Liquidity, financing and interest rate risks

Securing sufficient liquidity at all times is a vital task for Lufthansa’s financial management. The financial reporting system provides centralised information on the actual financial status and expected cash flows of all companies in the Lufthansa Group. This adds up to an up-to-date picture of the Group’s liquidity at all times. To maintain its freedom of action, Lufthansa always holds strategic minimum liquidity available at short notice of EUR 2.3bn, as defined in its financial strategy. As of 31 December 2011 the Group held total liquidity of EUR 4.1bn. At year-end Lufthansa also had undrawn bilateral credit lines for a further EUR 2.1bn.

Lufthansa will continue to have a regular borrowing requirement in order to make the investments planned for the years ahead. Especially due to its financial strength and its position in the market, banks and investors still consider Lufthansa to be a preferred partner. We rely on a strong, sustainable profile to ensure that this remains the case. Our financial profile and the pillars of our financial strategy are presented in detail in the chapter “Financial strategy”.

Interest rate risks arise from financing our business. As of 31 December 2011 total outstanding financing came to EUR 6.4bn. To manage general interest rate risk Lufthansa uses the synchronous fluctuations in the operating result, which depends on the economic cycle, and short-term interest rates (natural hedge). As a rule, 85 per cent of financial liabilities are either at floating rates from the outset or are swapped into floating rates using derivatives. This also enables Lufthansa to minimise average long-term interest expense at the same time. Foreign currency risks from financing are always hedged to 100 per cent. The derivatives used are cross currency swaps and interest rate swaps. Additional information can be found in the Notes to the consolidated financial statements, “Note 47”.

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