and more important. The expansion of digital business models will also be an important focus. Data from around 3,300 aircraft is currently already connected to the AVIATAR platform. This means that maintenance is becoming increasingly data-based. And lastly, Lufthansa Technik can also play an important role in the decarbonization of air traffic. Ladies and gentlemen, last year we laid the foundation for our continuous success. In 2024, we will continue on this positive development. All stakeholders will benefit from our regained strength. Our guests are offering them the premium quality they deserve and rightly expect, our employees by continuing to be the attractive employer with the best conditions in the industry, our shareholders while creating value for them and enabling them to participate in our success. We are proud of what we already have achieved and thank you very much. Now for your questions and for listening. Thank you.
Operator: Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Harry Gowers from JPMorgan (NYSE:JPM). Please go ahead.
Harry Gowers: Thanks. Hey, Carsten and Remco. Two questions. First one just on the unit revenue outlook for this year. You're talking to flat to slightly down for the full year. Maybe you could give us a bit of flavor in terms of your assumptions that you've made in terms of the phasing over the four quarters to get to that full year figure? And then secondly just on the balance sheet, I think you're at 1.7 times leverage for 2023 and that's lower if you exclude the pensions. Then you're talking about the free cash flow generation in 2024. So going forward, do you have a leverage target in mind? Or put a bit differently is there a certain leverage ratio you would get to and then see yourself maybe returning additional cash to shareholders? Thanks a lot.
Remco Steenbergen: Harry, good afternoon. Remco here. Let me take both of your questions. First of all on the unit revenue, we say -- we have indeed said a flat to a slight decline. How we will have to see that over the quarters is the following in Q1 with strikes. Of course delayed bookings are difficult. So we see a slight decline in the yields in Q1 impacted again by the strikes. In Q2 at this moment, we see a more flat yield. So we are very confident that overall for the year, we actually end up on a more flat yield, while Q1 is a little bit impacted as we see it now. And hopefully, it's soon gone but we don't know. That's why we have this guidance. Clearly we are targeting on a flat yield for the year that we think is also the right thing to do. But the short-term impact is there for Q1. With regard to the balance sheet and the net debt levels, at €5.7 billion of financial net debt, so excluding the pensions, I think the company is on a very solid footing. You have seen as well the growth investments we want to do in 2024 of €4.5 billion as a combination of the cash investments and the operating leases. But both, of course, ends up in the debt level. That's why we expect for 2024, flat, possibly declining that level, because at this level I think it's the most important for us that we do the right investments to get our product on the top level again. And at this point in time, we have started to pay dividends again, which will be an outflow next year and we want to be consistent with the dividend payment. We're not contemplating buybacks of shares or anything like that. I think we find a good way of our investments and to get a better return from that. I hope that answers your question.
Harry Gowers: Yes. Very, very clear. Thanks Remco.
Operator: And the next question comes from Jaime Rowbotham from Deutsche Bank (ETR:DBKGn). Please go ahead.
Jaime Rowbotham: Good morning, gentlemen. Remco, wishing you all the best at Sandoz (SIX:SDZ), and Dennis, all the very best at SWISS. Two questions from me. First one perhaps for Carsten. Leisure demand has been very strong. Corporate has lagged. I'm not sure anyone expects corporate to suddenly come roaring back given some of the structural changes post-COVID. But when it comes to leisure, do you think airlines can keep increasing fares with limited impact on demand? And perhaps you could say, how this is impacting where you're deploying capacity given we see much faster growth in Munich compared to Frankfurt for example? Second one, perhaps for Remco, and sorry, because it's a bit similar to the previous one. But given the strong free cash flow in 2023, the outlook for more of the same in 2024, I was a bit surprised to see the dividend at the very low end of the proposed payout range 20% to 40%. Was there any particular reason, Remco, for this prudence would you say? Thanks very much.
Carsten Spohr: Yes. Jamie, it’s Carsten here. On corporates, I think I agree. This pent-up demand is not going to jump out of the bottle. It's going to come up slowly, but I'm sure even including your own companies, home office is on the way back to be reduced. Video conferences are reduced further and further and turned into real meetings, so I think this trend will be there. In our specific case, I think we're going to see a nice jump to corporate because of our Asia network expansion. Asia, historically, is a part of our network with the highest corporate shares. As you all know, we're growing more into Asia this year than in any other destination or region. So, I think we see a miracle, whatever you want to call it, effect on corporate in that regard. On Leisure, we just finished the largest, I think, global fair on tourism in Berlin, and it was amazing how optimistic all the leaders there were. We don't see that all in our airplanes yet, because some of this packaging tourism now goes with some delay into our systems. But I think we're going to see a very strong summer, especially to the Med and the North Atlantic. And that also answers your questions about Munich. Munich, obviously, is closer to the Mediterranean than Frankfurt. So for cost reasons, we try to channel as much traffic to the Mediterranean via Munich rather than Frankfurt, which is further north. I hope that gives you a few indications to your question. Remco?
Remco Steenbergen: Thank you. I'll take the question on the dividend. What is important for us that once we start the dividend again, and I think we're also the only airline, as I understand, now correct who started again the dividend payment. Number two is that we want to be consistent over the coming years to keep on paying the dividends and have also the opportunity to have that further grow in the years to come. Now when we came to setting the dividend level, we looked what the total amount that we're spending on dividends in the years before the crisis and €359 million is roughly in ballpark figure. So all combined that, we thought the 21%, a 4% dividend yield and 30% would make sense as the first year to start as the only airline in Europe. There's nothing else behind it than that.
Jaime Rowbotham: Thank you very much.
Operator: And the next question comes from Tobias Fromme from Bernstein. Please go ahead.
Carsten Spohr: Hello?
Tobias Fromme: Two questions for me, please. The first one is regarding the recent industrial action and how do you see this developing? Are there any further risk expected throughout 2024? And the second one on unit cost, first also slightly relation to the recent industry actions, could you talk about any client initiatives for unit cost in 2024, please? Thank you.
Carsten Spohr: Yes Fromme, it's Carsten Spohr. I think on the industrial action, the more and more staff I meet and see, the more I understand, they're different than in the manufacturing business where the shareholder usually takes the pain of strikes. In our industry it's a customer that obviously goes right back to the staff. So less growth, less promotions. This is what the staff understands will eventually be the output of these strikes. And they have learned I think in previous labor conflicts that we are not just willing to give in just for a few more days of peace. As I said, once the pilot strike rather a few days with our Lufthansa than one day aviation world without Lufthansa. So I would see that they rather want to fly and work than strike and we see them coming back to the table quickly. And we're not that far apart so there should be room for solutions. The cost, Remco said this morning in the press conference about €100 million impact in Jan and Feb. Obviously, there is revenue effect you cannot easily judge because customers don't book today maybe for next week, even though when next week things are settled or stabilized they might go to the same bookings. So I think that is little difficult to do while you are in such a situation. But I think when it comes to our budget and next year's planning we obviously, have an assumption for wage increases in the number set and we're not willing to move away from that. So expect that to be the results of the negotiations.
Operator: And the next question comes from Stephen Furlong from Davy Research. Please go ahead.
Stephen Furlong: Yes, good afternoon, Carsten and Remco. First one maybe for Carsten. I mean I know you shouted out about European short haul and transatlantic. Can you just talk about Asia? I know it's been longer in recovering. But I mean it's a big – relative to others maybe a bigger proportion strategy of your network. And I know it can be a bit tricky and you deal with JVs but also with the Middle East and Istanbul, et cetera, how you deal and where you see the Asia business going. So I'll ask the first one first.
Carsten Spohr: Yes, you probably answered your question I think to a certainty degree. Yes there have been of course delays in the business coming back. We all know that. Secondly, maybe as a comment, the Russian overflight is obviously an operational disadvantage compared to those carriers who go straight through European airspace. But more and more Europeans or let me say, citizens of certain countries don't want to be in an airplane in the Russian air space. So we – if we now see some customer segments, we are basically advantaged by circumnavigating Russia rather than going straight through it. In Asia itself, there's quite a little bit different picture, very strong by the way Hong Kong. Also very strong recovery in business to Japan, less so from Japan. China a bit slower, but India, Korea, Singapore, Thailand, next to Hong Kong actually back already at pre-COVID levels. And again for us in Lufthansa, highest share of corporate travelers to and from Asia. Best market position of all the European players to Asia, so I think in relative terms this now for three years downside of Lufthansa being further exposed to Asia will now turn to an upside. You should buy shares quickly.
Stephen Furlong: Thank you. Just then for Remco, first of all, best of luck, Remco. I think you're following Christoph Franz in going to the pharma industry. But talk about maybe just your observations, as you leave the industry because maybe it's linked to technique being remaining fully part of the Lufthansa Group and its importance, because with aviation recovering and balance sheets being repaired, some kind of companies let's say, in the value chain, their -- let's say market performance, capitalization has done very well, whether their MROs or leasing or even OEMs and the airlines to some extent of that behind. So, maybe you might just talk about your observations, what you think the market is missing or just generally, about the group and best of luck again.
Remco Steenbergen: Thank you, Stephen. This is a very wide question. So, let me start, with the thought which also crossed my mind, when you asked the question three years ago, correct, you were sitting here, signing off on the 2022 results, with a net loss of around €7 billion, correct? The enormous progress, which this company altogether made over these last three years ending up, with a result of €2.7 billion, almost 8% EBIT, ROCE of 13% and a balance sheet in order. I think it's a fantastic achievement. You know as well, that I love the company and the people who work here. And I also believe this company has a fantastic future ahead of us. I hope in the whole supply chain and all the efforts which is done, to really make sure that we go into a different mode and consistently deliver on EBIT and cash flow. And I think the company is ready for this. I think so far, over the last three years, we have been very consistent on doing this. And I hope that everyone gets a little bit addicted to that consistency in profit and cash flow. And then, this ridiculous share price, which the company currently has. So that's clearly, an observation from my -- I really don't get why 3 times EBITDA, is a fair valuation of this company. As you all know, I have quite some shares in this company as well because I believe in that as well. So for the years to come, I will with a lot of confidence see the future of Lufthansa coming. It's a little bit more on a high level, but I hope that helps you.
Stephen Furlong: Very good. Thank you.
Operator: And the next question comes from Muneeba Kayani from Bank of America (NYSE:BAC). Please go ahead.
Q – Muneeba Kayani: Hi. Thank you for taking my questions. Just wanted to go back on unit costs, and your outlook. Just how confident are you on the productivity improvements? How much is already in place and what kind of needs to be implemented? And how much of it is, dependent on that capacity increase and the new aircraft deliveries. So, what if there are delays on that front? And then secondly, just on your comments earlier on corporate demand recovery and where we are right now, that 30% below 2019 levels. Can you talk about, how that compares on kind of Europe versus your North Atlantic traffic? Thank you.
Remco Steenbergen: Yes, Muneeba, Remco here. First, come back on the unit cost flat -- the flat, which we have given as an outlook for this year. I think it's first of all important to note, that the 94% of capacity we have currently given is something, which we currently believe is also realistic, right? We have carefully looked at what we expect for the new planes coming in as well, the capacities at the airports. We originally wanted to go for a slightly higher capacity level, but to ensure premium and consistency and punctuality of our flight schedule, we have chosen for this capacity level. So, there can always be something unforeseen. But normally this 94% is something, we can reach along. Second is the productivity. There's quite an extensive program. And of course, we know where we are less efficient, where there are more planes on the ground than we would want to have, where we additionally put some additional time in the schedule, where we train new pilots for the new planes coming in. All the airlines have this very clearly on the radar, and are of course over the coming say, quarters in this year and next year steering to come back to the 2019 levels, which is an enormous improvement potential of around 10%. I would expect that most of that will actually come in 2025 so less than 2024, which means that they're less dependent on reaching the flat cost this level, on reaching those productivity, but of course the low preparation has to be done next year. And then I mean 2025 of Global Industry [ph] capacity goes from 94 to close to 100, which we currently foresee that will also help together. You know that our cost structure is around 50-50 between variable and fixed. So all-in-all, we believe that the unit cost outlook of flat is good. And in that sense I think we're also doing better than our competition. And I think that trend should continue in 2025. The corporate recovery your second question. If you think about 94% for this year you have to see that say all regions are around 100% versus 2019 with the exception of Asia which is around 80%. So the average is a little bit down because of Asia. And as Carsten said before that is of course a gigantic opportunity, because we saw Asia coming back quite fast. And with this coming back we clearly have an improvement on bringing the capacity higher up because Asia will just come higher up. It's not coming from somewhere which we don't know. So with regard to the corporate travel, it's a similar percentage than on a lower capacity level and we expect that also to slightly further increase, hopefully to around 80% by the end of this year or in 2025. We have to see how that further develops. I hope that answers your question Muneeba.
Muneeba Kayani: Yes. Thank you.
Operator: And the next question comes from James Hollins from BNP Paribas (OTC:BNPQY). Please go ahead.
James Hollins: Yes. Thanks very much. And best of luck Remco and Dennis. Just looking on your 12% capacity increase. I was wondering if there's much of where you can point to a certain variation by division across 12% whether one or not liftings at Lufthansa, et cetera growing more or less than the 12% to get to that group number? And then secondly, clearly, we have a management team that talked about selling Technik and then promised it would happen then didn't. I was wondering if you would sort of fully commit to walking away from ITA if the remedies were too onerous. I think you've been quoted in the press quite a bit rumored in the press that you would walk away. I was just wondering how you -- how you're feeling about that? Thank you.
Carsten Spohr: Yes on ITA, let me say -- but let me say, something else first you're already saying goodbye to Dennis and Remco, you will be with them and me unfortunately probably at the next Q1 as well the next call I think beginning of May, Dennis and the AGM. Yes, April 30 on Q1 and the AGM a week later. So this again conference in Q1, we're still going to be in the current team. And then, of course, champagne fireworks caviar all these things to say, farewell, if you want to join let me know. But this is not the farewell for Remco and Dennis. Okay. ITA. Yes, because some of you already said farewell. ITA, we don't do ITA like we go to the Italian restaurant, okay? This is a business case for us. So we very well analyze how much value this can create to our shareholders over the next years, and which potential remedies which of course will have costs to attach to it will occur. And as buying an airplane, I don't know closing down a plant in Technik, or opening one will do a business case and take a decision. And that -- we didn't say that in public, but I'd probably say it in public if anybody would ask me. And Brussels knows that, Rome knows it. And I think more and more people in Brussels understand our European industry wants to maintain its global competitiveness small airlines like ITA need a home, and the three big ones need an inorganic chance to expand beyond, of course, organic opportunities where they exist. We are lucky we have some airports, which can still grow. Some of my competitors less. And that I think is the future of the decision on ITA. Remco, anything there was another question. Yes the growth do you want to do that? Okay. Go ahead, yes.
Remco Steenbergen: First question on the capacity increase with the division by airline. Let's first take stock on 2023 correct. Overall, as we know that the German airline is a little bit lower than the average of the group. And the other airlines are slightly above the average coming to the 84%. If we bring this now up to 94% in this year, all the airlines will keep growing with the main airline slightly higher, because it has to catch up over the coming years to come back to the overall group level. But other than the main airline growing a little bit more than the average the rest are getting close back to 100% of 2019 already in 2024.
James Hollins: Perfect. Thank you, very much.
Operator: And the next question comes from Ruairi Cullinane from RBC Capital Markets. Please go ahead.
Ruairi Cullinane: Yes. Good afternoon. Firstly, on MRO you've guided to stable EBIT in 2024. So, what will drive margin decline there. And secondly, could you just touch on what trends you've seen in air cargo, particularly since containerships began bypassing the Red Sea? Thank you.
Remco Steenbergen: With regard to your first question on Technik, you know that, Technik has formidable close to 10% EBIT margin. And yes, we expect Technik to further grow in '24 and come to a similar or slightly low percentage, but certainly an amount go up versus the prior year. So I think it's a very, very good achievement over the coming years with plans which are out there. The idea is clearly to further increase that over the coming years and hold on these levels. So I think, it's super business. Cargo, in the first quarter, I think the first two months were relatively soft still for cargo ahead of Chinese New Year and also because China is relatively soft. Lately, we see a little bit more impact of the Red Sea, not so much correct? And perhaps they can also use this opportunity for all you having your models also for Q1 available. You know that Q1 last year included a €150 million EBIT margin or EBIT amount for cargo. Actually, Q1 of this year because of the seasonal pattern and will be a slight decline. So please keep that in mind, when you update your model. For the year, cargo, we still expect an EBIT amount similar to what we realized in '23. So we expect actually what we currently see for Q2 and Q3 and Q4, a further improvement in the cargo business. I think the way it's currently set up with its fleet very efficiently. We have very good traction also on the customer side, also new customer bases. So also, we believe it's very promising what's going to happen in the coming year.
Operator: And the next question comes from Sandra Hadiza from HSBC (LON:HSBA). Please go ahead.
Sandra Hadiza: Good afternoon. Thank you for taking my questions. First, looking at your regional capacity development, you are lacking in terms of capacity restoration to South America, but despite CCU plan under proportional growth to this region in 2024. So, could you please explain your view on the Europe, South America market medium term? And second, could you please give us an update on discussions with Pratt & Whitney with respect to compensation? Have you concluded this discussion? Thank you, very much.
Carsten Spohr: Yes, Sandra, Carsten. South America is very interesting for us, because we see very solid demand in the routes we operate there and we would love to extend our network. But for that we need more 787s, because really the 787 is the aircraft of choice to go to Latin America. For us the big widebodies are too large, the smaller widebodies the 340s are not efficient enough for such a long route out of Frankfurt and Munich. So, once we have enough 787s being delivered, you'll see us being a stronger player in that very interesting market in the future. And Pratt & Whitney, it's obvious we are in the middle of discussions. You would not expect me to say anything else, but that they are confidential. If you look at the balance sheet of Pratt & Whitney's mother company, you can see how serious they take these negotiations with customers including us. So we're talking big money here. But we will of course disclose that once we have finalized an agreement and ask for your understanding in this regard that's part of the agreement or the negotiations on an agreement that we have agreed confidentiality at this point. But this is about in the direct cost, it's about indirect costs, we have wet leases, we need to pay. So this is quite comprehensive.
Sandra Hadiza: Thank you.
Operator: And the next question comes from Neil Glynn from AIR Control Tower. Please go ahead.
Neil Glynn: Good afternoon. If I could also ask two please. The first one on Eurowings. Firstly, congratulations on getting to a near 8% EBIT margin for that business after all it's been through. That's -- it's impressive. I noticed with some of the new route announcements that the proportion of non-DAC route seems to be growing for example with the new Stockholm announcements. And I'm interested if you could confirm what proportion of routes don't touch DAC countries now and what your expectations are for non-home territory growth going forward? And then the second question following on from the fact that Eurowings is now near 8%. Within the other passenger airlines, you've obviously got mainline, Austrian, and Brussels, which are lagging DAC target with SWISS above. You've mentioned recovery in Asia some bottlenecks to get through. Hopefully, corporate demand keeps growing. But I'm interested do you think that everything is in train for those other passenger airlines to ultimately get to that 8%? Or do you need to dig deeper now that you see a more normal environment for any of those airlines? Thank you.
Carsten Spohr: Neil thanks for that feedback on Eurowings because you and I have been discussing that topic now for 10 years. Believe me I am quite happy that Eurowings is now finally profitable, but I also want to be honest this year's results has a significant one-time effect out of SunExpress, which we consolidated in Eurowings. So, indeed Eurowings is on the right track. We have turned around the company, restructured. So, I would accept the compliments for the success story, but the particular number we are showing in today's presentation is not reflecting the profit level of that business, yet but we will continue to work on that. Indeed the NEO offers new opportunities, but we stick with our logic. We only operate to and from our home bases without having, obviously, Berlin is a home base of Eurowings, our competitors left Berlin more or less or have given room there. So, we now have as you know opened Riyadh and Dubai and we're looking at others. Also the German domestic business, which was very interesting for Eurowings for many years is not that strong anymore. It's declining. So, that's why we are moving aircraft rather towards what we call warm water destinations including very warm water like in Riyadh and Dubai. Important bases, Palma, by far, we're having 60 flights every day in and out of Palma to 26 different destinations all over Mainland Europe. Stockholm had a good start. We see some opportunities there. Prague is interesting for us also good labor costs. So, we will not turn into a second Ryanair (LON:0RYA). That's not our point. But Eurowings will extend its defense role for our important German catchments, which are not only defensive not anymore because we make a lot of money, but that is key to Eurowings and where we see opportunities to create value, you see Eurowings to expand. The other airlines, I think significant improvements we will see in Brussels once United and us have started or will have started to share our joint forces towards more African traffic via Brussels to and from the U.S. That's a big project we have with United we look forward to. And I think also we probably overdid it in terms of capacity cuts in Brussels on the narrow-body side. So, we are now looking at readjusting the network to make sure we have significant and sufficient feed for our Africa network. Austrian running the oldest long-haul fleets in the group are now getting 787s as you know. We even got some very cheap ones from Bamboo which we are putting in there. So, there obviously you see significant improvements on the cost side with the new aircraft. And Lufthansa Airline is just more complex animal and just took longer to come back from COVID, but let's not forget there is a total of eight fleet types. We are taking out over the next three and a half years. Most of that will come out of the Lufthansa Airline where we still have 346, 343s, 744s. So, that will be a significant cost improvement. And last but not least, as you know as investors, there is a natural hedge in Lufthansa. We always allocate capacity and airplanes to where its most profitable. So, over the years now with maybe more operational challenges over the last years, will create an environment that we will put capacity, aircraft resources, investments into the airline, which has the highest profitability. And that I think will create value for the shareholder of the group. And that's very deep in our business model now and that's why we are so proud that all airlines are now positive and now we can start to optimize. It's a big part of what we do here.
Operator: And the next question comes from Andrew Lobbenberg from Barclays (LON:BARC). Please go ahead.
Andrew Lobbenberg: Hi. Carsten, I think, you're getting bored of us saying goodbye to Dennis and Remco, but they have been absolutely brilliant. But more importantly, if there's champagne and caviar, I'm in. Can I ask on the MRO? Are you going to give us some targets in terms of growth or margin targets or free cash flow target? There's lots of good words and concept. And then the second one I would want to come back to the industrial relations situation. I mean it seems very wide spread across different operating companies and different work groups. Why do you think you're having such a challenge because it does seem clearly far more challenging for you than for your other European peers at the moment? Is there anything to do with the domestic political situation? Or what else is driving it? And what gives you the confidence that you can step it down when all we see from reading the media is the situation is just sort of spiraling at the moment?
Carsten Spohr: Andrew, the second one is a difficult one to discuss. Next time we have dinner together, we can go deep into this. But on MRO by the end of the decade which is why we call the Program Ambition 2030 we want to double revenue and profit and that will be done in a mix of organic growth in Lufthansa Technik. And surely there will be some M&A steps on the way. So this industry we believe is huge for the next years because with all these old airplanes flying a lot longer than they were intended to fly we see the Lufthansa Airline from the other side of the medal. There is a 744 or even an old 320 you need to keep flying you were looking to putting out obviously the MRO costs significantly increased. That is bad if you operate an airline, but it's wonderful when you own an MRO company. So we are very optimistic on Technik. I mentioned one sentence the defense industry as we all probably agree as Europeans is significantly changing its approach to a multi-supplier strategy. So they are looking for new partners and we already are a partner of the German Air Force for example and at the same time digitalization I think will further consolidate the industry because only if you have a significant amount of MRO data you are a player. And that's why the larger ones so we are number one as you know. We take advantage of that and the smaller ones will find it more difficult. On labor relations I think it really goes back to the beginning of the German Federal Republic in 1945. And because in those days when Germany was rebuilt there were -- obviously with our history the allied forces needed to find stable parts of the German civil society. And the two stable elements they found was the church and unions the only non-corrupted parts and they gave them a huge power to help to build up Germany and the success story of Germany is built also on the units especially. But the downside is they have huge powers which they don't have in other countries. And they didn't misuse them for 60 years. But now with full employment and some other changes in our political system, the units are becoming much more brutal on executing on their legal powers which they have not used for so many decades. And that will need some new stabilization. And it's mainly seen on critical infrastructure, the train system airports, the public transport. So I think Lufthansa is in the middle of the significant shift here of union behavior in Germany which with full employment in Germany of course lacks an incentive for unions to reconsider their actions quickly. For us as Lufthansa we have enough non-German activities to basically turn our business into a more European business which we do. And of course also you have the individual staff members who don't really like to go on strike like they do in other industries. So I'm still optimistic, we'll find solutions here but there's something bigger happening and is even making us more convinced that our strategy of becoming more international operating hubs outside of Germany putting maintenance work to other places than Germany will continue to be the right track for in the end a fairly German-based company which of course we still are. So this is more dinner topic I think next time you invite me. And thanks for the feedback on the champagne. I know you guys in the financial industry have it every night, but for us in aviation it's a rare thing.
Andrew Lobbenberg: Thanks, man.
Operator: And the next question comes from Johannes Braun from Stifel. Please go ahead.
Johannes Braun: Yes. Thanks for taking my question. Also two. First one back on ITA. We hear some crazy stuff in German press. For example, that you're asked by the EU Commission to not only give up slots at airports, but also to kind of directly subsidize your competitors on overlapping routes or finally to sell MRO, which you have just abandoned. So all a bit difficult to understand. I don't know, if you can tell us anything on that whether it's true or what the rationale of the EU Commission, might be? And then secondly on cargo, you mentioned in your presentation that there are strong e-commerce volumes currently coming out of Asia. We had yesterday DHL Express reporting the same, but they saw some headwinds on EBIT as on Asian inbound the demand is actually rather weak. So there's a kind of a volume imbalance between strong Asian outbound but weak inbounds which created some headwinds for EBIT. Just curious, if you see anything similar to that?
Carsten Spohr: Well, Johannes, historically, we have seen that imbalance in cargo since I remember, so we have always been much more full or in the end, we're always full, but reflects in higher yields out of China than into China. Even though Germany is exporting, obviously much higher share to try in other European countries, but the things we import cars and machinery don't tend to be necessarily air cargo products. So that for us is something we are used to. And recently to be honest, with those especially good deals out of China, we are seeing a very competitive and not just competitive, but profitable part of the cargo network in that regard. On ITA, yeah, there's all kinds of ideas. I don't know, if they're always are the ideas of the Commission or journalists. But in the end, what I said before is true. We look at this in a very rational way, and we have done this before SWISS Austrian Brussels you name it and then we see if we have a deal. I think, again, I think the political environment is helping us with the new EU Commission much more focused on European competitiveness than the current Commission. Of course, you already see the first developments there. So I will not give up my optimism that we come to a solution here which is good for Italy and for Lufthansa and also good for the Italian customers, who now suffer from a 40% dominance of a famous European low-cost carrier. We need to free the Italians from that. I'm sure that, this target will help me doing that.
Johannes Braun: Thank you.
Operator: And the next question comes from Sathish Sivakumar from Citi. Please go ahead.
Sathish Sivakumar: Yeah. Thank you. I got two questions here. Firstly on the disruption cost. If I look at the disruption cost back in 2022 it was around €550 million and you had seen it slightly go down to €500 million in 2023. And how much of it actually could still like take it out in the form of investing in resilience and how much is more like not in your control it's more driven by infrastructure bottleneck? So basically into 2024, how should we think about disruption costs excluding the strike impact that you had about €100 million? And then the second one is around the domestic Germany. If I look at the domestic Germany, it's only back 50% versus 2019. End of 2023 obviously underperformed the other European market. Do you think this kind of normalizes at this level? Or do you expect further pressure? And just related to that, if I had to put your network on 2019 today coming -- domestic is being down 50% in German market does it actually help you in terms of profitability? Or do you think it's kind of an EBIT neutral impact? Thank you.
Remco Steenbergen: Yeah, Sathish, Remco here. I think your numbers are correct. So we had irregularity cost of close to €500 million in 2023. It's a little bit less than we had indeed in 2022. It's still far too much correct, if you think about the number of €0.5 billion it's an extraordinary amount of money and it should be about half of this amount correct when you're in a more normalized situation. Yeah, Q1 will be impacted because of the strikes. Fortunately, the law says that even when these strikes are there disruption costs have to be paid out to customers by us. So there is some impact, but I would expect over the coming quarters also with all the measures we have taken to have a better punctuality and a more stable system that these costs will gradually come down over the coming 1.5 year, which is very positive and possible. And of course that will also help the CASK. With regard to domestic Germany, correct, I think it's right. There is a tendency when there are good railway connections in a country to find also the way which is the most sustainable way to travel. So in that sense we have also seen Germany coming down. We saw also corporate travel in Germany to come down. We expect that we end up on a lower level and from there to grow back again. That is not a surprise for us. We expected that in the crisis already that this would happen. And we don't see relatively to the profitability problem on this. You know that most of money we make on the inter-continental traffic. And that is our focus. And that's good for us.
Sathish Sivakumar: Okay. Yeah. Thanks Remco.
Operator: And the next question comes from Jarrod from UBS. Please go ahead.
Jarrod Castle: Good afternoon, everyone and congrats, Remco and Dennis. Two as well, Passenger business is growing at 12%. What should air freight be growing at just given the belly versus the freight exposure take up less than 12%? And then, secondly just on your kind of Lufthansa Holidays business. It's probably the highest visibility business if you're selling packages into summer. Can you give some color in terms of how the selling is panning out for summer? And if there's, more you can do in this business going forward? Thanks.
Carsten Spohr: Well, on passenger versus cargo growth, let's try to find the right number, but we're getting two more freighters this year 777s and obviously receiving quite a few widebodies which as you well know in Lufthansa, more or less carry 50% of our cargo capacity. But if you need exact numbers, I'm sure Dennis' team will either find them while I speak or send them to you. Holiday business is a good example of auxiliaries being the most profitable part of what we do. But of course as the name implies, it's only auxiliaries. So you still need to fly somewhere to make extra revenues. But we believe we can do more there. Eurowings probably is a little bit our innovation center for this. And the business model of Eurowings probably also applies to higher opportunity -- larger opportunities. But we will indeed, go into that I think more successfully over the years. As you well know I'm sure it's the same in the UK, but for sure it's true for our home market Germany. After COVID package tourism really came back. We all thought its dead because of the Internet allowing people to put their own packages together. But with all these interruptions in COVID, people now love to have everything secured in one package. So package tourism becomes a more and more important part of our growth in Leisure. Low-teens Dennis' team is just telling me is our capacity growth in 2024 in cargo. And in Passenger as you know it's 12. So that sounds similar to me. If you need something exact we're happy to provide that, but that's all we can now pull out here out of our information. And again, Eurowings, is the one to look at when it comes to this package topics. Eurowings Holidays using artificial intelligence nowadays, so it's a very innovative stuff going on there, and it will add some nice extra margins to our business in general and Eurowings in particular.
Dennis Weber: Thank you very much. I think we've got no more questions in the line. So thank you for your interest. Thank you for your participation. We look forward to meeting and speaking with you in the next couple of weeks, and then with the publication of Q1 results at the end of April. Have a good day. Bye-bye.
Operator: Ladies and gentlemen, the conference has now concluded. And you may disconnect. Thank you for joining. And have a pleasant day. Goodbye.
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