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Operator: Ladies and gentlemen, welcome to the Lufthansa Group Q3 2025 Results Conference Call. I'm Moritz, your 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.
Marc-Dominic Nettesheim: Thank you, and welcome, ladies and gentlemen, from our side to the presentation of our third quarter results 2025. With me on the call today are our CEO, Carsten Spohr; and our CFO, Till Streichert, and both will present our results for this third quarter and discuss the commercial outlook for the remaining 3 months of the year. Afterwards, you will have the opportunity to ask questions. And as always please limit yourself to 2 questions so that everybody else has a chance to participate in Q&A. Thank you very much. And with that, Carsten, now over to you.
Carsten Spohr: Yes. Thank you, Marc. And to all of you, a warm welcome also from my side. It's just a few weeks since we met many of you at our Capital Markets Day in September. And today, then following this, I'm pleased to share our third quarter figures with you together, of course, with Till Streichert on my right here. As you have read from the figures published this morning, we can report rather positive developments for the quarter with quite a few aspects and KPIs showing improvements. The most important one for sure, we are well on track in terms of regularity and punctuality of our flight operations, which serves in the end as the basis for all other improvements we'll be talking about later today. So let me nevertheless, start with a macro view of the whole industry. The global aviation sector continues to boom. And over the next 20 years, at least according to IATA forecast, the global passenger numbers will once again double. I think there are very few industries in the world, at least in the real economy that can count on such a reliable and long-term upward trend in demand. And in the current aviation landscape, strong demand growth meets limited supply very likely for many years to come. And this combination obviously generally works in our favor, even though, of course, there are downsides on the operational side with delayed aircraft. We'll also be touching on this in a minute. But overall, as by now the fourth largest airline group in the world and as #1 in Europe, our passenger airlines are globally well positioned to benefit from this global high demand, especially premium classes. We'll come to that as well. And on top of that, the supply constraints also provide enormous momentum for the MRO sector, worldwide aging fleets ultimately drive higher maintenance demand and that ensures stable and recurring revenues for Lufthansa Technik even though we had some setbacks this quarter due to tariffs, Till will elaborate on that. And this balanced portfolio provides stability in macroeconomic turbulence times. And on top of it, of course, we have Lufthansa Cargo, where we also own a business that can benefit from these current global uncertainties. Our industry has become more resilient and so have we in the Lufthansa Group. Through collective efforts and focus, we have regained network stability that sets the foundation for our future profitable growth. The core, as mentioned before, of our whole business model remains a stable flight operation. In this regard, the summer '25 clearly marked a turning point, especially if you compare it to the 3 summers before. And this came not for free. We had massively invested into stabilizing the system. We have, for example, extended scheduled flight times. We have brought up the share of aircraft reserves. We have increased connecting times in our hubs, but all this was well worth it. Stabilization came. And on top, of course, significant reduction in IRREG cost allowed us to also have a positive impact on our financial numbers. And now, of course, looking into the future, starting in '26, there will be efficiency enhancements that we will have on the top of our agenda. This fortunately goes hand-in-hand with the biggest fleet renewal of our company's history. Just 3 weeks ago, our first Dreamliner with a new Allegris Cabin on board took off to Toronto, and we will get further 787s almost by the week, actually more than by the week, we get 2 this week alone and will bring the number up to 34 total very soon. Until the end of the year, we will have received at least 8 brand-new Dreamliners, at least according to the updated information from Boeing. And on top of that, on behalf of Airbus, we were able to get and receive the first 350-900 for Swiss with a new product SWISS Senses on board also just 2 weeks ago. So now our premium long-haul product, Allegris is not only available in Munich, but also in Frankfurt and in Zurich. Ladies and gentlemen, let me take a look at the numbers. In Q3, we were able to further expand our capacities and that particularly on the North Atlantic. And despite the somewhat cautious booking situation in spring caused by the tariff announcement around Easter, we, in the end, experienced a well-booked summer. Globally, we have seen moderate capacity growth of 3.2% compared to the previous year. By that -- or partly by this, total revenue has increased by almost EUR 300 million to EUR 11.2 billion -- sorry, by EUR 500 million, reaching EUR 11.2 billion. Our adjusted EBIT for the third quarter remained stable at EUR 1.3 billion, more or less on par with last year. And year-to-date, though, we can report an improvement of already EUR 300 million versus '24, showing some nice progress on this promise of significantly improved results for the whole year. Key driver of our financial success, again, is and has been the stabilization of our flight operations. Regularity in Q3 was at 99%. Departure punctuality improved by more than 10 percentage points compared to last year. This brings me to our capacity allocation. Year-to-date, we have mainly grown on our European -- domestic European routes and on our North Atlantic routes. And while the third quarter indeed showed some but anticipated yield softness in these regions, the North Atlantic was still our most important profit pool. Of course, as you well know, supported by our successful joint venture with United and Air Canada. But it's worth to note that the yield softness is, of course, also partly currency driven. Excluding currency effects, our RASK actually remained stable versus the prior year. Looking ahead, we plan continued growth on the North Atlantic, in line with the market and also given that capacity-wise, we are still somewhat lagging behind our peers compared to pre-pandemic levels. Growth on the continental network, nevertheless, will be more limited, more or less stable, less than 2% with capacity discipline translating for sure into improved booking outlooks in terms of load factor and yields. In Asia, we remain cautious regarding growth given our unfortunately continued structural disadvantage due to the closure of the Russian airspace. However, increased demand to Japan, South Korea and India give us confidence. In the winter schedule this year, we offer 43 weekly flights to Japan and South Korea and even 64 weekly flights to India. As a matter of fact, Frankfurt, Tokyo has become our best-selling route in terms of revenue. Going forward, we are also optimistic again for the Middle East. Already now, we are seeing a significant recovery on our important route to Tel Aviv. We're also happy to reopen [ Tehran ] again, which is also contributing to our commercial success in this part of the world. But not only the Middle East services are picking up, bookings across all traffic regions reflect a positive trend not only for the coming months in '25, but also for the first visible weeks in '26. Up until January, the booked load factor is consistently above last year's level and balanced capacity growth is helping, as mentioned, to stabilize yields. Compared to the third quarter, yield decline clearly slows down in the months ahead despite ongoing headwinds from a weaker U.S. dollar. So combined with a favorable seat load factor development, that means our revenue -- revenue -- sorry, unit revenues are stabilizing also on the North Atlantic again. And we, like others and our American peers already communicated on this as well, we are benefiting in our industry from an extending and extending and extending summer season. I recall that a few years ago, I called it the endless summer, but even then, I didn't realize that one day summer will last until Christmas. That's more or less what we see right now, very nice bookings to leisure destinations all the way through the late fall. But even more important, especially for Lufthansa and our business model is the fact that premium bookings remain above last year's levels. And also finally, corporate sales are gaining some further traction. Summarizing, our booking outlook is robust, and we are well positioned to capture further upside as demand continues to recover more and more. And with that, I hand over to Till, who will now guide you through the detailed figures of the third quarter. Thank you. Till, over to you.
Till Streichert: Yes. Thank you, Carsten, and a warm welcome also from my side. Thank you for joining us today to discuss our Q3 results and also the financial outlook for the rest of the year. So let me get started. In the third quarter, revenues increased by 4% compared to prior year, driven by a 3% capacity increase as well as robust growth in both our cargo and MRO division. This reflects the resilience of our core business, and you can see also the ongoing high demand for air travel, air cargo and MRO services. In the passenger airline business, notably, ancillary revenues rose by an impressive 13% compared to the previous year. And this growth is a strong proof point of the effectiveness of our evolving offering structure and you can see also the success of our digital initiatives across the airlines, which continue to drive new revenue potential on top of the classic ticket sales. On the cost side, we benefited from lower fuel costs with a positive impact of EUR 170 million in the third quarter compared to prior year. At the same time, we continue to observe rising costs in other line items, many of which affect the sector, the entire industry as a whole. Fees and charges increased by 9% year-over-year with ATC costs alone rising by 17%. Airport-related passenger charges and handling charges also saw double-digit increases, mainly in our home market in Germany. In the end, the anticipated head and tailwinds offset each other, and that resulted into a third quarter adjusted EBIT of EUR 1.3 billion, pretty much on par with last year. The adjusted EBIT margin is 11.9%, which is slightly 0.6 percentage points below the previous year's level. Now when looking at EBIT, the Q3 development included a substantial one-off effect on the tax side, where we recorded an increase by EUR 121 million net. This increase is largely driven by the so-called German tax booster announced earlier this year. And while the initiative to gradually reduce German corporate tax rates in the future will eventually have a positive impact, it initially led to a revaluation of our deferred tax assets, resulting in a higher tax burden in the quarter. At the same time, our financial result increased by around EUR 128 million compared to the previous year, and that's mainly due to currency translation and market valuation effects. And as a result, net income decreased by approximately EUR 130 million. Let's now take a closer look at the results of our Passenger Airline business. Revenues rose by 1% to EUR 8.9 billion in the third quarter, and the adjusted EBIT amounted to EUR 1.2 billion, which is in line with last year's result, which is a solid achievement given the market environment in the third quarter. We increased capacity by 3.2% compared to prior year with a strategic focus on our key markets. And as anticipated, unit revenues declined by 2.2% during the quarter and the positive revenue effect from higher seat load factors, increasing ancillary revenues and less IRREG events mitigated but did not fully compensate the negative effect from lower yields. There were 2 primary drivers behind the yield softness, a highly competitive environment in the [indiscernible] business and the anticipated temporary slowdown in North Atlantic demand, which was intensified by a weak U.S. dollar exchange rate. Adjusted for the currency effects, unit revenues were largely on par with previous year's level. While unit revenues in the third quarter showed the expected dip, we kept our unit cost position firmly under control. As a result, ex-fuel unit cost only increased by 0.5% despite the previously mentioned cost pressures. A flat ASK at Lufthansa Airlines contributed significantly. And that is, for me, a reflection of early proof points of our transformation success, resulting in an improved operating result for Lufthansa Airlines despite the challenging trading environment. And this underscores as well our unwavering focus on executing on the turnaround program, and that remains a crucial catalyst for driving as well profitability in the quarters and years to come. So let's have a closer look at the positive effects of the turnaround program on our 2025 results. And here, it is worth highlighting the progress that we've made. The program is delivering tangible and measurable results with a positive effect on adjusted EBIT of around EUR 500 million until year-end. So that's the full year figure. And that is also delivering on our target that we've set for ourselves. As mentioned before, this rapid progress already had a positive effect on our unit cost, resulting in year-to-date unit cost reduction of 1.4 percentage points at Lufthansa Airlines. For Q3, unit cost of Lufthansa Airlines increased by just 0.1%, so almost flat. This shows that the effect from the turnaround program materialized in the second half of the year as expected. Key drivers for the cost improvement revolve around reestablished operational stability, laying the foundation also for further -- for future optimization. And in addition, structural adjustments such as the successful renegotiation of several MRO contracts as well as our commitment to focus growth on more cost-efficient AOCs are starting to pay off. City Airlines has grown to 11 aircraft by the end of September, and we recently announced the allocation of 4 of our A350s to Discover. In addition to the cost benefits already realized, the program has also achieved meaningful progress on the revenue side. Measures include the realization of pricing uplifts through new tools and the continuous rollout of our new cabin product, Allegris, clearly one of the key drivers of the increase in ancillary revenues per passenger. And with many additional measures in implementation for the years to come, the effects of our turnaround will enable profitable growth for Lufthansa Airlines in the years to come. Let us now move to one of our other strong pillars, Lufthansa Cargo. And this year's positive trend remains unabated. The adjusted EBIT reached EUR 49 million in the third quarter, an increase of EUR 11 million compared to the previous year. With that, our year-to-date operating result stands at EUR 184 million, which is an impressive increase of EUR 132 million or 250% compared to last year. So a very strong first 9 months in comparison to last year. This result was primarily volume-driven with chargeable weight up by 11% in Q3 compared to the previous year, compensating for slightly softer base yields. And the volume increase was a result of -- or was also a result of higher capacity due to additional new 777 freighter and the marketing of IATA belly capacities, which started during summer this year. Our points of sale in Europe and the Asia Pacific region have shown particular strength. The Asian e-commerce business remains our most important growth driver here and frequent charter flights to and from China built at preset rates ensure regular revenue streams and provide also a degree of predictability in what is normally a business model that is known for its high short-term dynamics. Proactive cost management also shown positive results at Lufthansa Cargo. Ex-fuel unit cost decreased by 6% versus prior year, and that was driven by a reduction in mainly IT cost and also higher crew productivity. Looking ahead, the fourth quarter is expected to deliver this year's strongest result, in line with the usual seasonality of airfreight. And all in all, Lufthansa Cargo, there remains well on track to deliver a full year result significantly above last year's level. Let me now provide you with an update on our MRO segment's performance and outlook as well. Lufthansa Technik's positive top line outlook was once again confirmed by a growing market and a strong customer order book. Revenue grew by 10% in the third quarter, driven by a strong 28% growth of third-party business, which is particularly encouraging. At the same time, adjusted EBIT amounted to EUR 130 million, a decline of EUR 31 million compared to the previous year. This negative result and this margin development was driven by ramp-up efforts in new facilities such as Portugal and Calgary and substantial external headwinds, including supply chain disruptions, currency effects and mainly tariffs. At EUR 13 million, this impact of tariffs alone makes up more than 40% of the adjusted EBIT decline in the third quarter. So that is just for the third quarter. Lufthansa Technik has already started implementing countermeasures to limit the impact of tariffs on their results going forward, for example, through the redirection of production flows. And as an example, material from customer locations in Canada or South America is no longer shipped via our logistics hub in the U.S. And including these measures, we expect to limit the full year net effect of the tariffs to about EUR 50 million and to mitigate the impact in the upcoming years as well. Looking ahead, we expect a more positive development for Q4, particular, the output growth in the Engine segment is encouraging, which will be a key driver for future profitable growth. And please keep in mind here, despite the tariffs that we are facing this year, keep in mind that the MRO business is a marathon, not a sprint. And what matters is that the demand environment overall is healthy and intact and our Ambition 2030 strategy remains firmly on track. Let's now turn back to the group level, and let's have a look at our cash flow. In the first 9 months of the year, the operating cash flow amounted to EUR 3.9 billion, an increase of EUR 600 million compared to the previous year, and the improvement was primarily driven by a stronger operating result as well as tax repayments with each of these 2 items contributing roughly EUR 300 million. Moreover, net capital expenditure were EUR 200 million lower than last year. And one of the reasons was a decrease in gross CapEx of EUR 100 million due to the delays of our Dreamliner deliveries. All of these effects improved our adjusted free cash flow, which amounted to EUR 1.8 billion at the end of September. And until year-end, we still expect to take delivery of between 7 to 10 Dreamliners, some of which were delayed from previous quarters and resulted there was also in the shift of CapEx and some of it will come through -- this will come through, obviously, in the fourth quarter. For the full year 2025, we therewith stick to our guidance and expect adjusted free cash flow to be broadly stable versus 2024. Our balance sheet strengthened further. Our strong liquidity position currently at EUR 11.9 billion ensures that we are well positioned for the upcoming aircraft deliveries and debt maturities as well. And at the end of September, net debt amounted to EUR 5.1 billion, which represents a decline of EUR 600 million compared to prior year, and this improvement is mainly attributable to the strong cash flow generation. The key highlight in September was the successful issuance of a new EUR 600 million convertible bond at an annual 0% coupon rate. And at the same time, as you know, we took the opportunity to buy back half of our existing convertible bond. And these actions further optimized our capital structure and also demonstrate our proactive approach to financial management. Net pension obligations decreased by roughly EUR 500 million to EUR 2.1 billion, primarily driven by an increase in the discount rate. And our leverage ratio at the end of the third quarter was 1.6x, reflecting a continuous downward trend since the end of last year. Now moving over to fuel cost. Since the start of this year, our fuel costs have developed in a highly favorable way, and I'm pleased to confirm that this positive trend persists. And our Q3 fuel bill of EUR 1.7 billion was in line with our expectations, and there was also substantially below prior year. And for the full year 2025, we expect fuel cost to amount to about EUR 7.3 billion, roughly in line with our previous guidance. And thereof EUR 7.1 billion relate to fossil fuel only representing a reduction of EUR 700 million compared to last year, and the remaining EUR 200 million relate to additional cost for sustainable aviation fuel. Given the favorable fuel price during the first half of October, we also decided to execute additional hedges for the remainder of 2025, even going beyond our regular target hedge ratio of 85%. For 2026, we have already hedged our Passenger Airlines business at a rate of 71%, ensuring continued protection against fuel price volatility next year. Let me now close by commenting on our financial outlook. Taking into consideration our year-to-date result improvement of EUR 300 million and our positive outlook for the rest of the year, we again confirm our 2025 adjusted EBIT guidance for the group achieving a result significantly above prior year's level. Let me give you some more details on our outlook for Q4 to underline our positive expectations for the rest of the year. On capacity, we will continue our focused and disciplined growth path with an envisaged ASK growth of about 4%. On unit revenues, we see a more positive demand environment in Q4 than the one we experienced in Q3, and we do expect RASK to be flat compared to last year's level. On unit cost, I mentioned before that the Lufthansa Airlines turnaround program is proving successful. And for the first 9 months of this year, we've seen a unit cost increase across the group of 2.5%. So that's for the entire passenger airlines. And for the last quarter, we expect the CASK increase to be below this figure, so to be below what we had year-to-date incurred. For Lufthansa Technik, we expect a stable Q4 adjusted EBIT compared to last year. And given the negative external factors, mainly tariffs and currency movements, this means that Lufthansa Technik will most likely not be able to achieve a clear increase in profits this year. And as described before, we've taken action to mitigate those effects going forward, and we stick to our midterm outlook of EUR 1 billion adjusted EBIT in 2030. As every year, we will provide you with guidance on 2026 alongside our full year 2025 communication in March next year. However, I can already provide you with a direction of what we plan for next year. Regarding capacity growth, we will focus on long haul as described during our Capital Markets Day. And next year, we are planning long-haul growth in the mid- to high single-digit region, while we expect almost no short-haul growth. And in total, we want to continue this year's disciplined growth with about a 4% year-over-year increase in ASK. Also, I expect to see progress in the modernization of our fleet. We expect that this will lead to a reduction of reserve aircraft on the ground, which will improve aircraft productivity, our clear goal of asset utilization -- improved asset utilization and hence, also our profitability next year. This will be enabled by new aircraft delivery, which Carsten will comment on in more detail in a few minutes. However, I can already tell you that we expect the delivery of twice as much long-haul aircraft in 2026 and this year. And finally, let me reiterate that for 2026, we continue to believe that the Lufthansa Airlines turnaround program will achieve a gross EBIT impact of EUR 1.5 billion, and we will achieve an adjusted free cash flow. This is now for the group of broadly on the same level as 2025. To summarize, we keep delivering with a confirmed and a refined full year guidance for this year. And we deliver -- we have delivered there with tangible proof points also on the main value levers mentioned at our Capital Markets Day. And for the upcoming months, we do see a more positive demand environment, which already today gives us reason to also believe in a good start into 2026. And with that, let me hand back to Carsten, who will provide you with some more thoughts on the strategic outlook, including insights on fleet and customer development.
Carsten Spohr: Yes, Till, thank you very much. And indeed, part of the optimism we are portraying here today and one of the facts why we are convinced to be in a good path today is driven by our comprehensive fleet modernization and harmonization. After years of waiting was added on by COVID, we have finally reached a point where we take delivery of a new aircraft more or less every week. Out of the total 230 next-generation aircraft in our order book, we anticipate more than 50 deliveries until the end of next year. And obviously, all these aircraft freighters aside are equipped with our premium products, which delights customers, which also excites our flight crews and obviously will also add to the excitement of our shareholders when it turns into additional profits. Flights with the premium cabin, Allegris and SWISS Senses, now, as mentioned before, in my opening takeoff from our biggest hubs, Munich, Frankfurt and Zurich. And on the high-yield routes or the highest yield routes, these include selling our exclusive new first-class suites. When you talk about business class, we don't only receive outstanding passenger feedback, but we also see above expectations, I must say, a high willingness to pay extra for the first-time individualized seating options we offer. Our most profitable compartment continues to be premium economy. This will grow by 50% by the end of the decade. And as you also know, we will also equip existing Lufthansa and Swiss subfleets, including our flagship 748, 747-8 and the 777 at SWISS with the new products. In total, the new product will already be available on 1/3 of the wide-body fleet by the end of the coming year. By '27, this applies to roughly 70%. And then by the end of the decade, every long-haul aircraft of Lufthansa and Swiss will fly with our new premium products. On the Capital Markets Day, we presented how we enhance and harmonize our offers and products. And our aim is, as expressed there, to further integrate all activities across our group and realize even more synergies. For example, our increasingly popular airline app, which already serves all group airlines or at least group hub airlines and is hosted to one single group-wide -- by one single group-wide IT platform. To further enhance the physical travel experience, we have invested EUR 70 million in onboard improvements just at our core brand, Lufthansa alone. For our loyal Miles & More customers, we are offering new opportunities to earn and redeem. And together, for example, with the Marriott Group or also in partnership with Deutsche Bank, where we're just launching a new credit card. If you put all these initiatives together, they contribute to significantly improved customer satisfaction, which has increased by an unheard of 8 percentage points in the third quarter compared to the year before, but not only on customer satisfaction, but in all dimensions, we want to continue, obviously, our successful development. So looking ahead, we want and must make our group, especially our core airline, also more profitable again. The fundamentals of our business for this have never been stronger. We are also, as mentioned in the opening, operating in a favorable market environment characterized by resilient and rising travel demand on the one hand and supply constraints persisting on the other hand. This supports a continuing capacity discipline across the industry and therefore, supports strong yields across all our markets. Over the past decades, we have transformed from a national flag carrier of Germany into Europe's leading multi-hub airline network. And this group, as you know, is built on 4 strong strategic pillars, integrated network airlines with now 6 hubs, complemented by a strong point-to-point carrier, world-leading MRO business and very flexible cargo operations, each of them contributing to our resilience and value creation. We're, therefore, confident to achieve a full year '25 result significantly above prior year's levels, the targets which we are reaffirming today. Also midterm, we will significantly further increase our profitability level, targeting an adjusted EBIT margin of 8% to 10% between '28 and 2030. We're proud to say that we deliver on our promises, and we look forward to providing you with further and tangible proof points soon. For now, though, we're looking forward to your questions. Thank you.
Operator: [Operator Instructions] And the first question comes from Jaime Rowbotham from Deutsche Bank.
Jaime Rowbotham: Two areas I wanted to explore. The first is on the Q4 unit revenue comment. Perhaps you clarify if the flat RASK guide for Q4 includes what you currently see on currency, i.e., we should compare it to the 2.2% decline in Q3 as opposed to the 0.4% decline, which excluded FX. And in terms of the stabilization of the intra-European trend coming from growing ASKs at less than 1% compared to 5.5% in Q3. I can understand how this helps the yields, but it must hamper a bit the narrow-body aircraft utilization, which we saw at the CMD was running low. So just keen to understand how you balance that. Second area was cargo. Till, you mentioned visibility is low in cargo given the short-cycle nature of the business. I just wondered if you'd be willing to say what might be a sensible range of profit outcomes for Q4 relative to the circa EUR 200 million of operating profit delivered last year. I'm just conscious that, that figure could half and you'd still have about 30% year-on-year growth, so significant growth in full year EBIT.
Till Streichert: Jamie, let me start with the second question first, just on cargo. So you're quite right. We had last year an exceptionally strong year where actually out of the EUR 250 million profit, we made EUR 200 million just in the last quarter. So we don't even need that in this quarter to already achieve comfortably our target of significantly above. Look, can I be more specific in terms of what I do expect for cargo? Difficult to say without now kind of specifying really our guidance, which we stayed away from. But just leave -- I'd like to leave it with that. We have seen, obviously, year-to-date very good performance. And you can see also in the third quarter, the strong volume demand, which we are quite positive about even after airfreight traffic streams or air freight streams have kind of reorganized a bit globally post the so-called Liberation Day, and we are participating in that. And drivers of this volume is really the belly capacity, the added ETA commercialization of belly capacity and the freighter added capacity. So this makes me positive. But of course, we now need to see how the last 2 months we're going to come out. But all in all, clear and I would say, optimistic confirmation of our significantly above 4 cargo. RASK guidance, your first question in terms of FX. So you're quite right. The comment in terms of improving RASK guidance and stabilization there in terms of year-over-year is basically a like-for-like. So there's no FX assumption that changes that changes in there. And let me remind you as well that we have seen already during the third quarter between July, August and into September, September was already a month that was notably better in terms of RASK evolution.
Operator: And the next question would come from James Hollins from BNP Paribas.
James Hollins: First of all, probably for Carsten. Just on that corporate strength, it's not something we've seen for a while. It's certainly something the U.S. names were flagging. I was wondering if you could sort of run us through if that's sort of a big acceleration as we've come into the autumn, where it's particularly strong? Is it U.S. inbound to Europe? Is it maybe in Germany, first time in a long time, maybe signs of this fiscal stimulus working. So just run us through on the corporate side there. And then secondly, I hate to be that person in the room, but maybe get your view on the likelihood of a strike sort of take us behind the scenes of weather. Obviously, the media have got their views on what's going on, but just get your views on likelihood of strike, would be great.
Carsten Spohr: Yes. James, I think we've missed one question from before utilization of our [indiscernible] fleet, if it would go down further, it's the opposite, we are probably looking at 2% growth on [indiscernible] with the same fleet size. So take that as a thumb rules, you see an increase in productivity by at least 2% more production of the same fleet. James, proper strength, indeed, the U.S. carriers and also our people, of course, leaving the shutdown aside. Don't forget our largest customer is the U.S. government. So recent weeks put aside, we see some development from the U.S. Also, Germany is at least not aggressively growing, but somewhat growing on volumes. Tech industry is strong. For example, consulting is strong. Finance industry is strong. So it's not crazy the growth, but compared to what we have seen now for quite a few years, it was worth mentioning it. Likelihood of the strike by the pilots in the end, the union has to answer. But as we already said before, we have done our yearly staff survey and the biggest improvement in satisfaction comes from the pilots. And the pilots also expressed not worries about their pensions, which are already quite high, but rather expressed worries about their future and future growth and future careers. As we always allocate strike cost is personnel cost, of course, any strike would increase the cost disadvantage of the mainline and decrease perspectives and careers even further. So putting all that together, I think there's room as our Head of HR offered to talk about future perspectives rather than additional pensions. We just cannot afford and not willing to raise further also in terms of fairness to the pilots in the other airlines. I think that's about what I can say about that today.
James Hollins: Can I just come back on the U.S. government shutdown? Maybe just give us your thoughts on what you're seeing very near term? I assume U.S. inbound corporate, given that your largest customer has taken a hit and maybe whether you sense there's a feeling that there's a bit of reticence from some Europeans going to the U.S. because there might be delays or whatever. Just it would be great.
Carsten Spohr: Well, I think there was a very special event -- not event, effect, sorry, from my language. Coming out of the Easter tariff announcement, the so-called Liberation Day Till referred to, that was the time around Easter when German booked their late summer holidays. And surely, we saw some softness out of Europe, especially Germany, Austria, Switzerland and Denmark [ flying off ] to the U.S. We never saw that coming out of the U.S. There, of course, the yield was impacted by the currency. So I think that what people have been seeing a little bit in Q3, and we forecasted that in Q1 and Q2, if you recall, is already softening and/or the effect is softening. So we will see a more positive outlook on Q4 and also in the first weeks of '26. The shutdown in general is, of course, affecting U.S. carriers a lot more than it affects us because the main travel from the U.S. government is domestic U.S., but also us with our joint venture partner, United, enjoying some nice business from the U.S. government, which, of course, is slow now. But I don't think the shutdown will eventually last too much longer either.
Operator: And the next question comes from Harry Gowers from JPMorgan.
Harry Gowers: First question, can I just ask on your -- you've got this slide, I think, Slide 6, which kind of shows the bookings outlook and kind of the RASK development into Q4. So first question, I think October is missing from that chart. So could you give any commentary on what you've seen in the bookings for October? And then is your flat RASK guide for Q4, is that just what you see in the books at the moment? Or have you made any further assumptions on how bookings and pricing will actually evolve over November and December? And then Till, maybe one for you. Could you just clarify or kind of narrow down the range a little bit on ex-fuel CASK for Q4? Because I think you said the guidance would be below the 2.5% you've seen year-to-date. But are you going to see an ex-fuel CASK, which is higher than the 0.5% that you saw in Q3? And what exactly would be driving that?
Till Streichert: Thanks, Harry. I'll start with the second question, and then we'll work backwards to the first one. On CASK, so as I said, we've got year-to-date 2.5% CASK growth. Remember, the quarterly trajectory was basically we had 3% and 4% CASK growth in the first and second quarter, now 3.5%. Pretty pleased with that. And for the fourth quarter, I expect something which is below the 2.5%. Now being even more specific, look, hard to say what's the driver of the movement from the 0.5% in the third quarter up to something which is below the 2.5%. It's -- I expect that MRO will going to be one of the drivers, which goes up in the last quarter a bit. And then we've got the usual drivers as well on additional cost evolution from ATC, from fees and charges, et cetera, et cetera. But again, with that for me, what we said at the -- throughout the year, this half 1 versus half 2 is starting to materialize where CASK is coming down. And that for me, if you just say I look at half 1 and half 2, clearly an effect of the materialization of the Lufthansa Airlines turnaround and look in the same way also for the other airlines that are all running their efficiency drives. So that's on CASK. On RASK, so what we've shown there is basically Page 6 is really what we've got on the books. So there are no -- that's what we see in terms of seats sold at the seat load factor that we've got right now. Your question, October, October was with -- I mean, we've almost closed, it was good. And there was for the third quarter, what we said is clearly better trading environment and resulting into this positive evolution from the third quarter where we obviously saw that as a dip. And here again, the comment that throughout the quarter, September was already notably better than July and August.
Operator: And the next question comes from Jarrod from UBS.
Jarrod Castle: You're still talking about a material increase in adjusted EBIT. Consensus is EUR 1.9 billion, give or take, versus the EUR 1.6 billion, give or take, last year. From where you stand today, do you see risk on the upside or the downside? Or are you comfortable with kind of where consensus is? Just any broad color. I know you've still got 2 months left of the year. And then secondly, the balance sheet continues to degear. So just thinking about the dividend payout ratio. Are you or the Board thinking more towards the top end of the 20% to 40% of net income guidance for this year? Or again, is it a little bit too soon?
Till Streichert: Look, in terms of -- let me not comment specifically on the consensus. We've given a bit of color, of course, on the fourth quarter with RASK, CASK, also a bit of explanation on what I expect to happen on Lufthansa Technik and Cargo. So I don't want to be specific on that. We've given the elements. I think you get to a good picture with that. And I would probably leave it more or less with that element or with that answer. But if you would see us uncomfortable, obviously, then we would have said something. Let me put it like that. And finally, on the dividend policy, which we did reconfirm at the Capital Markets Day of 20% to 40% in place, this is a healthy dividend and the exact payout ratio within that range. We will obviously detail further down the line when we've got the full year results. But you can imagine, and that is what I also highlighted at the CMD. Of course, I want that our dividend per share continues to grow, driven by the improving operating performance as a key driver of it, okay? And the strength of the balance sheet as a backdrop and the lower leverage is helpful. I'm very happy with that. But also here, let me just highlight the fourth quarter, I do expect still to have aircraft deliveries and CapEx outflow. And with that, I did reconfirm that I expect free cash flow to be broadly stable versus prior year. And with that, you've got the key elements put together.
Operator: Then the next question comes from Muneeba Kayani from Bank of America.
Muneeba Kayani: Just going back to Slide 6, and thank you for that. It's very helpful. The bookings number, just to clarify the dark blue in there, is that kind of comparing to bookings at the same time last year in terms of the year-on-year increase? And then just kind of when you're seeing that yield improvement, is there any specific region that is driving that? Or is it across the board? You point out premium yields above previous year for every month. What are you seeing on the main cabin, please? And then on the unit cost side, so in your 2026 guidance, you're talking about fleet productivity. Till, you've talked about unit costs getting -- trends getting better in the second half of the year. I know you're not giving guidance specifically on next year. But broadly, how are you thinking about unit costs on a passenger airline in '26?
Till Streichert: So that was 3 questions. So the first one, just quickly, yes, you are right. That's a year-over-year comparison. So nothing else, the dark blue bookings number on Slide 6. The second question on yield evolution. So we have, in fact, seen an improvement in all traffic regions, albeit I would actually also highlight that intercont is probably -- is improving more. I expect it to improve more than cont. And in terms of cabin class, premium, so this is the same theme that we've seen also before. Premium continues to be doing better than basically economy class. And your third question in terms of CASK evolution, I'll answer it from 2 angles. One is what I said also at the CMD, longer term, I do expect that our CASK growth, we are able to clearly beat inflation on CASK. And when we now talk about 2026 specifically, please bear in mind that we will be giving guidance and further details closer to the time beginning of March. But for now, all of the drivers that you highlighted, asset utilization, productivity gains, turnaround improvement playing into it, you can almost roll forward a bit also from what we've started to do and seen in 2025 as proof points. So -- and again, the flat CASK at Lufthansa Airlines in the third quarter, and again, bear with me, I'm not saying that this will be now flat for the next quarters to come. There will always be a bit of volatility, but a 0.1% CASK increase at Lufthansa Airlines only in Q3 is a big success.
Operator: And the next question comes from Conor Dwyer from Citi.
Conor Dwyer: The first was on basically your comments around next year on long haul. You talked about mid- to high single-digit capacity growth. And I said that obviously, that will have good implications on the unit cost side. But how are you thinking about the risks there from a unit revenue perspective that a lot of that just gets eaten up by some of the pricing pressure that, that may bring? And then secondly is on Technik. So as you said, very strong revenue growth with third parties, but quite a bit of a pullback on the internal revenue side. So I'm just wondering what exactly is that reflecting? Is that basically the need to fly planes because you're tied on capacity slow deliveries or anything else that might not have thought of?
Till Streichert: Conor, it was a little hard to really understand. I'll start and you please just repeat where we don't answer your question fully, okay? I'll go with Technik first because there, I think I got it. So to repeat, 10% revenue growth, that was good. Indeed, the third-party business over-indexed, 28% growth, which for me is actually extremely good because there [indiscernible] obviously take it from the market. In terms of internal business, I think you were questioning, is that a problem that we are scaling back there? I'm not aware. I mean, obviously, mathematically, there's a little bit of a shift. But again, what matters is the external revenue because that's where you are usually in long-term contracts -- going into long-term contracts and building basically business. I hope that answers the Technik question.
Conor Dwyer: I was really just wondering, basically, is that weaker internal revenue reflecting basically the need to fly the planes and that some maintenance actually internally is going to be coming more so through the winter in that regard.
Till Streichert: Sorry, I struggled. Can you just repeat it again?
Conor Dwyer: Yes. So the question was more so around with the internal revenue being a bit, let's say, less in the peak summer, is that reflecting the need to fly the planes currently and do the work through the winter because you're kind of tight on capacity at the moment?
Till Streichert: The need to fly...
Conor Dwyer: So you're basically charging less internal revenue on the maintenance business. Is that basically reflecting the fact that at the moment, you basically need the planes flying and more work is to come, i.e., on the internal revenue side through winter?
Till Streichert: Look, this is math -- I would actually think this is more mathematical what's happening here. I wouldn't read too much into the internal revenue generation or whether there are shifts in terms of business. I mean, obviously, this is also driven by just what's happened in terms of MRO that we use internally with Lufthansa Technik.
Conor Dwyer: That's fine. Then the other question was simply basically around the risk of medium to high capacity digit capacity growth into next year in long haul. What the risks are basically around unit revenue there, even though there is obviously some unit cost benefits from doing that?
Carsten Spohr: Well, I think the major effect on long-haul growth next year is North Atlantic. And there, we are still lagging behind our peers compared to pre-COVID. So if you draw a line from 2019 to where we are in North Atlantic capacity, we have a little catch-up to do, and '26 is going to be another catch-up year. So we don't see a risk on the yield side because we're basically catching up to demand overhead. They can also get new airplanes. Don't forget the new airplanes we'll be using to a large degree on the North Atlantic as well.
Operator: And the next question comes from Antoine Madre from Bernstein.
Antoine Madre: Two questions, please. First is that the free cash flow guide for 2026 more on the safe side with the current turnaround and the current fuel price level. So maybe you could give some color on the '26 CapEx? And second, we saw that the 777X is now expected for 2027. Does that further delay fleet simplification initiative?
Till Streichert: Antoine, let me start with the free cash flow guide. Look, I mean, we'll technically speak about that when we speak in March next year. But let me say -- let me reiterate what I also guided at the Capital Markets Day. I do expect that 2026 free cash flow should be broadly on the same level as 2025 and there was also 2024. And as a reminder, I do expect progression in terms of earnings improvement. This will improve as well operating cash flow. But we do have, and we've given you also the schedule on the fleet renewal. The next 2 to 3 years will be the years where we've got elevated fleet renewal and there was also elevated gross CapEx. And there with -- in combination with utilizing also more sale and leasebacks, we have arrived at the conclusion of a broad free cash flow target -- broadly stable free cash flow target for 2026, but further details to come when we speak in March.
Carsten Spohr: Yes. On the delays or additional delays on the 777X, we never expected the airplane to be in operation commercially in '26. So we are scheduling the aircraft earliest summer '27. So there's no need yet to make any changes to our plans so far, and we'll see where it goes from here.
Operator: Then the next question comes from Andrew Lobbenberg from Barclays.
Andrew Lobbenberg: Can I just carry on from the 777 question and go to the 78 question. I think there have been stuff in the press about how the approval of the seats might be challenged by the U.S. government slowdown. So how confident are you on the timing of the approval of the Allegris seats other than the front row in the 787? And does that impact your willingness or enthusiasm to take delivery of the 7 or 8 aircraft to come in the balance of Q4? And then my second question would come down to the RASK because obviously, we've been dancing between the flat RASK, excluding FX and the 2% negative RASK, which I think is your headline number. But in your regional RASK, down in the appendix, which I think is just the pure airline tickets, that number is negative 5% for Q3. So could you perhaps explain to us a little bit about the difference between the regional RASK number and the headline RASK number? And how should we think about that -- the differences and how those differences evolve in terms of irregularity or ancillaries or whatever?
Carsten Spohr: Andrew, I'll start with the first one. So far, the shutdown has an impact on some delays by days of the deliveries of the aircraft. I'll come to the certification in a minute. So therefore, we don't expect 10 aircraft anymore this year, but rather probably around 8; 6, we have scheduled to fly. That's a minimum which we would need to achieve to not have any changes in our published schedules, and we're pretty optimistic to be above 6. As I said, 8 probably the most likely shot as of today. We do not yet see delays due to the shutdown in the certification part. This is basically all paperwork, which has to be done. So we're still confident to get that done by the end of the year. But we all have learned there's always question marks when it comes to the triangle between Boeing, Collins and the FAA. So I can only say what we know as of today. And again, that the confidence of my team on the ground in the U.S. still tells us end of the year is feasible. And then maybe even the last aircraft would already arrive with unblocked seats, but also quickly afterwards, we can unblock the seats of the aircraft, which are already across the pond in Europe.
Till Streichert: Andrew, I'll take the question on RASK. So the figure of minus 2% that we are referring to here for the third quarter in terms of RASK evolution includes ancillaries, cargo revenues and also the revenue benefit from less Iraq events. And what you are referring to in terms of the regional RASK in the appendix is excluding exactly those 3 line items. So there's no ancillaries in, no cargo belly, no benefit from irregularities. And therewith, in terms of dynamics going forward, look, I still do expect that we will going to improve further on [indiscernible]. So you should see that basically helping. I do expect that on the cargo belly over time, also contribution continues to evolve positively. And ancillaries, as you can see right now, is growing strongly. And with Allegris, rolling -- with Allegris rollout taking pace, gaining pace, you should see actually even on that one, a stronger contribution. It's just important to distinguish between what we show as a regional RASK, which is RASK 1A and the one that is basically RASK 3, including everything.
Andrew Lobbenberg: So when we think of the numbers in compute and do our modeling, is there some double count of your RASK with the belly compared to what's in the cargo business?
Till Streichert: No, there's no double counting. So this you see -- this is strictly or this is kind of mutually exclusive and collectively exhaustive allocated in the reporting.
Operator: And the next question comes from Stephen Furlong from Davy.
Stephen Furlong: You talked about Boeing. Can you just ask about Airbus? They announced a slowdown in the production rate of the A220. Is that something that worries you or not? I think it's gone from 14 to 12. And then the other question, I just want to ask about cargo, which is performing very well. In general, it tends to be, I guess, a division or product that is very -- even more volatile, let's say, than the passenger business. But maybe you could just talk about some of the structural things that are happening that maybe would suggest that the cargo business and profitability be more enduring than perhaps the volatility in the past, not just with Lufthansa, but the industry.
Carsten Spohr: Stephen, no, so far on the 220, we don't expect any delays. Actually, we just met with the Airbus management last week. So we're still confident that our 40 220s we have ordered for Lufthansa City Airlines will be starting to be delivered end of next year and will come on time. On cargo, 2 thoughts. First of all, it's still a volatile business. But one wave seems to more or less compensate the other. So there are so many trends now in the industry compared to the old days when there was only 1 or 2 mega trends that I think you see one wave on top of the other. And like I know if you're a sailer, that happens in the harbor in the end, then there is kind of...
Stephen Furlong: I [ know ]...
Carsten Spohr: Then you know, it's kind of zeroing out. That's one element. But I think more important is another one. As you well know, Stephen, we talked about this before, cargo has 2 elements. There's the so-called planned air cargo, Think about pharmaceuticals, think about valuables, think about consumer e-commerce. And then there is an unplanned cargo, which is mainly B2B spare parts to keep factories around the world going and so on. And you see clearly a shift at least in Lufthansa cargo, which tends to be more high-end cargo, we see more and more shift towards the valuables, pharmaceuticals and especially to e-commerce. And e-commerce is always what you call planned air cargo. You always send your fashion products from China by cargo and not only when something goes wrong in the supply chain, which happens on the more B2B-driven cargo providing factory. So I think that could be a reason why things become a little bit less volatile. But I would still call cargo volatile, but it just, as I said before, has worked in our favor over the last years because the predictability of supply chains has come down. And therefore, even the unpredictable high volatile cargo has helped us to support our profitability. So that's -- I wouldn't want to be a forecaster here on this, but this is where how we look at things, and that's why the optimism for cargo is going on. And an argument which is not new, but which proves to be right even more, remember, I always -- when I see you in London, I say, I wish I had a home base of London, how nice must it be to run an airline in Heathrow. But that's true for passengers. When it comes to cargo, Frankfurt is, I think, for cargo, what London is for passengers. Amazon has just announced to shift additional cargo streams via Frankfurt. So here, surely, our biggest hub is a major advantage why on the passenger side, things probably look more fun in Paris or London.
Operator: Then the next question comes from Antonio Duarte from Goodbody.
Antonio Duarte: As you have seen the reallocation of assets to more efficient routes talking about summer next year and into the future, could you give us some colors on which airlines you're planning to expand the most considering different EBIT margins between these? And following on this topic as well, we have seen a year-on-year improvement in your Lufthansa Airlines EBIT margin this quarter. Could you also talk us a bit about any targets you have going into Q4 and maybe into next year?
Carsten Spohr: Antonio, I hope I got your first question right. But since some time, and I would definitely say since coming out of COVID, beyond operational requirements, we really allocate aircraft and growth according to ROCE principle. So where do we return investments highest? And that means currently, those airlines which have a favorable cost position, think about Discover, think about Edelweiss, think about Lufthansa City Airlines, but also ITA, we're looking at additional growth due to their cost position and due to their market opportunities to somewhat underserved home market roam. So that's what we do. That ROCE principle also internally clearly communicated to unions, to our staff, I think will help us to make sure that the right airlines grow. And I think on Lufthansa Airlines, I want to repeat what I said. First, we had to stabilize operations. We did. Now customer satisfaction had to be stabilized. It is going on while we speak. Allegris plays a role, also [indiscernible] plays a role, also the EUR 70 million of improvements we invested on board. And therefore, I think as Till pointed out, we are optimistic to perform on track with our Lufthansa Airlines turnaround program.
Operator: 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.
Marc-Dominic Nettesheim: Thanks to all of you. Thanks to you, Carsten and Till, for your answers, and thanks to all of the interested participants for your questions. We're looking forward from the Investor Relations team to continue our dialogue. And for now, we wish you a great afternoon. Talk to you soon. Bye-bye from Frankfurt.
Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your line. Goodbye.