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 “critical” or 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 2026 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 unstable situation in the Middle East and the possible global spread of protectionist measures.

Crises, wars, political unrest and natural disasters

The security situation, the risk of terrorist attacks on air traffic and the increasing risk of hybrid threats and deliberate 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 tense situation in the Middle East, together with the military escalation between Israel and Iran and the conflict between India and Pakistan last year had significant impacts on global security and constituted a challenge for the Lufthansa Group.

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 resources such as oil and gas. The destabilisation of the region and the 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.

Hybrid threats, i.e. the combination of conventional military means, cyberattacks, disinformation campaigns and economic pressure, are becoming increasingly important. They can impact the aviation sector directly or indirectly, with disruptions to flight operations from drones, attacks on IT systems and critical communications infrastructure, for example, or the deliberate manipulation of supply chains.

Geopolitical trends also mean there is an increasing risk of sabotage to traffic and other critical infrastructure by actors commanded or supported by states. Such attacks can cause physical damage to airports, navigation systems or fuel supplies and so disrupt flight operations significantly.

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 it. 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 services and specialised advisers to do so.

Potential financial losses could result from primary effects, such as not being able to fly to certain destinations, but also from secondary effects, including a drop in passenger numbers, higher insurance premiums, additional fuel costs due to airspace closures or a shortage of 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 or large-scale cyberattacks 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. 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. 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.

The Lufthansa Group’s increasing engagement in the defence sector increases the risk of becoming a potential target for aggressors. The Lufthansa Group is also exposed to internal and external threats such as white-collar crime, espionage and sabotage, which can result in reputational damage, financial losses and operational disruptions.

To evaluate site-specific security-relevant events, 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, the sites are inspected regularly in the course of risk audits for aviation security and country risks.

Pandemics and epidemics

The risk of pandemics and epidemics is increasing due to factors such as greater 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 demand for flights due to a fear of contagion, as was dramatically demonstrated in 2020 by the spread of the coronavirus pandemic. In addition, it is possible that staff may not be willing to fly to the countries concerned for fear of infection and that local employees may want to leave these countries. The potentially high prevalence of sickness among employees may put operations at risk. Official travel restrictions may also result in operational constraints and economic burdens due to reduced demand.

The Lufthansa Group’s Medical Service reviews relevant information continuously 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.

Sector-specific risks

Development of markets and competition

The growth of the aviation sector is highly dependent on global political stability and macroeconomic performance. Structures on the demand side have changed permanently in some cases in the aftermath of the coronavirus pandemic, particularly due to reduced business travel. Regulatory requirements in the field of climate change mitigation may weigh on demand, and it may also be impacted by the war in Ukraine and the changes to flight routes that this necessitates. Under these circumstances, the assumption is that long-term demand growth in the markets concerned will 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. At the same time, the European airline market is characterised by intense competition and high cost pressure. The assumption is that 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 uncertainty concerning future market developments remains high. Although inflation rates have declined, higher prices, modest global economic growth and ongoing geopolitical tensions are suppressing demand and making it harder to forecast revenue. Risks also arise from potential overcapacities, economic fluctuations, global competition, possible changes in customer behaviour and other unpredictable geopolitical events. In the short term, these risks can be addressed by continuous monitoring of the bookings situation and flexible capacity planning. Sales, product and cost-cutting measures are also being taken.

Risks due to irregularities in flight operations

Heavy traffic and unfavourable weather conditions may result in capacity bottlenecks among infrastructure providers and air traffic control that could impact the ability to manage flight traffic and passenger numbers. In addition, bottlenecks in the delivery of aircraft, engines and spare parts may mean that temporarily fewer aircraft are operational than planned. These bottlenecks in operational aircraft represent risks, since they may result in changes to flight timetables, delays and cancellations and lower customer satisfaction. Lost revenue and additional costs for compensation may result. Processes and flight plans are continuously optimised to minimise risks and reduce their impact.

Risks in the MRO segment

Lufthansa Technik is exposed to demanding conditions in the maintenance, repair and overhaul (MRO) market. In a market environment characterised by high demand for MRO services, political crises, military conflicts and high inflation rates are putting pressure on earnings in a way that is hard to forecast and cannot always be offset. Political crises, military conflicts and high inflation rates also have a negative impact on market developments, making them volatile and difficult to predict.

Despite countermeasures and the exemptions announced for aircraft components, US tariffs continue to weigh heavily on the MRO business, since the exemptions are only partially applied in practice.

Supplies of materials for various latest-generation engine types remain scarce, and the resulting higher costs and increased throughput times ultimately 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 conditions on the one hand and operational challenges within production systems on the other.

Increasing use of digital platforms for planning and controlling MRO processes has a fundamental impact on customer relationships. 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.

Company-specific risks

Risk of failure to achieve cost savings targets

The Lufthansa Group strives continuously to improve its cost base, productivity and efficiency. The identified improvement goals are part of the plan for the business segments and are discussed in detail during the Group planning process. There is a risk that the expected improvements are not achieved in full, or are only achieved later than planned. This applies to the agreements being negotiated with works councils, trade unions, system partners and suppliers, for instance. There is also a risk that delayed aircraft deliveries defer the planned efficiency gains. It also cannot be ruled out that insufficient additional potential is identified over the course of the year to meet the targets. Developments in total costs are reviewed regularly with the business entities 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. The additional EU tariffs on aircraft imports from the USA have currently been suspended, but any change in the trade policies of the US administration could lead to these being reimposed at any time. The EU countermeasures in this context are known and have been temporarily suspended. Such reciprocal measures would increase procurement costs and thus affect the Lufthansa Group’s financial and investment planning. In view of the political unpredictability, the Company is monitoring developments in the USA and the EU closely, in order to respond quickly and flexibly.

Human resources

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. These can lead to reputational damage and tangible economic impacts for the Lufthansa Group. Conversely, if the trade unions are successful in their demands, this may result in higher staff costs.

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. Negotiations on benefits for cockpit staff were deemed to have failed and a strike ballot was called. A majority of trade union members voted in favour of industrial action.

There are also strike risks in other flight operations in the Lufthansa Group. For example, Lufthansa Cityline has been faced with demands from the two trade unions Vereinigung Cockpit e.V. (VC) and Unabhängige Flugbegleiter Organisation e.V. (UFO) to begin negotiations about a redundancy plan. In addition, the wage agreement for cockpit staff and the framework collective bargaining agreement for cabin staff have both been terminated at Lufthansa Cityline. There is also a strike risk concerning company retirement benefits at Eurowings. 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. ↗ Employees.

Cooperation with works councils and labour unions

Effective, trust-based collaboration with the labour union partners is a prerequisite for the success of structural measures and so forms the basis for the Company’s long-term success. The labour market is 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, as well as of co-determination processes. A far-sighted, solutions-focused working relationship makes it possible to overcome challenges and use the momentum for further growth. Measures to increase productivity and flexibility are also a focus for the Lufthansa Group in 2026 and include redundancies.

Continuous dialogue with the labour union partners, particularly when times are challenging, 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.  

Attractiveness as an employer

Being a highly attractive employer is a key success factor for ensuring the Company’s lasting competitiveness and performance. It has a significant impact on the ability to attract, retain and develop qualified specialists and managers. The Lufthansa Group has revised its working conditions in cooperation with the labour union partners to increase its attractiveness as an employer and strengthen employee engagement. At the same time, the Company is refining its employer branding and HR marketing activities by means of a consistent brand presence. Recruiting processes and key career experiences, during onboarding, for example, are optimised on an ongoing basis. This includes offering various apprenticeships, student and trainee programmes, as well as professional training and development programmes. Talented individuals in a variety of professional groups were supported nationally and internationally and systematically networked.

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 2026. 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. To this extent 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.

Procurement at the Lufthansa Group works with the departments concerned to identify 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, there is a regular process of dialogue with relevant suppliers. Identified risks are documented as part of the annual procurement strategy process and suitable actions are defined. 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. Risks such as fluctuations in demand, cost increases and delayed deliveries can lead to deviations from the plan and reduce earnings for the Lufthansa Group. The Lufthansa Group reviews and adjusts the development of its fleet annually and more frequently if required. Aircraft can then be sold or parked, orders cancelled, deliveries postponed or leases terminated or signed 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, technical factors, organisational factors and the human factor.

The systematic identification and analysis of risks enables suitable countermeasures to be developed to continuously improve the level of flight safety. For example, every single flight made by an airline in the Lufthansa Group is routinely analysed using recorded telemetric data. Any peculiarities are therefore identified at an early stage and action on them taken, in the context of training courses, for example. Other sources of information, such as prior reports and accident reports are reviewed and the findings integrated into countermeasures as appropriate. The established safety management systems are continuously improved and refined with the aim of reducing the risk exposure of the airlines in the Lufthansa Group. 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.

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 and relevant data exchange processes. Information security requirements for civil aviation are described in new regulations that take effect in 2026 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. 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.

Cyberattacks are increasing worldwide and becoming more professional. 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. 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, other contract partners and public authorities. A loss of income is also conceivable if operating systems should fail.

The Lufthansa Group monitors the IT security situation across the Group, the industry and worldwide on an ongoing basis. On this basis, it takes various measures to strengthen its IT security. Technological tools designed to prevent cyberattacks and to respond quickly to them are being developed further, processes are being adapted to respond to changing risk scenarios and the new hybrid working practices, and employees participate in awareness training every year to strengthen cyber resilience within 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 are defined across the Group that also include partners and providers of the Lufthansa Group when they are implemented in the IT systems and processes, and which are already making a positive contribution to risk mitigation. The Lufthansa Group also monitors its own cybersecurity performance as well as that of 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 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

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 to identify and manage potential risks from breaches of the extensive legal requirements. 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 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 worldwide and is therefore subject to various legal norms and jurisdictions with different legal frameworks, including for criminal law on corruption. All activities not only have to comply with the respective legislation, but also with cultural practices and social conventions. Any infringements are investigated rigorously and may result in criminal prosecution for the individuals involved. For the Lufthansa Group, any such infringements represent a substantial risk of financial penalties. There would also be significant reputational damage and distinct disadvantages when competing for public tenders. For this reason, the Lufthansa Group has implemented processes to identify and prevent compliance risks, particularly relating to corruption. Specifically, these include rules on transparent 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 it operates in oligopolistic markets and has a strong position in some of these markets. Furthermore, the Lufthansa Group cooperates with competitors by means of alliances. Some of these partnerships have to be approved by 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 also introduced a Group-wide digital compliance risk analysis. This digital solution helps the operating companies in the Lufthansa Group to identify compliance risks systematically by means of an annual self-assessment, to evaluate them and to document suitable risk-mitigation actions, including implementation.

The Lufthansa Group 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. Regular communication of compliance requirements and risk-based training promote an appropriate awareness of risk in the Lufthansa Group. A whistleblower system enables suspicions of white-collar crime or breaches of compliance rules to be reported via an electronic system and ombudspersons.

Litigation, administrative proceedings and arbitration

The Lufthansa Group is exposed to risks from legal, administrative and arbitration proceedings 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. 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. Deutsche Lufthansa AG appealed to the European Court of Justice against the court ruling. In July 2024, the European Commission initiated a formal examination procedure, as it has done in similar cases. There is no further 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.

In the reporting year, Luxair and Condor filed lawsuits with the General Court (of the European Union) to determine that specific decisions are (partially) null and void. At issue are the decisions by the European Commission to approve the Lufthansa Group’s potential acquisition of control over ITA Airways as well as the package of conditions (“remedies”) and the choice of the “remedy taker”. If the lawsuits are successful, there is the possibility of lodging an appeal before the European Court of Justice. Moreover, in this eventuality it must be assumed that, following a formal review process, the European Union will once again issue its approval, possibly subject to revised conditions.

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 have a strong influence on the entire aviation sector. The large number of rules and regulations (e.g. on sustainability targets, taxes, fees and charges or tariffs) results in a fragmented framework and can lead to competitive distortions and disadvantages for particular locations. The Lufthansa Group campaigns actively to influence political decision-making processes, also in cooperation with other companies, industry associations and trade unions. Particularly important aims at the moment are to reduce the state-imposed costs of doing business in Germany and to make European climate change mitigation policy competition-neutral.

Regulatory risks in connection with climate change

The Fit for 55 package imposes wide-ranging obligations on the European aviation sector to reduce CO₂ emissions. This leads to a rising cost of doing business here and entails significant risks for competitiveness. Particularly important are the proposal to introduce a quota for blending sustainable aviation fuels (SAF), the revision of the Emissions Trading System (ETS), CO₂ offset obligations as part of the CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) and the possible introduction of a uniform minimum tax for aviation fuel (EU kerosene tax).

The ReFuelEU Aviation Regulation in effect in the EU since the beginning of the year mandates a quota for SAF, which will increase gradually until 2050. A subquota for synthetic fuels (power-to-liquid, PtL) will apply from 2030. SAF are significantly more expensive than conventional aviation 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. Since the SAF quotas only apply to flights from EU airports, they cause a further distortion of competition in intercontinental traffic to the detriment of European Network Airlines. Airlines from outside Europe with transfer airports close to Europe only have to meet the SAF quota on the flight segment from Europe to their hubs. 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 threatens to entail additional stipulations, which will lead to higher costs for the Lufthansa Group. 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. Prospectively, the European Commission is planning to include the non-CO₂ effects of aviation, such as contrails and nitrogen emissions, for example. Operational measures may also reduce the climate impact. Research in this area has only just begun. As a result, the focus of regulation will remain on CO₂ emissions for the time being.

The introduction of an EU minimum tax on kerosene is currently the subject of political debate. The EU Council recently extended the tax exemption for kerosene until 2035. The introduction of a minimum tax, which requires a unanimous resolution by the EU Council, would massively increase the existing global competitive disadvantage.

In addition to wide-ranging measures to limit CO₂ emissions, such as the continuous renewal of its fleet, the use of sustainable aircraft fuels and the expansion of voluntary CO₂ 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.

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. ↗ Notes to the consolidated financial statements, Note 45.

Fuel price movements

At around EUR 7.3bn, fuel expenses constituted a major item of expense for the Lufthansa Group in 2025. Severe fluctuations in fuel prices can have a significant effect on earnings. A change in the price of kerosene of +10% (⁠-⁠10%) compared to year-end 2025 would increase (reduce) fuel costs for the Lufthansa Group in the 2026 financial year by an estimated EUR 409m (EUR 283m) after hedging.

The Lufthansa Group uses rules-based fuel hedging with a time horizon of up to 24 months. The target hedging level for fuel hedging was 85% as of 31 December 2025 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. Using gas oil hedges in combination with 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 2025, crude oil, gas oil and kerosene hedges covered circa 76% of the forecast Group fuel requirement for 2026 in the form of futures and unconditional forward transactions. Around 29% of the forecast fuel requirement for 2027 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”. Of the foreign currencies that are hedged, the US dollar is the only one for which there is a net requirement. Of this net operating requirement for 2026 of USD 4.3bn, 57% was hedged as of 31 December 2025. ↗ Notes to the consolidated financial statements, Note 45.