Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Lufthansa Group Full 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. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Dennis Weber. Please go ahead.
Yeah, thank you very much. Good afternoon, ladies and gentlemen. Welcome to the presentation of our results for the financial year 2022. With me on the call today are our CEO, Carsten Spohr, and our CFO, Remco Steenbergen. The two will review our performance in 2022 and present to you our outlook for the current year. Afterwards, you will have the opportunity to ask your questions. Since we are expecting a great deal of interest, I would like to ask you already now to limit your questions to two. Thank you. Carsten, over to you.
Dennis, thank you very much. Ladies and gentlemen, warm welcome from me as well. At least those of you who have been around for some time won't be surprised when I open up by saying that we once again look back today on an extraordinary year. The start of the year was strongly impacted by the spread of the Omicron variant and the related travel restrictions. From Easter onwards, when restrictions eased, it became clear that the desire to travel remained unbrokenly strong after the pandemic. As a result, the whole industry, the whole airline industry at least, witnessed an unparalleled boom in demand. The recovery of passenger numbers was so steep that the global air transport system went into overload at some periods of time, and also we in the Lufthansa Group disappointed our passengers at this stage to a certain degree.
However, in economic terms, it was clearly a successful year. 2022 marked the biggest financial turnaround in our history. Our passenger airlines are back in business, and we welcomed 102 million passengers aboard, more than twice the number of the previous year. In total revenue for the Lufthansa Group nearly doubled year-over-year to EUR 33 billion. Once again, strong earnings from our cargo and our MRO segments made a major contribution to overall profits. Lufthansa Cargo achieved an Adjusted EBIT of EUR 1.6 billion, and Lufthansa Technik, an Adjusted EBIT of over EUR 500 million. These are both record highs in the history of these two companies. In total, the Lufthansa Group achieved an Adjusted EBIT of EUR 1.5 billion for the 2022 financial year, a significantly better than expected result.
Ladies and gentlemen, in 2020, we actually were fully busy to secure the economic survival of the Lufthansa Group. In 2021, the year was characterized by our restructuring and the early repayment of all stabilization measures in Germany based on a successful debt and equity refinancing. In 2022, we ramped up our operations and managed the financials of the crisis by reducing debt almost to pre-crisis levels. We also launched our comprehensive premium and service initiative last October, which we are continuing this week with our announcement of additional aircraft orders and the details of our new long-haul product offer, both at Lufthansa and Swiss.
We expect this strong momentum to continue into 2023, so we once more confirm our medium-term targets, which you know are to achieve an Adjusted EBIT margin of at least 8% and Adjusted ROCE of at least 10% by 2024. When we aim to do so, we use our three focus areas, which I use towards our staff, calling them the three Ps. First of all, product. We want to remain the quality and innovation leader of our industry. To this end, we are making substantial investments in our product and services to drive future profitable growth. Number two, people. We want to grow again as a team and create attractive career opportunities for our employees. To this end, we are recruiting more people to support our return to pre-crisis levels of activity and productivity, by the way.
Because we believe that's our employees who give us an edge over our competitors. Number three, profitability. Further increase in profitability and the continuous generation of strong free cash flow remain an absolute necessity so we can continue to invest in our fleet and our premium quality initiatives. We will achieve this by becoming more focused and even more international, and by speeding up our development from an aviation group into an airline group. One thing remains very clear to us, our multi-hub, multi-airline and multi-brand concept, including multi-AOCs and the diversity of our airline group, are not at all a weakness. On quite the contrary, these elements are increasingly becoming the key success factor in our strategy.
I will go more, into more detail on these three topics in a moment, but first, what you're all waiting for, Remco will explain the key financial figures for the past year in more detail. Remco, over to you.
Thank you very much, Carsten, a warm welcome to all of you as well. Before discussing our full year results, let me briefly present to you our performance in the fourth quarter. Group Adjusted EBIT was significantly positive at EUR 575 million, in line with the expectations that we communicated in mid-December. All main business segments recorded profits. The group passenger airlines continue to be successful in passing through higher costs. Yields were 21% above the pre-crisis level, in line with Q3. The strength of the transatlantic continued with a 23% yield increase over 2019, the same as in Q3. Adjusted EBIT of the passenger airlines amounted to EUR 191 million in the quarter. Lufthansa Technik continued its strong performance and recorded an operating profit of EUR 140 million in the fourth quarter.
Lufthansa Cargo continued to generate strong results, with an Adjusted EBIT of EUR 292 million in the fourth quarter, although demand and yields continued to normalize. With regard to the full year, 2022 was indeed a year of the group's financial turnaround. Actual performance exceeded all expectations, as Carsten already highlighted. Group Adjusted EBIT reached EUR 1.5 billion, significantly more than the blank zero we were aiming for at the very beginning of 2022. I would also like to highlight our performance below the operating profit line. Net income reached EUR 791 million, benefiting from structurally low financing costs, reflecting the good timing of debt refinancing measures in 2021, our historically only small share of leasing, and the successful deleveraging in the past 12 months. As a result, financing costs even declined year-on-year.
In terms of cash flow generation, 2022 was the best year in the company's history. Adjusted free cash flow was EUR 2.5 billion, driven by the earnings recovery, strong bookings, also by our focus on strict cash and working capital management. The capability strongly encouraged throughout the company by the crisis. Our Adjusted return on capital employed, ROCE, was slightly above 7%, in line with our weighted average cost of capital. We are proud that we are making visible progress towards our 2024 target of achieving an Adjusted ROCE of at least 10%. For the passenger airlines, 2022 was a year of two halves. While the beginning of the year was marked by the spread of the Omicron variant, the outbreak of the war against Ukraine, and rising energy costs, demand gained momentum week after week from spring onwards.
An operating profit of around EUR 900 million in the second half was not enough to have fully offset a EUR 1.2 billion loss in the first six months. Adjusted EBIT was minus EUR 300 million for the full year. Swiss stood out with an operating margin of 10%, and also Austrian Airlines had a remarkable performance and return to profitability. Our disciplined approach to capacity expansion and sophisticated revenue management paid off with a yield increase of more than 20% in the second half year and a 16% increase in the full year, both compared to 2019. This was driven by our long-haul business in particular. Seat load factors were even higher than in 2019 in the second half year, and for the full year, only slightly short of the pre-crisis level.
Turning to our aviation services. Profits of Lufthansa Cargo exceeded the prior year record level, amounting to EUR 1.6 billion, despite a gradual normalization of yields which started mid of last year, and moderation in demand caused by an easing of congestion in sea freight and the economic slowdown. Lufthansa Technik was the second company in our portfolio recording a record result, highlighting its strong position in the global aviation market that Carsten will elaborate on a bit later. Its Adjusted EBIT amounted to EUR 511 million in 2022, including an around EUR 100 million benefit from the appreciation of the U.S. dollar. LSG faced some challenges in 2022 due to high inflation and an especially tight labor market in North America.
LSG grew almost 80% and recorded an improvement in its operating results when excluding the support from grants under the U.S. CARES Act included in the prior year base. Digested EBIT loss was EUR 11 million in 2022. The result of the other businesses and the cost of group functions was minus EUR 255 million in total, 70% better compared to the prior level, especially AirPlus improved significantly. The recovery of earnings was the base for the generation of EUR 2.5 billion of adjusted free cash flow. Historic record for the Lufthansa Group. Customer prepayments related to new bookings increased by more than EUR 1.5 billion year-on-year, despite still shorter term booking patterns. Working capital developed positive as well, with the increase in trade payables far exceeding the increase of trade receivables.
Besides the effect from the expansion of business driving both positions higher, this reflects strict management of receivables and payables. I would like to emphasize that our working capital is clean. It does not include any deferred payments or similar support that could lead to the outflow in the future. Net CapEx amounted to EUR 23 billion in 2022. The gap to the guidance of EUR 25 billion resulted from the delays in the delivery of new aircraft, which we only expect in 2023 now. The cash outflow related to operating leases amounted to EUR 381 million, slightly above the previous year figure. I've always made it clear that returning to a strong balance sheet was one of our top priorities in overcoming the crisis.
Only a strong balance sheet provides the resilience needed to invest in the future of our business and to manage future crises. That's why I'm extremely pleased with the progress made last year. Available liquidity increased by EUR 1 billion to EUR 10.4 billion, despite a repayment of maturing liabilities and of the remaining state support outside of Germany, in a total of EUR 2.7 billion. New financings amounted to just EUR 800 million and mainly related to Japanese operating leases, the so-called JOLCOs, where the cost remain below our current average interest rate on gross borrowings of 3%. We have increased our target corridor for available liquidity to a range of EUR 8 billion-EUR 10 billion given the expansion of our business.
To design the liquidity buffer as efficiently as possible, we concluded a EUR 2 billion sustainability-linked revolving credit facility in spring last year. The interest rate on the facility is linked to the reduction of carbon emissions in line with our SBTI targets. Net debt declined by EUR 2.1 billion to EUR 6.9 billion, almost back to the pre-crisis level. Pension liabilities decreased to around EUR 2 billion at the end of the year. We're now examining how we can ensure that the net pension liability remains as low as it is today, even if interest rates would fall again, although it's too early to communicate details in this regard. Financial leverage defined as net debt, including pensions over Adjusted EBITDA, has fallen to two point three, even below 2019 levels when we were rated investment grade.
In view of the near doubling of equity in 2022, we intend to distribute a dividend again in 2024, provided that the financial year 2023 develops as currently expected. In this case, our dividend policy remains to pay out between 20% and 40% of net income. Another important priority over the past two years has been to adjust the group's cost base to the changes brought about by the crisis, by structurally reducing costs by EUR 3.5 billion. We have achieved great progress here, as EUR 3.2 billion of savings have been implemented, leading to a reduction of fixed cost by around 9%.
This includes the reduction of leadership positions in group functions by almost 20%, the closure and restructuring of profitable businesses such as Germanwings, SunExpress Germany and several MRO subsidiaries, and the achievement of significant synergies, particularly in operations across the group airlines, just to name a few examples. The cost reduction program has played a key role in limiting the impacts of inflation. CASK, excluding fuel, was around 13% higher in 2022 compared to 2019, with lower capacity having the largest impact. For 2023, inflation will increase to a mid-single digit % rate as a consequence of the implementation of the CLAs agreed in past months, as well as the rise of fees and charges, mainly in relation to air traffic control and airport charges.
Nonetheless, we are confident to keep CASK stable year-on-year in 2023 based on the impact of our cost savings program and better leverage of fixed cost because of capacity expansion. 2024, we target a low to mid-single digit percentage rate CASK decline. The reduction will be mainly driven by capacity expansion almost back to 2019 levels, increases in crew and aircraft productivity and additional efficiency gains, mainly due to the positive unit cost impact from fleet renewals and the standardization of operational processes and systems across our airlines, partly offset by inflation. The recent decline in fuel cost does not change our approach to yield and cost management. We don't rely on lower fuel costs to do the cost work for us, and we'll pass through higher costs to customers wherever possible.
Given the volatility of energy costs over the past 12 months and the potentially large impact of geopolitical events on the oil price, we decided to increase our target hedge ratio for crude oil back to the pre-crisis level of 85%. Taking into consideration that our options-based hedging strategy will still allow us to participate in case prices fall. For the year 2023, we have currently hedged around 76% of our crude oil exposure at a break-even price of $90 per barrel. The jet crack, which we hedge with swaps on jet fuel and gas oil, is 52% hedged with a break-even price of $30 per barrel. Including the effects of hedging and based on current market rates, we expect fuel costs to amount to EUR 8 billion for the full year of 2023.
This equates to an expected all-in price of around $960 per ton. I would also like to give you an update regarding possible changes in our portfolio, always based on the principle that we only talk about M&A when there's something to talk about. One thing is clear, we aim to develop from an aviation group into an airline group. Accordingly, for the remaining international business of LSG and AirPlus, we target a sale of both businesses once we can realize their full value. The sooner, the better. We have also advanced in the process towards a partial divestiture of Lufthansa Technik. In the past week, we have started initial talks with investors with the aim of finding a partner with relevant expertise to contribute to the value creation and expansion of the business.
Interest is very high, but it's too early to draw any conclusions. Now, let me finish with our financial outlook for 2023 and beyond. In line with previously communicated expectation, we intend to operate 85%-90% of pre-crisis capacity in the full year of 2023. In terms of profitability, we expect to make strong progress towards the achievement of our 2024 targets. We guide for a significant year-on-year increase of Adjusted EBIT in 2023 as the return of solid profits in the passenger airline segment is expected to be more than the decline in cargo profitability. Our MRO segment is forecast to generate at least a similar profit as in 2022. In line with the normal seasonality of an airline-focused business, we expect a particularly strong performance in the quarters two and three.
In the first quarter, we expect Adjusted EBIT to be negative. Net CapEx should amount to between EUR 2.5 billion and EUR 3 billion, including an impact from the aircraft deliveries originally planned for 2022, as well as some additional cash CapEx resulting from yesterday's fleet decision, which Carsten will elaborate on in a minute. Nonetheless, we expect a significant positive Adjusted free cash flow also in 2023. Our Adjusted free cash flow planning remains firmly anchored to our target of EUR 2 billion per annum also for 2023. Based on our expectations for the next 12 months, we're on track for the achievement of our 2024 targets. Compared to our initial expectations laid out in summer 2021, we expect unit revenue performance to be much stronger compared to our original expectation of a low single-digit % rate decline compared to 2019.
We expect this to offset the impact from higher cost inflation than originally expected. As a result, we confirm our targets to reach an Adjusted EBIT margin of at least 8% and a capital return of more than 10% in 2024. With that, over to you, Carsten, with a more detailed explanation of what will be driving this.
Thank you. Remco, thank you. Ladies and gentlemen, let me give you some more insights into our strategic outlook. Along the lines of our three focus areas, which I mentioned before, product, people, and profitability. An improved product for an airline consists first and foremost of an advanced aircraft and modern cabin interiors. That is why we are systematically continuing the modernization of our aircraft fleet. By 2030, we expect to have at least an additional 200 new state-of-the-art fuel and cost-efficient aircraft in our fleet, more than half of them long-range airplanes. In 2023 alone, we will add 35 new aircraft to our various airlines. Only yesterday, our supervisory board approved our decision to acquire 22 additional long-haul aircraft, which will join our fleet from the middle of the decade onwards.
This will enable us to further accelerate the modernization of our long-haul fleet. In the medium term, we will phase out at least six of the currently 13 long-haul aircraft types of our long-haul fleet, to reduce obviously operational complexity and costs, as well as the resulting carbon emissions. Now, let me come indeed to the cabins of these aircraft. This week, we presented the new Allegris Lufthansa long-haul concept to our customers and the public. It includes modern suites in first class, a completely newly designed state-of-the-art business class, and new comfort seats in premium economy and economy. Swiss will also be introducing an enhanced in-flight experience on its long-haul services, including new seats in all travel classes. The new Swiss concept is actually presented today in Zurich under the name of SWISS Senses.
Depending on delivery delays of our aircraft manufacturers, our guests will hopefully soon be able to enjoy these new cabin products. By 2027, over 80% of the whole long-haul aircraft in Lufthansa will be equipped with the new cabin products. With both Allegris and SWISS Senses, we aim to set new industry benchmarks once again and position our airlines far ahead in the premium segment. These new cabin interiors are part of the extensive product and service initiative that we launched last fall. For us, premium, though, is much more than a top-class hardware product. For us, premium is an attitude across the board throughout the group. It's the attitude we adopt when interacting with our customers, the attitude we adopt when developing new premium services and solutions, and the attitude we cultivate in our role as an innovation leader in our industry.
Innovation has always been part of our DNA. We have been central here at Lufthansa to numerous new developments in the past that have played a major role in shaping the aviation industry. Think about Amadeus, which we founded with our partners in 87. Think about Miles & More, our frequent flyer program, number one in Europe, or of course, the Star Alliance as a global ally network and the first mover in this area. It's in this tradition which we, in which we want to continue to develop new ideas that inspire, ideas that excite, and ideas that create added value. This particularly includes the technological innovations which we are convinced are the true key to effective climate protection.
We aim to have our Or aim to half our net carbon emissions by 2030, we aim to be completely carbon neutral by 2050. We made quite good progress in this regards last year, reducing our specific CO2 emissions by 11% compared with the previous year. Sustainable aviation fuels or SAF are the one other key element on the path to more environmentally friendly air transport. The five largest SAF customers worldwide, we will have invested more than a quarter of a billion EUR in these fuels by 2024. We have contracted with our partners to acquire over 200,000 tons of SAF by 2025 to ensure that we will always have enough SAF for our customers, speed cargo or passengers, to make sure that their air travel or air transport is carbon neutral.
Our SAF supply volume is expected to steadily increase each year all the way up to 1 million tons in 2023. For our private travel customers, we have now made it even easier to purchase sustainable fuel. With our Green Fare, the offsetting of the carbon emissions generated by the customer's air travel is included in the price of the ticket. This offsetting is achieved 20% through the use of SAF and 80% through a contribution to quality climate protection projects. While only 3% of our customers used one of our various carbon offset options for their air travel in the second half of 2022, we are confident that at least 5% of our guests will soon be offsetting their carbon emissions based on the successful reception of the Green Fares in the first days after launch.
Our efforts to increase sustainability have also been recognized by CDP, the most important climate ranking worldwide. Here, we improved from a B rating ranking in the prior year to a A- in 2022. Our second focus, people. We want to continue to attract the best people to the best team in the industry. To ensure that we do, we've launched the biggest recruiting campaign ever in our company's history. By the end of 2023, we will have some 115,000 employees on board again in the whole group, obviously supporting the ramp up back to pre-crisis levels of activity. To achieve this, we need to recruit 12,000 new employees across all the group's companies in this year alone.
At our airlines, for instance, we are looking for over 3,000 new members of our cabin staff alone, with more of half of them already recruited. Our personnel needs remain sizable on the ground as well, at our stations, but also in the hangars of Lufthansa Technik and Lufthansa Airlines. Our recruitment activities are therefore a permanent priority because they will help us to make our contribution to the stability and the reliability that we are seeking for this coming summer in Europe's air transport sector. Third focus, profitability. Our preparations for the coming summer are also vitally important because we continue to see very high booking demand among our customers. For the first quarter of the year, we expect our yields to be around 20% above 2019 levels, thanks primarily to the demand for leisure travel.
This trend is set to continue and even accelerate in the second quarter. Booking levels here are so high, especially for Easter and the weeks thereafter, that based on current bookings, we expect our second quarter yields to be even higher above 2019 levels than the ones of the first quarter. We are quite optimistic for the summer as well. The present encouraging revenue trends look, especially in the long-haul segment, where the demand, among others, for transatlantic travel is very strong. We have also seen a steady increase in travel demand in our home markets in recent weeks.
Leisure travelers, in particular, continue to book flights in business or even first class. As a result, our premium classes are currently significantly better booked for this spring and summer than they were at the same point in pre-corona times. We also have high hopes for the impacts of China gradually reopening on our business, especially in the second half of the year. We further expect business travel to continue to recover as the year progresses. By the end of 2022, as a result of higher yields, business travel was already back to some 70% of its pre-crisis levels in revenue terms. By the end of this year, business travel should be back at around 70% of its pre-crisis levels in terms of passenger numbers as well, resulting obviously in an even higher share on the revenue side.
The predicted recession in our home markets has fortunately not materialized, and global trade continues to be as important as ever. Companies are diversifying their supply chains and target markets in light of the geopolitical situation, with a corresponding impact on international business travel research says that global trade is back to 17% of global GDP, which is among history, rather higher end numbers. Ladies and gentlemen, in addition to our home markets and the U.S., Italy is and remains one of our top markets in 23. It's a market in which we are seeing very strong demand for our premium travel product with business class bookings up nearly 30% on their 2019 levels. In view of this, but not only in view of this, our possible acquisition of an equity interest in ITA remains a strategic goal for us.
By successfully achieving this, we aim to further strengthen our position in one of our key markets, mainly Italy, but also of course on our market shares to other parts of the world from Italy, which we are currently serving through our hubs. We have devised a detailed plan here that has identified significant synergies with ITA and can make the airline profitable in a reasonable period of time. Broadening our multi-hub, multi-AOC system will also help us to for ward on our path to becoming more international. We feel that this is essential in view of global competition. This is because being too dependent on one very restrictive regulatory framework or only one labor market would cause us to fall behind globally, at least in the long term.
We at the Lufthansa Group will therefore continue to do our utmost to remain an international leader beyond our home market position in our field. Ladies and gentlemen, after all, we expect to see a very healthy balance between supply and demand in the years to come for the whole airport, air transport sector. In my own assessment of the market here, I completely agree with my colleague Scott Kirby at United Airlines, our most important partner globally. Capacities will remain limited for many years ahead, while at the same time demand continues to increase. This is something we in the industry have been waiting for since I'm around. That is because there are currently so many factors in many areas that should help prevent overcapacity from developing. These are, among others, shortage of personnel at our airport partners, other industry partners at some airlines.
Think about the pilot shortage in the U.S. Second, bottlenecks in aircraft deliveries. This currently affects all aircraft manufacturers as well as the suppliers of engines and sometimes forgotten, the suppliers of seats. Of course, third, bottlenecks in the supply of components and spares which are affecting us. As all our global competitors are faced with the same challenges, the capacity offered by the Lufthansa Group airlines is in line with the markets in Europe and Asia. But on our transatlantic routes, we're even able to slightly reduce our offer beyond the market developments, thanks to our strong Atlantic Joint Venture with our partners. Overall, at 85%-90% of capacity, we have deliberately planned our capacity more conservatively than many other airlines. The high load factors, the high yields are just too much fun.
It's not just about money, it's also about operational stability, reliability, quality and punctuality at our airlines being our top priority. Therefore, our commercial strategy will remain clearly yield-focused. Fortunately, we do not have to expect major capacity constraints this summer within our entire multi-hub systems. Our system, our hubs and airlines outside Germany, therefore Zurich, Vienna and Brussels, are very confident that they will be able to perform their flight program as planned long term. Let me switch to Lufthansa Cargo and Lufthansa Technik, which played both a major part in our strong performance in 2022, and we expect these segments to continue to post strong results. We expect our cargo business to deliver another very good performance this year, compared at least with the pre-crisis period.
Our cargo yields are sure to decline from their 2022 levels, but still should be significantly higher than in pre-pandemic times. Lufthansa Cargo is consistently digitalizing its sales and handling processes more than any of its competitors known to us. Our cargo business is acknowledged and appreciated worldwide, especially for its so-called specialist expertise, particularly in the field of complex transport, such as temperature sensitive pharmaceuticals, very strong growing market, where specific know-how and maximum reliability are essential. In response to the high demand in the e-commerce segment, we are also doubling the size of our short-haul cargo fleet this year from two Airbus A321 freighters to four. The expansion of Lufthansa Cargo's business model here has been a complete success. On its long-haul routes, Lufthansa Cargo operates an all Boeing 777 fleet, and that offers the world's obviously most advanced freighter aircraft to our cargo customers.
With its strong market position, Lufthansa Cargo is set to remain a clear success story and a key pillar within the Lufthansa Group. We expect, as mentioned before, our cargo business to make a further significant contribution to the overall results in 23 and beyond. Like Lufthansa Cargo, Lufthansa Technik also holds a top position within its industry sector. As the number one in the aircraft MRO industry, Lufthansa Technik has a diversified global customer portfolio and holds maintenance contracts for more than 4,000 aircraft. Our MRO business is also benefiting from its successful digital transformation. Its core services, such as predictive maintenance, material management, and process innovation, for instance, are already fully digitalized. The post-pandemic recovery has prompted a steady increase in demand for Lufthansa Technik services. Here, too, we expect to see a continuation of the favorable results of the past three years.
Obviously, with exception of the pandemic years, in this case, different than cargo. Ladies and gentlemen, we look ahead with great confidence. The past few years have made us not only stronger, but also, and in particular, more resilient. It's sometimes easily overlooked that we have used the past crisis years to streamline our organization and to make ourselves more efficient, at the same time, more effective. The full effect of this, I think we will only start to see in 2023, 2024 and beyond. In doing so, we have laid the foundations to continue to grow in the interest of our customers, employees, and of course, shareholders. We want to continue to shape the industry's future, providing premium products that excite our guests and enable our industry to make progress when it comes to protecting our climate.
We want to live up to our claim to leadership in this fascinating and unique industry, always with the aim of further improving our number one position in Europe. Personally, I'm not just very proud of the performance of our unique team in the last years and these terrible years of the pandemic, I'm also very convinced that together we will achieve the goals I just lined out. With that, thank you for your attention, and we all 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 . If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. In the interest of time, please limit yourself to two questions only. Our first question is from the line of Jaime Rowbotham from Deutsche Bank. Please go ahead.
Afternoon, gentlemen, and congrats on the contract extensions, which it was very pleasing to see. Two questions from me. First, on slide 23, I'm looking at the line for the recovery in corporate travel. What is it about 2024 relative to 2023 that leads you to be a lot more optimistic in terms of the recovery there? What would be the implications for the group if that didn't materialize, please? Secondly, on CapEx, in terms of yesterday's order for 22 further wide-bodies, to be delivered from the middle of the decade, what does this mean for CapEx in 2024 and 2025, please, given the pre-delivery payments that will start falling due on top of existing planned CapEx? Thank you very much.
Let me start with the first one, Jaime. I think there's two triggers to our optimism on corporate travel. One is the individual behavior of corporate travelers, which, as we all know, after the pandemic, being used to video conferencing, not seeing your customers for a while, we see a little bit of a hybrid way of running your jobs. We don't think, and we see it also in larger companies now slow, more slowly than in the small and medium companies, this way of running a business doesn't work. Individuals will travel more, think about the diversification of supply chains where you have to visit three suppliers rather than one in China before. That's the individual element. The second one is a more mathematical effect.
Two large mark ets with a high share of corporate travel were not really in full swing in 2022 and not even the first part of 2023, which is China and Japan. Now just these markets coming back to even the same levels as other markets with the higher share of corporate travel will, by statistics, drive our corporate share. Remco, you love CapEx for airplanes, so I hand that to you.
Thank you, Carsten. We have said before, correct, the CapEx around EUR 2.5 billion. That's still applicable also for 2024. Last year we had a little bit lower CapEx, around EUR 2.2 billion, EUR 2.3 billion. That delta we expect to come into 2023, so hence the range we have given of EUR two and a half billion-EUR 3 billion. Yes, we have given out a new order.
Large part of this order is in the later part of this decade when it comes about. Some of the part, of course, we had already taken in considerations after 2024, in line also with our profitability further going up. We expect an increase of the CapEx. The net CapEx might then go to around EUR 3 billion.
Thanks.
The next question is from the line of James Hollins from BNP Paribas. Please go ahead.
Yeah, thanks very much. As Jaime noted, well done on your deals. First one is on Frankfurt capacity. I think the 75% in Q1 is related to trimming Frankfurt. Maybe you could tell us, if I may have missed it, where you'd be on 2023 as a whole on Frankfurt, and do you think they will be ready for the summer? 'Cause last year it wasn't great. Secondly, Carsten, well, you and your group, very committed to rail air connectivity. I know you're already talking about it in Italy, also in Germany as well. I was wondering, where we are on that getting traction on that with the regulators and rail providers, and also how that might impact your short-haul fleet planning. Thank you very much.
James, on Frankfurt capacity, we're looking at probably 85%, so on the lower end of our overall capacity planning of this year. I'd rather stay at 85% from Frankfurt and go to 90% and whatever in Brussels and Vienna, because we do know, second part of your question, that Frankfurt is more challenged by constraints than other hubs in our system. I happy to say they are fully recognizing that. They are investing in technology, some of the security checks. They're hiring as much as we can. I really think they have woken up, and therefore, I think that 85% we are planning with them should be running as we need it. If there is a need to cancel flights, and you probably know we did that just a couple weeks ago, we'll do it.
I'm positive in terms of how do we cooperate. I'm realistic in terms of how much can Frankfurt cope with compared to the other hubs in our system. Intermodality, let's stay in Frankfurt for a second. We have connected every German destination we offer by train to Frankfurt Airport with that wonderful train station they built here, which we cannot do in Munich. We are working closer and closer with the German railway system company, as we also do in Austria and Switzerland, and we're now starting in Italy. If you ask me how that plays in the future, I would think when it comes to intermodality in terms of digital cooperation tickets, customers getting used to it, tend to be positive. When I look at infrastructure developments, think about connecting Munich Airport to rail.
I don't know how old you are, but I'm probably too old to see that in my corporate life at least. That's surprisingly, not surprisingly, it's frustratingly slow in Germany compared to other parts of the world. Using the infrastructure we have, I think we'll see more progress here. On fleet planning, we of course have this in our fleet planning. What we do is we take the share of fleet we have on rail, take that away from our overall fleet planning. Best example for me is always Düsseldorf. We fly now 4x a day from Düsseldorf to Frankfurt, which is exactly our four intercont banks we have in Frankfurt. All other connections between Düsseldorf and Frankfurt are by rail.
Just a few years ago, we had 10 flights a day from Düsseldorf to Frankfurt. That gives you six less flights and all that of course happening in other airports, Stuttgart and Hanover as well. Quite an impact on fleet planning. Included in our current planning.
Okay, thanks for the detail.
The next question is from the line of Stephen Furlong from Davy. Please go ahead.
Yes. Hi, Remco and Carsten, and well done again. Wanna ask maybe Carsten, you could just talk about thought process. I mean, it's early days, but all being well in terms of ITA, do you see Rome as being the kind of southern hub of the Lufthansa Group? I'm kind of thinking, you know, with perhaps TAP also being up for sale, just your thought process there. Then for Remco, just maybe if you go back to Lufthansa Technik, could you share any more kinda again, the thought process in terms of what would be potential structure of a deal? Have you looked at, I know to extract value, other examples or industries where this type of similar type of structure has taken place? Thanks a lot.
Stephen, as you are aware, the five hubs we have are fairly northern positioned in Europe, which has its advantages. Think about the North Atlantic, think about Japan, Tokyo, China, or Japan, China. When it comes to the, in my view, relatively small but growing Southern Hemisphere markets, of course, being further north is a disadvantage because a certain share of our European passengers need to backtrack.
Doesn't matter for the Germans or the Scandinavians or the East Europeans, but it does matter for the Iberian Peninsula passengers we have or the Italians themselves. To have some of that traffic being rerouted by a southern hub makes sense. The big difference between TAP and ITA is TAP would be new markets for us. They only serve two markets which we serve ourselves in Latin America, while the others are not served by Lufthansa. In terms of ITA, we all serve basically what in the group ITA serves, we increase our market share and reduce backtracking times. In regard to ITAP, we would add new destinations to the Lufthansa network.
One after the other, now we focus on ITA, then of course, we will be looking at TAP, like probably my two best friends in the industry will as well, and we take it from there. Let's not forget the airport of Fiumicino. I don't know how many have been there. It's not the Rome we have all been knowing 10 years ago, huh? It has been privatized, owned by Atlantia, part of Benetton family group, very well managed, well-invested infrastructure, not exhausted in terms of capacity. That's an asset in itself, in our view.
Thank you. Thank you.
Let me take the question on Technik. Just to the starting point of Technik, it's a partial divestiture, correct? We want Technik to remain part of our portfolio. It's not about selling a little part and getting the cash in. It's truly about five- 10 years from now, making sure that in the... We expect further consolidation of the industry and the value chain that we're in the best possible position. We're looking at someone who can bring us with capabilities in order to drive further value. Now, that process we're currently last year, did a lot of work to prepare ourselves from how would we see a business plan, which kind of capabilities we're looking for, what kind of governance structure would work for us and which wouldn't work. We now started the discussions.
Yeah, we are confident that something could be found, but the reality has now to prove it in the months to come. Yeah, there are few other industries and companies in Germany who did partially spin-offs, correct? In order to create very value because a standalone company on itself has a bigger focus. I don't think that is our prime logic of doing this. We believe there's a core value in itself, and that's what we are looking for.
Thank you.
The next question is from the line of Jarrod Castle from UBS. Please go ahead.
Thank you everyone, and good afternoon. Firstly, you know, very good cash flow, net debt to EBITDA, you kind of highlighted. When do you think you go back to investment grade? Is the first question. Then secondly, just on ex-fuel unit costs, you're given, you know, some good guidance for this year and next year. I guess, you know, some airlines like Air France and Ryanair are obviously talking, you know, flat, maybe even down unit costs. Where do you think you can get to in a, you know, with a medium-term horizon versus 19, you know, as you ramp up to 100% capacity? Thanks.
Okay. Thank you for asking the first question. I don't know whether the rating agency are actually listening in, but let me say the following, right. We are currently in a position as we were before the crisis, and then we were investment grade. For me, as soon as possible, we are back to investment grade. We know that rating agencies unfortunately go very quickly down, and it takes a long time to go up. I'm not sure whether that's they don't have enough people working for them or it's another process, but I'm very keen that we go up as soon as possible there. I think the numbers show it by itself. With regards to the CASK excluding fuel, right. You have seen that on the slide. We expect a flat CASK year-on-year.
What we have to keep in mind, correct, that the CASK versus 2019 is still significantly down, correct? Of course, in 2023 we go up versus 2022, but we know that inflation is coming into the system and that inflation is mid to high single digits, and we expect to be able to completely offset that with the capacity increase. Now in 2024, when by the end of 2024, we expect to be roughly back to the 2019 level in terms of capacity, say that deficit versus 2019 on the lower capacity is gone, then we have a significant amount of inflation in the system.
Nevertheless, with all the cost savings which we have been pursuing, we expect that we can offset a large part of this, and hence we are looking only at the mid-single digit kind of increase versus 2019 in 2024. Also in 2024, when you look versus 2023, we expect that our operational efficiency will further improve. We know that this year we have to do a lot of stabilization and efficiencies which we have in the system, and we think that we can benefit of that in 2024. That's the main reason why 2024 versus 2023, we're actually coming down on the, on the CASK. I hope that gives you a little bit more insight.
Okay. Thanks very much.
The next question is from the line of Neil Glynn from Air Control Tower. Please go ahead.
Good afternoon. My first question, if I could just touch on Austrian, Brussels, and Eurowings. None of the three made a profit in 2022, I'm just interested in your take on improvement prospects for 2023. My second question, following on from that one, I'm thinking about your, the group level management's role as effective portfolio managers in the context of whether it's ITA or TAP, eventually.
What lessons have you learned from the ownership of Austrian and Brussels that you would look to apply to future investments? Is the profitability contribution to Lufthansa's hubs actually more important than thinking about the profitability of a potential purchase on a standalone basis? Thank you.
Yeah, thanks, Neil. I think the second question is the interesting one. The answer is easy. If you own 100% of both, it doesn't matter. It matters to Remco and to reporting. In the end, it's one cash box if you own 100%. In between, of course, it's more complex. I think in the end, what we are trying to do is to maximize the value from having additional hub, which of course is both feeding into the existing hubs, not just the Lufthansa hubs. Let's not forget, you buy an airline in Belgium, it also feeds into your hub in Switzerland, and so, and vice versa.
Of course, also to run the business, the independent P&L responsibility needs to be in place, and especially Remco, very much focused on that do make sure we have the right entrepreneurial approach and people wake up hungry in the morning. We steer also still by P&L, even though we know the effect is one beyond the pure P&L only. What have we learned? By the way, Austrian has been profitable in 22, so it's not quite true what you're saying, and Brussels almost. By the way, in 23 we expect all airplane airlines, passenger airlines to be in the black. I think we would be faster in plugging in synergies, not just because we are now faster, but we have a much more sophisticated system of commercial steering developed over the last years to plug another hub in.
It's not just commercial, it's also on some of the cost synergies where we have an existing system, and if we have five hubs or six, won't make such a big difference. We would send our own people in. I think that's another learning. Cannot stay with the existing team for too long, both for the existing team that probably is unfair and in a way it also costs us time. That's probably a learning both from Austrian and Brussels, where we will act differently in the future.
Next question is from the line of Sathish Sivakumar from Citi. Please go ahead.
Yeah. Thank you again. I've got two questions here. Firstly on the capacity ramp up. Previously you said that if you had to go beyond 85% of 2019 levels, you've got to end up doing the leasing and so on. Now to get to that 90%, where is that at like additional network is coming from in terms of fleet? The second one is actually more around Miles & More. If you look at that, there's been a big push, both some of your peers in Europe as well as across the Atlantic, to monetize that. Do you know, can you share like any KPIs related to Miles & More in terms of profitability and like the revenue and so on? That'll be helpful. Thank you.
Hi, Sathish. Remco here, correct? What we are looking for, correct, is particularly in the course of this year to be around 80% in Q1 and then ramp up to a much higher percentage in the second half. That's very much dependent also with the opening of China, correct? Particularly also on the demand side and particularly also on the supply side, what we can do with different airports. The constraints in terms of planes is not a constraint. We expect also in the second half of the year, we have hired more people and have trained them. Along that way we would have to see a gradable part, and that's why we said 85%-90%.
It really depends on what makes sense both from a logistic point of view and also from a pricing point of view. Was 85 the number we said before? Yes, it was with the knowledge we had six months ago and we currently have, we can have a better planning because we are further on. On Miles & More, what we see some of our European competitors do actually get cash out of Miles & More by leasing this out, of taking debt on it. We don't need that, correct? We're well-financed balance sheet, that doesn't make any sense for us.
In terms of the returns on Miles & More, I think it's a wonderful program. For us it's really key that we can link and give added value to our customers when they fly with us to benefit from the program. We'll be looking at further offerings, of course, within the program to further explore our customers who love the Miles & More program. That's the route we are going. It's not partly selling it off or capitalizing debt on Miles & More because that doesn't create any value for us.
Have you like started to measure the profitability as on a standalone basis on Miles & More? Like, do you like track it internally?
You tell me which profitability you want and I give it to you because all you have to do is change the price of the miles and points you trade between the airlines and Miles & More. This is a paper money exercise which we are very happy not to participate in like some of our competitors in the past did. I think by the way, in the U.S., most of them have reversed the decision in the meantime and brought it back in. This is not a discussion we're having here.
Okay. Yeah. Thank you.
The next question is from the line of Harry Gowers from J.P. Morgan. Please go ahead.
Good afternoon, gents. Thanks for taking the time. The first one would just be actually probably both for Remco, but first one would just be on the margin progression to get to the 8% EBIT margin in 2024. Are you expecting maybe a bigger jump in 2024 versus 2023, compared to 2023 versus 2022? The second one, you know, clearly the balance sheet is in good shape at the moment. If you do get proceeds from asset sales this year, then how would you look to deploy those proceeds or that cash? Would you continue to solidify the balance sheet, or would you maybe consider returning that to shareholders, whether through a buyback or special dividends, et cetera. Thanks.
Hello, Harry. Yeah, Remco here. Yes, indeed. Going 2024, we're looking for an 8% margin. We expect from this year actually to make good progress along that way. Clearly that is also a logical step, correct? Otherwise 88% in 2024 would not be possible. That's also why we have guided for significant Adjusted EBIT increase this year over last year, correct? That is not the EUR 1.6 billion, which is in the consensus. That is in. We expect a higher number than that, otherwise we wouldn't give significant. With regard to the balance sheet, yes, it's healthy. If proceeds are coming in, then we will reduce further debt. That is what we were looking for. That makes certain sense.
There might also be some outflows if ITA would happen, so we have also to cater for that. Overall, a balance sheet can never be strong enough.
All clear. Thank you.
Next question is from the line of Muneeba Kayani from Bank of America. Please go ahead.
Hi. Firstly, if I could ask about fleet financing, and how you're thinking about it. Are you considering operating leases for the new deliveries at this point? How should we think about that impacting the balance sheet over the next couple of years? If you could talk a little bit more on China ramp up, kind of what would drive the timing of that from your perspective, and how does the closure of Russian airspace impact your plans? Thank you.
With regard to fleet financing, as we have said, over the last two years, that we will increase our share of operating leases as part of the portfolio. The slightly less than EUR 500 milion of operating lease additions we have seen last year, we expect that to increase in this year to close to 1 billion EUR. In line with that number will go further up. What happens in the years after, we have to see. Of course, it will be at a little bit higher level. What we would have as a target in the end is come to an lease versus owned more 30-70, rather than the 10-90, which we currently have.
That is what we have to see in the coming years. Having said that, it truly depends, of course, on the offers we get from the lease companies. If they're very good offers, then we move along. If there would be very bad offers or something happens with the interest rate, of course, we were looking again to loan financing. We don't expect that at this point in time, but in case lease companies are listening to this call, it's not a done deal. Only when they do good offers we will move along.
With regard to the China ramp up, we are really looking forward to the second half of the year, not only for the passenger airlines, it will also have a benefit on the cargo side when that comes further up in the second half as we expect. We have to look when we look at the rest of Asia, things are going very fast. Japan is currently around 50% of 2019 capacity, and we expect that to further increase in the course of this year. Closure of Russian airspace, life is as it is, correct? We have to see how that further develops. Many of our competitors have the same problems. Yes, there's a certain disadvantage versus the Chinese carriers.
We have to deal with that along the way.
Next question is from the line of Sumit Mehrotra from Société Générale. Please go ahead.
Good afternoon. Thank you. First, I would like to challenge your views about the yields for 2023 a bit. Do you not believe that yields should now stagnate and edge down a bit? Firstly, from weaker head from U.S. dollar. Secondly, somewhat a mixed dilution given the markets that now drive the capacity growth in 2023. Some views on yields resilience for this year. Secondly, I would like to check on your unit cost guidance for 2024. It's back to slide 14. Specifically, you believe that yields decline by low to mid-single digits versus 2022 or 2024. This I calculate 9%-7% above just 2019 levels.
Why do you think that the yields should perform sorry, the cost should perform so strongly in 2024 versus 2023, and we see a decline? Thank you.
Let me first take the question on the yields. Right? If you look at the yields in the second half of last year, they're around 20% higher than 2019. It was, of course, also not without a reason, huh? There is a lack of capacity in the system. Secondly, costs are structurally going up in all industries, including ours, correct? Prices, in that sense, are going up. Of course, with the capacity restrictions, correct? When you think about the high season Q2 and Q3, we see bookings coming up, and we see. The comment is that in Q2 we even see slightly higher than the 20% we had last year.
That is due to the very disciplined revenue management which we have internally, and we will continue that. Why I'm positive is still on the capacity constraints which is in the system. Carsten highlighted it quite extensively in his presentation. I would argue, even when we think about 2024 and 2025, we see that currently with inflation is in the system, inflation is not there to stop. If inflation is not there to stop, prices have to go up also for us. There's no way around it. We're not going to run a business by making less money but flying more, right? That doesn't make any sense. The thing is, it's applicable for everyone in the industry. Then in a capacity constraint environment, that will be the case.
If you think about unit cost in 2024 versus 2023 and why we still think we have an advantage that it comes down, we should not forget that if you think about 2024 versus 2023, it's an enormous still increase we expect in our capacity year-over-year. That naturally helps, of course, the cost to bring down, which is different from our competitors who already fly on a higher capacity level. We did all the cost savings of EUR 3 billion. We'll be further paying off when we ramp up the capacity. Of course, we'll invest, of course, in the operating staff to fly the planes. In the terms of the overhead, we will take advantage of all the pain we had to endure over the last years. This assumes a low to mid-single digit inflation in 2024 versus 2023.
If it turns out that inflation is significantly higher, of course, it's a different ballgame. We look at what the current market gives us, and we take that into account. I hope that gives you a little bit more insight.
Thank you.
The next question is from the line of Alex Irving from Bernstein. Please go ahead.
Hi. Good afternoon, gentlemen. Hope all is well. Two from me, please. First, on the corporate travel recovery, you mentioned earlier on how you're seeing the recovery continuing and then accelerating into 2024. On your chart, it looks like the corporate volumes are still below 2019 levels. How dilutive is this business to leisure mix shift to your RASK, and how would you plan to offset that? Second question is on your recent launch of Green Fares. Very excited to see this innovation. What is the target customer for this product, please? What sort of penetration are you hoping to achieve? Are there other innovations in this area in the pipeline that you're excited about around different fare products for your customers? Thank you.
Let me take the first question, correct? With corporate travel, as we said last year, in terms of corporate travel, in terms of passengers, about 60% of 2019, and revenue 70%. For this year, we expect 70% in personal passengers, 80% of revenue, and the year after it goes further up. In terms of the growth, that's a positive mix which will keep contributing. We have also seen that in the leisure travel as well, there are positive yields. We don't think there is a negative effect in the coming years coming from the business travel. With regard to the Green Fares, I think, Carsten, you want to take that one?
Yeah. The one number I can give you is that currently 3% of our passengers are using some kind of compensation when they book their ticket with us. We hope that the Green Fares will bring that up to five, which does not necessarily mean that 2% will exactly do the Green Fares, because some, I'm sure, will switch from compensate and other forms of compensation to the Green Fares because they are so much easier to use. In the end, it's like any other product feature, we need to adjust. What's the customer willing to pay? What does he like or doesn't like? We are, as you know, the first ones in the industry to do this, so there's no other data to look at as the one who is leading the pack here, and we'll be adjusting along the way.
I think it's a big step forward from also what we see over the first days and also the media attention. I think we're on the right track here.
Thank you.
The next question is from the line of Achal Kumar from HSBC. Please go ahead.
Yeah. Hi. Good afternoon, gentlemen. First of all, on the going back to the cost, you mentioned that the costs are high, but can be passed on to the customers. Is that the trend, do you see in the short-haul and long-haul both? If the trend is a bit different, and if you find it difficult to pass on the cost in the short haul, what kind of strategy do you think you'll adopt? You mentioned that you are being cautious in terms of capacity, you are enjoying the strong yield.
I mean, if the macro environment remains challenging and if you see the yield weakness, how rapidly can you ramp up your capacity so that you can manage your costs better? That is my first question. Secondly, on the cargo, you mentioned that Asia is strong, and you're increasing capacity in Asia, since the cargo is strong. Yesterday, on the Association of Asia Pacific Airlines, they reported data, and the international cargo is 20% down, and so they reported strong weakness. I just want to understand about, you know, if you could break up your cargo market, where do you see the cargo volumes are coming from? Yield-wise, where do you see the strong yields in terms of cargo? Thank you.
Yeah. I think, Achal, your first question, let's be honest, our industry, to a high degree, is driven by the balance between supply and demand. If you see that, at least in our networks, in our company, we are not anywhere close to 100% capacity yet. The world, more or less, is going towards 100% demand, and we cannot fill that gap on the supply chain side because of the various restrictions I mentioned, lack of staff, lack of infrastructure, lack of airplanes, lack of spare parts, lack of engines. That gives you an answer that we believe strongly we'll be continuously able to.
Move on the higher cost to our customers because there's just a shortage of supply. I think the first semester we all have visited a university. On cargo, much more difficult to forecast, but let's not take only the 22 numbers as a reference. Even in today's press conference, Remco and I refer to 2019, which I think should be our reference because we all know 22 was crazy. Look at shipping by sea, it was even more crazy. I wish I was the CEO of Hapag-Lloyd, not Lufthansa. Too late now, they won't take me. I really believe that that one is a much more difficult business to forecast, much more volatile. I or we don't think it will go back to 2019 levels quickly, and even those were not that bad, by the way.
Somewhere between 2019 and 2022, we'll be hanging around for a while, we think.
Sorry, following up on.
The global economy is not doing badly, yeah. Especially I mentioned today 17% of the global GDP is back to international trade, which is a fairly high share. China is only coming back now, slowly, but surely will come back strongly eventually in the second half of the year. Detours are, you know, eating up capacity also, especially freighter capacity. Very many old freighters were, you know, brought back to the air in the COVID crisis, which probably will not be profitable now. I think it looks good on cargo.
Sorry, following up on cost. I mean, you mentioned that you are negotiating with your unions, and if the their demand, they're successful in their demands, it will result in higher staff costs. What I mean, in the cost, what kind of risk do you see on the cost side?
We don't see a risk on the cost side. I'm also not 100% sure what you're actually referring to because we made agreements, correct, with our the cabin and ground staff, which are lasting to the end of 23. With the cockpit for our pilots, we have an agreement through the summer, and we are discussing now how to move onwards for from here. In that sense, we have certain agreements. There are certain things we have to further work on, but other than that, there is not much more to say.
Okay, thank you.
Next question is from the line of Conor Dwyer from Morgan Stanley. Please go ahead.
Hey, thanks very much, guys. Quick question back on the unit cost guide. Obviously flat this year, but down next year. How do you kind of square that, given the ramp-up in capacity is obviously a bit larger this year and actually slightly smaller for next year? Is that predicated on basically just the lower level of assumed inflation, or is there anything else in 2024 that should be cutting the cost out? Just on cargo, obviously market yields do seem to be coming down now relatively quickly, but you guys do seem to be doing a reasonably good job of holding on to it, although it is also sequentially weakening. What exactly is benefiting you there? Are you accessing more constrained markets?
Going forward, do you not think the ability to do that will fall away a little bit as Asian belly capacity comes back online? Why, structurally speaking, why would profitability in the cargo market remain ahead of pre-COVID levels in the medium term as that belly capacity comes back? Thanks.
With regard to your first question, for 23 versus 22, we're looking at mid to high single digit inflation. For 24 at this point in time, we're more looking at low to mid single digit inflation levels. That's one benefit. The second benefit that in 24 we expect our operations to work on a more efficient level than this year because of constraints on the airports, all the ramp up we have to do, the stabilization of the system. It costs relatively more in terms of the productivity, which is fine, which is the right thing to do for our customers. In 24 we hope to have left that behind and be in a more stable position and take the fruit of that, hence the decline in the cost in 24 versus 23.
When we think about cargo, there are a couple of drivers for the profitability, right? The cost structure of cargo from before the COVID crisis is much better. They have also done their cost savings. We know that we have a completely new fleet, which is very much more efficient. At the same time, we're also driving on our business itself, a lot more specialized business before that we further gradually bring up, and that brings higher yields. It's a sophisticated revenue management. To give you an example on this, quarter four, 2020, we had a yield which is about 110% above 2019. When we look at the current yield in Q1, it's lower, but it's still 70% above 2019, right?
Despite that demand supply is in a different ballgame. We see that as far as we can look in the bookings for Q2, the same place. For the second half of the year, of course, it's still open how it further develops. We made there the comment particularly on China because with the China further ramp up, we've heard it as well with the sea freight that can give a certain injection, but it's too early to say. We have to see. In general, that means that we are still significantly in profitability above the 2019 levels.
Great. Thanks. Did you just say, yields tracking 70-ish% ahead of 2019 levels at the moment?
Currently, we're looking at yields which are 70%, so 70% above 2019 levels.
Thank you.
Yes.
This concludes our Q&A session, and I hand back to Dennis Weber.
Thank you very much for your interest today. As far as we can see, we should have answered all questions. If this is not the case, please feel free to reach out to the IR department anytime. Otherwise, we look forward to seeing and speaking with you in the next couple of weeks. Thank you, and have a good afternoon.
Ladies and gentlemen, the conference is now concluded and you may disconnect. Thank you for joining, and have a pleasant day.