Lufthansa chief says Germany must speed up

Lufthansa Chairman and CEO Wolfgang Mayrhuber unveiled some pleasing news for
shareholders at the Lufthansa Annual General Meeting in Cologne whilst calling for the dismantling of investment hurdles and impediments to growth.“We are growing
profitably, we are more flexible and have set the course for the future.” The Group
is well positioned and ideally equipped for coming challenges. “Lufthansa has
immense potential for the future, the demand for mobility is still growing,” said
Mayrhuber. The sold financial basis of the Group, its strong brand and highly
motivated staff constitute the best prerequisites for further success. The Lufthansa
Chairman underlined the Group’s strategic principles: “For us, profits have priority
over revenues and market shares, not vice-versa. Every euro saved will be
re-invested in attractive prices - to the chagrin of our competitors, in innovative
products - to the benefit of customers, and in dividends - to the joy of our
shareholders.”

Shareholders are profiting from successful business developments over the past year.
“50 years Lufthansa translates into a 50 cent dividend. That is an exceptional
increase of 67 per cent.” The stock market is honouring the Group’s performance,
observed Mayrhuber. “The share price is finally heading in the right direction. We
intend to further strengthen the confidence of the capital market. Our share price
still has potential to move further upwards.”

In the 2005 business year, Lufthansa lifted its operating profit by more than 50 per
cent to 577 million euros. All the business segments had contributed to the Group’s
success, Mayrhuber noted. “All posted an operating profit last year.” Particularly
pleasing were the developments at Thomas Cook and LSG Sky Chefs. “2005 was for both
the year of the turnaround.” 

The Lufthansa chief was optimistic for the current business year and confirmed the
forecasted operating profit target for the full year. It will be at least on the
level of the previous year’s figure, he said.

For the year 2008, Wolfgang Mayrhuber underlined that the Group is aiming for a
result totalling one billion euros. “Our size of company requires profits of that
dimension. They provide us with the necessary flexibility and financial resources
for ongoing investments, with which to lastingly safeguard our future.”

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Wolfgang Mayrhuber emphasised the success of the strategy of operating as a
full-line provider. With 51.3 million passengers in 2005, the airline had again
surpassed the record passenger count in 2004. But Lufthansa would not rest on its
laurels. “Our quality and innovation campaign will continue running at full steam.”
With new, better and more comfortable seats, the airline is appreciably upgrading
the European fleet. Cooperation with SWISS has already turned out to be a good
decision. “The synergy effects are coming through faster and more extensively than
we originally thought. The Swiss carrier will break even this year,” said Mayrhuber.
“Our customers also appreciate the get-together.” Lufthansa’s commitment to the Star
Alliance remains strategically important. The official admission of SWISS and South
African Airways in April had rightly been celebrated. The world’s biggest airline
grouping is delighted to have acquired Shanghai Airlines last week as a new alliance
partner in the Far East. “We will expand our position as the leading airline into
and out of Asia. We are well poised and have strong partners.”

At the AGM, Mayrhuber called for reliable operating conditions for the airline
business. The Group is suffering particularly from licensing bureaucracy in Germany.
“Air traffic is growing and we want that growth to occur with us and here in
Germany. But while we are setting up halls for public hearings on expansion
projects, an international airport is being built in Dubai.” In Germany, Lufthansa
is constantly coming up against investment hurdles and home-made impediments to
growth. “It is evident that Germany is capable of more,” said the Lufthansa
Chairman. “We need less bureaucracy and instead more courage, more foresight, more
speed and a greater willingness to accept change.”

As a positive example of unbureaucratic cooperation between politics and industry,
Mayrhuber cited the joint venture between Rolls Royce and Lufthansa on the
construction of an engine maintenance services in Thuringia in eastern Germany. “It
took just a year from the signing of the contract to the laying of the foundation
stone. That is sensational, but sadly the exception,” Mayrhuber said. The regional
government in Thuringia and the local authorities have shown what is possible. “That
project is creating 500 competitive jobs. Were it to set an example in Germany, no
one need harbour concerns about this Country’s economic development.” Air traffic is
essential for the national economy. “We must therefore further the air traffic
industry and not impede it. We need structural change and a modern approach from
politicians in Brussels and Berlin.”

Mayrhuber firmly opposed additional levies burdening the industry, such as the
planned tax on airline tickets to fund development aid. The airline business of all
is generating momentum for the poorest countries and even the developing countries
themselves have come out against that special tax. “I’m against new levies to plug
holes in the budget. Every euro the state rakes in is a euro less for investment and
jobs. Whoever, like Lufthansa, trains and recruits staff, and has 70 per cent of its
jobs in Germany although only 35 per cent of its customers come from Germany should
not be unduly burdened.”

It remains important for Lufthansa to be able react quickly to changes and
challenges. “For that purpose, we have the necessary experience and we are
flexible,” Mayrhuber emphasised. New routes, additional frequencies, partnerships or
acquisitions, like Fraport or SWISS - Lufthansa has learnt how to utilise those
tools effectively. The course is clear. “Lufthansa will remain on the success path.
We intend to grow profitably.”
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