Report of the Supervisory Board

Karl-Ludwig Kley,

Chairman of the Supervisory Board

Ladies and gentlemen, dear shareholders,

2023 represented an upturn for the Lufthansa Group in many respects. Right from the start of the year our bookings showed that our customers had rediscovered their need to travel. It was gratifying that this trend continued over the course of the year. In the summer, it enabled the Lufthansa Group to generate the most revenue in its history. In 2023 we were able to take a great stride towards our target of an Adjusted EBIT margin of at least 8%. At the same time, Adjusted free cash flow was again significantly positive. We continued to implement our strategy of focusing even more on the core airline business with the sale of the LSG Group and the agreed sale of Lufthansa AirPlus Servicekarten GmbH. The agreement to acquire shares in ITA Airways was also in the spirit of this strategic focus.

In the 2023 financial year, the Supervisory Board once again oversaw the work of the Executive Board members and advised them. It carried out the duties conferred on it by statute, the Company’s Articles of Association and its internal regulations. The Executive Board regularly provided the Supervisory Board with full information on the course of business, the competitive environment, planned Company policy and significant strategic and operational decisions. In particular, it provided reports on the Company’s economic position and on the operational challenges. Throughout the year, the Executive Board provided the Supervisory Board with reports on the current course of business. As Chairman of the Supervisory Board, I read the minutes of the Executive Board meetings and discussed the current situation and the course of business with the Chairman of the Executive Board and other members of the Executive Board on an ongoing basis.

In 2023, the Supervisory Board held a total of six meetings; four ordinary and two extraordinary meetings. At its plenary sessions and committee meetings, the Supervisory Board had sufficient opportunity to discuss the reports and proposals for resolutions from the Executive Board. When doing so, the Supervisory Board and its committees also met without the members of the Executive Board.

Key topics discussed by the Supervisory Board

Our meetings focused on the economic development of Deutsche Lufthansa AG and its associated companies. Regular agenda items in particular included the ongoing operational challenges and the general competitive environment. In addition, the Supervisory Board dealt with the Lufthansa Group’s various M&A activities. In this context the Supervisory Board approved by circulation of documents the sale of all the remaining LSG Group businesses to the private equity investor Aurelius in early April 2023. At an extraordinary meeting on 22 May 2023, the Supervisory Board also approved the acquisition of 41% of the shares in ITA Airways and options to purchase the remaining shares in ITA Airways. In June 2023, the Supervisory Board also approved by circular resolution the sale of all the shares in Lufthansa AirPlus Servicekarten GmbH to SEB Kort Bank AG from Stockholm, Sweden.

At its meeting on 2 March 2023 the Supervisory Board approved the purchase of up to 30 of the latest generation of wide-bodied aircraft from manufacturers Airbus and Boeing. At the same meeting, the Supervisory Board also approved new leases for up to four and lease extensions for two Airbus A350-900 wide-bodied aircraft.

The Supervisory Board also approved capital expenditure in non-current assets as part of the modernisation of the Lufthansa Cargo Center in Frankfurt at its meeting on 9 May 2023.

The meeting on 22 September 2023, which took place in Vienna, was dedicated to the Group’s ongoing strategic development, which was discussed in detail with the Executive Board. The corporate strategy was updated on this basis and approved at the Supervisory Board meeting on 5 December 2023.

The Supervisory Board also noted the planning status of the budget for 2024 and approved the medium-term financial planning for 2025 to 2027 at its meeting held on 5 December 2023. At this meeting, the Supervisory Board also discussed reports on risk management including internal control systems, cybersecurity and compliance. The Supervisory Board also reviewed the Executive Board’s remuneration at this meeting and found it to be appropriate.

At this meeting the Supervisory Board also noted the Executive Board’s decision to abandon the negotiations for a partial disposal of Lufthansa Technik AG and discussed the implications for future M&A processes and for the future development of Lufthansa Technik AG.

At the end of the year, the Supervisory Board approved by circular resolution on 19 December 2023 the purchase in particular of 40 Airbus A220-300s and 40 Boeing 737-8 MAXs.

Changes in the Executive Board

At its meeting held on 2 March 2023, the Supervisory Board reappointed Carsten Spohr as CEO and Chair of the Executive Board of Deutsche Lufthansa AG, as well as Remco Steenbergen as CFO and member of the Executive Board, in each case as of 1 January 2024 for a five-year term expiring 31 December 2028.

Wide-ranging reorganisation of the Executive Board decided from July 2024

At its meeting on 22 February 2024, the Supervisory Board of Deutsche Lufthansa AG followed a recommendation of its Steering Committee and voted to carry out a wide-ranging reorganisation of the Executive Board.It approved the corresponding changes to the division of responsibilities for the Executive Board with effect from 1 July 2024. These consisted mainly of reducing the Executive Board from six members to five and reorganising responsibilities.

As part of this reorganisation, Christina Foerster, Harry Hohmeister and Detlef Kayser will leave the Executive Board as of 30 June 2024, and Remco Steenbergen will leave the Executive Board at the close of 7 May 2024, the date of the 2024 Annual General Meeting. The Supervisory Board thanks the departing Executive Board members for their commitment, their performance and their outstanding loyalty.

At the recommendation of the Steering Committee, the Supervisory Board appointed Grazia Vittadini and Dieter Vranckx to the Executive Board with effect from 1 July 2024 for a term of three years, ending on 30 June 2027. Grazia Vittadini will be responsible for the MRO & IT function and Dieter Vranckx for Global Markets and Commercial Hub Management.

A new candidate is to be found for the position of Chief Financial Officer in the course of 2024. After the departure of Remco Steenbergen until a new appointment is made, Michael Niggemann will lead the Finance function in addition to his other responsibilities.

Changes in the Supervisory Board

The mandates of all the Supervisory Board members elected by the employees expired at the close of the Annual General Meeting on 9 May 2023. The employee representatives on the Supervisory Board up to this point were reappointed by resolution of Cologne District Court of 10 May 2023 until completion of the elections by employees on 29 July 2023. Alexander Behrens, Jörg Cebulla, Jürgen Jennerke, Ilja Schulz, Birgit Spineux and Olivia Stelz left the Supervisory Board at the completion of the elections by employees on 29 July 2023. The departing members were replaced by Tim Busse, Sara Grubisic, Christian Hirsch, Jamila Jadran, Arne Christian Karstens and Marvin Reschinsky, who were elected to the Supervisory Board for the first time in accordance with the Co-determination Act.

The periods in office of Miriam Sapiro, Carsten Knobel and myself also ended at the close of the Annual General Meeting on 9 May 2023. Karl Gernandt was elected for the first time, and Carsten Knobel and I were re-elected to the Supervisory Board for three years. The Supervisory Board thanks all the former members for assuming their responsibilities and for their constructive and dedicated work.

The members of committees initially remained unchanged until the constitutive meeting on 8 August 2023. At this constitutive meeting the Supervisory Board confirmed me as Chair and again elected Christine Behle as Deputy Chair. In accordance with the internal regulations for the Supervisory Board we are therefore also both members of the Steering Committee and the Arbitration Committee required by Section 27 Para. 3 Co-determination Act. Thomas Enders and Christian Hirsch were also elected to both committees. In accordance with the internal regulations for the Supervisory Board, I also chair the Nomination Committee, to which Thomas Enders and Harald Krüger were again elected. Harald Krüger was elected as Chair of the Audit Committee and Arne Christian Karstens, Michael Kerkloh, Carsten Knobel, Holger Benjamin Koch and Klaus Winkler as members. Erich Clementi was elected as Chair of the Environmental, Social and Corporate Governance Committee (ESG Committee) and Sara Grubisic, Marvin Reschinksy and Angela Titzrath as members.

Attendance at meetings

Overall, the Supervisory Board members had an attendance rate of 98% for all meetings of the committees and the Supervisory Board in 2023. No member of the Supervisory Board was present at only half or fewer of the meetings of the Supervisory Board or the Supervisory Board committees.

The meetings of the Supervisory Board and its committees are generally held as in-person meetings, with the possibility of video conferencing. With the exception of the extraordinary Supervisory Board meeting on 22 May 2023 and the  constitutive Supervisory Board meeting on 8 August 2023, as well as one extraordinary meeting of the Steering Committee and the Nomination Committee respectively, which were held as video conferences, all of the meetings of the Supervisory Board of Deutsche Lufthansa AG and its committees were held in person.

Corporate governance

The proportion of women on the Executive Board meets the minimum quota defined in the German Act Extending and Amending the Rules on Equal Participation of Men and Women in Executive Positions in the Public and Private Sectors (FüPoG II).

The statutory quota requiring supervisory boards to consist of 30% women is met by the Supervisory Board as a whole as well as by both the shareholder and employee representative groups.
lufthansagroup.com/corporate_governance_declaration.

We again carried out a self-assessment of our working practices in the 2023 financial year on the basis of a detailed questionnaire and conversations between the Chair and individual members of the Supervisory Board, which were discussed at the meeting on 6 March 2024. In addition, the members of the Supervisory Board and of the Audit Committee especially attended several training events offered by the Company in the 2023 financial year. The subjects on offer particularly included a seminar on the Supply Chain Due Diligence Act and the European Supply Chain Directive on 19 January 2023, and on the Lufthansa Group cabin product on 1 March 2023.
Other training subjects for the Supervisory Board were ESG in the Lufthansa Group, including an in-depth look at what are known as sustainable aviation fuels, on 21 September 2023, and the Lufthansa Group brand development on 4 December 2023. The new Supervisory Board members elected by the employees were offered a training course on the principles of Supervisory Board work, including an introduction to the strategy and fleet planning of the Lufthansa Group.

In September 2023, the Supervisory Board and the Executive Board issued an updated declaration of compliance with the German Corporate Governance Code. At this meeting the Supervisory Board also adopted an updated requirements profile and an updated qualification matrix.
lufthansagroup.com/corporate_governance_declaration. No conflicts of interest were disclosed in the 2023 financial year.

Work of the committees

In the 2023 financial year, the Supervisory Board formed five committees whose activities were each reported on at the beginning of the following Supervisory Board meeting. Further details on the composition of the committees can be found in the chart ↗ G01 Supervisory Board Committees.

The Steering Committee met five times in 2023. As in previous financial years, the Steering Committee prepared the Supervisory Board meetings and considered the course of business in detail. The Steering Committee also considered all of the issues relating to the remuneration received by the Executive Board. The Steering Committee also made recommendations to the full Supervisory Board on all personnel and remuneration decisions concerning the Executive Board.

In 2023, the Nomination Committee met three times and the Audit Committee met five times, always in the presence of the auditors. As an independent financial expert in line with the requirements of the German Stock Corporation Act and the German Corporate Governance Code, the Chair of the Audit Committee has particular knowledge and experience in the field of accounting, including international control procedures, and in relation to sustainability reporting. The Audit Committee discussed the annual financial statements for 2022 and the interim reports for 2023 with the CFO before their publication. The committee also dealt with the supervision of accounting processes and the effectiveness of the internal control, risk management and internal auditing systems. Furthermore, the members received regular reports on the compliance management system and capital market communications.

They also discussed in detail the planning status of the 2024 budget and the Group operational planning for 2025 to 2027, the medium-term financial planning and the combined non-financial declaration, which was subject to a voluntary limited assurance engagement by EY GmbH & Co. KG Wirtschaftsprüfungsgesellschaft, Eschborn.
↗ Combined non-financial declaration

The purpose of the ESG Committee established as of 1 January 2023 is to advise the Supervisory Board, its committees and the Executive Board on issues of sustainable corporate governance and the Company’s business activities in ESG areas. It met twice in 2023. Focus topics were the steps taken by flight operations to reduce emissions, sustainable aviation fuels and the changing requirements for sustainability reporting.

The Arbitration Committee was not convened in the reporting period.

Audit and adoption of the annual financial statements and approval of the consolidated financial statements as of 31 December 2023

The Supervisory Board appointed EY GmbH & Co. KG Wirtschaftsprüfungsgesellschaft, Stuttgart, who were elected as auditors for the parent company and the Group at the Annual General Meeting 2023, to audit the financial statements and the consolidated financial statements, the combined management report and the system for the early identification of risks. The Audit Committee acknowledged the declaration of independence provided by EY and discussed the main topics of the audit. No potential grounds for disqualifying the auditors or doubting their impartiality came to light during the course of the audit.

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), taking account of interpretations by the IFRS Interpretations Committee as applicable in the European Union (EU). The auditors audited the annual financial statements and consolidated financial statements of Deutsche Lufthansa AG and the combined management report as of 31 December 2023 in accordance with the legal requirements, and had no reservations to make. They further confirmed that the system for the early identification of risks established by the Executive Board is suitable for the early identification of developments that could endanger the Company’s continued existence. During their audit, the auditors did not come across any facts that would run contrary to the declaration of compliance.

On 29 February 2024, the Audit Committee discussed the audit reports in detail with the CFO in the presence of the two auditors who had signed the auditors’ report. At the Supervisory Board accounts meeting on 6 March 2024, the auditors reported on their audit findings and answered questions. We examined the financial statements and the consolidated financial statements of Deutsche Lufthansa AG, as well as the combined management report, including the combined non-financial declaration and the remuneration report pursuant to Section 162 AktG, and had no objections to make. The financial statements and the consolidated financial statements were approved. The 2023 annual financial statements of Deutsche Lufthansa AG as prepared by the Executive Board have thereby been adopted. We agree with the Executive Board’s proposal for profit distribution. Now that the stabilisation has been completed, it is gratifying that a dividend can be distributed for the financially successful financial year 2023.

Frankfurt, 6 March 2024

For the Supervisory Board
Karl-Ludwig Kley, Chairman