Shareholders’ equity and liabilities

34. Issued capital

Share capital

Deutsche Lufthansa AG’s share capital totals EUR 3,063,342,970.88. It is divided into 1,196,618,348 registered shares with transfer restrictions, with each share representing EUR 2.56 of share capital.

Authorised capital

A resolution passed at the Annual General Meeting on 10 May 2022 authorised the Executive Board until 9 May 2025, subject to approval by the Supervisory Board, to increase the Company’s share capital by up to EUR 1,000,000,000 by issuing new registered shares on one or more occasions for payment in cash or in kind (Authorised Capital A). In certain cases, the shareholders’ subscription rights can be excluded with the approval of the Supervisory Board.

A resolution passed at the Annual General Meeting on 9 May 2023 authorised the Executive Board until 8 May 2028, subject to approval by the Supervisory Board, to increase the share capital by EUR 100,000,000 by issuing new registered shares to employees (Authorised Capital B) for payment in cash. Existing shareholders’ subscription rights are excluded. As of 31 December 2023, the issued capital was increased under this authorisation by a total of EUR 2,899,722.24, so that Authorised Capital B still amounted to EUR 97,100,277.76 as of the reporting date.

The Executive Board is authorised, in the event of the fulfilment of the requirements stipulated in Section 4 Paragraph 3 of the German Aviation Compliance Documentation Act (LuftNaSiG) and with the consent of the Supervisory Board, to increase the issued capital by up to 10% by issuing new shares in return for payment in cash and without subscription rights for existing shareholders. The issue price for the new shares must be determined subject to the agreement of the Supervisory Board and may not be significantly lower than the market price. The authorisation may only be made use of insofar as this is necessary in order to achieve the non-applicability of the conditions stipulated in Section 4 Paragraph 3 LuftNaSiG.

The Executive Board is authorised, according to Section 5 Paragraph 2 LuftNaSiG and subject to the approval of the Supervisory Board, to require shareholders to sell some or all of their shares and to provide the Company with proof of this sale without delay insofar as this is necessary for compliance with the requirements for the maintenance of air traffic rights and in the sequence prescribed in Section 5 Paragraph 3 LuftNaSiG, subject to an appropriate time limit and while indicating the legal consequence which would otherwise be possible of the loss of their shares in accordance with Section 5 Paragraph 7 LuftNaSiG.

Contingent capital

A resolution of the Annual General Meeting on 5 May 2020 increased the Company’s contingent capital by up to EUR 122,417,728. The contingent capital increase serves to provide shares to the holders or creditors of conversion and/or option rights from convertible bonds that may be issued by the Company or its Group companies until 4 May 2025. In certain cases, the shareholders’ subscription rights can be excluded with the approval of the Supervisory Board.

On 10 May 2022, the Annual General Meeting increased the Company’s contingent capital by up to EUR 306,044,326.40. The contingent capital increase serves to provide shares to the holders or creditors of conversion and/or option rights from convertible bonds that may be issued by the Company or its Group companies until 9 May 2027. In certain cases, the shareholders’ subscription rights can be excluded with the approval of the Supervisory Board.

Authorisation to purchase treasury shares

A resolution passed at the Annual General Meeting held on 9 May 2023 authorised the Executive Board pursuant to Section 71 Paragraph 1 No. 8 of the German Stock Corporation Act (AktG) to purchase treasury shares until 8 May 2028. The acquisition is limited to 10% of current share capital and can be purchased on the stock exchange or by a public purchase offer to all shareholders. The authorisation states that the Executive Board can use the shares in particular for the purposes defined in the resolution passed at the Annual General Meeting. According to the resolution of the Annual General Meeting held on 9 May 2023, the Executive Board is also authorised to purchase treasury shares by means of derivatives and to conclude corresponding derivative transactions.

Deutsche Lufthansa AG issued 1,132,704 shares from Authorised Capital B at a price of EUR 8.12 in 2023 in order to distribute them to employees as part of the profit-sharing scheme for 2022. 17,246 shares from this capital increase were still held as of 31 December 2023.

Capital management

The aim of capital management is to cover future funding requirements at low cost and to ensure that financial debt can be repaid, by ensuring good access to the capital markets. To achieve this, gearing, measured by the ratio of Adjusted net debt to Adjusted EBITDA, should remain limited to a figure of less than 3.5. The figure was 1.7 as of 31 December 2023 (previous year: 2.3) and, together with Adjusted net debt, takes into account both net indebtedness (including the financial obligations arising from lease agreements, primarily for property and aircraft) and net pension obligations.

The balance sheet ratios for equity and debt were as follows as of 31 December 2023 and 2022:

T112 EQUITY AND LIABILITIES
  31 Dec 2023 As of 31 Dec 2022
  in €m in % of total assets In €m In % of total assets
           
Shareholders’ equity 9,709 21.42 8,474 19.55
Liabilities 35,612 78.58 34,861 80.45
Total capital 45,321 100.0 43,335 100.0
           

In the 2023 financial year, the equity ratio went up by 1.87 percentage points to 21.42%, particularly due to the positive consolidated net income.

Deutsche Lufthansa AG’s Articles of Association do not stipulate any capital requirements.

35. Reserves

Capital reserves only include the share premium paid on capital increases and a convertible bond that was redeemed in full in previous years. In the previous year, EUR 704m were used from the capital reserve and EUR 26m from the statutory reserve within retained earnings to offset the loss shown in the HGB financial statements. No reserves were reversed in the reporting year. The other reserves consist of other retained earnings.

The following table shows changes in other neutral reserves in the 2023 financial year:

T113 NOTES ON OTHER COMPREHENSIVE INCOME
in €m 2023 2022
     
Differences from currency translation 270 150
Profit/loss for the period 92 150
Reclassification adjustments recognised in profit or loss 178
Subsequent measurement of financial assets and liabilities at fair value (with recycling) 18 - 108
Subsequent measurement of financial assets at fair value (without recycling) 5
Profit/loss for the period 23 - 108
Reclassification adjustments recognised in profit or loss
Subsequent measurement of hedges – cash flow hedge reserve - 234 1,331
Subsequent measurement of hedges – costs of hedging - 131 -56
Profit/loss for the period -300 1,436
Reclassification adjustments recognised in profit or loss - 65 - 161
Other comprehensive income from financial investments accounted for using the equity method -7 - 11
Profit/loss for the period – reclassifiable -7 - 11
Profit/loss for the period – non-reclassifiable
Revaluation of defined-benefit pension plans -665 4,648
Other expenses and income recognised directly in equity (with recycling) - 1
Other expenses and income recognised directly in equity (without recycling) 8 42
Income taxes on items in other comprehensive income 389 -1,881
Other comprehensive income after income taxes -347 4,114
       
T114 NOTE ON INCOME TAXES RECOGNISED FOR OTHER COMPREHENSIVE INCOME
  2023 2022
in €m Amount before
Income taxes
Tax expenses/
income
Amount after
Income taxes
Amount before
Income taxes
Tax expenses/
income
Amount after
Income taxes
             
Differences from currency translation 270 270 150 150
Subsequent measurement of financial assets and liabilities at fair value (with recycling) 18 -10 8 - 108 32 -76
Subsequent measurement of financial assets at fair value (without recycling) 5 5
Subsequent measurement of hedges – cash flow hedge reserve - 234 58 -176 1,331 - 285 1,046
Subsequent measurement of hedges – costs of hedging - 131 31 -100 -56 -8 -64
Other comprehensive income from investments accounted for using the equity method – reclassifiable -7 -7 - 11 - 11
Revaluation of defined-benefit pension plans -665 310 -355 4,648 - 1,620 3,028
Other expenses and income recognised directly in equity (with recycling) - 1 - 1
Other expenses and income recognised directly in equity (without recycling) 8 8 42 42
Other comprehensive income -736 389 -347 5,995 -1,881 4,114
               

The overall change in equity is shown in table ↗ T060.

36. Pension provisions

The Lufthansa Group’s pension obligations comprise both defined benefit and defined contribution plans and include both obligations to make current payments and entitlements to future pension payments.

In addition to various actuarial risks such as interest rate risk, life-expectancy risk and the risk of salary increases, the pension plans expose the Group primarily to financial risks in connection with plan assets.

Obligations under defined benefit pension plans for employees of the Lufthansa Group related mostly to pension obligations in Germany, Switzerland, Austria and the USA. Various commitments have been made to different groups of employees.

Germany

Between 2015 and 2017, the conversion of the defined benefit plans to defined contribution plans with guaranteed contributions during the vesting period for future pension commitments was completed for all groups of employees.

The Lufthansa collective agreement on benefits for ground staff established a new Company retirement benefit plan in the form of a defined contribution benefit commitment for the ground staff in Germany, in particular those at Deutsche Lufthansa AG, Lufthansa Cargo AG, Lufthansa Technik group and the LSG group. For employees recruited before 1 January 2016, the entitlements vested up until 31 December 2015 are maintained. For service periods starting from 1 January 2016, employees can reach the same level of benefits by making contributions from their own pocket as under the previous wage agreement. For employees recruited from 1 January 2016, the contributions to the new model will be invested on the capital market. When the employee reaches retirement age, the entire account balance is converted into an annuity on the basis of the applicable BilMoG interest rate in accordance with Section 253 Paragraph 2 of the German Commercial Code (HGB), subject to a pension adjustment of 1% per annum and while guaranteeing the contributions that were originally made.

For cabin crew recruited up to 5 July 2016, the pension entitlements vested up until 30 June 2016 are maintained. For service periods from 1 July 2016, these employees receive employer contributions to the Company pension scheme depending on their eligible gross salary. An initial contribution to the transitional benefit scheme was calculated for the staff concerned as of 30 June 2016 on the basis of parameters and valuation methods defined by the collective bargaining partners. This initial transitional benefit contribution will replace all existing claims by the employees concerned under the collective agreement on “Transitional Benefit for Cabin Crew” and will be switched to a contribution commitment with a minimum guaranteed payment. All employees are free to make their own contributions on a voluntary basis. Contributions from both employer and employee, as well as the initial transitional benefit contribution, are invested on the capital markets with a capital guarantee. When an employee reaches retirement age, the available account balance is converted into an annuity on the basis of the applicable BilMoG interest rate in accordance with Section 253 Paragraph 2 HGB, subject to a pension adjustment of 1% per annum.

For cockpit staff recruited before 1 January 2017, the pension entitlements vested up until 31 December 2016 are maintained. For service periods from 1 January 2017, employees receive employer contributions to the Company pension scheme depending on their eligible gross salary. All employees are free to make their own contributions on a voluntary basis. The capital is invested on capital markets with a capital guarantee and the guaranteed interest rate offered by the life insurance companies (currently 0.25% per annum) as an additional commitment. When an employee reaches retirement age, the available account balance is converted into an annuity on the basis of the applicable BilMoG interest rate in accordance with Section 253 Paragraph 2 HGB, subject to a pension adjustment of 1% per annum.

Cockpit staff are still additionally entitled to a transitional pension arrangement covering the period from the end of their active in-flight service until the beginning of their statutory/Company pension plans. Benefits depend on the number of years of service and the final salary before retirement (final salary plans). Pension entitlements continue to accrue while transitional benefits are being received. Since 2021, the collective retirement age for pilots has been 60.

In the Company retirement benefit scheme for ground, cabin and cockpit staff, the obligations from the capital market-oriented components are recognised at the time value of the corresponding assets, insofar as the assets exceed the minimum guaranteed amount. Plan assets and benefit obligations are presented on a net basis. The employer contributions constitute service expense.

Defined-benefit Company pension schemes and transitional pension arrangements for Germany are funded by plan assets, while amounts that have not yet been transferred are covered by pension provisions.

In the 2004 financial year, work began on building up plan assets to fund and safeguard future pension payments. The aim was to fund the pension obligations under existing plans in Germany in full. Contractual trust arrangements (CTAs) in the form of a mutual two-stage trusteeship were set up for this purpose.

The main trustee is Lufthansa Pension Trust e.V., a separate legal entity subject to German regulations. Deutsche Lufthansa AG and the trustees/other trustors agree on contributions and, if such a contribution is determined, make a payment to Lufthansa Pension Trust e.V. Deutsche Lufthansa AG and its subsidiaries Lufthansa Technik AG and Lufthansa Cargo AG are parties to the contractual trust arrangement. The trust assets have largely been held by a Maltese corporate vehicle since 2007. The Investment Board of Lufthansa Malta Pension Holding decides on the fund’s asset allocation. The asset management itself is delegated to fund management companies, who invest the assets in accordance with the general investment principles defined by the Investment Board.

Assets to fund pension obligations for other German subsidiaries have been invested with Deutsche Treuinvest Stiftung with the same investment strategy.

The assets to fund pension obligations in the Lufthansa Pension Ground, Lufthansa Pension Cabin and Lufthansa Pension Cockpit capital market-based benefits system were transferred to an external trustee, Deutsche Treuinvest Stiftung, as part of a contractual trust arrangement. Capital is invested in what are known as age group funds, whose investment strategy is based on a life cycle model. As employees get older, less and less is invested in asset classes with a higher risk-return profile and a greater percentage in more conservative asset classes. The Company has set up an Investment Committee that is responsible for defining and monitoring the investment strategy, e.g. how the age group funds are composed and how the asset allocation changes over time.

There are no minimum funding requirements in Germany. The pension contributions for employees calculated in the financial year were transferred in full to the plan assets. Reimbursements totalling EUR 371m (previous year: EUR 325m) for pension payments made were withdrawn from the plan assets of Lufthansa Pension Trust e.V. for the plans of Deutsche Lufthansa AG, Lufthansa Cargo AG and Lufthansa Technik AG.

Switzerland

Pension obligations in Switzerland are largely based on statutory obligations. The retirement benefits are funded via pension funds. In addition to retirement benefits, the plans cover disability and surviving dependant persons’ benefits. Beneficiaries can choose between an annuity and a lump sum payment. The retirement age for the plans generally lies between 58 and 65 years. Contributions to the pension funds are made by employers and employees; the Company contributions must be at least equal to the employee contributions defined in the terms of the plan. Contributions are deducted from the qualifying salary according to a sliding scale. If there is a deficit of plan assets, employer and employee contributions can be increased, a lower return can be determined or other steps permissible by law can be taken. The decision is taken by the trustees of the pension fund concerned. The trustees’ strategies for making good a deficit are based on the report by a pension fund expert and must be presented to the regulatory authority. The approval of the authority is not required, however. In 2023, the annuity factors for the cabin pension fund for all employees retiring from 2024 and the savings contributions for the cockpit and ground pension funds were reset, resulting in a past service cost of EUR 18m.

Austria

The pension obligations for employees of Austrian Airlines AG are mostly on a defined contribution basis and have been outsourced to a pension fund. They consist of retirement, occupational disability and surviving dependant persons’ benefits. Obligations under defined benefit plans at Austrian Airlines AG relate to former directors and Executive Board members and others already receiving their pensions. Obligations under defined benefit plans for ground staff are now contribution-free and are determined by converting plan assets into an annuity. There are no defined benefit plans but only defined contribution pension obligations for active pilots, flight attendants and members of the top management level. There are also entitlements to severance payments when employment comes to an end.

On the basis of changes in collective agreements and legislation, the conditions were created in 2023 for transferring all the remaining defined retirement benefit commitments to a pension fund. In future, the pension payments to participants will depend solely on the assets and the investment performance of the pension fund. Based on these measures, Austrian Airlines AG will make payments of EUR 46m in total to the pension fund over the next nine years. Otherwise, Austrian Airlines AG no longer has any payment obligation. This transaction is therefore presented as a plan settlement that gave rise to a settlement gain of EUR 4m. The pension obligation and the associated plan assets will be derecognised when the final instalment is paid.

USA and other countries

There is also a small number of retirement benefit commitments for other staff abroad, based mainly on length of service and salary earned. As a rule, benefits are financed by means of external funds. No new entitlements can be acquired in the US and UK pension plans, which are the largest by volume.

Amounts shown in the statement of financial position for defined benefit commitments are made up as follows:

T115 DEFINED-BENEFIT RETIREMENT COMMITMENTS
  31 Dec 2023 31 Dec 2022
in €m Defined
benefit
obligations
(DBO)
Fair
value
of plan
assets
Effects
of the
asset
ceiling
Net carrying
amount of
defined
benefit
commitments
Defined
benefit obligations
(DBO)
Fair
value
of plan
assets
Effects
of the
asset
ceiling
Net carrying
amount of
defined
benefit
commitments
                 
Retirement benefits Germany 13,445 -12,333 1,112 11,957 - 11,264 693
Transitional benefits Germany 1,491 -20 1,471 1,251 - 134 1,117
Switzerland 4,064 -4,217 105 -48 3,307 - 3,865 560 2
Austria 286 -170 116 283 - 141 142
USA 106 -116 -10 273 - 271 2
Other countries 345 -303 42 319 - 282 37
Carrying amounts 19,737 -17,159 105 2,683 17,390 -15,957 560 1,993
of which pension provisions 2,895 2,069
of which shown under liabilities for disposal 12 -4 8
of which other assets 220 76
                   

The asset ceiling arises for plans in Switzerland where the fair value of plan assets exceeds the defined benefit obligation. However, this surplus cannot be withdrawn from the plan through payouts or future contributions to the plan assets that are less than the service cost.

The total amount of defined benefit obligations is distributed among the beneficiaries as follows:

T116 ALLOCATION OF DEFINED-BENEFIT COMMITMENTS
in €m 2023 2022
     
Active employees 11,237 9,767
Vested employees who have left the company 2,027 1,705
Retired employees 6,473 5,918
  19,737 17,390
       

The weighted duration of pension obligations was 16 years as of 31 December 2023 (previous year: 15 years).

The changes between the opening balance and the closing balance of the pension obligation, the plan assets and the pension provision are as follows:

T117 PERFORMANCE OBLIGATIONS TO EMPLOYEES
  2023 2022
in €m Defined benefit obligations (DBO) Fair value of plan assets Total Effect of asset ceiling Net carrying amount for defined benefit obligations Defined-benefit obligations (DBO) Fair value of plan assets Total Effect of asset ceiling Net carrying amount for defined benefit obligations
                     
Opening balance as of 1 Jan 17,390 -15,957 1,433 560 1,993 24,935 -18,510 6,425 121 6,546
Current service costs 452 - 452 - 452 497 - 497 - 497
Past service cost/effects of curtailments 24 - 24 - 24 19 - 19 - 19
Interest expenses/interest income 665 -599 66 12 78 293 -210 83 - 83
Total amount recognised in profit and loss 1,141 -599 542 12 554 809 -210 599 - 599
Actuarial gains/losses from changes in financial assumptions 1,431 - 1,431 - 1,431 -7,759 - -7,759 - -7,759
Actuarial gains/losses from changes in demographic assumptions -12 - -12 - -12 -1 - -1 - -1
Gains/losses from experience adjustments 231 - 231 - 231 -98 - -98 - -98
Performance of plan assets, without amounts included in interest - -509 -509 - -509 - 2,784 2,784 - 2,784
Effect from asset ceiling - - - -479 -479 - - - 426 426
Total amount recognised in other comprehensive income 1,650 -509 1,141 -479 662 -7,858 2,784 -5,074 426 -4,648
Plan contributions – employees 160 -157 3 - 3 84 -81 3 - 3
Plan contributions – employers - -476 -476 - -476 - -397 -397 - -397
Pension payments -662 630 -32 - -32 -746 678 -68 - -68
Settlement payments - - - - - -12 12 - - -
Total amount recognised in the Group cash flow statement -502 -3 -505 - -505 -674 212 -462 - -462
Currency translation differences 226 -240 -14 12 -2 194 -209 -15 13 -2
Changes in the group of consolidated companies -169 147 -22 - -22 -12 6 -6 - -6
Other/reclassifications 1 2 3 - 3 -4 -30 -34 - -34
Closing balance as of 31 Dec 19,737 -17,159 2,578 105 2,683 17,390 -15,957 1,433 560 1,993
of which pension provisions - 2,895 - - 2,069
of which present value of non-funded pension obligations - - - - 263 - - - - 230
of which shown under liabilities for disposal 12 -4 8 - 8 - - - - -
of which surpluses of plan assets over pension obligations - - - - 220 - - - - 76
                       

Interest expenses on pension provisions and interest income on plan assets are shown in the financial result. The current service cost and past service cost are recognised in staff costs.

The past service cost incurred in the reporting year mainly stems from an adjustment to the annuity factors for the cabin pension fund in Switzerland for all employees retiring from 2024 and from changes to the savings contributions for the cockpit and ground pension funds in Switzerland.

Actuarial gains/losses from changes in financial assumptions include losses due to the reduction in the discount rates compared with the previous year. Adjustments to obligations regarding capital market-based pension plans, which are due to changes in exchange rates, are shown in adjustments based on past experience.

The plan assets generated a gain of EUR 1,108m in the 2023 financial year (previous year: loss of value of EUR 2,574m). This amount is made up of the interest income recognised in the income statement and the revaluation component for plan assets.

The outflows of plan assets due to pension payments of EUR 630m include the financing of pensions in Germany from CTA assets in the amount of EUR 426m.

Information on tax assets related to pension obligations can be found in ↗ T082.

The main actuarial assumptions used to calculate pension obligations and the corresponding plan assets are shown below:

T118 MAIN ACTUARIAL ASSUMPTIONS FOR GERMAN COMPANIES
in % 31 Dec 2023 As of 31 Dec 2022
     
Interest rate    
Retirement benefits 3.6 4.2
Transitional benefits 3.6 4.2
Salary increase    
Retirement benefits 2.5 2.5
Transitional benefits 2.5 2.5
Pension increase    
Retirement benefits 1.0 1.0
Transitional benefits 1.0 1.0
       

The Heubeck Actuarial Tables 2018 G were used in the biometric calculations for the German companies in the Group.

T119 MAIN ACTUARIAL ASSUMPTIONS FOR FOREIGN COMPANIES
in % 31 Dec 2023 As of 31 Dec 2022
     
Interest rate    
Austria 3.6 4.2
Switzerland 1.4 2.4
USA 5.0 5.0
Salary increase    
Austria1) 1.8 1.8
Switzerland 1.9 2.1
USA
Pension increase    
Austria 1.8
Switzerland
USA
       
1) Comprises severance payments only in 2023.

The BVG 2020 generation tables are used for the biometric calculations for Switzerland.

The following table shows how the present value of the defined benefit obligations would have been affected by changes in the relevant actuarial assumptions for the main pension plans described above.

T120 CHANGE IN ACTUARIAL ASSUMPTIONS
  Effect on
defined
benefit
obligations
as of 31 Dec 2023
in €m
Change
in %
Effect on
defined
benefit
obligations
as of 31 Dec 2022
in €m
Change
in %
         
Present value of the obligation  1) 19,737 17,390
Interest rate        
Increase by 0.5 percentage points 18,451 - 6.5 16,423 -5.6
Decrease by 0.5 percentage points 20,759 +5.2 18,455 + 6.1
Salary trend        
Increase by 0.5 percentage points 19,767 +0.2 17,474 + 0.5
Decrease by 0.5 percentage points 19,684 -0.2 17,318 -0.4
Pension trend        
Increase by 0.5 percentage points 19,929 + 1.0 17,573 + 1.0
Decrease by 0.5 percentage points 19,714 - 0.1 17,367 -0.1
           
1) Present value of the obligation using the assumptions shown in the “Actuarial assumptions” tables.

A reduction of 10% in the mortality rates used to calculate the pension obligations increases the life expectancy of the beneficiaries by a given amount depending on their individual ages. It roughly corresponds to an increase of one year in the life expectancy of a male employee who is 55 years old today. A 10% reduction in the mortality rates would therefore increase the present value of the main benefit obligations in Germany and Switzerland by EUR 254m as of 31 December 2023 (previous year: EUR 241m).

The sensitivity analysis examines changes in one assumption and leaves the other assumptions unchanged compared with the original calculation. The effects of any interaction between the individual assumptions are therefore not taken into account.

The plan assets are made up as follows:

T121 COMPOSITION OF PLAN ASSETS
  31 Dec 2023 31 Dec 2022
 

Listed price

in an active market

in €m

No listed price
in an
active market
in €m
Total
in €m
in % Listed price
in an
active market
in €m
No listed price
in an
active market
in €m
Total
in €m
in %
                 
Shares     5,919 34.5     5,359 33.6
Europe 3,377     2,084    
Other 2,542     3,275    
Fixed-income securities     6,454 37.6     5,084 31.9
Government bonds 1,940     2,340    
Corporate bonds 4,514     2,744    
Share funds 202 202 1.2 166 166 1.0
Fixed-income funds 207 207 1.2 135 135 0.8
Mixed funds 1) 0.0 64 64 0.4
Money market investments 984 984 5.7 1,572 1,572 9.9
Property     1,509 8.8     1,476 9.2
Direct investments 1,059 10     11    
Indirect investments 46 394     1,034 431    
Insurance contracts 120 120 0.7 104 104 0.7
Bank balances 56 60 116 0.7 207 390 597 3.7
Other investments 2) 561 1,087 1,648 9.6 184 1,216 1,400 8.8
Total 15,488 1,671 17,159 100.0 13,805 2,152 15,957 100.0
                   
1) Mixed funds include equities and interest-bearing securities.
2) Other investments include, in particular, alternative investments such as hedge funds, commodities and private equity funds as well as hedging instruments in connection with the LDI strategy.

The plan assets for defined benefit pension obligations consist mainly of fixed-income securities, equities, property and cash and cash equivalents. They do not include financial instruments issued by companies in the Group nor properties used by Group companies.

Plan assets serve solely to meet the defined benefit obligations. Funding these benefit obligations with assets provides security for future payments. In some countries, this takes place on the basis of statutory regulations, while in others (Germany, for example), this takes place on a voluntary basis.

The responsible decision-making bodies within the Lufthansa Group manage and monitor the financial risks that arise from funding the defined benefit pension obligations.

Within the Lufthansa Group, the pension plans aim to cover the German and Swiss pension obligations by means of plan assets and positive capital market returns in the medium to long term. The key factors for achieving this are the performance of the investments and, for the Swiss plans, the structure of the contribution system and the interest rate policy.

The allocation of the funds to asset classes (e.g. equities) for the defined benefit plans is carried out on the basis of asset-liability matching (ALM) studies. The ALM study is conducted periodically, generally every three years, with an external adviser in order to review the funding strategy on a regular basis and to make adjustments as necessary. The results of the study should indicate what combination of investments (annuities, equities, etc.) can be used to cover the long-term pension obligations. Step one of this process is for the actuary to draft a long-term forecast charting how the pension obligations will develop.

In addition to this, target figures are needed for the relative return and relative risk as regards coverage of the obligations. Last but not least, a risk budget must also be defined. A simulation is used to test all permissible investment allocations for their future compliance with these objectives. Those which do not fulfil the criteria are eliminated. Preference is given to allocations that are return-oriented yet conservative and that have a high probability of achieving the investment target. The results of the ALM study show whether there will be strategic shifts in the existing allocation.

Higher interest rates meant that the funding ratio for the defined benefit pension obligations at Deutsche Lufthansa AG, Lufthansa Technik AG and Lufthansa Cargo AG went up to nearly 100%. To stabilise the funding ratio, 50% of the investment portfolio was shifted to a liability-driven investment strategy (LDI).

The LDI strategy requires capital to be invested in such a way that the assets replicate the interest rate risk for the pension obligations. This reduces fluctuations due to interest rate changes in the net pension obligations presented in the consolidated statement of financial position. It entails capital investments largely in fixed-income corporate bonds and in derivative interest rate swaps that establish the same sensitivity to interest rates for both assets and liabilities. As of 31 December 2023, around 50% of these pension obligations were hedged against interest rate risk. The intention is to go up to 75% LDI and a 75% interest rate hedge in 2024. Derivative financial instruments are also used to manage foreign exchange risks.

The capital investments for the other defined benefit plans at the other entities in Germany and Switzerland are not affected by this change.

The investment strategy for the capital market-based pension plans was also initially defined by the Company and is regularly reviewed in the course of an ALM study. Where necessary, it is adjusted by the Investment Committee to reflect changes in capital market requirements. This may result in changes to the investment strategy for amounts that have already been invested.

Based on current knowledge, an estimated EUR 584m is expected to be transferred to pension plans in the 2024 financial year (previous year: EUR 481m). In Germany, they only relate to capital market-oriented schemes.

Over the next ten years, the following pension payments are forecast for the defined benefit commitments in existence as of the reporting date:

T122 FORECAST MATURITIES OF UNDISCOUNTED PENSION PAYMENTS
in €m Forecast pension payments
31 Dec 2023
Forecast pension payments
31 Dec 2022
     
2024 (previous year: 2023) 715 661
2025 (previous year: 2024) 738 671
2026 (previous year: 2025) 778 687
2027 (previous year: 2026) 808 721
2028 (previous year: 2027) 822 744
2029-2033 (previous year: 2028-2032) 4,214 4,048
       

The projected maturities for pension payments do not include possible allocations to or funding from plan assets. As a result, the cash flow effects from payments in respect of pension plans may be higher or lower than the projected pension payments, primarily depending on the Company’s ability to continue its past funding policy in the future.

Contributions for defined contribution retirement benefit commitments came to EUR 481m in 2023 (previous year: EUR 385m). These mainly relate to contributions to statutory pension schemes, but also include collective bargaining contributions or voluntary contributions to other pension schemes. The increase stemmed mainly from higher statutory pension contributions, particularly due to less short-time work and higher salaries.

37. Other provisions

Other provisions disclosed in the statement of financial position as non-current and current other provisions are made up as follows:

T123 NON-CURRENT AND CURRENT OTHER PROVISIONS
  31 Dec 2023 As of 31 Dec 2022
in €m Total Non-current Current Total Non-current Current
             
Obligations under partial retirement contracts 62 47 15 103 82 21
Other staff costs 199 166 33 196 157 39
Obligation to return emissions certificates 225 225 125 125
Onerous contracts 150 95 55 161 104 57
Environmental restoration 32 28 4 39 29 10
Litigation 218 35 183 243 28 215
Restructuring/severance payments 49 7 42 125 55 70
Maintenance of lease aircraft 401 318 83 310 212 98
Warranties 72 72 81 81
Other provisions 232 68 164 246 90 156
Total 1,640 764 876 1,629 757 872
               

The obligations from partial retirement agreements result from collective bargaining agreements in Germany. In 2023, the obligations were measured using an interest rate of 3.72% (previous year: 3.16%).

To protect outstanding obligations under partial retirement agreements in the event of insolvency, funds were transferred to an external trust and reinsurance policies were taken out. These assets, which fulfil the requirements for plan assets and therefore reduce the gross amount of obligations accordingly, are measured at fair value on the balance sheet date.

The funding status for provisions for obligations to employees under partial retirement agreements is as follows:

T124 FUNDING STATUS
in €m 31 Dec 2023 31 Dec 2022
     
Present value of funded obligations under partial retirement agreements 251 240
External plan assets -193 - 139
  58 101
of which other provisions 62 103
of which other assets 4 2
       

The obligation only went up slightly in the financial year because the option in the collective agreement enabling new partial retirement agreements expired. Contributions to plan assets reduced the amount of provisions.

Provisions for other staff costs mainly relate to staff anniversary bonuses and other current obligations.

The provisions for the obligation to return emissions certificates cover the obligations to submit certificates under the emissions trading schemes applicable to the Lufthansa Group. The obligations are matched by certificates, which are presented under other receivables. ↗ Note 26 and ↗ Note 29.

The provisions for expected losses from onerous contracts relate in particular to maintenance contracts at Lufthansa Technik AG, where agreed revenues will not cover the attributable expenses.

Provisions for environmental restoration are based on surveyors’ findings and the assumption that all contamination is removed within ten years without any further legal requirements.

Provisions for ongoing legal proceedings were based on an assessment of the likely outcome of the proceedings.

The provisions for restructuring and severance payments are based on concluded termination agreements or proposed contract terminations which the Lufthansa Group can no longer avoid.

The provisions for the overhaul of leased aircraft mainly relate to obligations for the maintenance, overhaul and repair of these aircraft.

Changes in individual provisions in 2023 were as follows:

T125 CHANGES IN OTHER PROVISIONS 2023
in €m Obligations
under
partial retirement
agreements
Other
Staff
costs
Return
obligation
Emissions
certificates
Impending
losses from
onerous
contracts
Environmental
restor-
ation
Litigation
             
1 Jan 2023 103 196 125 161 39 243
Changes in the group of consolidated companies
Currency translation differences 1 1
Utilisation -84 -26 -116 - 32 - 1 -22
Increase / additional provisions 88 44 216 67 31
Interest added back 2 2
Reversal - 1 -5 - 1 -47 -6 - 31
Transfers - 44 -13 - 1 -3
As of 31 Dec 2023 62 199 225 150 32 218
               
T125 CHANGES IN OTHER PROVISIONS 2023 (CONTINUED)
in €m Restruct-
uring
severance payments
Overhaul of
lease
Aircraft
warranties Other
provisions
Total
           
1 Jan 2023 125 310 81 246 1,629
Changes in the group of consolidated companies
Currency translation differences - 2 1 1
Utilisation -51 - 38 -19 - 28 -417
Increase / additional provisions 3 144 22 64 679
Interest added back 1 2 1 8
Reversal -10 - 15 - 12 -18 -146
Transfers -19 - 34 -114
As of 31 Dec 2023 49 401 72 232 1,640
             

Changes in individual provisions in the previous year were as follows:

T125 CHANGES IN OTHER PROVISIONS 2022
in €m Obligations
under
partial retirement
agreements
Other
Staff
costs
Return
obligation
Emissions
certificates
Impending
losses from
onerous
contracts
Environmental
restor-
ation
Litigation
             
As of 1 Jan 2022 50 197 20 169 31 247
Changes in the group of consolidated companies 1
Currency translation differences 1 1
Utilisation -64 - 29 - 12 - 39 - 1 - 31
Increase / additional provisions 120 26 120 44 9 48
Interest added back 5 2
Reversal - 14 -6 -13 - 23
Transfers -8 12 3 1
As of 31 Dec 2022 103 196 125 161 39 243
               
T125 CHANGES IN OTHER PROVISIONS 2022 (CONTINUED)
in €m Restruct-
uring
severance payments
Overhaul of
lease
Aircraft
warranties Other
provisions
Total
           
As of 1 Jan 2022 487 342 65 350 1,958
Changes in the group of consolidated companies 2 3
Currency translation differences 8 10
Utilisation - 294 - 167 - 12 -66 - 715
Increase / additional provisions 21 146 32 93 659
Interest added back 7
Reversal -99 - 25 -6 - 140 - 326
Transfers 10 6 9 33
As of 31 Dec 2022 125 310 81 246 1,629
             

The following cash outflows are estimated for the non-current portion of the other groups of provisions:

T126 CASH OUTFLOWS FOR NON-CURRENT PROVISIONS
  2023 As of 2022
in €m 2025 2026 2027 2028 and
thereafter
2024 2025 2026 2027 and
thereafter
Onerous contracts 19 20 17 53 23 21 16 52
Environmental restoration 3 3 3 19 3 3 3 20
Restructuring/severance payments 4 2 1 49 4 2 1
Maintenance of lease aircraft 93 122 24 91 42 39 79 55
Other provisions 35 17 18 36 37 24 16 35
                   
38. Financial liabilities

Financial liabilities consist of a non-current portion with a residual term of more than one year and a current portion of less than one year, which is shown under current liabilities. Table T127shows the total amount of borrowings.

T127 FINANCIAL LIABILITIES
    31 Dec 2023 31 Dec 2022
in €m Total Non-current Current Total Non-current Current
             
Bonds 6,224 5,084 1,140 6,659 6,060 599
Liabilities to banks 1,164 404 760 1,558 1,268 290
Leasing liabilities 2,568 2,149 419 2,444 2,041 403
Other loans 3,987 3,418 569 4,490 3,901 589
  13,943 11,055 2,888 15,151 13,270 1,881
               

The Lufthansa Group pursues the strategy of converting financial liabilities in all currencies into financial liabilities in euros by means of interest rate derivatives.

The outstanding bonds comprise seven bonds with fixed redemption amounts issued under the Euro Medium Term Notes programme. As of the reporting date, bonds with a nominal volume of EUR 5.0bn, interest rates between 0.25% and 3.75% and maturities between July 2024 and July 2029 had been issued under the programme. The programme enables bonds to be issued up to a total volume of EUR 10bn. One convertible bond and one hybrid bond are also reported under this item. The convertible bond was issued with a nominal volume of EUR 600m. Unless previously converted, the bond will be redeemed at its nominal value on 17 November 2025. Investors also have the option of converting the bond into new and/or existing registered shares of Deutsche Lufthansa AG at a conversion price of EUR 9.23. The hybrid bond has a term until August 2075 and an interest rate of 4.38%. It can be cancelled in a five-year cycle, the next time in February 2026.

Of the liabilities to banks, borrower's note loans account for EUR 1,143m. One borrower's note loan with a carrying amount of EUR 59m was secured by an aircraft.

The lease liabilities correspond to the present value of the remaining payment obligations from contracted leases. Further details on the contracts concluded can be found in ↗ Note 23.

The Lufthansa Group’s lease liabilities have the term structure set out below. The disclosures are based on contractual, undiscounted payments.

T128 MATURITY ANALYSIS OF LEASE LIABILITIES
in €m 31 Dec 2022 31 Dec 2021
     
1st quarter 122 120
Up to 1 year ¹⁾ 333 333
1 – 5 years 1,374 1,239
Later 1,345 1,310
       
1) Without payments in 1st quarter.  

Under other loans, EUR 3,802m (previous year: EUR 4,407m) were attributable to structured leasing companies and other aircraft financing models (↗ Note 20). This amount was secured by the respectively financed aircraft. Another aircraft was financed in this way in 2023.

In both the 2023 and 2022 financial years, all payment obligations and requirements from the loan agreements described have been fulfilled.

39. Non-current contract liabilities
T129 NON-CURRENT CONTRACT LIABILITIES
in €m 31 Dec 2023 As of 31 Dec 2022
     
Non-current contract liabilities 26 30
    26 30
       

Non-current contract liabilities consist of long-term deferrals for construction contracts where the payments received exceed the performance to date.

40. Non-current advance payments received, deferred income and other non-financial liabilities
T130 NON-CURRENT ADVANCE PAYMENTS RECEIVED, DEFERRED INCOME AND OTHER NON-FINANCIAL LIABILITIES
in €m 31 Dec 2023 As of 31 Dec 2022
     
Advance payments received 2 2
Deferred income 26 12
Other non-financial liabilities 39 30
    67 44
       

Deferred income includes EUR 2m (previous year: EUR 4m) for government grants and subsidies for capital expenditure, which are realised over the useful life of the assets in the following years.

Other non-financial liabilities include obligations under share-based remuneration agreements for Executive Board members, managers and, in the previous year, for non-payscale employees.

A variable remuneration system has been in place since 2020 for the Executive Board, in which 85% of performance is now measured by financial parameters and 15% by sustainability parameters. The financial targets are the relative total shareholder return (TSR) of the Lufthansa share compared with the DAX and the average adjusted return on capital employed (adjusted ROCE) or Adjusted EBIT during the performance period, both in equal parts (42.5% each). The performance period is four years. For the TSR component, the 60 trading days immediately preceding the beginning of the performance period and the 60 trading days immediately preceding the end of the performance period are used in the performance period. The performance of all the companies in the DAX index at the beginning and end of the period is ranked and the relative position of Deutsche Lufthansa AG is determined by its achieved percentile. Performance against the target for average adjusted ROCE is based on a comparison of the average adjusted ROCE for the four-year performance period against a strategic target set in the grant year, which has a lower weighted average cost of capital (WACC). The sustainability parameters are set by the Supervisory Board for each performance period. The TSR performance target was replaced by the target “Repayment of stabilisation measures” in 2021. The performance weighting was redistributed for the 2023 programme. It is now 30% for the relative TSR of the Lufthansa share compared with the peer group NYSE Arca Global Airline Index, 50% for Adjusted ROCE and 20% for sustainability parameters.

For the performance targets not dependent on the market, an expected target achievement of 200% for the repayment of stabilisation measures, 200% for Adjusted EBIT and 65% for the sustainability parameter was assumed within the framework of the measurement for 2021; for 2022, an expected target achievement of 200% was assumed for Adjusted ROCE and 0% for the sustainability parameter, and for 2023 an expected target achievement of 197.55% was assumed for Adjusted ROCE and 0% for the sustainability parameter. At the beginning of each performance period, a number of virtual shares are awarded, which are calculated by dividing the individual target amount of the long-term variable remuneration by the average price of Deutsche Lufthansa AG shares during the 60 trading days immediately following the beginning of each performance period. The payment is calculated by multiplying the degree of target achievement for this performance target by the number of virtual shares at the beginning of the performance period and the average price of Deutsche Lufthansa AG shares during the 60 trading days immediately preceding the end of the last year of each performance period.

As part of the share-based remuneration agreements, Deutsche Lufthansa AG and other Group companies participating in the programme offer a 50% discount on employee investment in Lufthansa shares to managers and non-payscale employees. The option packages granted in 2020 and 2021 include an outperformance option and a performance option. At the end of the programme, the participants receive a cash payment if the conditions are met. The Group programme for non-payscale employees was last offered in 2019 and ended in 2023. The 2021 programme was set up retroactively for managers in the 2022 financial year.

The outperformance option is linked to the performance of the Lufthansa share compared with a notional index of shares in European competitors. When the beneficiary exercises the outperformance option, they receive a cash payment for every percentage point of outperformance, with a hurdle rate of 1%. The cash payment is capped at an outperformance of more than 20%.

The performance option is linked to the absolute performance of the Lufthansa share. The payout begins at an absolute performance of 20% and the maximum payout amount is reached at a performance of 35%.

The performance and the outperformance in all programmes are calculated on the principle of total shareholder return.

The programmes are scheduled to run for four years. By contrast, the duration of the 2021 programme for senior executives was reduced slightly to three-and-a-half years. The shares invested in personally may not be sold until the option is exercised.

As a result of the regulations in the stabilisation agreement with the ESF, the 2020 and 2021 programmes for senior executives was only offered with a contribution of shares. The discount of 50% only applies to some of the potential tranches in the 2020 programme for senior executives. The discounts were paid to employees at year-end 2022 after the ESF-shareholding had come to an end.

The outperformance option of the 2019 share programme, which has now expired, resulted in a payment of EUR 20.4m (previous year: EUR 2.6m). Participants in the 2020 and 2021 programmes hold 1,814,713 shares in total as of the reporting date (previous year: 2,873,092 shares).

A new multi-year incentive programme in the form of share-based remuneration, which replaces the previous programme, was awarded to the managers of Deutsche Lufthansa AG and other consolidated and non-consolidated Group companies in 2023. Adjusted ROCE accounts for 50% of target achievement. Another 30% depends on the relative performance of the Deutsche Lufthansa AG share against the performance of the shares in the NYSE Arca Global Airline Index (TSR target). The remaining 20% of the target amount is tied to sustainability targets relating to reductions in carbon emissions. The range of target achievement for the individual performance criteria is from 0% to 200%. The vesting period began on 1 January 2023 and lasts for three years. A personal investment in Lufthansa shares is no longer required for participation in this programme. Entitled participants are included automatically. The plan is to pay a potential bonus, half in cash and half in Lufthansa shares. The fair value of the share component is therefore shown in equity and initially measured at fair value at the time of the award. The cash component, which amounts to EUR 6.2m and is also part of the other non-financial obligations, was measured at fair value on the reporting date and increases staff costs accordingly.

The fair value of equity-settled share commitments for the new 2023 programme was EUR 5.6m and was measured based on a valuation model. At the time of the award the model used an expected weighted volatility of 43% and a price of EUR 8.94 for the Lufthansa share. The expected volatility was derived from historic volatilities. A risk-free interest rate of 2.96% was applied for the model. Assumptions for correlations between the Lufthansa share price and the performance of the NYSE Arca Global Airline Index were based on historical share and index performance.

During financial years 2023 and 2022, the number of options changed as follows:

T131 CHANGE IN NUMBER OF OPTIONS AND VIRTUAL SHARES
  2023 2022
  Number of options Number of virtual shares/
option rights
Cash settlement in € thousands Number of options Number of virtual shares Cash settlement in € thousands
             
Outstanding on 1 Jan 10,796 2,612,518 14,736 571,106
Issued 3,027,003 1,905 2,041,412
Expired or unused 988 616
Exercised 5,861 20,401 5,229 2,618
Outstanding on 31 Dec 3,947 5,639,521 10,796 2,612,518
               

The fair values of the option rights in the ongoing share programmes were calculated using Monte Carlo simulations. This involves simulating the future returns of the shares in the index and of Deutsche Lufthansa AG and calculating the value of the option rights as the forecast amount of a dividend.

The following fair values were measured in total:

T132 FAIR VALUE OF OPTION RIGHTS AND VIRTUAL SHARES AS OF 31 DEC 2023
  Number of options/virtual shares Fair value per option/virtual share in € Proportional vested benefit Total fair value in €
         
Board member        
Virtual shares 2020 571,106 5.11 90% 2,636,592
Virtual shares 2021 957,126 12.00 100% 11,485,512
Virtual shares 2022 1,084,286 8.78 100% 9,520,031
Virtual shares 2023 863,873 8.92 100% 7,705,747
Managers        
Options 2020 2,140 4,422 77% 7,286,572
Options 2021 1,807 4,692 51% 4,324,006
Option rights 2023 2,163,130 8.00 33% 5,602,507
Total options and virtual shares 5,643,468     48,560,967
of which options 3,947      
of which virtual shares 3,476,391      
of which option rights 2,163,130      
           
T132 FAIR VALUE OF OPTION RIGHTS AND VIRTUAL SHARES AS OF 31 DEC 2022
  Number of options/virtual shares Fair value per option/virtual share in € Proportional vested benefit Total fair value in €
         
Board member        
Virtual shares 2020 571,106 2.52 90% 1,300,135
Virtual shares 2021 957,126 11.00 100% 10,528,386
Virtual shares 2022 1,084,286 7.99 100% 8,663,445
Managers        
Options 2019 2,836 6,688 79% 15,015,675
Options 2020 2,279 5,295 52% 6,285,055
Options 2021 1,880 6,030 23% 2,636,372
Non-payscale staff        
Options 2019 3,801 830 79% 2,497,574
Total options and virtual shares 2,623,314     46,926,642
of which options 10,796      
of which virtual shares 2,612,518      
           

Staff turnover of 7.22% is assumed when accounting for the liability resulting from the valuation of option rights, with the result that the recognised liability is less than the calculated time value. The measurement of option rights therefore results in an obligation of EUR 41.5m as of the reporting date (previous year: EUR 44.2m), of which EUR 33.1m (previous year: EUR 28.8m) is shown under non-current liabilities. The payout for expired option rights of EUR 20.4m in the reporting year reduced the liability. The proportion of commitments intended to be settled by equity instruments increases equity by EUR 5.6m. Changes in the value of option rights and the award of additional option rights in the financial year are recognised in staff costs for a total of EUR 24.0m.

The weighted average share prices at the calculation date (excluding the TSR programme for the Executive Board) were used in the Monte Carlo simulation. As stated in the terms of the programme, these are 50-day averages for Deutsche Lufthansa AG shares and the competitors included in the comparative index. The volatilities and correlations used are forecasts for a specific date and maturity on the basis of current market estimates.

Swap rates were used as the interest rate for the remaining term of the outperformance option in each case. The maximum term of the programmes was used for measurement purposes.

Time values for the Executive Board programmes were also measured using a Monte Carlo simulation based on historical and current market data for the relevant peer group companies, plus the NYSE Arca Global Airline Index for the 2023 programme. Forecast volatilities are based on historical TSR data. The share prices for the past four years were used to calculate historical volatility. The measurement for the 2021 programme took into account a remaining term of 13 months and a risk-free interest rate of 3.22%, for the 2022 programme a remaining term of 25 months and a risk-free interest rate of 2.75%, and for the 2023 programme a remaining term of 37 months and a risk-free interest rate of 2.47%.

The parameters used by the external service provider for the notional airline peer group index are shown in the following table:

T133 REFERENCE PRICE
    Options 2020 Options 2021
       
Lufthansa EUR 8.53 6.99
Air France-KLM EUR 3.68 4.10
IAG GBP 122.08 157.32
Ryanair EUR 13.54 16.40
easyJet GBP 623.82 625.16
Turkish Airlines TRY 10.84 26.47
WIZZair GBP 3,781.00 4,237.54
         
T134 PROJECTED VOLATILITIES
in % for: Options 2020
as of 31 Dec 2023
Options 2020
as of 31 Dec 2022
Options 2021
as of 31 Dec 2023
Options 2021
as of 31 Dec 2022
         
Lufthansa 29.06 42.20 37.15 50.50
Air France-KLM 34.90 46.70 45.61 55.03
IAG 31.06 50.22 41.11 65.12
Ryanair 27.97 40.43 35.82 46.34
easyJet 36.49 49.34 43.76 63.94
Turkish Airlines   48.89 55.60 49.13 43.60
WIZZair 50.50 43.05 59.70 59.81
Risk-free interest rate Options 2020:
3.26% for euro zone (previous year: 2.08%)
4.72% for UK (previous year: 3.28%)
40.00% for Turkey (previous year: 9.00%)
Options 2021:
2.81% for euro zone (previous year: 2.02%)
4.40% for UK (previous year: 3.26%)
40.00% for Turkey (previous year: 9.00%)
Fluctuation 7.22% (previous year: 7.41%) 7.22% (previous year: 7.41%)
           
41. Current contract liabilities

The Lufthansa Group recognised the following contract liabilities:

T135 CONTRACT LIABILITIES
in €m 31 Dec 2023 As of 31 Dec 2022
     
Contract liabilities from unused flight documents 4,981 4,898
       
Liabilities from customer loyalty programmes 2,203 2,087
Liabilities from MRO and IT services 363 261
Other contract liabilities 204 334
Other contract liabilities 2,770 2,682
Liabilities from contracts with customers 7,751 7,580
Revenue recognised in the reporting period 2023 2022
Revenue recognised that was included in the contract liability balance at the beginning of the period    
Revenue from unused flight documents 4,250 2,512
Revenue from customer loyalty programmes 431 358
Revenue from MRO and IT services 81 191
Other 139 128
Total 4,901 3,189
     

Of the contract liabilities as of 31 December 2022, EUR 287m (previous year: EUR 298m) could not be realised and was refunded to customers. Ticket refunds totalling EUR 1,946m (previous year: EUR 2,045m) were made in connection with flight cancellations in 2023.

Liabilities under customer loyalty programmes as of 31 December 2023 included 261 billion miles/points from bonus miles programmes (previous year: 245 billion miles/points). As a rule, the miles that are expected to expire are recognised pro rata over the general validity period of three years.

The remaining performance obligation under existing long-term service contracts came to EUR 9.7bn in total, assuming that the services are performed as agreed, of which EUR 1.7bn relate to the next twelve months. These essentially consist of maintenance contracts in the MRO segment for the long-term maintenance and overhaul of airline sub-fleets. To calculate the outstanding performance obligations, the number of maintenance inspections derived from the respective flight plans and agreed in the contracts are taken into account, along with the expected revenue and fixed prices for certain services (VIP and cabin modifications). Around 60% of performance obligations beyond twelve months are expected to have been fulfilled by 2029.

As in the previous year, no revenue was recognised in 2023 for performance obligations fulfilled in prior financial years.

In line with the simplification rules of IFRS 15, disclosures are not made on performance obligations as of 31 December 2023 or 31 December 2022 that have a forecast original term of one year or less. The option of rebooking flights means that there may be a period of time between the conclusion of the contract and the provision of the service that exceeds one year, although this cannot be foreseen when the contract is concluded. Due to the advance booking period of a maximum of one year and short-term rebooking possibilities, the Group assumes that the application of the simplification rule is justified. Award miles can be redeemed for at least three years, but may also be redeemed at short notice and for this reason are also reported as current.

The Lufthansa Group applies the simplification rule defined in IFRS 15.94, which allows contract initiation costs to be expensed if the amortisation period otherwise to be taken into account would be twelve months or less.

42. Trade payables and other current financial liabilities
T136 TRADE PAYABLES AND OTHER CURRENT FINANCIAL LIABILITIES
in €m 31 Dec 2023 31 Dec 2022
     
Trade payables    
Trade payables to affiliated companies 94 118
Trade payables to other equity investments
Trade payables to third parties 4,031 3,923
  4,125 4,041
Other liabilities    
Liabilities to banks 4 21
Other liabilities to affiliated companies 312 327
Other liabilities to equity investments
Liabilities from equity investments 627 531
Other financial liabilities 837 740
  1,780 1,619
Total 5,905 5,660
       

Other liabilities of EUR 32m (previous year: EUR 79m) serve as collateral for positive fair values of derivatives.

The Lufthansa Group takes part in a Supply Chain Finance (SCF) programme to optimise working capital and cash flow and to strengthen supplier relationships. The provider of the programme is CRX Markets AG, Munich, and is free of charge for participating suppliers. Supplier participation in the programme is voluntary; suppliers can receive earlier payment of their receivables from the participating banks at a discount. The Lufthansa Group then pays the original invoice to the bank on the due date. This does not result in any additional costs for the Lufthansa Group in relation to the twelve participating banks. As of 31 December 2023, the SCF programme was used by the Group companies Deutsche Lufthansa AG, Lufthansa Cargo AG, Lufthansa Technik AG, Austrian Airlines AG and Swiss International Airlines Ltd. As of the reporting date, sixteen suppliers with an outstanding trade payables volume of EUR 418m (previous year: EUR 316m) participated. Payment terms of liabilities in the programme do not exceed payment terms with suppliers not participating in the programme. All relevant contractual payment terms are also negotiated with suppliers outside the programme on a bilateral basis, which is why the SCF programme does not change the nature of the supplier liability. Consequently, the definition and disclosure of the trade payables remain unchanged. The cash flows from trade payables continue to be presented as operating cash flow in the cash flow statement.

43. Current advance payments received, deferred income and other non-financial liabilities
T137 CURRENT ADVANCE PAYMENTS RECEIVED, DEFERRED INCOME AND
OTHER NON-FINANCIAL LIABILITIES
in €m 31 Dec 2023 31 Dec 2022
     
Liabilities for other taxes 355 296
Accrued expense for holiday, flexible working hours and overtime 262 230
Advance payments received 14 25
Deferred income 45 52
Other non-financial liabilities 46 78
    722 681
       

Other non-financial liabilities also include the current portion of obligations under share-based remuneration agreements measured at fair value (↗ Note 40).

Lufthansa Group Annual Report 2023