Risks at an individual level

The following table shows the top risks for the Lufthansa Group. It encompasses all quantitative A and B risks, as well as qualitative risks with a rating of at least “substantial” and “high” in the order of their significance. Detailed explanations can be found in the following sections.

Macroeconomic risks

Uncertain economic environment

The Lufthansa Group’s forecast for 2025 is based on the expectation that future macroeconomic conditions and sector developments will correspond to the description given in the ↗ Forecast. If the global economy performs worse than forecast, this is expected to have a negative effect on the Lufthansa Group’s business.

Risks with potential effects on global economic growth, and thereby for the Lufthansa Group’s sales, primarily arise from the further course of Russia’s war of aggression against Ukraine, the Middle East conflict, the possible global spread of protectionist measures, higher inflation, and the energy transition towards renewable energies with the related government regulation.

Crises, wars, political unrest and natural disasters

The security situation, which is due partly to Russia’s invasion of Ukraine and the Middle East conflict, as well as the latent risk of terrorist attacks on air traffic and the sabotage of aviation infrastructure, could have concrete effects on business operations and on the safety of the Lufthansa Group’s flight operations, customers, employees and assets.

The Russian war of aggression against Ukraine and the sanctions this has caused, including potential countermeasures, continue to affect the development of the global economy and cause further increases in the prices of important energy sources such as oil and gas, and other resources. A destabilisation of the region and continued tensions between Russia and the member countries of NATO and the EU could also lead to pressures and operational restrictions in the medium and long term.

In order to analyse, track and manage these risks, the Lufthansa Group carries out comprehensive monitoring of the global security situation and current events that may affect the Lufthansa Group. These include natural events that may make high demands of our employees and the organisation of our flight operations. The Lufthansa Group prepares comprehensive security analyses on an ongoing basis and continuously refines them in order to assess developments in advance so as to draw up preventive scenarios in the event of any disruptions. It can draw on an extensive network of national and international security authorities and specialised security advisers to do so. The necessary security measures depend on the probability and consequences of the event.

Potential financial losses could result from primary effects, such as not being able to fly to certain destinations, but also from significant secondary effects, including a drop in passenger numbers, higher insurance premiums, additional fuel costs due to airspace closures, higher costs due to a shortage of energy and raw materials or more stringent statutory security requirements.

Any further deterioration in the security situation, due to a further escalation in Russia’s war of aggression, for example, could affect the insurance coverage of airlines worldwide. In particular, there is a risk of insurance coverage being cancelled immediately in the event of direct military action between Russia, USA, China, the United Kingdom and France, and in the event of incidents constituting a casus foederis under Article 5 of the NATO treaty. To address this risk and ensure continuity of flight operations, the Lufthansa Group companies are engaged in discussions with governments and aviation authorities in their respective home markets.

Because of its strong symbolic effect, civil aviation is still a potential target of terrorist attacks. Geopolitical trends also mean there is an increasing risk of sabotage to traffic and other critical infrastructure (KRITIS) by actors commanded or supported by states. Military conflicts between states are a high risk, especially if they take place in the short term and outside clearly defined borders. The threat from air-defence systems and increasing military activities mean that flights over crisis areas continue to require comprehensive risk assessment and management. The demands made of the security functions of international companies are rising continuously in view of the political environment and the continuous development of new technology. In this context, particular mention should be given to the greater availability and use of unmanned, and in some cases armed aircraft (drones) and the various challenges they present. Increasing security regulations due to greater threats, as well as a tightening of entry requirements for passengers around the world, could lead to further restrictions in international air traffic and thereby to adverse effects for the air transport industry.

To evaluate security-relevant events in the context of the regional environment, the Lufthansa Group uses a quality management system, which helps with the continuous evaluation of local security procedures, both in existing operations and with new destinations. In order to guarantee compliance with national, European and international aviation security legislation and the Lufthansa Group’s own security standards, these sites are inspected regularly in the course of risk audits for aviation security and country risks. If necessary, deficits are compensated for by additional measures that may affect all relevant functional areas. In addition, perceptions of Germany, and of Switzerland, Austria, Belgium or the EU in certain regions of the world and the profile of the Lufthansa Group compared with other, particularly exposed Western airlines are taken into account when choosing infrastructure and processes abroad.

Pandemics and epidemics

The risk of pandemics and epidemics is rising due to factors such as increasing urbanisation, climate change and migration. Epidemics, pandemics or other causes such as bioterrorism could cause high rates of disease in various countries, regions or continents. In the short, medium and long term, this could drastically reduce the number of passengers travelling by air due to a fear of contagion, as was dramatically demonstrated in 2020 by the spread of the coronavirus pandemic. Furthermore, it is possible that staff may not be willing to fly to the countries concerned for fear of infection and that local employees want to leave these countries. The potentially high prevalence of sickness among employees may put operations at risk. Official travel restrictions to prevent the transmission of pathogens may also result in operational constraints.

The Lufthansa Group’s Medical Service reviews information from relevant sources unceasingly as part of its Epidemiological Intelligence Process. Own staff with infectiological and epidemiological training evaluate information from the different early warning systems to identify any potential relevance for the Lufthansa Group. Employees receive detailed information, risk groups are given personal protective equipment as needed and preventive vaccination campaigns against influenza are run throughout the Lufthansa Group every year. Passengers and employees receive optimal protection from infection by means of safety measures adapted to the situation and based on the Lufthansa Group’s pandemic planning.

The coronavirus-related health risks to customers and employees of the Lufthansa Group have now declined significantly thanks to increasing immunity within the population. The ongoing evolution of the virus in the reporting year did not give any grounds for concern; its evolutionary changes have diminished since the emergence of the omicron variant.

However, a general risk that new virus variants able to evade the immune system will arise remains. Generally speaking, the greatest risk for future pandemics comes from respiratory diseases caused by the influenza viruses or coronaviruses, for example.

Sector-specific risks

Development of markets and competition

The growth of the aviation sector is highly dependent on global political stability and correlates with the macroeconomic development. In the past, the airline industry was on a long-term growth path with above-average growth rates, especially in regions such as Asia/Pacific. Ongoing changes in demand, particularly in the aftermath of the coronavirus pandemic and as a result of the armed conflict in Ukraine, along with the influence of climate regulations, mean that long-term market growth, particularly in Europe, is expected to be lower than in the past. In addition, supply-side bottlenecks such as limited infrastructure and restrictions in supply chains act as further brakes on the development of air traffic. Cost competition, which is already prevalent in many segments of the airline market, will intensify further as a result of the changed market environment.

Revenue risks

The entire Lufthansa Group is exposed to revenue risks, and there is still a high level of uncertainty concerning future market developments. Ongoing inflation, forecast slower economic growth and ongoing geopolitical crises continue to affect how demand and bookings will develop in future and make it difficult to predict revenue. In addition to the factors mentioned above, risks can still result from price fluctuations, excess capacities, economic fluctuations, competitive developments, potential changes in customer behaviour for reasons of climate protection, geopolitical influences and unpredictable events with a global impact. They can be addressed in the short term by continuously monitoring bookings and adjusting capacities. Distribution, product and cost reduction measures can also be taken.

Risks due to irregularities in flight operations

On days with heavy traffic and unfavourable weather conditions, there may still be capacity bottlenecks on the ground and in the air that impact the ability to manage flight traffic and passenger numbers. In addition, bottlenecks in the delivery of aircraft, engines and spare parts remain a challenge. These bottlenecks represent risks for the airlines and may result in changes to flight timetables, delays and cancellations and lower customer satisfaction. Lost revenue and additional costs for compensating the passengers affected may result. Processes and flight plans are continuously optimised to minimise these risks and reduce the impact of flight irregularities. In addition, internal capacities are being increased by means of continuous recruitment and employee training.

Risks in the MRO segment

Lufthansa Technik is exposed to increasingly complex and demanding conditions in the maintenance, repair and overhaul (MRO) market. Global demand for maintenance and repair services has returned to its level before the outbreak of the coronavirus crisis due to the recovery in passenger air traffic. In the Americas and EMEA (Europe, Middle East and Africa) regions in particular, demand sometimes exceeds available capacities, which is exacerbated by shortages of staff and materials. The APAC (Asia-Pacific) region has also recovered, even though political crises, military conflicts and high inflation rates continue to impact market developments, making them volatile and hard to predict.

Supplies of materials for various latest-generation engine types remain scarce, and the resulting higher costs and increased throughput times lead to exceptionally high demand for MRO services. The expectation is that this situation will return to normal by the end of the decade. Significant risk factors, however, arise from macroeconomic and geopolitical conditions on the one hand and operational challenges within production and service delivery systems on the other.

The Lufthansa Group has significantly reduced the risks arising from problems with materials in components of Pratt & Whitney PW1000G engines after successfully negotiating compensation from Pratt & Whitney for the related financial losses.

Increasing use of digital platforms for planning and controlling MRO processes has a fundamental impact on contracts and customer relationships. Both established market participants and new competitors are trying to transform the MRO market with data-based services and digital competences. In this context, the increasing digitalisation and networking of MRO processes creates a significant cybersecurity risk for Lufthansa Technik. Vulnerability to cyberattacks and system manipulation is growing as sensitive data and business processes are increasingly digitised and processed across various platforms. These threats can have severe consequences, including operational disruptions, the loss of confidential data and financial losses, as well as negative impacts on Lufthansa Technik’s reputation.

Company-specific risks

Risk of failure to achieve cost cutting targets

The Lufthansa Group strives to improve its cost base, productivity and efficiency in all business segments. The identified improvement goals are part of the plan for the business segments and are discussed in detail during the planning process. There is a risk that the expected improvements are not achieved in full, or are only achieved later than expected. This also applies to the agreements being negotiated with works councils, trade unions, system partners and suppliers, for instance. There is also a possibility that insufficient additional potential may be identified in the course of the year, resulting in the agreed cost targets not being achieved in full. The persistently high inflation rate and the resulting increase in staff and operating costs also create a risk of countervailing effects that counteract productivity and efficiency gains more than currently expected. Developments in total costs are reviewed regularly with every business entity and by the Executive Board to enable early countermeasures.

Additional tariffs on aircraft imports

The Lufthansa Group is exposed to a potential risk from the reintroduction of additional tariffs on aircraft imports. Tariffs of 15% on Boeing aircraft are currently suspended, but could be reintroduced as a result of changes in the political direction of the newly elected US administration. Any such move would increase the costs of purchasing aircraft and thus affect the Lufthansa Group’s financial and investment planning. The Company monitors political developments and trade policies closely in order to respond promptly to any changes.

Staff

Labour disputes

There is a general risk of labour disputes as a result of pending collective bargaining agreements with various groups of employees within the Lufthansa Group.

Of particular note are the flight operations of Deutsche Lufthansa AG and Lufthansa Cargo AG. The no-strike period for the collective bargaining agreements on retirement benefits for cockpit staff and the framework agreement for cabin staff expired on 31 December 2024. There is also a strike risk for cockpit and cabin staff at the flight operations of Eurowings Germany, Lufthansa Cityline, City Airlines and Discover Airlines. The possibility of these wage disputes spreading to other companies also cannot be ruled out.

After difficult negotiations at Austrian Airlines, the strike risk has diminished significantly since the collective agreement for in-flight personnel was signed in 2024. It runs until 2026.

A collective agreement was reached with Airport Services Dresden and Airport Services Leipzig until the end of September 2025. This agreement includes an absolute no-strike obligation until 30 September 2025.

After agreement was reached on wage settlements for some 20,000 pay scale ground staff and apprentices in 20 companies, there is no longer any strike risk for these agreements. The wage settlement runs until at least 31 December 2025, plus a further no-strike period of six weeks. 

If the trade unions are successful in their demands, this may result in higher staff costs. Strikes can also lead to reputational damage and tangible economic impacts for the Lufthansa Group. ↗ Employees.

Lack of cooperation between works councils and labour unions

Effective, trust-based collaboration with the labour union partners is the basis for the Company’s long-term success. The labour market remains tight and, in combination with demographic developments, this requires a strategy that addresses both the increasing need for qualified staff and the implementation of efficiency measures. These parallel imperatives make high demands of people’s flexibility and willingness to change at an organisational level, as well as of co-determination processes. A far-sighted, solutions-focused working relationship makes it possible not only to overcome challenges, but also to use them as an impetus for further growth.  

Looking ahead to 2025, the focus is on measures to boost productivity and flexibility, including as part of the Lufthansa Airlines turnaround programme. Continuous dialogue with the labour union partners creates a stable foundation for developing creative, practicable solutions that support both economic success and employee satisfaction. The aim of continuously developing the working relationship is to create a common basis for taking decisions quickly and making change processes efficient.  

This approach is intended to ensure that the Lufthansa Group remains successful in the long-term even in a challenging market environment. 

Attractiveness as an employer

In order to become more attractive as an employer and boost employees’ commitment, the working conditions for staff were revised in cooperation with the labour union partners. The Lufthansa Group deliberately uses its employer branding and HR marketing activities to support additional hiring, and is making improvements to its recruitment process and certain key elements of the employee experience, such as onboarding. Various apprenticeships, student and trainee programmes are offered to this end, and talents in a variety of professional groups were supported nationally and internationally and systematically networked. Furthermore, an assortment of professional development programmes is offered to enable employees to work on their personal and career development.

Staff structure

Discrepancies between strategic HR requirements, the existing skill sets of employees and how they are distributed across the companies in the Lufthansa Group constitute a structural HR risk. The Lufthansa Group will again recruit a large number of new employees in 2025. Both the recruitment activities and the professional integration of new employees pose great challenges for the organisation. There is a risk of frustration at long recruitment processes and inefficient onboarding. The Lufthansa Group addresses this risk with a Group-wide steering body for recruitment and talent support measures, strategic human resources planning and the continuation of increased employer branding and recruitment activities.

Supplier risks

The economic effects of the current geopolitical situation and disruptions in supply chains also affect suppliers to the Lufthansa Group. Factors such as the energy crisis, a lack of raw materials and staff shortages or the insolvency of an important supplier mean there is a risk of disruptions in the supply of goods and services, which in turn jeopardise business continuity. Another risk is that of significant price increases.

Purchasing at the Lufthansa Group regularly identifies providers that are critical for business continuity and assesses the relevant risk. In order to address the risk of interruptions to supplies or a price increase in time or to mitigate it, there is a regular process of dialogue with relevant suppliers. Identified risks are documented as part of the annual strategy process and supported by suitable actions to address them. Furthermore, suitable instruments are used, such as changing the terms of payment, reviewing contracts regularly, identifying alternative suppliers and implementing a system to visualise and manage the risks of any supply chain disruptions.

Risks from strategic fleet sizing

The strategic sizing of the Group fleet determines the available capacity and therefore also a large part of the fixed costs and future capital expenditure. Due to the demand, competition and cost risks mentioned above, as well as potential delays in the delivery of new aircraft – particularly for the Boeing 787 due to ongoing supply chain and certification problems – there is a risk that the size of the fleet does not develop as planned, resulting in a decline in earnings.

As part of the annual strategy and planning process, the Lufthansa Group regularly reviews the planned fleet development over the next ten years and takes decisions on the allocation of aircraft to the various airlines in the Group and capacity for the next four years.

Fleet planning is also reviewed and adjusted during the year as needed. The fleet may be reduced through the sale and parking of aircraft. Similarly, aircraft orders may be cancelled or delivery postponed in negotiations with aircraft manufacturers, and lease agreements may be terminated. If deliveries are delayed, it is possible to postpone planned retirements and take out additional leases at short notice.

Flight operations risks

The airlines in the Lufthansa Group are exposed to potential flight and technical operating risks. One of these is the risk of not being able to carry out regular flight operations for technical or external reasons. Another is the risk of an accident, with the possibility of personal injuries and damage to property. This is divided into environmental factors (for example, weather or bird strike), technical factors (such as engine failure), organisational factors (for instance, contradictory instructions) and the human factor.

The companies in the Lufthansa Group search for these dangers systematically and in a forward-looking manner in order to manage the resulting risk by means of suitable countermeasures and to increase the level of flight safety further. For example, every single flight made by an airline in the Lufthansa Group is routinely analysed using recorded telemetric data in order to identify any peculiarities at an early stage and to act on them, such as in the context of training courses. Other sources of information, for example, accidents and hazardous situations around the world that come to light, are also analysed and the results integrated into prevention measures where relevant. The established safety management systems are continuously improved and refined with the aim of reducing the risk exposure of companies in the Lufthansa Group.

Generally speaking, ongoing dialogue between the airlines in the Lufthansa Group provides an opportunity to consolidate the information gained in an operational setting and factor it into the development of the corresponding standards. A standardised platform for the analysis of flight data relevant to flight safety is currently being implemented.

Risks in connection with information security in flight operations are also taken into account. This concerns the IT systems on board and on the ground that are relevant to a flight event and the associated data exchange processes; it applies both to the Lufthansa Group’s own systems and processes and to supplier processes and products. Information security requirements with a potential impact on the safety of civil aviation are described in new regulations (Part IS – Information Security). They take effect in the medium term and will be satisfied in full by the Lufthansa Group companies.

Cyber and IT risks

Cyber risks are all risks to which computer and information networks, ground and in-flight IT infrastructure as well as all IT-enabled commercial and production processes are exposed as a result of sabotage, espionage or other criminal acts. If established security measures fail, the Lufthansa Group may suffer reputational damage and be obliged to make payment on the basis of contractual and statutory claims by customers, contract partners and public authorities. A loss of income is also conceivable if operating systems should fail.

The business processes in the Lufthansa Group are supported by IT components in virtually all areas. The use of IT inevitably entails risks for the stability of business processes and for the availability, confidentiality and integrity of information and data. Such risks can ultimately not be fully eliminated.

The number of cyberattacks continues to increase worldwide and are becoming more professional. This is borne out by the Group’s experience of security incidents and by information from other companies and public agencies. At the same time, the digitalisation of business processes in the Lufthansa Group is increasing, meaning that the potential effects of cyberattacks and the corresponding risk potential may also continue to escalate.

The Lufthansa Group monitors the IT security situation across the Group, the industry, and worldwide on an ongoing basis. On this basis, the Lufthansa Group takes various measures to strengthen its IT security. Technological tools are continuously refined to prevent and respond quickly to cyberattacks, processes are adapted to changing risk scenarios and the new hybrid working practices, and awareness training is carried out regularly to strengthen cyber resilience in the Lufthansa Group. This also includes the mitigation of new risks arising from the digitalisation of aircraft. In line with the current risk assessment, measures have been and are defined in various core areas of the Group that also include partners and providers of the Lufthansa Group when they are implemented in the IT systems and processes. The results of these actions are already making a positive contribution to reducing risks. The Lufthansa Group also monitors its own cybersecurity performance as well as that of the individual subsidiaries and key service providers using an external, neutral cybersecurity rating. This makes it possible to compare the Group’s security level with that of other industry participants and sectors.

IT risk and IT security processes are organised across segments. The status of IT risks and IT security is compiled annually, consolidated at Group level and discussed by the Risk Management Committee of the Lufthansa Group. The Lufthansa Group’s information security management system (ISMS) for core processes (including passenger check-in, frequent flyer programme, Logistics, MRO and IT) is certified in accordance with ISO 27001. The risk and security management systems and selected other measures are also reviewed regularly by the Internal Audit department.

The Lufthansa Group sources most of its IT infrastructure from external service providers. The operational and commercial risks involved in this kind of outsourcing by nature are assessed and managed on a continuous basis.

Risks of breaching data protection regulations

Protecting the privacy of its customers, employees, shareholders and suppliers is a subject that is important and self-evident for the Lufthansa Group. With a view to meeting the requirements of the General Data Protection Regulation (GDPR), all Group companies within the scope of the GDPR have put in place appropriate governance structures and processes in accordance with the requirements of the Group’s Executive Board, based on recommendations from the Group’s data protection unit to identify and manage potential risks from breaches of the extensive legal requirements. Customers regularly exercise their rights to access and erasure of data. Risks arising from international regulations are also taken into account.

Compliance risks

Compliance refers to the observance of legally binding requirements, and is intended to ensure that the Company, its executive bodies and its employees act in accordance with the law. The efficiency and effectiveness of the Compliance Management System (CMS) is therefore vital to the Lufthansa Group. https://investor-relations.lufthansagroup.com/en/corporate-governance.html.

The Lufthansa Group is active in many countries and is therefore subject to various legal norms and jurisdictions with different legal frameworks, including for criminal law on corruption. In addition, all activities not only have to be judged against relevant national criminal law, applicable regulations, cultural customs and social conventions, but also against international and extraterritorial regulations such as the US Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. Any infringements are investigated rigorously and may result in criminal prosecution for the individuals involved. For the Lufthansa Group companies, any such infringements represent a substantial risk of financial penalties. There would also be significant reputational damage and the Company would be put at a distinct disadvantage when competing for public tenders. The Lufthansa Group has therefore put processes in place that are intended to identify specific compliance risks and, in particular, to prevent corruption. Specifically, these include rules on transparent, lawful dealings with business partners and office holders, as well as actions to avoid conflicts of interest.

The Lufthansa Group is also exposed to risks arising from competition and antitrust law. They stem in particular from the fact that the Lufthansa Group operates in oligopolistic markets and has a strong position in some of these markets. Furthermore, Deutsche Lufthansa AG cooperates with competitors by means of alliances. Some of these partnerships have to be approved by various competition authorities. In some business units in the Lufthansa Group, the same individuals are employees of suppliers and competitors as well as customers. The Lufthansa Group’s Competition Compliance function addresses the risks of collusive behaviour and provides executive bodies and employees with extensive training.

As a listed company, the companies in the Lufthansa Group are subject to strict requirements under capital markets legislation, including a ban on insider trading and market manipulation, obligations to publish ad hoc information under the EU Market Abuse Regulation (MAR) and other national and European regulations. The Lufthansa Group takes many organisational precautions to comply with the provisions of the MAR. They include the use of special software to compile insider lists, to publish any ad hoc announcements, and to provide the corresponding policies, information letters and process descriptions. The Corporate Compliance Office also provides a web-based training course. It is intended for employees particularly affected by insider and market abuse legislation. Matters relating to the law on ad hoc announcements are also discussed with the Ad Hoc Committee in consultation with external experts.

The Corporate Compliance Office has implemented a Group-wide compliance risk analysis based on an IT tool developed in 2023. This digital solution helps the operating companies in the Lufthansa Group to identify compliance risks systematically by means of a self-assessment, to evaluate them and to document suitable risk-mitigation actions, including implementation if this is not already the case. The risk analysis is carried out once a year.

The CMS comprises risk-mitigation actions intended to rule out infringements as far as possible. Despite this, individual breaches and related investigations by public authorities and penalties cannot be ruled out completely, particularly in the fields of integrity, competition and capital market compliance.

Litigation, administrative proceedings and arbitration

The Lufthansa Group is exposed to risks from legal, administrative and arbitration proceedings in which it is currently involved or which may take place in the future. Due to the adverse effect this may have on the proceedings and in accordance with DRS 20 No. 154, these risks have not been quantified. It cannot be ruled out that the outcome of these proceedings may cause significant damage to the business of the Lufthansa Group or to its net assets, financial and earnings position. Appropriate provisions have been made for any financial losses that may be incurred as a result of legal disputes. More information on provisions for litigation risks and contingent liabilities can be found in ↗ Notes 36 and 46 to the consolidated financial statements.

Furthermore, the Lufthansa Group has taken out liability insurance for an amount that the management considers appropriate and reasonable for the industry in order to defend itself against unjustified private third-party claims and to settle such claims it considers justified. Even in such cases, however, this insurance cover does not protect the Lufthansa Group against possible damage to its reputation. Such legal disputes and proceedings may also give rise to expenses in excess of the insured amount, expenses not covered by the insurance or those which exceed any provisions previously recognised. Finally – and depending on the type and extent of future losses – it cannot be guaranteed that the Lufthansa Group will continue to obtain adequate insurance cover on commercially acceptable terms in the future.

Ryanair has appealed to the General Court (of the European Court of Justice) against the decision by the European Commission approving stabilisation measures for companies in the Lufthansa Group. Stabilisation measures of around EUR 7.6bn in total are affected for Deutsche Lufthansa AG, Austrian Airlines AG and Brussels Airlines SA/NV. The lawsuits relating to the state aid for Austrian Airlines AG and Brussels Airlines SA/NV were definitively dismissed. In May 2023, the European General Court upheld the action for annulment with regard to the stabilisation measure in the amount of EUR 6bn granted to Deutsche Lufthansa AG by the Economic Stabilisation Fund (ESF) of the Federal Republic of Germany and annulled the corresponding state aid decision of the European Commission on the grounds of substantive errors of law. Until a final judgement is made or a new state aid decision is issued, uncertainty remains as to the legal consequences of the annulment of the decision to grant state aid. There is no immediate repayment risk as the stabilisation measures have already been completed and Deutsche Lufthansa AG has repaid the stabilisation funds it received in full. Potential indirect consequences include the demand for clawback interest for the period between the allocation and the repayment of the stabilisation funds, as well as the imposition of conditions attached to a new state aid decision. Deutsche Lufthansa AG appealed to the European Court of Justice against the ruling of the court of first instance. The European Commission and the Federal Republic of Germany are intervening in the appeal. In July 2024, the European Commission initiated a formal examination procedure, as it has done in similar cases. At the time this report was prepared, it was not yet clear what the European Commission’s response to the judgement of the European Union General Court would be.

The Lufthansa Group is subject to tax legislation in many countries. Changes in tax laws and case law, as well as different interpretations as part of tax audits/external wage tax audits can result in risks and opportunities affecting tax expenses, income, claims and liabilities. The Corporate Taxation department identifies, evaluates and monitors tax risks and opportunities systematically and at the earliest stage possible, and initiates steps to mitigate the risks as necessary.

Regulatory risks

Political decisions at national, European and international level continue to have a strong influence on the entire aviation sector. This applies in particular when rules in individual countries or regions (e.g. taxes, emissions trading, fees and charges, rules and subsidies) create an inconsistent legal framework, resulting in an uneven playing field.

Following the new appointments to the European Commission and the EU parliament after the European elections in 2024, and snap election for the German parliament in early 2025, there will be important political decisions with far-reaching consequences to be taken in the Lufthansa Group’s home markets. The Lufthansa Group campaigns actively to influence these developments in cooperation with other companies, industry associations and trade unions.

Regulatory risks in connection with climate change

The European Fit for 55 package and additional national climate legislation impose wide-ranging obligations on the European aviation sector to reduce carbon emissions. This entails material risks for the competitiveness of the industry and contributes to higher costs of doing business in Europe. Air transport is particularly affected by the proposal to introduce a quota for blending sustainable aviation fuels (SAF), the revision of the Emissions Trading System (ETS), and the proposal to introduce a uniform minimum tax for aviation fuel (EU kerosene tax).

The ReFuelEU Aviation Regulation provides for a rising quota for sustainable aviation fuels (SAF) in all EU countries from 2025. A subquota for synthetic fuels (power-to-liquid – PtL) will apply from 2030. In Germany, there is also a national PtL quota that goes beyond the requirements of the ReFuelEU Regulation and will take effect from as early as 2026. SAF is more expensive than conventional aircraft fuel. In addition, PtL fuels are currently only available in small quantities. There is currently no sign that production will be ramped up quickly, which means there is a risk of shortages. Altogether, this will increase fuel costs for the Lufthansa Group, and result in a further distortion of competition in intercontinental traffic to the detriment of European network airlines. This is because airlines from outside Europe with transfer stops near Europe could then continue to use unblended fuel for part of the journey and ignore the quota. Traffic and emissions will move to hubs outside Europe as a result – an effect known as carbon leakage.

Air traffic within the EU is already part of the EU ETS. The revision of the ETS will entail additional stipulations, which will lead to higher costs for the Lufthansa Group in the financial years ahead, however. This applies particularly to the reduced cap on emissions and the abolition of the previously free distribution of emission allowances. Tightening the ETS severely distorts competition. In future, the regulation is also intended to address the “non-CO2 climate impact of aviation”, such as condensation trails and nitrogen emissions. Operational measures may also reduce climate impact. However, research in this area has only just begun. As a result, the focus of regulation will remain on carbon emissions for the time being.

As part of the revision of the Energy Taxation Directive, the European Commission is proposing to introduce a minimum tax on aviation fuel, which creates an additional cost risk. A minimum tax also creates the risk of different tax rates within Europe, which would also create a distortion of competition within Europe.

In addition to wide-ranging measures to limit carbon emissions, such as the continuous renewal of its fleet, the use of sustainable aircraft fuels and the expansion of voluntary carbon offset options for passengers, the Lufthansa Group participates in the public debate – also together with other European airlines, airports and industry associations – and campaigns actively in this context for competition-neutral regulations.

Furthermore, the Lufthansa Group is faced with ever-higher bureaucratic hurdles to meet environmental obligations. ↗ Combined non-financial declaration.

Increased noise legislation

Stricter noise standards may apply to airlines or airports. They may cause, for example, higher costs for retrofitting aircraft, bans on specific aircraft models, higher charges or higher monitoring expenses. The still outstanding revision of the directive on environmental noise at European level is primarily relevant here. The limits set in the Aircraft Noise Abatement Act were reviewed at the federal level as scheduled in 2017. The Act has not yet been amended. Although the results of noise research in Frankfurt do not show any significant changes in health risks, the perception of noise as a nuisance by those affected has dramatically increased, even when noise levels at airports are stable. The Lufthansa Group therefore anticipates increased lobbying aimed at tightening noise legislation by other stakeholder groups.

The Lufthansa Group develops coordinated strategies by means of targeted communications in collaboration with trade associations and other industry stakeholders. It is involved in research projects looking at active noise abatement measures and follows research into the effects of noise closely. ↗ Combined non-financial declaration.

Financial risks

Financial market developments represent opportunities and risks for the Lufthansa Group. Negative changes in fuel prices, exchange rates and interest rates can result in higher expenses and/or lower income compared with the assumptions used for planning and forecasting.

System of financial risk management for fuel prices, exchange rates and interest rates

Financial and commodity risks are systematically and centrally managed for the entire Group on the basis of internal guidelines. The derivative financial instruments used serve to hedge underlying transactions. In this respect, the Lufthansa Group works with partners that have at least an investment grade rating equal to Standard & Poor’s BBB rating or a similar long-term rating. All hedged items and hedging transactions are tracked in treasury systems so that they can be valued and monitored at any time. The functions of trading, settlement and controlling of financial risk are strictly separated at an organisational level. The executive departments and Financial Risk Controlling ensure compliance with these guidelines. The current hedging policies are also discussed regularly in management bodies across the business areas. ↗ Note 45 to the consolidated financial statements.

Fuel price movements

In the 2024 financial year, the price of crude oil was on average 3% lower than in the previous year. In addition, the price difference between crude oil and kerosene, known as the jet crack, also fell compared with 2023. Whereas the jet crack was USD 29.58/barrel on average in 2023, it came to USD 20.33/barrel in 2024.

In the reporting year, the Lufthansa Group consumed 9.5 million tonnes of kerosene. At around EUR 7.8bn, fuel expenses constituted a major item of expense for the Lufthansa Group in 2024. Severe fluctuations in fuel prices can have a significant effect on earnings. A change in the year-end 2024 kerosene price of +10% (-10%) would probably increase (reduce) fuel costs for the Lufthansa Group by EUR 582m (EUR -485m) after hedging in the 2025 financial year.

The Lufthansa Group uses rules-based fuel hedging with a time horizon of up to 24 months. The target level for fuel hedging was 85% as of 31 December 2024 for the Passenger Airlines. The aim is to reduce fluctuations in fuel prices. The Lufthansa Group uses standard financial market instruments in fuel hedging. Hedges are mainly in gas oil and crude oil with option combinations for reasons of market liquidity. Incomplete protection against higher prices is accepted in exchange for maximising the benefits derived from any fall in prices. The increasing use of gas oil hedges instead of solely crude oil-based hedges addresses the price difference risk to kerosene to a greater extent than in the past. The instruments used will be settled by payments and will not result in physical deliveries. As of 31 December 2024, crude oil, gas oil and kerosene hedges covered around 76% of the forecast Group fuel requirement for 2025 in the form of futures and unconditional forward transactions. There were no separate crack hedges as of 31 December 2024 due to the long-term use of hedging instruments based on gasoil, which largely cover the jet fuel crack. Around 28% of the forecast fuel requirement for 2026 was hedged at that time. As fuel is priced in US dollars, fluctuations in the euro/US dollar exchange rate can also have an additional positive or a negative effect on reported fuel prices. US dollar exposure from planned fuel requirements is included in currency hedging.

Exchange rate changes

Foreign exchange risks for the Lufthansa Group arise in particular from international ticket sales and the purchasing of fuel, aircraft and spare parts. All subsidiaries report their planned currency exposure over a timeframe of at least 24 months. At Group level, a net position is aggregated for each currency to take advantage of “natural hedging”. Eighteen foreign currencies are hedged against the euro because their exposure is particularly relevant to the Lufthansa Group. The US dollar is the only one of these currencies for which there is a net requirement. Of this net operating requirement for 2025 of USD 4.4bn, 46% was hedged as of 31 December 2024. ↗ Note 45 to the consolidated financial statements.