Good morning, ladies and gentlemen. Thank you for standing by. Welcome, and thank you for joining Lufthansa Group first half- year 2022 results Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Press the star key followed by zero for operator assistance. It's my pleasure, and I would now like to turn the conference over to Dennis Weber. Please go ahead.
Yeah, thank you, operator, and good morning, ladies and gentlemen. Welcome to the presentation of our results for the first half- year and Q2 2022. With me on the call today are our CEO, Carsten Spohr, and our CFO, Remco Steenbergen. They will give you an update on operational and financial performance, and as usual, afterward, you will have the opportunity to ask your questions. Carsten, over to you.
Yeah. Thank you, Dennis, and ladies and gentlemen, very warm welcome from my side as well. You won't be surprised by me opening up in a frank way, saying that when it comes to operations, I definitely would have liked international air traffic to be in a better position compared to what we are currently experiencing at airports. For our own industry, for the entire industry, overcoming this crisis, which began two and a half years ago, is indeed an ongoing challenge, especially when it comes to operations. In simplified terms, I think my personal view is that this industry is overcoming the crisis in three phases. First phase basically is the grounding phase and the fight for economic survival we all have been through all over the world.
Second, which I think is the current phase, it's the restart phase, which is unexpectedly steep ramp up of global flight operations on the one hand, and therefore including the operational challenges that come with it. Third will be the return to full normalization in terms of personnel, in terms of reliability, punctuality, and our products. We expect this phase to come with renewed consolidation in the industry. We believe there will only be moderate capacity growth due to ongoing growth limitations we'll be touching later on. We'll see that supporting sustainably higher yields compared to the pre-crisis levels, and we believe we will reach this phase next year.
We in the Lufthansa Group have already successfully completed the first phase and its financial rescue, including the gradual exit of the German Economic Stabilization Fund, which has just reduced its stake to under 10% a few days ago. We are currently, obviously, in the second phase, the restart, which is characterized on the one hand by unforeseen high- demand in all classes. We'll be touching on this in a few minutes. On the other hand, by an aviation system around the world that can no longer, or at least at this point, cannot yet adequately serve this demand in many parts of the production chain.
Although the last few weeks have been marked by painful operational irregularities in a way that we have not yet experienced on this scale in our industry, or at least not us here in Lufthansa, we are very satisfied with the financial results of the Q2. We significantly increased our revenues and returned to profits. Adjusted EBIT, as you know, was almost EUR 400 million. Once again, it was Lufthansa Cargo who made a significant contribution to this good result. Our colleagues there have been achieving record results now for 22 months in a row. With an adjusted EBIT of EUR 482 million, cargo's Q2 earnings were another almost 50% higher than the already record results in the exceptional previous year. The peak of the cargo season is still ahead of us.
The second half of the year, demand normally increases further. Many of our corporate customers are diversifying their supply bases around the world, and this in turn is creating both additional flows of goods and, not to be forgotten, it also, we believe, will create additional demand for business travel. This will, in our view, additionally fuel the already strong booking demand from our customers around the world. That brings me to the passenger airlines, where in the past quarter, our passenger airlines brought 29 million passengers to their destinations, more than 70% of the pre-crisis level. We see a clear trend here. More and more guests are traveling in our premium classes. In addition to overall strong demand, this obviously further supported our huge performance. Overall, our aircraft were very well- utilized in the Q2.
In the period, the seat load factor reached 80%, which is just 3 percentage points below the pre-crisis level of the record year of 2019. I already mentioned it, not just today, also to our passengers around the world and to our staff, the joy of good demand was and is clouded by operational difficulties. Those of you who have traveled by air in recent weeks, let me say, no matter which airline probably, will have experienced the disadvantages of strong demand of yourselves. For the complex air traffic system, the ramp-up curve from just 20% to 80% in just a few weeks, to be honest, was just too steep. The overload of the system was caused by industry-wide staff shortages and on top, partly caused by the shortages, high sickness rates.
Unforeseeable events such as airspace closures due to the terrible war in Ukraine and unprecedented supply problems with spare parts for aircraft and even more for engines added to this. Therefore, our top priority remains the stabilization of our flight operations. We have implemented numerous operational measures that have significantly eased the tense situation. First, we took a large number of flights out of the schedule early on. Second, we also temporarily brought back, and bringing back employees who had just left us recently. In the second half of this year alone, we are hiring around 5,000 new employees, the vast majority of them in operations in line with the expansion of capacity planned for this year and next. Recruiting focuses on the cockpit and cabin of our 10 passenger airlines, ground personnel at our airports, mainly hub airports and technicians at Lufthansa Technik.
A similar number of new hires is planned for 2023. Thirdly, we have introduced additional shifts on the ground, which we financially incentivize for our staff. For example, at check-in or at the gate, where we're also deploying employees from other airports to our hub in Frankfurt, where the operational problems remain greatest. Fourthly, we are offering our customers more and more digital solutions to self-service them to reduce waiting lines, be it in the call centers or at the airport. Last but not least, we are working closely with our system partners, also leading to the decision to significantly reduce the number of aircraft movement, especially at our hub in Frankfurt. Thanks to these measures, the situation has already stabilized significantly at all of our five hubs.
The current operational challenges are an additional burden for our employees, no doubt, and coming on top of the financial cuts they had to live with during the crisis and the high- inflation we see everywhere. Currently, while we speak, our Chief Human Resources Officer, Michael Niggemann, and his team are in talks with all three of Lufthansa's main unions here in Germany. Negotiations for the ground personnel with ver.di have just entered the third round, and we are confident that we will soon reach an agreement. Already in the first two rounds of negotiations, we made significant progress and offered fairly high increases with a very strong social component for the lower- end of the payment scale.
Despite the result of the strike ballot by Vereinigung Cockpit, our cockpit union in Germany, which of course we respect, we have noticed a strong will to negotiate not just on our side, but also on their part. With our offer, we have laid a good foundation for further constructive talks and eventually a joint solution. We have already offered a compensation increase of 5.5%. We're also discussing the possibility of reviving the so-called PPV, the agreement which defines the size of our mainline operations, which we have been living with for the last years.
Michael Niggemann and his team also talked to UFO, the cabin crew union here in Germany, and after the cuts made during the crisis and in view of inflation, adjustments to the collective agreements are also necessary here, with a particular need for action in the lower pay- grades. Before I talk about the third phase of the recovery, which is the return of premium product quality, Remco, our CFO, will present you our quarterly results in details. Remco, over to you.
Thank you very much, Carsten, and a warm welcome to all of you as well. As Carsten mentioned, we are delighted that we returned to positive adjusted EBIT and positive net income in Q2. We're not only pleased because we generated positive results in the Q2, we also believe that this quarter is a real turning point for our profitability going forward. In Q2, adjusted EBIT amounted to EUR 393 million and net income to EUR 259 million. Performance was not only driven by the continued strength of cargo and the solid performance of our MRO business, we also increased yields in our airline business to an extent that seemed quite impossible just a few months ago.
Even more remarkable was the generation of more than EUR 2.1 billion of free cash flow in the Q2, driven by both robust bookings and strict working capital management. We are confident that we can hold on to a significant portion of the EUR 2.9 billion of adjusted free cash flow generated in the first half- year. Before discussing our cash flow performance and outlook in more detail, let me explain you the drivers of performance in the passenger airline segments, where results improved significantly. Compared to the Q1, we expanded capacity from less than 60% to almost 75% in the Q2. Seat load factors also improved significantly and were only three percentage points below the 2019 level, with June being almost on par. Yield performance was outstanding.
Early on, we had signaled that there was upside to our yield indication for the remainder of the year of a high single-digit % increase. However, the momentum we'd built over the course of the quarter and the strength of short-term bookings still exceeded our expectations. In the quarter as a whole, yields were 24% above 2021 levels. Yields increased across all traffic regions. Still, the transatlantic stood out based on strong US-based demand for travels to Europe. Compared to 2019, yields were 10% higher. Unit costs trended closer to 2019 levels as we realized more cost savings and higher- capacity helped leveraging our fixed cost. CASK, excluding fuel, was 8.5% above 2019 levels in the quarter, which around two percentage points can be attributed to the translational effect from the appreciation of the Swiss franc.
The remaining gap is due to the fact that we're still missing a quarter of the pre-crisis capacity and to a lesser extent, high irregularity costs. The latter amounted to EUR 158 million in the Q2, around half of which were booked as operating expenses. Unfortunately, we expect customer compensation payments and duty of care expenses to remain high also in July, but then to moderate in the months thereafter. For the full- year, we expect irregularity expenses to amount to around EUR 450 million-EUR 500 million. Our aviation services again made a significant contribution to the group's earnings in the Q2. The profits in the logistics and MRO segments were almost on par with a strong Q1. Lufthansa Cargo continued its exceptional momentum.
Market-wide capacity in air cargo remains below pre-crisis level despite the return of belly capacity on the transatlantic. In contrast, demand continues to be higher than in 2019, driven by ongoing supply chain disruptions and congestion in sea freight, which even worsened most recently in Northern Europe and the U.S. East Coast. As a result, yields remain elevated, driving the generation of EUR 482 million of adjusted EBIT in the Q2. At Lufthansa Technik, demand was particularly strong across the key components in engine divisions as airlines ramped up for the market recovery. With material shortages remaining manageable and cost inflation largely being passed on to customers, adjusted EBIT amounted to EUR 100 million in the Q2. The recovery of LSG's North America business progressed further, whereas the Asian business continued to suffer from Corona-related restrictions.
Despite this, and some inflation-related cost pressures in the US, LSG's adjusted EBIT was just positive in the Q2. Finally, the results in other business and group functions improved slightly. Now, let me turn to the drivers behind our exceptionally strong cash flow performance in the Q2. As we highlighted at several occasions, booking activity was strong over the entire quarter. Taking also the yield strength of new bookings into account, the liability related to unflown ticket increased by EUR 1.3 billion in the Q2. Additionally, working capital management made an almost equally large contribution. Trade payables increased by EUR 1.1 billion because of the ramp-up of the business and the extension of payment terms.
Vice versa, we successfully limited increase of receivables associated with the ramp-up, even including ticket-related receivables, which increased by EUR 470 million in the Q2. Net capital expenditures were EUR 738 million in line with our guidance. In sum, also including the IFRS 16 operating lease expenses, this resulted in a positive adjusted free cash flow of EUR 2.1 billion in the Q2. Based on the seasonality of the airline business, customer prepayments of new bookings will be lower at year-end compared to the end of June. Although the exact change is difficult to forecast, given the fact that we have only limited visibility on 2023 bookings at this stage, we're confident that the rest of the working capital will remain largely stable.
As a result, adjusted free cash flow, we expect, will also be significantly positive for the full- year 2022, albeit lower than the EUR 2.9 billion we generated in the first half. Due to the strong free cash flow performance, net debt declined to EUR 6.4 billion, EUR 2.6 billion below the level at year-end 2021. In addition, I would like to highlight that our net debt is in principle fixed rate finance. The average interest rate on gross borrowings is around 2.5% with an average maturity of almost five years. This, combined with the fact that we only need to refinance around EUR 1.6 billion over the next 18 months, provides us with good protection against rising financing costs resulting from the change in monetary policy currently underway.
In addition, available liquidity of EUR 11.4 billion at period end, above our long-term target corridor of EUR 6-8 billion, serves as additional crisis protection. Our equity also strengthened and amounted to EUR 7.9 billion at the end of June. This is EUR 3.4 billion above the level at the end of 2021, and unfortunately, if I may say so, even higher than our current market capitalization. The increase of shareholder equity was mainly driven by the sharp reduction in the pension benefit, which amounted to just EUR 2.8 billion at the end of June. Compared with the end of 2021, deficit has just more than halved and has fallen by as much as EUR 6.7 billion compared with year-end 2020.
The positive valuation effect resulted from a 190 basis point increase in the IFRS discount rate since year-end 2021, which was only partly offset by the negative performance of plan assets, reflecting the losses in the global bond and equity markets. The development in the first half- year only further strengthens our belief that as it returns and the normalization of global monetary policy, we eventually close the deficit. In fact, our pension plans outside of Germany are already over-funded today. In Germany, the plans are around 80% funded on an IFRS calculation basis. A further increase of the discount rates to 4.5% would close the remaining gap. That's why we will continue our strategy of paying all pensions out of plan assets and not out of the operating cash flow as has been the case before the crisis.
This limits the pension funding to around EUR 400 million per year, reflecting the employer contribution to active contribution plans and the legally required payments for plans outside of Germany. Now, when it comes to our program to structurally reduce costs, a good EUR 3 billion of measures have now been implemented, equaling more than 85% of the target volume of EUR 3.5 billion. Further progress on the personnel cost side will depend on the outcome of the current negotiations with ver.di and Vereinigung Cockpit. The agreements we're targeting will be key for achieving the remaining personnel cost savings of close to EUR 400 million. We will not walk away from our multi-hub, multi-brand and multi-AOC strategy. Given that we need differentiated platforms, for example, to profitably grow our leisure and touristic business and to remain competitive in short-haul.
With tight productivity management to continue and assuming a further normalization of capacity to between 85% and 90% of pre-crisis levels next year, we're hence optimistic that unit cost ex-fuel will be back to around 2019 levels by the end of 2023. When it comes to fuel cost, price volatility has been enormous since we last reported in May. Nonetheless, the price of crude oil has declined somewhat in the past weeks, as has the jet crack since reaching all-time highs only at the end of June. At this stage, we have hedged 67% of our exposure to crude oil for the remaining of 2022 at an average rate of $76 per barrel. For 30% of exposure, we have also hedged the jet crack for the rest of 2022 at around $37.
Also, for the year 2023, we have already hedged 46% of our crude oil exposure at an average break-even price of $87 per barrel. In sum, our hedging will limit the increase of fuel costs in the remainder of 2022 and in 2023. This will provide us with additional time to pass on additional costs through higher- yields, building on the progress made here to date and still expected in the coming months. Please note that the sensitivity matrix for the year 2022 included in our slide deck includes the impact from the stronger US dollar, but does not factor in the effects of currency hedging. This currency hedge result is booked in other operating income, not in the fuel cost line, as it relates to our overall net exposure.
It's our strategy to hedge 60% of our net short position in the US dollar with a 24-month layer strategy. Based on that, we have covered 54% of our net exposure of more than $3.5 billion for the remainder of 2022 at an average rate of around 1.10. This brings me to our financial outlook. Due to the recently decided reduced capacity levels for the months of July and August, we expect capacity in the Q3 to be around 80% instead of the 85% originally planned. However, full- year 2022 capacity is still expected to be around 75% as we plan for similar capacity in the Q4 as in the Q3, both compared to 2019.
Considering the yield strength implied by current bookings, on which Carsten will elaborate in a minute, and seat load factors reaching almost 2019 levels, we expect the performance of our airline business to further improve in the Q3. That is why we forecast adjusted EBIT in the Q3 to be substantially higher than the second. For the full- year of 2022, adjusted EBIT should hence be above EUR 500 million, very much in line with current market expectations. Finally, and as explained earlier, we forecast adjusted free cash flow to be significantly positive in 2022, assuming net CapEx of around EUR 2.5 billion. This means that we are well on track to achieve our 2024 targets, an adjusted EBIT margin of at least 8% and an adjusted ROCE margin of at least 10%.
Lastly, let me briefly touch upon the status of the assets divestitures. The planned divestments of AirPlus and the remaining non-European catering business around LSG remain a key management focus also in the second half- year. There is robust investor interest in both assets, so we are now entering the next phase of the process. At Lufthansa Technik, we're continuing as planned with the preparations for a minority sale or partial IPO in 2023. With that, over to you, Carsten.
Yeah. Thank you, Remco. Ladies and gentlemen, we all know, more maybe than in normal times this year, nothing is as constant as change. I think this is indeed once more, especially the case for aviation, a little bit more, I would think, than for many or most other industries. Therefore, in our tough competitive environment, the ability to adapt is and remains vital. In our case, with our well-diversified portfolio, our very international footprint and the three strong business segments. We believe the Lufthansa Group is ideally positioned to take advantage of the further recovery in our industry, even if the macro environment becomes more difficult in our home market. When almost all passenger aircraft were grounded at the beginning of the pandemic, Lufthansa Cargo was able to capitalize on the disruption of supply chains and became a backbone of global trade.
Around 70% of the cargo it carries comes from countries other than Germany. As mentioned before, the business will continue to benefit from the ongoing capacity bottlenecks. Our passenger airlines are also well- established and respected worldwide. Today, we are more international than ever before. The majority of our 11 AOCs are not based in Germany anymore, and we only sell about 30% of our tickets in Germany. More than 70% of bookings are made in other countries, and that is even though Japan and China are yet not opened and obviously will be key markets once they reopen. Lufthansa Technik serves one in five of all passenger airlines worldwide.
With more than 35 international bases, MRO recently benefited in particular from the recovery of global air traffic and the resulting increase in demand, be it for airline maintenance and repair services, and the ramp up, we believe, will continue. With our passenger airlines, logistics, and MRO businesses, we are convinced to be ideally positioned for the future. The trend towards an increasingly international and synergetic Lufthansa Group, which also takes advantage of growth opportunities outside Germany, will continue. Now, we're doing everything in our power to sustain the premium positioning of our airlines and to live up to our own product and quality standards again.
We have already upgraded our in-flight catering and expanded our lounge offering, and beyond those short-term improvements, we will start a new product and quality initiative in the fall, leading then to the upgrade of our product in the coming-y ear with new seats and services in all four travel classes, first class, business class, premium economy, and of course, economy. Our product and service innovations will further support premium demand, which is already very strong today. Yields have increased significantly in both premium and non-premium classes over the course of the Q2, and this trend, to our joy, also continued in July and the outlook beyond. Also in the rest of the quarter, we therefore expect yields across our airlines to remain high as demand remains very strong.
Business travel continues to come back, and the operational challenges put a limit to what the market-wide capacity can at all be offered around the world. Therefore, the trend toward higher- priced booking classes continues unchanged with premium leisure demand, especially originating in the U.S., playing a more and more important role in this regard. Seats in our premium and non-premium classes were almost equally well- booked in the past quarter. In the coming quarter, advanced bookings for premium classes are already above the comparable figures for 2019. An important part of our premium position is the sustainability of our offers and services, and this topic becomes more and more important for all customer groups. For example, it is now even easier for our passengers to offset the carbon emissions of their flights.
Since the beginning of the month, we have been testing our so-called Green Fares in Norway, Sweden, and Denmark. If the customer chooses the corresponding fare, the compensation of their carbon emissions for these flights are already automatically included in the ticket price. Green flying is also becoming even easier outside Scandinavia. As of this year, guests of Lufthansa and Swiss can also book the carbon offset of their flight directly on board. In order to reduce carbon emissions, we have always relied on the intelligent linking of different modes of transport. We are therefore all the more pleased that Deutsche Bahn, the German railway system, has been the world's first intermodal partner of the Star Alliance since August first. For us, that is the logical further development of our successful Lufthansa Express Rail Corporation.
We are also resolutely pushing ahead with our goal of increasing the use of sustainable aviation fuel, SAF. Just this week, we signed a memorandum of understanding with the fuel manufacturer Shell. This allows for the supply of sustainable aviation fuel in a volume of up to 1.8 million metric tons for the years 2024-2030, which means we're on the verge of agreeing on one of the world's most significant commercial SAF collaborations in the aviation sector. We want to be a leader in our industry when it comes to climate protection. That is why we have set ourselves ambitious goals. By 2030, the Lufthansa Group wants to halve its net carbon emissions compared with 2019, and by 2050, we want to operate completely carbon neutral.
In this context, the most important levers for us to improve our carbon footprint are an accelerated fleet modernization, sustainable aviation fuels, and the optimization of flight operations. Our clearly defined reduction path has also been validated by the Science Based Targets initiative. We are the first aviation group in Europe to receive this validation. Our carbon reduction target has thus been scientifically validated as being in line with the targets of the Paris Agreement of 2015. The unit of measurement for this Science Based Targets initiative, SBTi, is carbon intensity, which means carbon emissions per payload carried. This quite technical term includes freight but also passengers. According to SBTi criteria, the Lufthansa Group will reduce its carbon intensity by more than 30% by 2030 compared to 2019.
Converted into absolute carbon emission and reductions, this value corresponds to 18% less carbon emissions by 2030. We will achieve the remaining 32 percentage points toward our self-imposed target of 50% less carbon emissions through compensation measures. Ladies and gentlemen, even if the operational difficulties have pushed this somewhat into the background in recent weeks, the outlook for global aviation is strong and demand for our services and products remains very high. The times of overcapacity, as we have seen them, for example, right before the pandemic, we believe are over for quite some time. Aviation is facing a global supply bottleneck. The delays in aircraft deliveries from both Boeing and Airbus are surely painful for us operationally, but at the same time, they will stabilize prices for the entire industry by less capacity.
The same is true for the significant shortage of pilots in the US market, for example, or infrastructure restrictions in Europe. With our 11 airlines and their individual strength and our strong market positions in cargo and MRO, the Lufthansa Group is excellently positioned for this future. In the past two and a half- years, we have become even more resilient and ready for the future. Due to our unique portfolio, we were able to return to profits in the Q2 and generate high cash flows. We have significantly improved our balance sheet, as Remco pointed out, reduced debt, and increased our equity ratio. In the process, we are determined to continue our transformation towards a more sustainable future.
For me, personally, the priority now is three things, upgrading our product for the benefit of our customers, creating attractive and inspiring prospects for our employees again, and obviously ensuring the return to profitability in 2022, which we are reporting here today. Thanks for your attention, Remco and I, and of course, Dennis as well. We now look forward to your questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from James Hollins from BNP. Please go ahead, sir.
Oh, yeah, good morning. A few from me, please. On the pilots on the ground, I mean, clearly you're confident something's going to get done there. I think the pilots were voting 98% in favor of action. Obviously, ground you've had an action that grounded your flights for a day at Frankfurt and Munich. I was just wondering if you could embellish on your confidence in the deal getting done there, 'cause the data might suggest otherwise. Second one is on corporate or business bookings. Not much detail in here. I may have missed it or I've been distracted, but I think you talked about being 50% recovered in March. Maybe you can update on the data into maybe June.
July, obviously not seasonally strong, and whether you still think it'll be. I think you've previously talked about 80% recovered by year-end. Then thirdly is on this sort of premium demand. I was just wondering if you could sort of remind me as an ignorant fool as to why you and many other airlines think premium leisure in particular stays super strong into a macro downturn. Thank you.
Yeah, sorry for the delay. We had technical issue here. Let me answer the third one first because probably it's the least aviation question. I think it's a question of how the global societies are developing. I think we are seeing more and more people who due to their income or to their wealth are less sensitive to economic ups and downturns, but are willing to spend money on vacations, on hotels, on rental cars, on expensive restaurants, and also willing to spend more money for personal space and traveling. We have seen that for many years in Switzerland, and now we see more and more other markets, especially the U.S., but also Germany. I think these people are less sensitive, as I said, to economic ups and downturns. Coming to the more difficult question, your first one, pilot and ground staff.
I think there's a big difference here in terms of time frame. With the ground staff, we indeed, as also the negotiating leader of the ver.di union said just last night, we are believing to be fairly close to each other and therefore short- term could see an agreement being reached. On the pilot side, it's important that our head of HR just two days ago made an offer to renew the agreement which has been valid for the last years, which not only offered our pilots competitive salaries, but also offered them perspectives for career and growth. When I talk to our pilots in the cockpit every day, that's what most of them are looking for.
I think that offer of us to renew that agreement, which will allow that perspective and additional careers to be created in the mainline, is an attractive one and is a very good base for constructive dialogue. We already have set dates over the next weeks to negotiate with the pilot union, and therefore my optimism that there's also solutions to be found is founded then. Remco, you were talking about the corporate bookings.
Yeah. Hello, James. Good morning. On the corporate customers, we were in the Q1, you know, around 20%, correct, of our travel that returned to around 40% or doubled by the end of June. The Q2. We saw in the bookings the end of June, July, clearly a further increase up to 50%-60%. We expect 50%-60% of corporate to come back in Q3. We're targeting for an increase and further in Q4 to go above the 60%, hopefully to 70%. We have to keep in mind that in the 2024 targets, we always said that more normal would be 80%. We have to see if that can go further up, but we believe we are well on track on that forecast we had set before and assumed.
Appreciate your thoughts. Carsten, could I just come back on the pilots? I know historically, part of the career progression of younger pilots was that there was tons of older, very well-paid ones who didn't want to leave. Has COVID restructuring sort of seen that problem disappear with lots of the older ones blocking their career sort of leaving the business?
Yes, indeed. As you might recall, I think we reported this last time. We have created a so-called volunteer program which allowed senior pilots of the mainline to leave at very attractive terms. 388 of them accepted that proposal, and they are actually leaving while we speak this week. Quite a few we asked to hang on a little bit longer because we need them. Overall, in the next weeks and months, these almost 400 will leave us. They will create, of course, career opportunities, but probably more important for the younger pilots is that the renewal of this agreement, which we were forced to cancel in December, allow them guaranteed careers to a certain number.
The other alternative, of course, if there's no agreement on such a deal, would be that we will enter pure CBA negotiations only based on costs and salary increases, which I think is the least interesting version for our pilots. While we speak, we are offering 300 new jobs for captains in the main airline, and we're actually at the limits of our training capacities in the main airline. I think there are, especially in the main airline, interesting opportunities, but of course also there's opportunities in other airlines as they are all growing next year. We are adding obviously new jobs into the main airline, but also the other ones. As you know, we are stepping up the airline probably for another 10%-15% next year. I'm sure we come to that later on.
We are currently, as Remco was pointing out, operating at 75% this year, and we're looking at something between 85% and 90% for next year, which is probably more on the conservative side, by the way, which, of course, we love our yield stabilization. We love the high- yield factors. We will be on the more conservative side of growth in 2023. Still, this growth be a little bit less than some competitors will create these career opportunities I just mentioned.
Lovely. Thanks very much.
The next question is from Jaime Rowbotham from Deutsche Bank. Please go ahead.
Morning, Carsten, Remco, and Dennis. I have three. On the first, sorry, just come back on the pilots one more time. I've read they're looking for uniform pay across all units, inflation protection, and perhaps erroneously, I'd thought that the annulment of the perspective agreement was one of the building blocks towards you achieving the targets in your cost savings plan. Apologies if that's misunderstood, but if you give in to some of these demands from the pilot union, do you think you might need to revise your aspirations on CASK, or are you going to rely on RASK to provide an offset? Secondly, and linked, I guess, very impressive Q2 yield from the passenger airlines, as you mentioned, 10% above pre-crisis, driven by long- haul and in particular the Transatlantic.
How sustainable do you think that's going to be in Q3 and perhaps more importantly into the winter quarters? Finally, I think you said EUR 450 million-EUR 500 million for full- year irregularity costs after 158 in 2Q. I don't think there was much in Q1. That feels like a big number for the rest of the year. Why is that so high? Is there an assumption in there around costs of industrial action? Thanks very much.
Hey, Jaime. Good morning, Remco here. Let me take the first one because it's very, very clear that we will not walk away from multi AOC strategy, right? We need that. As I said also in my speech, we need for certain differentiated customer groups and certain routes, we need to be at a different competitive level than for the main airline. To come to one overall pay scale system for all the airlines in Germany is, for us, a strategic no-go. We cannot do that because that will really put our company at such a strategic disadvantage position against the other airlines. That will remain. Of course, within that structure, we can do a lot of the things as Carsten has said.
We believe it still provides a very good outlook to come to a good resolution. I don't think it is conflicting in itself. Of course, we have seen the request of the pilots, but that is a strategic topic we want to keep. Second question on the yield. Yes, we saw a 10% yield in the Q2 versus 2019 overall. We expect also for the second half of the year about 10% yield increase versus 2019. Even in Q3, it might be even slightly higher than the 10%. In that sense, we are positive.
I think also that is it's possible because of the whole capacity price management, which I've iterated before, very carefully managed, and with compliments to our commercial teams. I think that's also an industry-wide situation we're currently in. That is the outlook we have. For the last point on the irregularity cost, right? We were slightly below EUR 200 for the first half of the year. Of course, you can imagine July was a very difficult month for us, so that was a more expensive month than June has been. Probably have also a little bit of that in August and then tempering down. That's why we are around EUR 450. It doesn't include anything with regard to industry actions or further strikes or anything. That is not something we can assume when we make any planning. I hope that answers your question, Jaime.
It does. Thanks a lot, Remco.
The next question is from Ruxandra Döser, from Kepler Cheuvreux . Please go ahead.
Good morning. Thank you very much for taking my questions. First, what cargo performance do you consider in your guidance for H2? Second, could you please give some details on the catering disruptions in Germany this year? What exactly has caused the problems, and has the situation improved now from Q1, beginning of Q2? Are you bound to the contract with gategroup, or could you consider alternative providers? Since you are currently in discussions for selling the remaining part of LSG, how can you make sure that what happens this year on long-haul outbound flights from Europe will not happen on long-haul inbound flights as well in the future? Third, Eurowings is the only airline in the group where the operating result has not significantly improved year-over-year in H1, despite a significant improvement in revenues. Is this because of particularly high irregularity costs or other one-offs? Thank you very much.
Hey, Ruxandra. Good morning, Remco here. Let me go through your question. First on cargo. What we have said on cargo for the full- year that we expect to have reached at least the results of last year, which is around EUR 1.5 billion. Overall, of course, the volume is all going up. We see in Q3 that the yields are going slightly down, but they're significantly above the levels we had pre-crisis. That is still the outlook we have. It will be less than we have seen in the first half of this year as we currently see it. But in cargo, we have always the opportunity, depending on how the whole supply chain goes.
We look very positively to the second half, but you have to look slightly above what we had last year as the current guidance. With regards to catering in Europe and gategroup. With this important supplier, we had quite some discussions over the last month. They have made an enormous progress over the month of June into July, and I think we're in a much better position with gategroup than we were in Q2. They were impacted in the same way as the whole industry was by shortage of people, delays, which made it also difficult for them to cater all the planes at the right time. This is what was always a gategroup problem. Also on the catering which we had in the US coming back, correct, which is not done by gategroup.
We had similar issues which are also getting in the resolution. I would say it is not much to do with the sale of LSG rest of the world, because that is majority a North American business, which also has a lot of third-party customers as part of their business. It's different than the LSG Europe, which we are ourselves the largest customer. Lastly, with regards to Eurowings in Q2. Yes, it was still in significant negative EBIT. They were impacted quite a bit by the irregularity cost. That was about half of the loss. Also to keep in mind with Eurowings, there is some travel agencies bookings involved, which it takes a little bit longer to get the yields and the price agreements through the system.
With Q3, we expect a still smaller impact from the travel agents with much less. For the second half of the year, we expect the turnaround from Eurowings to continue as it did in the last part of half- year. They're still on track to become profitable in 2023 as it currently stands. It will probably be more difficult now in this year. All on track from the strategic direction we have set for Eurowings. Hope that answers your question, Ruxandra.
Yes. Great. Thank you very much.
The next question is from Stephen Furlong from Davy. Please go ahead.
Good morning, Remco and Carsten and Dennis. Just interested in two things in the internal debate. I'm sure the commercial teams are very excited about the demand environment and how you manage that in terms of the capacity plans for next year. Is it a function of needing to pay for input costs, or things like disruption in the operation, or the way the slot rules are now going back to 80/20? Just interested in that. The second thing might just talk a bit about the Lufthansa Technik sale process in 2023. Just what is the internal kind of work or building blocks that need to be done to get to that stage? That'd be great. Thank you.
Let's start with 2023. As the number I think I mentioned just a few minutes ago, just to be repeated, we are looking at something between 85%-90% in 2023, which is probably less than what people had expected. We see that the business model really works so well right now with that premium demand, with that very stable yield and high-l oad factors across the whole network that we think a more conservative approach is the right one. That's where your question pointed. Of course, there is a lower- end of this, which needs to be that we have to protect our slot assets, and we'll do that. One way of doing it is making sure you have enough short-haul aircraft, because that's basically obviously much more efficient to protect slots than to protect slots with a long-range aircraft.
Also we have decided to bring some wet leases in where there's interesting capacity offers on the market right now, both short-haul and long-haul, through Eurowings for example. We'll balance the system on slot protection on the lower- end, somewhat conservative on the overall dimensioning, looking at the training capacities in the airlines not being overstretched, also to make sure we have enough reserves for high- production quality, as I mentioned before. We have a nice mix with some wet leases where our own training capacities either are not enough or there's very interesting offers in the market. That's a little bit the mix of how we define our network for 2023.
Again, slot protection in my view is an ultimate goal, but we also believe that the EU would do well to look at this again to make sure there is no empty flights, unnecessary flights in terms of the environment topic which could be avoided. You know, we had some issues on this this year, and I'm sure everybody learned on the slot protection mechanism in these, the talks I have in Brussels show that we all have learned our lessons here.
Stephen, good morning. With regard to LHT, correct, and the building blocks you were asking, correct? Of course, when such an important segment has another shareholder, partly IPO involved, there are a couple of things which you need to organize. The whole legal structure where certain operational activities are falling under LHT, but the legal structure is not aligned. We need to make that in place. When we have internal services between MRO and our internal airlines, correct, those contracts need to be watertight, correct, when you go in these discussions. When you think about financials, and you think about the treasury setup, with cash flows and the loans and the balance sheet, et cetera, those things have to be set up. When you have to report on financials, it needs to be structured with proper sub-consolidation, et cetera.
People of departments need to be strengthened in certain ways because certain other stakeholders are getting involved and being handled. A couple of these things which we carefully wanted to walk through. Of course, the strategic plan needs to be gone through. There need to be third parties who check that our numbers and our forecasts and our markets are correct when valuations are taking place. Just a lot of the practical questions you need to be very well- organized to go in the process. That we have gone through. We have started at the beginning of this year after we had all agreement actually, and we all made the conclusion that it makes sense to continue. With that, then we would go in the process, probably at the beginning of next year.
With that, we expect then to come to a conclusion in the course of next year. That's the logic. I think it's going well. It's well on track. Everyone is excited throughout the topic. We believe it creates an enormous amount of opportunities for everyone involved. We're fully on track here.
That's great, Remco. Thanks a lot. Thanks, Carsten.
The next question is from Jarrod Castle from UBS. Please go ahead.
Thank you. Good morning, everyone. Also three from me. You know, staffing levels obviously going higher as you ramp up, and I'm interested just to get your views on, you know, where you were pre-COVID, you know, over 130,000 staff, you know, on a like-for-like basis, if you got back to 2019's capacity, you know, where would the staff levels be, you know? So i.e., you know, have you made structural changes, you know, from productivity perspective? Secondly, you know, how should we think about, you know, at some point dividend restoration, given you continuing to de-gear pension funds falling, German government shareholdings coming down? How would you kind of frame that?
I guess slightly related to the previous question related to kind of dividend restoration, you know, the proceeds from any disposal. Then just lastly, any updates on ITA, or is it ongoing? Thanks.
Yeah, let me start on ITA. I think the latest is in terms of news, unless you have already read it yourself, that last night, the ITA unions are now willing to become active to support a fast decision by the current government because they believe that ITA needs a partner, and they believe that MSC and Lufthansa are the right partner. So that's also for me, a new one that unions go on the street on behalf of Lufthansa. More important maybe is that this confirms what we have been saying for months, and this is regardless of political developments, ITA needs a partner, and we believe we are the right partner. That is, I think, independent from which party is running or which group of parties running the country, which I think we have to leave to the Italians for me to comment that.
We have, as you probably know, written a letter to Mr. Draghi that we believe we need to be fast here, that our patience is not endless. I have to consider it a positive signal that now even the staff of ITA is pushing for a fast decision, because that shows that what we have been saying about ITA is right. They need a partner, and we are the right one. When it comes to Italy in general, we have seen an even more successful summer in Italy than we have seen in all the years before. I think the information I have given you before that Italy is our most important market beyond our home markets, and of course, the US is even more true than it has been before.
We also have decided to grow Air Dolomiti by a few aircraft, independent of the decision of ITA, because we need a stronger position in Italy one way or another, hopefully together with ITA, otherwise with our own means of the 10 passenger airlines we have.
Hey, Jarrod. Good morning. Remco here. Staffing, good question. Of course, the whole productivity around the staffing is one. We have been very much looking at as part of our cost savings, and that has not gone away. The comment which Carsten made more around staffing is just the natural changes which take place. Let me give you the examples. If you take the first half- year, we went up with about 1,000 FTEs, which is about 3,000 increase in LSG, because LSG North America had a big reduction, correct, in North America during the crisis, and it went up with 3,000, just in the last period.
On the rest, we actually went down by 2,000 because of all those voluntary programs coming to an end, and people left the organization. Equally, we have also people who are leaving the organization, and we need to replace. Now, where we do increase is in Lufthansa Technik. That business is going very well. We need engineers, so we're actually moving up, and we expect also that in the second half to continue. That is very good news. On Eurowings Discover, we have grown to 750 people, and that is exactly in line also with the question which was asked for the platform strategy in the first half of the year. Of course, with Eurowings, that is similar.
There's also platform strategy which comes through in the period. Dividends. With the WSF needs to have sold their full participation before we are actually allowed to pay dividends again, as I understand the latest situation to be. Of course then when we come in a sustainable, profitable situation and also legally with the Deutsche Lufthansa AG, it's all allowed. We of course come back to a dividend policy, that is a bit too early to say. Of course, I can confirm that once we're in the position, we will. That's our intention to restart. With proceeds of disposals, first idea is just to lower our debt levels so as to come back to investment grade rating. Nothing more to say other than that boring answer.
Great. Thanks a lot.
The next questions come from Muneeba Kayani from Bank of America. Please go ahead.
Good morning. First question is just a follow-up on the strikes impact, and if it's not included in that EUR 450 million-EUR 500 million disruption number, can you help quantify what's the financial impact from the strikes that you had recently from ver.di? Then secondly, you'd mentioned that bookings are at 83% of pre-crisis levels. Is kind of can you help us understand how to think about that? Is it should we be comparing that with kind of the 80% of capacity, and given what you've said on yield, shouldn't we be expecting it to be higher? If you could help us frame that 83% of bookings. On asset sales, are you comfortable with your balance sheet if there are no asset sales because of market conditions? Thank you.
Yeah, maybe on the bookings, why it is not that easy to compare. Of course, booking patterns have also changed compared to initially pre-crisis booking patterns have been very short- term. Which is why your inventory usually is lower than it would be in pre-COVID times. Now, recently, booking patterns have become more normal again. corporate-travel is coming back, so we see longer booking pre-runs. Basically, your logic is right. If you have 83% of bookings compared to 80% capacity, which obviously is part of the reasons you see those nice yields and load factors you see. You cannot just purely do the math because, of course, there is booking patterns, logics here as well. I don't want to make it too complicated, but generally, I would say yes to your question.
Let me, Muneeba, good morning. Let me take the question on the strike. Just to avoid any confusion before I answer, right? The ERAC costs, as we mentioned, are the compensation costs we pay to employees, right? But it does not include any loss of revenue, right? That would come on top of in case of a strike. For the strike we had with ver.di, the irregularity costs are included in the EUR 450-500 million. Also, the loss of revenue and everything we had in July, correct, is also included in the guidance. If there are more strike days coming, of course, we will have some more irregularity costs and we have lost revenue. A one-day strike costs us somewhere between EUR 30-35 million. We cannot count.
We hope that that is not something which will happen again, but if it happens and comes on top of. Again, we want to do strategically the right thing for the company. We try to manage the situation the best, to do the best for the employees and the company, and try to find a good solution, as Carsten laid out, before. With regard to the asset sales, as I said before, the asset sales are actually to faster pay back on the debt, so to get us faster back to investment-grade rating. If it does not happen, there's no problem whatsoever with the balance sheet. I think you can see that as well as with the current debt level and the track record we have, the debt is coming down the level where the current equity is. That will have no material impact on our current position.
Thank you.
The next question is from Clementina Flinoy from Bernstein. Please go ahead.
Hi, good morning. Two for me, please. On booking patterns, how do you see them evolve, and, are they still much closer in versus pre-pandemic? What about business travel in particular? Second question on leisure passenger and premium cabin, is that something that you expect to stick around beyond the next 12 to 18 months? Or do you see that as more related to spending excess savings accumulated during the pandemic? Third, on capitalization, are you still looking at a 2-3 own to lease aircraft target? If so, is the current situation accelerating the latter, given your current visibility or uncertainty? Basically, how comfortable are you with your current fleet mix and order book? Thank you very much.
Hello, Clementina and Carsten. To be honest, we had a little bit of a technical problem to fully understand what we are saying, so I'll try to answer as good as I understood the question. Please get back to us if you feel misunderstood. Booking patterns or corporate-travel. You know that long- term, we said by the middle of the decade, we expect it to be around somewhat like 90%, 'cause some corporate-travel might not return. China might not completely open. There's so many question marks. That's how we looked at it. I think we can see ourselves going into the 80% next year. We're probably at 50% right now, but the summer, of course, has lower corporate- travel anyway.
We see a nice ramp-up coming for the third and the Q4, and I can see us being at 80 somewhere in 2023. Again, with all question marks attached to this. On premium leisure, I said again, I'm not an academic on the social developments around the world, but I think again, we have seen this in other crises. We have seen, especially in this one, those people who are traveling business class or even first class on an airline like Lufthansa, be it from the U.S., be it from China, from Europe, they tend to be less sensitive to economic up and downturns. Be it again, based on their income, be it based on their wealth. I think this is a very much less sensitive business in that regard.
Fair enough, we have to say there was a lot of room in business in first class because the yields are still lower than corporate yields. When now corporate-travel comes back, we might even see some competing for these seats in premium and first, which usually drives up the yield even further. A positive here also for 2023 and beyond. With the fleet order book, we're happy with the order book. We're not happy with the delivery times, as you know, because we have seen very significant delays both in Boeing and also Airbus. Again, as much as that causes some operational issues, you know that we are re-bringing back the three-eighty because of the delays of the triple seven nine-X.
I also shared in my little speech that when you look at the industry, that slowdown in deliveries will help the industry to reduce overcapacity and will allow every major player like us to stabilize yields further. The overall goal remains the same. We wanna streamline our fleet, we wanna harmonize our fleet, and we wanna bring down not only cost, but also CO2 emissions. There we strongly believe to be on track again with the delays you're well- informed about.
Okay, just one follow-up on the fleet. Are you still targeting a 2 to 3 own to lease aircraft or not anymore?
You mean the mix of owned and leased aircraft? Yeah, well, first of all, we're gonna answer your other question here. Remco will-
Yeah, let me take that. Correct. You know that we have an operating lease. A part of our portfolio is more closer to 15%-20% currently. That's over the coming 5 years we will want to take up. Proportionally, of the new aircraft we will take in the coming- years, we will take more operating leases in. Of course, that depends also on the deals we can get. Correct. The development of interest rates, et cetera. It's of course not a fixed one, which is unlimited. As part of the overall portfolio, we'll indeed increase the operating leases, and that I think is the right thing to do, and there's no change versus what we communicated earlier.
Thank you very much.
The next question is from Andrew Lobbenberg from HSBC. Please go ahead.
Remco, Dennis, good morning. Congratulations on the results and that presentation. Even you looked so not a German airline. Can I ask about the pilots just coming back and the willingness to discuss the perspectives agreement? I mean, I guess it was a smart move to remove the perspectives agreement so you can put it back in play. Does this mean you're going to give up on the CityLine 2 concept and you're willing to put in place limitations on the size of the likes of Eurowings and Discover Airlines? Second question would be around the impact of foreign exchange on RASK and CASK.
If you could just give us a bit of color, 'cause obviously in normal times, you know, people disclose the RASK ex-currency, but suddenly now RASK is up a lot with FX, you're all disclosing it with currency. What's the impact of the dollar and indeed the CHF on that for RASK, but equally for CASK. Then on the short-haul yields, they're you know, dramatically less strong than the long- haul. Given that you've got less speed flying, less connecting flows, I'd thought more point to point on short- haul would be supportive to yields or maybe it's the business mix. Can you just explain why the short- haul yields are that much weaker and maybe what the trend is through the quarter? Thank you.
Yeah, Andrew, good morning. Remco here, the Dutchman here in the German organization. I loved your first comment. Hey, on the Paris Agreement, right? I repeat again also on the Paris, our strategy to have multi-AOCs, multi-hubs is really essential because for some of the touristic routes, we need to have a competitive offer as well on some of the short-haul traffic. That will remain unchanged. We talk really about Discover Airlines and Eurowings, correct? With regard to CityLine, that depends on how the negotiations will go along the way, but clearly our strategy to make sure that we remain competitive on the different routes will remain in place, and we will not give that away.
On the CASK, what we give you on the number for Q2, the 8.5% versus 2019, as you said, it includes 2% with regard to the translation impact of Swiss, which actually brought those costs up. There is indeed also a US dollar impact, which will probably brought that up. We haven't quantified that. We will do that as next quarter. We had this discussion internally, but we didn't have the real right numbers here to come out. The same we'll also do from the RASK as of next quarter. Yes, there is a little bit of benefit in the RASK coming from the US dollar, but we can't properly quantify it at this moment.
Again, next quarter comes in, but we see overall in the benefit, if he excludes the fuel, it should net off, excluding fuel, about, and actually help us, net a little bit. We think it's limited, but again, sorry, we have to wait for Q3. On the yields. Correct. Indeed, you're right. Short- haul, 0% versus 2019. Long- haul, 15% net +10% versus 2019. We have to remember that on the short- haul, the corporate booking impact is quite significant, correct, to come through. To hit zero versus 2019, with still a significant lower corporate booking, I think is showing the strength. When corporate bookings comes back further next year, we expect that really helping on the short- haul.
For the moment, we expect a similar trend in the second half- year as in Q2. Around zero versus 2019 in continental, with probably a bit better in Q3. The same we would see in continental for Q3 and Q4, as I said before. I'm not worried on the short- haul, that level. I think it's on the contrary. I think considering the lower business carrying, it's a very good performance.
Okay. Thank you.
The next question is from Sathish Sivakumar from Citi. Please go ahead.
Good morning, Remco, Carsten, and Dennis. Thanks again for your time. I've got three questions. Firstly, on the yield progression, could you give some color on how it has actually progressed into the quarter and how does it actually looks into July in terms of yield trends? The second one is actually on the load factor. On slide 25, where you're given the load factor by different region. If I see that the short- haul, i.e., the Europe is actually below 2019 by 1.5% compared to Americas, which is like 5% below. What is actually driving this lag? Because we have seen a strong premium performance, so I thought actually what your American load factors should be close to 2019 levels. The third one is more related to the premium segment.
Where are you actually on the conversion program in terms of premium cabins? What is your current premium fleet mix today that you're offering, and how does it actually compare versus 2019? Thank you.
Sathish, let me start with the premium cabin. As I mentioned in my opening, we are now looking at a quality and product initiative starting this fall, then lead into new seats in all classes being rolled out in 2023. We have premium aircraft coming in while we speak, which we were able to have opportunities on the market that, which do not have our own new business class, but have an improved business class, both A350s and 777s probably to be received somewhere this month, latest September, somewhere this summer. In 2023, our first so-called Allegris product future in-cabin experience will be rolled out the way it looks now with the 787 and A350 in 2023. These seats will also be put into the 747-8 in the years thereafter. This will be the standard premium business class product.
Premium economy is currently being rolled out in Swiss, will be started to be rolled out in Lufthansa also in 2023. New first class starting in Lufthansa the end of 2023, and economy class as well. 2023, we'll see in all classes the new product being brought into the long-range fleet. Numbers, you asked for this premium share now compared to 2019. That, of course, is changing almost every month. The with A380 without. Let me see if I find a number on that. I don't have that at my hand right now. I'll see what I can do.
Your question on the load. There is a different commercial background between EU and North America. In North America, we have more business- related travel and also ramp up of the flights in the quarter. Yields in North America are significantly higher with a little bit lower- seat- load factor. You're right, but you have to see that in that combination, and it's to do with the ramp up and the business travel not yet on the level. It actually is a little bit opportunity when we think about Q3 and Q4 forward. On the EU side, that's the other. You know that in terms of the percentage return of ASK versus 2019, we're a bit higher.
Yields are very, very good, and seat load factors are also, but the yields are lower than the increase we have in North America. It's just a dynamic situation and commercial situation of the two regions. With the first question, I'm not sure I really understood it, but if it's related to the yields of the Q3, it's the same what I said before. We expect for the second half of the year an increase versus 2019, roughly in line with what we had in Q2 of around 10%, with Q3 probably a little bit higher than that.
Actually, it's more about our June yields versus July yields are tracking.
Yeah, I think I would like to stay on the quarter yields and not compare month-by-month in this discussion. I say overall, it doesn't make much difference. I would say I would be roughly in line, but I would not like to go in really specific numbers on a month-by-month basis if you allow me.
Yeah. Thanks. Thanks, Carsten.
The next question is from Johannes Braun from Stifel Europe. Please go ahead.
Also three questions. First one would be on your saving targets, EUR 3.5 billion. You said you've implemented EUR 3 billion by now. This EUR 3.5 billion obviously is a gross number, not a net number. The question would be, based on what you have offered to the pilots and to the ground personnel and to the cabin, to what extent would that be diluted, those EUR 3.5 billion? I'm just trying to get a feeling about the magnitude of the cost headwinds coming from labor. Second question, I'm not sure whether I understood this correctly, but I think, Remco, you said that the EUR 158 million disruption costs were 50% in operating costs. Question would be what's about the other 50%?
I assume this relates to lost revenues, and if yes, does the same 50/50 split apply to the EUR 450 million for the full year? Then thirdly, just on CityLine 2, I think it just said that CityLine 2 depends on the pilot talks. So does that mean that the CityLine 2 project is not a done deal yet? I remember from the Q1 call, I think, or at least I understood that CityLine 2 would be implemented anyway. Just a clarification on that would be good. Thank you.
Yeah, maybe I'll start on that one. I think as Remco pointed out, answering to Andrew Lobbenberg, the PPV, or in English, the PPV agreement we had with Vereinigung Cockpit over the last years indeed limits the number of airplanes in CityLine. Could there be also limitations on the number of CityLine if we come to a new PPV agreement? Could there be limitations on CityLine too flying only X aircraft or maybe even zero? That's up for negotiation. Last quarter, we were looking at a situation that there was no opening to come to a new PPV because we were so far apart with our fleet planning from the expectations of Vereinigung Cockpit, which is why we canceled it in the first place in December.
We are much more optimistic now with the current fleet planning that there could be a compromise on the PPV. We said that there's no option visible for an integrated larger solution. We need to go in terms of our cost savings for a different mix, including City Line two. City Line two also serves for two other reasons, not just cost savings. We need a room for the Germanwings pilots who unfortunately are denied to fly as captains in the main airline by the works council. We need to have a perspective for the City Line pilots flying aircraft with more than 95 seats, which without an agreement on a new PPV, they wouldn't be able to do after 2026. There are really three drivers for City Line two. I know it's complicated, but that's how it is.
If you have a new PPV agreement or a renewed one, these three issues could be solved. That's up for negotiation. If we don't have a new PPV, obviously we'll have only negotiations with Vereinigung Cockpit about their expectations for higher-s alaries. That, of course, would require us to compensate those higher- costs with a different mix, as Remco pointed out. That's where we are today. Again, I'm optimistic. We already have dates set to talk to Vereinigung Cockpit. I think, we are too early in the process to really give you, guidance. Beyond that, there's constructive dialogue going on.
Johannes Braun, good morning. Remco Steenbergen here. I will start with question two. It's a more technical answer. A disruption cost of 158, that number which I mentioned. Accounting-wise, there's a different treatment, which causes 50% to end up in expenses and 50% on revenue. The compensations we have to give for EUR 300 or EUR 600, they end up as a reduction in revenue, whereas, for example, hotel cost reimbursement, et cetera, ends up in operating expenses. That's why we give you that split in case of those of you who do the modeling. I hope that that answers your question. On the first one, the EUR 3.5 billion savings, they're indeed gross. We have also in our 2024 target assumed a certain amount for inflation, for fees and charges, salaries along the way.
That was an amount between half a billion EUR and EUR 1 billion we have assumed over that period. Some of inflation we can handle. If there is in general inflation which affects all industries in our industry in general, correct, I would expect things to come through higher- yields, correct? In that sense, less worried. If it impacts productivity, it's another ballgame. Hence the discussion before that strategically in the mix of the hubs and the AOC, we need to remain competitive. On the cost overall, EUR 3.5 billion, you have seen that on the non-personnel side, we are almost there. We have also additional product, more productivity, so that will not be written, but productivity-related savings identified, which we're also targeting to compensate if on the personnel side we will not reach that number.
That's our target, still internal. In that sense, I think we have the right balance overall to still come to our 2024 targets and also to the justification on our overall cost savings and productivity targets when we particularly look at the CASK. Hence also the CASK outlook we have given, because still to remember that the CASK outlook we have given for the end of next year still assumes a significant lower ASK than we had in 2019. Productivity-wise, we're in a different state. I hope that answers your question, Johannes.
Maybe just coming back on that. If you maybe just look in isolation on the, let's say, the ver.di demand of having 9.5% increase in wages, what would that be based on the 20,000 employees that you have, represented by the ver.di Union, what would that mean in euro terms?
I think it is because of the stage also of the discussions we have with the unions. I don't think it is opportune to be that specific on numbers. I don't think it's helpful for all the parties. I would like to refrain from answering that question for that reason.
Appreciate it. Thank you.
Ladies and gentlemen, unfortunately, we've come to the end of the call. Thank you very much for your interest and the many questions you asked, but simply for timing considerations, we'll have to stop here. In case of any questions that are left unanswered, please do not hesitate to reach out to us or to the IR department. We assume that you have our contact details. Thank you for your understanding, and thank you very much for your participation today. Bye-bye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.