Earnings Call: Q4 2019

Mar 19, 2020

Ladies and gentlemen, thank you for standing by. I am Emma, your Chorus Call operator. A presentation, all participants will be in a listen only mode. I would now like to turn the conference Kasnonsborg, Chairman of the Executive Board and CEO of Lufthansa Group. Please go ahead. Good afternoon, everybody from Frankfurt. Ladies and gentlemen, yeah, a warm welcome. First of all, we need to have time for this. Even on a very extraordinary time of this company. You all know, we had planned this day quite a little bit different but things are where they are. So, as a matter of fact, since also the top management in the meantime is practicing social distancing, This will be also the first time where I'll be talking to you here from Frankfurt and our CFO, Ulrik Svensson will talk to you later. From Stockholm. And of course, we'll be answering your questions according to who they are addressed to. Let's talk with the sentence or start with the sentence, which probably I wouldn't have used the same way 2 weeks ago, but really convinced it's the right sentence now. This company, this industry, and maybe soon the global economy is in the state of emergency. And our analyst conference, therefore, to a large extent, basically has become a corona crisis conference. That's quite sad, to be honest, because we are losing sight of our achievements in the last year, where we generated an adjusted EBIT of 1,000,000,000 despite all these significant headwinds. But today, of course, the corona crisis is over shadowing everything. The crisis is hitting us hard. And during the next few months, business will be everything but normal. Bookings have basically almost decreased to 0. We were, yesterday, about to decide to suspend the flight operations for air delivery for the first time in history. This is still being decided now, but what is decided is that Austrian Airlines will no longer offer scheduled services. Brussels Airlines will have to suspend their flight operations for 4 weeks at least starting Saturday. And next week, even Lufthansa will close mainline operation in Munich with only some city line flights, our regional carrier, remaining. The cancer relations in our network trace the exceptional course of the Glona crisis. And by mid March, This figure had already reached 50% as we currently offer only 20% of our planned short and medium haul flights and even only 10% of long haul. However, given the latest travel restrictions, we must continue to reduce and we will now almost completely discontinue intercontinental flights. Compared to the originally planned program, this will leave us with only around 5% of scheduled capacity. We have launched a wide range of measures to help cushion the impact of this crisis We have not only reduced capacities very, very swiftly, but also quickly introduce stringent cost cutting measures. Our focus is on protecting cash flow and liquidity in times like this. We have 4 weeks now imposed a hiring freeze and we're offering unpaid or early vacations as well as various part time working models. We have agreed with the unions to introduce short term work or could survive as we see in Germany in all companies where it is possible and where it makes sense. In order to safeguard the company's liquidity, the executive board has also proposed to our AGM not to pay a dividend for the successful year 2019. At the same time, we are in intensive negotiations with policy makers and how we can mitigate the consequences of the crisis. These discussions include the following potential legislative measures to support liquidity For example, the deferral of taxes or other fees, the potential use of loans and guarantees, if necessary, which government has made available to those companies most affected by the Corina crisis. The implementation of short term work, which is already on the way, The waving of the eightytwenty slot regulation, very important, and the EU passenger rights regulation, so called EU261, which also needs to be made more flexible at this stage. We cannot compensate for corona induced flight cancellations These must be seen as exceptional circumstances. If this is not exceptional, ladies and gentlemen, what else is? Furthermore, we are implementing structural crisis management tools where we look beyond the next days weeks to make sure that we get through the crisis with sufficient liquidity and also to set the right long term course for the group for the days and years to come after the crisis. This company, this group, this management has mastered numerous challenges. And it's in these situations when Lufthansa shows its full strength. We must and we will, I promise you to use this crisis to cease also strategic opportunities. Because there will be no back to normal. Lufthansa will not be in business as usual after this crisis, neither will the industry. And we will not hesitate to address also continuous issues, for example, if our operational structures are still appropriate and so on. I think we have to rethink the entire group whenever this is over or while this is happening and we're waiting for this to be over. And that's why I'm confident that we will eventually emerge from this crisis however long it lasts as an even stronger company. And with that, I'd like to hand over to my colleague, Ulrich Owens, and our CFO in Stockholm. Thanks right now for listening. We look forward to your questions after Oryx. Presentation. Thanks, Bastian. It goes without saying that the corona crisis is the absolute focus of growth management at the moment. Nevertheless, let me briefly present you our 2019 financial results before discussing the financial implication of the current crisis in more detail. 2019 was by no means of last year, we made significant strategic progress in various part of our business. Eurowings was clearly a bright spot We presented the turnaround plan in June with Capital Markets Day, and there were already good progress in Q3 and most importantly in Q4. Nonetheless, financial results were lower in 2019 compared with the year before. We were unable pass on higher fuel costs because of the lower economic growth in our home markets, which affected customer demand, especially in the premium segment. In addition, the logistics business suffered from the sharp decline of the global air cargo market. On the positive side, we continue to reduce costs for the 4th year in a row with a CASK reduction. Performance at the Network Airlines reflect the challenges we faced in terms of lower economic growth, especially in our home markets. And weakening corporate demands led to high levels of price sensitivity. In the full year of 2019, unit revenues at the Network Airlines declined by 0.1%. Unit costs declined for the 4th consecutive year in 2019, that were 1% below the prior level, primarily because of productivity improvements and lower irregularity cost. Taking an almost EUR 600,000,000 fuel cost increase into consideration, adjusted EBIT at the Network Airlines declined 26 to reach 1,000,000,000. At Eurowings, The turnaround gained further momentum, especially the optimization of the network, a cornerstone of the turnaround plan presented in you. Has yielded good initial results, performance improved in short haul and long haul. As a result, Eurowings narrowed its operating loss in the full year to a negative 1,000,000 compared to a negative million in the previous year. Turning to the non passenger business. Lufthansa Cargo recorded just a very small operating profit in the full year of 2019 as the global air cargo market remained weak in the seasonally very important fourth quarter as well. Lufthansa Technik, however, showed its resilience and grew its profit at double digit rates. Profits in the catering business didn't increase at a double digit rate, primarily driven by good performance in North America. Turning to the balance sheet and cash flow. Investment declined to 1,000,000,000 because of less aircraft deliveries. Adjusted free cash flow amounted to 203,000,000. The increase of net debt level was largely related to the first time application of IFRS 16, resulting in an increase of 1,000,000,000 from the capitalization of operating leases. Dollars. Excluding this effect, net debt amounted to 4.2. Pension provisions reached 6,700,000,000 at the end of 2019. 14% increase compared to the prior year was largely due to the decrease of the discount rate to 1.4% from 2% in the previous year. The pension liabilities and the Let me now turn to the corona problem and the corona crisis, which is hosting an unprecedented challenge for us and the airline industry. As Carsten alluded to earlier, we are experiencing significant booking declines, especially since the Corona breakout in Italy at the end of February. The implementation of travel ban in the U. S. And in many European countries have resulted in a further deterioration in the past 7 days. At the same time, cancellations are increasing. In response, we have expanded rebooking options and usage vouchers for customers to allow them more flexibility and to limit cash out related to refunds. We have cut our flight schedules quicker and more comprehensive than most other airlines. At this stage, capacity is around 70% below prior levels. This figure will increase further in the coming days due to the implementation of further measures, which Casper discussed in his part. Our swift response to the crisis has meant that we are to be able to successfully safeguard the load factors for weeks in which the crisis have already started to affect demand. However, already since several weeks, We had focused financial management entirely on cash and the preservation of liquidity. Taking out capacity in time, is a key action in that respect. When it comes to minimizing cash outs, we are benefiting from our fleet strategy and the fact that we own the vast majority of our aircraft. This saves us lease costs, which would otherwise burn in cash flows and limit operational flexibility. As a consequence, our share of variable cost amounted to around 60% of the group airlines is very high by industry standards. These costs primarily related to fuel and fees and charges are eliminated immediately when cancelling a flight. However, it is clear that the scale down of operations will not be enough in the current crisis. We will leave no stone unturned to save all possible costs. Non variable costs, which we consider just semi fixed from now on account for around 30% of the airline cost base, leaving aside depreciation as a noncash item. We target to reduce them by onethree. This starts with personnel costs which amount to around 1,000,000,000 per annum for the whole growth. We are in the final stages of implementing so called Coosabyte, German for short time work in various part of the group, and this concert allows us to shorten the work time of employees who are in this group of courts are wiped by up to 100%. For a maximum of 12 months, the government compensate employees for a large part of the resulting wage loss. At Luftanza, we have already signed the application for the cabin personnel. Preparations for other working groups, in particular, ground staff are ongoing. Other group airlines, such as Austrian and Brussels Airlines, are in the midst of implementing the same or similar concepts. Many other personnel measures have been taken. This includes the reduction of considerable overtime hours, which have been built up during the expansion of the business in the past few years. We are also enforcing unpaid temporary leads and mandatory holidays. A hiring freeze is in place too. All non safety relevant trainings will also be canceled or are already canceled. We had also stopped all marketing activities. Project in all areas have been radically postponed or canceled unless they are critical to operations and safety. The same applies to aircraft and engine overhauls and maintenance, which will be shifted to a later date wherever possible. WET leases are canceled following the overall cut of capacities. We have also started a negotiated postponement of planned investments. The majority of these investments, originally forecasted to slightly exceed 1,000,000,000 in 2020, relates to the acquisition of aircraft and end use. We are aiming for a drastic reduction. Please understand that our discussion with the is confidential at this stage. We will update you on the outcome once talks have progressed further. Current liquidity of around 1,000,000,000 plus an unutilized credit lines of another 1000000 offer us good protection in the coming weeks months. Even in a scenario where our fleet is largely grounded, and new bookings come to an almost complete stop. However, more will be needed in case of a prolonged de facto shutdown of the global aviation system, Having raised around SEK 600,000,000 in the last few weeks already, we are currently in the process of incurring additional funds. Our high level of fleet ownership put us in an almost unique position when it comes to tapping the credit market. We own 87 percent of our fleet, of which almost 90% is unencumbered. This corresponds to a book value of around 1,000,000,000 will become pledged to creditors if necessary. In light of the exceptional crisis, we propose to suspend the dividend payout for 2019. The decision is just another reflection of our absolute focus on preserving liquidity. It ties into my comments at the Capital Markets Days in June, when I said that our policy of staying out between 20% to 40% of net income would not apply in types of extreme external shocks. It is our intention to return to attractive payouts as soon as our financial situation allows. In the current situation, decline in 2020. The extent of the decline will largely depend on the future spread of the coronavirus and how customers and government authorities will respond to it. We will do our utmost to limit cash costs to the absolute minimum. To protect our balance sheet and to assure sufficient funding. And there will be a little personal note here As many of you know, I was the CFO at Swiss at its darker moments in 2003 in the middle of the SARS crisis. And in those days, we took very drastic measures. And when we came out of the crisis, since then, Suites has always been one of the most profitable airlines in Europe, of course, also very much benefiting for the large network synergies within the Lufthansa Group. Thank you very much and over to Frankfurt. So we will now be happy to answer your question. Ladies and gentlemen, you. First question comes from the line of Neil Glynn with Credit Suisse. Please go ahead. Good morning. Oh, good afternoon, everybody. Hopefully, you can hear me. If I could ask 3 quick questions, please. The first one with respect to current liabilities. Excluding forward bookings, which I think are the risk of self explanatory. I think you have over 9,000,000,000 of current liabilities. As of December, at least. Just interested in how much of these are payable in the next 3 months, and how much of them are deferrable. The second question on the 10,000,000,000 of unencumbered aircraft. How much do you see of this value as, utilizable to raise funds? Is it all usable? And any insight in terms of when we could expect, for example, said on these facts to be announced would be very welcome. And then the 3rd question, Karsten, you mentioned rethinking the entire group, and I guess that's an obvious task for many airlines at the moment. But with respect to Lufthansa technique, does Lufthansa technique potentially play a role in terms of you raising liquidity now or in the future? And how do you think about that as a useful asset at this juncture? Thank you. Yes. So maybe I start with the financial questions. In terms of the current liabilities, it basically only the accounts payable, which is a bit more than SEK 3,000,000,000. Which is something to consider in the next 3 months. When it comes to the 10,000,000,000 unencumbered assets, It is indeed our intention to continue on our successful parts, to use them as pledge as with different banks. So we are not thinking about the sale and leaseback. I think it will be the wrong time to do that. We are still as of this week having, no, good discussions with the banks. Everybody knows that this will not last forever. So, you'll get good, values, so to say, in terms of, collateral values for the aircrafts and we get, you know, fairly good interest rates. So this will be absolutely the wrong moment to do a sale and, leaseback. And I guess the last question, are you doing that question, Catherine, would you like to add? Go ahead, Ulrik, go ahead. It's just it's easier to keep going. We have the same opinion anyway. Yes. So Lufthansa Technik's IPO, well, at this stage, of course, there are no other discussions at all. On any IPO things. I mean, as it's been written in the press, there has been some rumors about the Lufthansa Technics going as an IPO, If we sit here 5 years later, I'm convinced the majority of the ownership of Lufthansa Techmix would still be within the Lufthansa group. But this is nothing we are discussing at all for the moment. The next question comes from the line of Steven Furlong with Davies. Please go ahead. Hi, gentlemen. I wish you all the best two questions. One, it's kind of on the line of Nails, but, just for Ulrich, first of all, just delving into a little bit more detail about the current contract liabilities. I think it's on page 192 of the Azure report. So There's about 4,000,000,000 of from unused flight documents. And then there's $2,200,000,000 from customer loyalty program. So I just want to know how that kind of unwinds do you give credit for customers to fly again in the future in terms of cash. And then the second question is more for Carsten. I think you might have said something on the press conference earlier on about maybe the industry obviously changing, post this crisis, but also that maybe a lot of times it could be I don't know. You meant the smaller tighter efficient operations than it already is. Maybe just might kinda amplifier, clarify, if I got it wrong. Thank you. Yes. So I start then on the financials. The combination of what you said there is mice and more, migrations and then unused flying documents, which of course is a combination of, you know, actually tickets, which no one can redeem even if they wanted because they are, so to say, unredeemable tickets in themselves. We have, as I mentioned in my speech, done a lot of flexibility for our customers when it comes to rebookings, We have issued vouchers. So I don't see this as a large problem short term, that those billions are existing. They are, So with that, I hope you are having answered and I'll leave it over to Casper. Yes, thanks. Well, I think there's 2 messages I was trying to get across in the press conference. I think the global economy will be shrinking. I didn't want to be too explicit on that on a public conference because there's citizens listening, politicians, people like you probably share my view anyway, and at least you would know where I'm coming from. So I need I think anybody who varies some public responsibility right now needs to be a little careful of how we make people even more nervous in this crisis. I don't want to be part of that, but in this group of people listening now, I think we all know This will have a serious impact on global economy. I would assume that maybe the German outputs of in these days, it's maximum 50 percent of the usual GDP output. So you have that for 1 month, means you are missing basically 4% of national GDP times 24, small as 100. So there will be a smaller global economy and that means smaller airlines in total because we all know we are we are hypersensitive to GDP growth or shrinkage. In that smaller economy, in that smaller aviation world, I think oftentimes it would come out as a winner. No doubt, or we can, I give indications? There will be other airlines who would bankrupt airlines who want to be part of a group, which are not part of a root now. Some will completely disappear. So in the relative terms, I'm very optimistic will come out as a winner. In absolute terms, number of passengers to be flown after this crisis around the world since an amber will be lower. We better prepare this airline now with the talks with the units and all that to come out of which crisis as it is now with Lufthansa and Swiss and Austrian to be rather smaller than anything else. So that was a little bit more to what I was trying to get across at the press conference without making the German public even more nervous. Understood, Karsten. Thanks and thanks for work and thanks Dennis. The next question comes from the line of Jarrod Castle with UBS. Please go ahead. Reiterate what Steven said. Good luck. And I guess a lot of people, depending on you. One thing firstly. I mean, we've got to a situation, which is obviously extreme. What have if you don't fly, to your hedging losses now. Can you quantify a quarter of not flying what that means for hedging losses, which just fall all the way through now and what cash cost would come through? And secondly, you spoke a little bit about MRO, but you did have plans to sell the rest of the world catering business is that on hold or is that trying you're trying to speed that up? And then just thinking a little further ahead, I mean, are you looking at potential write downs? I'm talking about brands or slots or, other items on the balance sheet, which as you're saying at the moment, the economy is going to be very different at the moment, unfortunately. So cost and how cost and how would you think about it, Yorek? Thanks. Yes. So starting from the bottom, as you know, where we do not have any large, assets on our balance sheet compared with some others. So there is no real, huge slots assets and so on. So there is probably not so much on that side. When it comes to the rest of the world, LSG. Yes, indeed, that we are pausing, that doesn't make sense to continue that process where we are today. And they will have to be restarted when the coronavirus is over. What I can say, however, there was a lot of interest in the Pro us before we now post it. If you do not fly, what does it mean for our hedging, Well, there will be a certain, as you say, loss going through the P and L every month, which will be then we classified into, you know, financial, financial costs. So I think there will be no flying. Of course, there's no oil being bought. This, however, will not be huge amounts from a cash point of view, the way it's, this being the hedges have been sent up. So that is not a concern from that aspect. Okay. Thanks very much and good luck. Thank you. The next question comes from the line of Roxandra Haraldo with Kepler Cheuvreux. Please go ahead. Hello. Two questions please. First, which employee groups are eligible for short time work in Germany? And do you plan to introduce short time work in the MRO division as well? And as of when do you expect the short time work program to work? And second, how has the performance of the MRO business in Q1? And what do you expect for this business over the next month? Thank you. Maybe I start with the MRO business in Q1 and maybe, Catherine, you can speak about the short time work. So clearly, the MRO business is holding up very well. There is full activities going on within law tons that technique so far. But if this is going to continue, the way we are looking at the, from the present moment, it is, of course, impossible to assess. So at some stage, of course, they will also get issues, if their customers are going to pay or not. So therefore, I think Q1 will be fairly normal, but that question is what is going to be going forward? In terms of short term, do you take that one cash down? Absolutely, to be honest, that question is, changing every hour almost every day. Right now, we have applied for short term for the holding company, for the mother company, and for the airline, which is legally the same. That's 31,000 people. This being done while we speak more or less. And everything else will depend on how the situation will look in a few days. Right now, MRO is busy, but let's see a week from now how many planes that are left owned by airlines which can afford to do Elma Row. Including our own aircraft, which of course will be less to be maintained when they don't fly. The, I'm sure will also be caught about eventually for MRO, but I cannot tell how many days this will be? I mean, in the end, this industry will be on the ground one way or another in Europe and every staff member of this industry will be more or less not being needed with very, very few exceptions of maintaining aircraft, maybe maintaining minimum operations. So we shouldn't underestimate what we're heading for. As a matter of fact, also looks at the Technik's CEO is in his team in the preparation for the corporate side. It will just be a few days behind us in the end. The next question comes from the line of James Holland with Exane BNP Paribas. Please go ahead. Hi. Good afternoon. A few for me, please. Just on this 10,000,000,000 of potential drawdown on against your owned fleet, I was wondering a, how quickly you can draw down. And secondly, what sort of, quantum you could do, whether you're going to do it in stages of 1,000,000,000 or several bidding to start with any sort of detail be useful. 2nd one is on what sort of progress you're making with German regulators and airports on things like aviation taxes, general environmental taxes, as well as airport parking fees, And then thirdly, I know you don't want to talk about numbers on Airbus or Boeing, but perhaps just give us an indication of what sort of flexibility you're seeing, which you may not since before in terms of delaying aircraft without financial penalties, or were you planning to actually take, near term deliveries that are committed? Yes. So maybe I start with the Airbus aircraft and the 10,000,000,000 and maybe you could take the regular question. So speaking about the SEK 10,000,000,000 we have in unencumbered assets, we are having quite a number of, discussions, which we started before this gap got as difficult as it is now. Starting with the number of bilateral banks, relations we have on aircraft financing. We also have our Jolt Coast, the Japanese operating leases, which we started already in January, February. So I think a a big portion of them can, be evacuated over the next couple of weeks months. But of course, not in the tune of SEK 10,000,000,000. That could be needed a much larger transactions than we are speaking about for the moment. When it comes to aircraft, I think it will be the same, for most airlines. So there will be very little deliveries going forward. I mean, it is as practical that you cannot really send down teams, through through the individual, suppliers and actually get the aircraft home. So, I think you can count on a very large reduction of aircraft deliveries and CapEx going forward. Regular Navy custom? Yes. On terms of the government, it's obviously the German government, but it's also the Austrian government, the government, the Belgian government, and the Italian government since this is the countries we are operating airlines in leading Sun Express in Turkey out for a moment, but it's even beyond our home governments because when it comes to 261 I think we're all aligned in airlines for Europe with the EU regulators that this, of course, is extraordinary circumstances. So I couldn't list you all the government talks we have been having since a few days here. And when it comes specifically more to Germany, you know, and of course, the focus is right now to defer payments, tax payments, whatever. And the same time change regulation where it has to be changed, slot regulation in 261. Now the next level, you know, the statement of the German government, whatever it takes, So if there was a need of Lufthansa to get extra liquidity, obviously, the German government would be ready to extend it to us. But as Ulrich said, with more than 5 something liquidity left of $5,100,000,000 including the unused credit line. That's not our concern now in the next days. I'm much more concerned for all us European players. How do we make sure that we come out as a winner in this global competition, which will erase after doing this crisis, then on only how we're going to know excess government funds to get over the next month. I think that will be fairly not easy, but will be strongly supported by various, maybe all governments but not to lose our global competitiveness, I think it's a much more challenging question to answer. Great. Thanks a lot. The next question comes from the line of Michael Kuhn with Societe Generale. Please go ahead. Good morning, a few from my side. Firstly, on the cost savings plan and the 1 third of savings on the fixed cost side. Do you have already attached some numbers to the various elements, so a short time work and the other things you are planning just to have a rough idea where the savings schedule to come from. And then secondly, I mean, we spoke about delays of aircraft deliveries. Is it possible to give any rough number on on CapEx spending, maybe a bandwidth, what could be possible this year? And then last, at least, I'm sure you're doing plenty of scenario analysis at the moment. What do you think is realistically possible when flight operations can gradually be relaunched and what are yourself preparing for? Thank you. Maybe I start with the financial ones. In terms of delay of aircraft, and the delay of the CapEx spend, not really giving any ranges, but I think it's going to be a very small number. In terms of the fixed cost and the fixed cost savings, you have to bear in mind, and it's easy to sometimes forget that we only started in this scenario where we are now, kind of, 2 weeks ago. So clearly, there are a lot of things which we are doing, but when exactly it will bear fruit, it's a little bit too early to say. But there's no doubt that the ordinary project cost you have in a large group like ours, they are going to be really minimized to nearly nothing. And the other large item, of course, is the personnel cost. Where in different jurisdictions, of course, the personnel cost is nearly variable, in some parts of the world, while here in the middle of Europe, it's more difficult, and it's all due to how quick we get in place the courts are bite, as Carsten mentioned already earlier. Carsten, you take the third one maybe? Absolutely. Well, the first part of your question, I think at this point, nobody can answer. I mean, the governments around the world, I think are learning day by day we had an IATA call 10 days ago. And when some of the European players, since I was chairing it, I trying to take a little bit of a more conservative role suggesting talks about this future. Some of the people around the world thought we have smoked the wrong thought And then 10 days later, you know, what happened last night in New Zealand or New Zealand closed down, Australia closed down. So I think This is a very dynamic situation. None of us, none of the politicians have ever been through. Your second question is all because we are Of course, pilots here and engineers, and we have a reputation to lose. So of course, we have plans. The ones we have is a 3 month on the ground, 6 months on the ground, 12 months on the ground. Those three scenarios will be working on the next days weeks. Thanks very much. Thank you very much. The next question comes from the line of Andrew Lobbenberg with HSP Please go ahead. Oh, hi, Carson. Hi, hi, Ulrich. Hi, Dennis. Can I ask about the press release out for Viata and and a 4e yesterday, Lambasting the the EU proposal that that that would require you to pay refund cancelled flights rather than vouchers? And and equally, there's the duty of care issue around a U261. Are you or how confident are you that you can get the the the commission to to see sense there? I appreciate they they they took some time to get there on the slot. But, can can we get that changed? And then otherwise, you know, whilst while whilst you say that, you know, I mean, clearly positive that the German government is ready to stand behind Lufthansa, around around Europe around the world. States are are also standing behind airlines, which which are perhaps less. They're solid. And and so we'll have less consolidation potentially through this process. Do you see that as a of the concern that the the the the weak carriers will not exit because of the the level of aid coming. Thanks. Well, Andrew, let me start with that second with the first question on 261. You might even have heard this. 2 weeks ago, we were all on stage in Brussels, airline for Europe. And mainly it was a thing, William, myself, who said we need to get rid of this eightytwenty rule because this is so obvious this industry needs it. It can only be a question of days. And then some in the room, including airports. Oh, no. Let's wait. Maybe things will get better in April. We cannot do this for the whole summer. Blah blah blah. 1 week later, it not only happens, but everybody has been walking, it's been woken up. 261, how confident am I you asked me? If I had to put my money on it tonight, maybe I'm only 60% confident. Will happen in the next 3, 4, 5 days in your home country in my own in Northern Italy in the U. S, we'll be looking at ourselves a week from now and saying you've got to be kidding that this corona is not extraordinary circumstances. So I think in some of these issues, the daily news and the daily facts play in our hands. So it gets more obvious where we are even for those who initially don't want to support that view. So I think it's obvious if this is not extraordinary, what else in the world is. The consolidation question, again, I'm very early in my strategic thinking here, but here's my little logic. If this would only last a few weeks, it might accelerate consolidation. Because the strong ones will somehow get through and the weak ones will not get enough support to, really come over the disadvantages of such a crisis, but this will not last a few weeks. If it lasts half a year, probably slows down consolidation because every country in the world will then have and take the time to safeguard the airline longer or another. If this lasts a year, this will get so expensive that many airlines in the world, even with government support, probably couldn't come out of this in a healthy way. So maybe it accelerates observation again. Now don't force me to put that on a slide, but my thinking, I think, as you understand, long term, this will not stop consolidation because the pressure of the industry will be higher and the healthy ones as always will take more advantage of the health and the unhealthy ones are able to fix it. And usually government support is just a short term drug. But this is could be so big that it's really difficult to answer your question in more detail, but my thinking I wanted to bring across as an answer. Karsten, can I just come back, what about the process of allowing allow or the EU requiring refunds? Do you think they'll row back on that as well? Again, this is a little arrogant. If I look what it means to us, to refund everybody. How could somebody with, let's call it, different balance sheet be able to do it? I mean, it's 1,000,000,000 going out right away. So I don't see how this industry, the U. S. Carriers even who were all much healthier than most of our Europeans, they announced they don't refund. I understand. I need to do some research on that. But, so also there, and with a few more days, I think we all know more. Yes. Good luck guys. Good luck. The next question comes from the line of Carolina is with Morgan Stanley. Please go ahead. Hi. Hello. Good afternoon. I have two questions. When we we just talked about the liabilities, but what about the 3,800,000,000 of receivables that you had at least as of 31st December how likely it is that you can cash that in and and and and how soon can you collect it. My second question is can you talk a bit about cargo? How much of your capacity can you keep just with the cargo fleet and and and and how much of the remaining capacity that it used to be valley cargo is economic for you to still have it through the crisis? Yes. So starting on the receivable side, which is, of course, more for our non airline businesses, looked at the techniques, it is cargo, LSG, and so on, as speaking about it only 3, 4 days ago, indeed, the customers are still paying, those receivables. So as we speak, cash is indeed coming in, but it's a bit like cash then say, if you look 2 weeks later, of course, it might be a different situation. Oh, yeah. Cargo, rough calculation. In normal times, we have 50% of our cargo inflators and 50% in the valleys of the passenger, mainly wide body fleet. So assume you would take it to an extreme, and we would fly every single wide body aircraft only for cargo. That will not happen, but to answer your question, we would bring up the cargo capacity to exactly the same level as we had it before. No way that would be profitable and it will not happen probably for other operational reasons, but the capacity of Lufthansa, again, is 50% of the freighters, which are all being used now and probably making great money while we speak. And there could be up to another 150 white bodies who could be used, but I don't see that happening, but we are preparing 330s and 748 to be ready when the need arises. But that's the math behind your question. The next question comes from the line of Maniva Kayani with Bank of America. Please go ahead. Hi. I just wanted to follow-up on the fuel question. What sort of instruments do you have that the impact would be limited in terms of financial impacts on the hedges? And then secondly, a follow-up on the cargo. If you could give a bit more color as to what you're seeing in the air cargo market since rates have spiked quite a bit recently. And do you expect that to continue over the next few weeks? Yes. So starting with the fuel thing, typically, it's a combination of, freeways and options, which means that we do not really have so much benefit of the fuel price going down. But on the other hand, if we are not flying at all, of course, that benefit is only theoretical. But there's no commitment to buy any fuel, anything like that. Just so I make myself clear on that. Again, cargo, you said something with your custom? I probably should have stayed in cargo 8 years ago. And it is very ad hoc. We get a call just a couple hours ago from a government agency. There's certain Medicare medicine in Czechoslovakia, which cannot be tracked because there's huge truck, delays, 80 case of stuck up traffic. So they now want us to send an airplane to bring that medicine into Germany. So in my view, the logistical change will be drying out over the next week's When the pandemic hits more and more people, there will be pandemics in harbors in train stations, making it difficult for ground logistics to continue. So I'm definitely building the need will go up, and we are preparing again whatever number of airplane is needed from the passenger fleet to be used for cargo. So it's not worth anything because the logistical change which are now high in sync usually, but they are now falling apart initially from China, but the last ships have arrived, which were loaded before the crisis. Now there is no more for weeks because China was down, but also within Europe, even we see that road traffic and train traffic is slowing down. Thank you. The next question comes from Malte Schulz with Commerzbank. Please go ahead. Hi, also three questions for me. Maybe one clarification or something you already touched on it, but as of now, as a rule for now, if you cancel on flight, you will have to refund the full ticket price and customers don't have to accept the voucher. That's correct. And the second question would be also on cargo. Do you have any ability to reuse or some already retired freight? Is there still some MD-elevens you could reactivate? And maybe the last question would be on a kind of to give us an idea as soon as this lift would be lifted sorry, as soon as the bands would be lifted, how long do you actually need to, ramp up your operation? Yeah. Well, I'll just start with this, a cancelling of flights. It is much more what you call it in English, multi nuanced. It's not as simple as, there are refunds. If it's to cancel our flights, it is, as you've heard already about the Americans. Basically, we are trying to push as many vouchers as possible and not allow for cancellations just to be refunded immediately. We have put in certain incentives for that as well. So you get something for it when you will do it to a voucher. So that's actually quite a large uptake of that. There's there's no yes or no to this question. There's probably a few freighters around the world, which are just retired a few days ago, weeks ago, you can easily bring them back. Others, once you have fully retired and aircraft, it's on the way to the scrap yard. It's gone. So I don't think that at least in these days, my focus. Don't forget, the MD-eleven, which is aircraft we retire, has 90 tons of cargo capacity. Our 747-eight has 60 tons. So two thirds. So rather than giving life back to freighters, I probably rather use the grounded 747 fleet, but it's in the making while we speak. But don't expect too many cargo airplanes to be able to be brought back. Ramp up. Well, there will not be no digital ramp up. There will be scale up. We'll be starting probably the other way around as we scale down. First, the big routes via the hubs hub to hop, then you bring up the frequency on hop to hop, then you start hop to spoke, then you start spoke to hop, then you do spoke spoke So this will be a long process if you don't want to get it done too expensive. But unfortunately, I don't think this is the 1st priority right now. This will take time. But we have no enough, we have enough people who know how to do this kind of stuff. So we'll have a nice multi hub ramp up where we connect Northern Italy first to, Zurich and then we connect North Eastern Europe to Frankfurt. Both are connected to New York then you bring the Los Angeles back. But for that, you need Italy. So also Italy needs to be connected to Frankfurt. So this is going to be in the wonderful puzzle, and I can't wait for the day we start playing it. Right now my worries are on other topics. The next question comes from the line of James Robathon with Doug Bank. Please go ahead. Hi, gents. Just one question from me, which comes back to this point around cash burn mean, obviously, Slide 1415 today are very helpful, allowing us to think about the operating cost that you might still have in April May when you're not really running any flights, allowing us to think about an operating loss. But beyond that, in addition to cash interest, cash tax, we've talked a bit about cash costs associated with hedges. We've talked about working capital outflows linked to refunds and prepayments. I mean, when you bring all that together, what sort of monthly cash burn will the Lufthansa group have in April and May or put another way if you didn't get extra liquidity on top of the CHF 5,100,000,000, how many April's and May's would it take to burn through the CHF 5,100,000,000? Sorry, I'm not used to this, muting all the time. Yes. So I was just saying that will be a number of different April's and May's to use your, the expression there. There is no more taxes being paid, because obviously we will make a loss this year. So then, it will not be any taxes. And the ones for last year is what it paid. Interest, as we all know, with our, taxes, sorry, with our interest bearing loans. At the moment, they are with very, very small amounts, so that is not a big item either. So it's more the question of how long this crisis is going to last. And so I come back to those are the operating costs we are showing there. These are the important ones. In reducing the overhead costs and reducing the quota bite. That's really where the matter sits. And then secondly, it is how we utilize that 10,000,000,000 under Cambridge assets. And finally, if none of all that would work, I think that very strong statement for the government that they will make sure that none of the large German corporates will run into liquidity problems, is the ultimate backstop So, from that point of view, I think the question is very difficult to answer because I think it is actually Infinity. The next question comes from the line of Daniel Rysko with Bernstein Research. Please go ahead. Good afternoon. First of all, Feder Forg, for Denise and Mochen, to you and the team. And maybe since we've talked about the, the smaller details already a broader question to you again on strategy. During the Capital Markets Day last year, you kind of alluded that you were looking to make the group a little bit more airline centric, and concentrating on the airline? And kind of how do you think about this choice between more airline centricity and more kind of adjacent businesses today. Maybe on the airline part, how are you thinking about, decentralization and centralization, a perennial discussion with the Lufthansa group kind of which is the more relevant one kind of which strategy changes or group changes would you be thinking about? Not saying that you're going that direction, but just what's popped into your mind, in the few moments you have to think about the longer longer term game after the crisis? Thanks. To be honest, on these two questions, I think the crisis even though has changed everything on these two questions, it hasn't changed anything in my view. We still believe it's right to focus the airline group on airlines rather than Broad Aviation Group, but we still think we are very glad to have Ruffa the technique in the portfolio. And this was true a year ago, and I think it's true now, and it will be true a year from now. Centralization was a decentralization compared to the times when you worked for us, we have gotten so much faster than optimizing our hub, not because you left, but because we work on the processes. So, we are, in the meantime, able to service right to attach certain parts of the world, to certain hubs, to optimize hub flows once the traffic was dropping over the last days instead of having 2 flights to whatever riga, we make sure there's only one flight of riga, but make sure that the important O and Ds are protected. So definitely centralization helped in managing this crisis, and our view on that hasn't changed. Great. Thanks. Best of luck. The next question comes from the line of Johannes Braun with MainFirst Bank. Please go ahead. Yes, thank you. Thanks for taking my question. I only have one left, mostly not in the focus currently, but obviously the talks with the cabin crew, union with four windows with Farpros are still open. I was just wondering do these talks continue currently? Are they or do you expect these talks to be affected by the crisis? Will there be different arguments in those talks with Frapert, especially given the headwinds that you now have with the crisis? Well, this crisis is the biggest thing in the industry since 45, including for our unions. So indeed, we are talking to all unions, not only in Germany, experience, and there's whatever number of other countries. Whenever gets a phone call should even put it on mute. Thank you. And, so we have talked to everybody and the issues we were discussing with UFO, I cannot tell you if they are put on pause or if they are basically put aside to the after the crisis, I'm far away from these talks. So Don't forget, this is always made bigger than it is by UFA in the media, but in the end, there's much more important priorities now. Understood and all the best. Yes, thank you everybody. For the discipline because indeed I need to run now for a government phone conference. But I don't want to leave the room with 4 I maybe try to summarize one more time what is in our minds. And believe me, our minds are quite busy now. So this is also changing every day, but, I think it was and it's important in a crisis like this to react fast and drastically, not the small thing some of my competitors were laughing at us for being too radical. I haven't seen them laughing for some time now. And I think this management team knows how to handle crises from all kinds of crisis we have been facing in the last years. This one is new. I repeat that, but we also manage with the same tools and people this crisis. Now focuses on protecting liquidity, basically cutting capacity fast, cutting cost, and of course, reducing CapEx to 0 or close to it. And then of course, these things, some of you even criticized for a few weeks ago until a few weeks ago for having such a large owned fleet, uncovered. None of you has criticized us in the last days. What I'm trying to get to. In the end, this is good old German boring thinking, owning your assets is a wonderful buffer for really bad times. And you might go back in history why the Germans sometimes are so boring. And this probably pays out now here that this is an absolute buffer. Hardly any airline in the world has I know your concerns, and we have discussed them with some of you that there is downsides, but right now, it is only upsides of that strategy. And, last but not least, I cannot tell you how this industry will turn out. I cannot even tell you how this group will turn out. But I would be very surprised if we don't manage based on this one. I just told you to come out as a winner. Even though a winner on this might be smaller than a winner in the industry of ours has been in the last, whatever, 10 years of just growth. But then so it is, still in the end, it's a relative positioning in the industry, which drives the profitability of the future. And our relative possibility, the positioning, I think, we can improve. Thanks for your interest and your support. And those of you who own shares, thanks for your trust. And, we'll be talking soon, I'm sure, maybe not even in 3 months only. If this dynamic situation arises, I will try to convince my CFO head of Investor Relations, maybe to have something in between to have a discussion. Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.