Deutsche Lufthansa AG (LHA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen for joining us short term for this conference call regarding our investment in ITA Airways. We're hosting this call for both analysts and investors as well as journalists. CEO, Carsten Spohr, will present the transactions and our plans to support -- afterwards, he will answer your questions. This part of the Q&A, Carsten Spohr, and our CFO, Remco Steenbergen, will answer the questions of our analysts. [Operator Instructions] Second part of the Q&A will answer the questions of all journalists. The second part of the call will be bilingual. Questions may also be asked and answered in German. All analysts and investors are welcome. Now over to you, Carsten.

Yes. Thank you, Dennis. And also on behalf of Remco and Andreas. Good morning, ladies and gentlemen. I would be surprised to hear that I'm very much convinced that yesterday was an important day for the Lufthansa Group. By investing in ITA, we have taken once again a major step towards positioning our group even better for the future of our industry, both in within Europe and global competitive landscape. And for that, ITA will help us to become even more international and somewhat less dependent on our home markets, which we believe is a key to maintain our competitive positioning around the world. And that obviously must and will result in benefits for shareholders, for customers, existing customers, and new customers, and of course, our staff combined companies in the group. Our investment in ITA will further broaden our access to the key Italia market, which I think is a major difference to the investments we have done in airlines before enter in a quite hostile environment. In the case of ITA, this is a market we have been looking at and considering a key market for many years, and we have been building some strength, which of course, was also made possible by the weakness of the predecessor of ITA of Alitalia. And therefore, that was the same reason that we did not invest in Alitalia because we believe that was not a valuable investment for our shareholders. But now the combination achieved, we are convinced will create value. ITA really has starting in common with the old Alitalia besides its market. The new airline that does not carry any of the legacy burdens of Alitalia fully restructured and it's, in our view, rightsized and seen our industry as a competitive cost base. Ready-to-grow and obviously, for that needs and will get the support from a leading European airline group, which is us. We have -- what it takes to turn this start-up company, like I like to look at it this will lead ITA into strong national carrier that will connect Italy to the global markets. We are confident that ITA will become profitable and value-creating business. As Remco has pointed out a few days ago to the media, this will not happen overnight. But surely, there will be quick wins. Other changes will take somewhat longer. But if the transaction closes in '23 and if we can assume joint control operations in half a year or so, we are confident that we can make ITA profitable within '25 and follow the example of Swiss, which obviously turned into a profitable airline eventually after we invested, by the way, 20 years ago. Probability for us is the key criteria for a full takeover, provide them we jointly reach this goal is clear to take over ITA Airways in full. An mechanism ensures that we cannot be forced into a full takeover as long as the joint business plan targets are not achieved. That was key in our negotiations. We are confident in this gentlemen that ITA Airways is a great addition to our group of airlines. Although multiairline, multihub -- multibrand means maximum value for our customers, coupled with significant synergies and operational efficiency, it's increasingly becoming our central strategic success factor. Being successful in an adverse market such as Europe is requires strong national brands, at least in our industry, aviation, with a clear unique identity that customers and staff can identify with. The customer proposition that considers the specifics of the individual market. Germany is not Switzerland or Austria, Italy and Belgium and now Germany. So we still preserve the unmistakable Italian heritage that ITA [ ambience ]. Still, connection of networks offers customers an unrivaled choice to reach destinations as flexible and as fast as possible via point-to-point or via one of our hubs. At the same time, we must closely integrate our airlines commercially and operationally, thus generate synergies from the size of our group. We are succeeding better and better in doing this to create synergies in the back end by keeping the individual flavor of each of our friends -- friend, sorry, facing the customers and the staff. Our network is designed to make the customer experience overall as seamless and smooth as possible. So let's talk about the Italian market a bit. Their Economy is the third largest in the EU and the #3 aviation market in Europe. Italy has always been a focused market therefore for the Lufthansa Group. From a regional perspective, it perfectly complements the group's existing footprint with our home markets in Germany, Switzerland, Austria and Belgium. Already today, Italy is the group's most important market after our home markets and after the U.S. More than 1,000 flights are operated by our group airlines every week to bring passengers either from Italy or to our home markets. It's EUR 4.6 billion in total in '22. And an interesting fun fact, almost half of them connect to other flights in our main hubs, especially to intercontinental destinations. And Italy, though it's not only an important service market, but also world's #5 in terms of international tourist arrivals. And another fun fact here in our network in '22, our airlines flew more U.S. passengers to Italy than our airlines flew passengers to Germany. And not surprisingly, the key destination of those going to Italy was Rome. The economic strength and export orientation of Italy also makes an important corporate travel market, especially when it comes to the North. Milan is the second most important city in terms of local passenger traffic. Within the EU, #3, if you add London to the list. And the combination with ITA will make us even more stronger in this key market, more than double our share in a highly fragmented market with a large touristic low-cost offer at an underserved long-haul market. That's why they have great potential in growing the hub in Rome Fiumicino, this will enhanced feeder network and the group's sales network and distribution power around the world. And also, our existing hubs will benefit from ITA joining Star Alliance and our joint ventures that Italian passengers will not connect via Rome, we have the choice to fly over Zurich, Munich or Frankfurt, instead of Paris or Amsterdam. With ITA's established position in Milano Linate, we will also be able to capitalize even more on the attraction of Lombardy, Milan as a premium leisure and business travel destinations. In addition to these revenue synergies, both partners will benefit from cost synergies. And finally, also Lufthansa Cargo will get access to additional belly capacity. Lufthansa Technik will be the preferred vendor for a fleet we can support with its full portfolio of MRO services. Before discussing the details of the transaction, let me highlight what guided us in our decision-making process. First, we want to make sure that we stagger the risk is associated with this investment. First, investment also ensuring that ITA has sufficient liquidity. Second, we want to create optionality provides that things go accordingly to plan and only then want to have the option for a full takeover in predefined terms that ensure we do not overpay. I'm very pleased that our agreement reflects exactly these guiding principles. The Italian Ministry of Economy and Finance, in short MEF, we ensured that ITA will receive the necessary funding to implement the jointly agreed business plan and live up to the roles of Italy's national carrier. Our investment in the company even at EUR 25 million for a 41% stake, benefits ITA Airways directly as we invest via a capital increase. MEF has committed to injecting an additional EUR 250 million of nonrefundable interest-free equity and the total EUR 1.35 billion framework cleared by the EU Commission. We expect the transaction to close by the end of the year latest. Upon closing, we will assume joint operational control of the business, that means transfer know-how and people to ITA's organization to implement the joint business plan, and that will remain on board as the majority shareholder overseeing the business through its representation on the Board of Directors. Responsibility for strategy and operations, however, lies with the Executive Board, for which we have the right to nominate the CEO and 1 additional Board member. Margin wise, our minority stake means that we will not consolidate ITA's results. Instead, we will account for it as a jointly controlled equity investment, we will participate in ITA's profits and losses on a pro rata equity change basis starting as of the closing of the transaction. As we will finance the investment from available liquidity, we do not expect an impact on our credit rating. An option mechanism structure ensures that we have the right of the obligation to take over ITA Airways in full. And as I said, we intend to take this step once the business has become profitable or at least is on a clear path to reach profitability. Price to be paid for the remaining stake will, in principle, be determined based on a predefined mechanism considering ITA's EBITDA and net debt. There's also put options for the MEF is conditional on ITA realizing its business plan, it's the same valuation mechanism, it can only be exercised in the medium term. The entire mechanism ensures that our capital structure remains protected as far as possible also in case of full consolidation. As I said, ITA is a different company compared to the previous national carrier, Alitalia. The airways was established as a new operation, relieved from the financial and legal legacy of Alitalia in late '22, with operations starting in autumn '21. ITA contracts were renegotiated to a level of around 30% below Alitalia. In addition, the structure of cargo terminal was simplified bringing the previous plethora of union contracts to an end. All Alitalia pension obligations were taken all by the state of Italy. Handling an MRO operations were fully outsourced Alitalia's all Airbus fleet and all IT and supplier contracts were reset. Airbus was rightsized across short and long haul. As a result, ITA is a much smaller, leaner and more flexible operation today with around 3,900 employees compared to about 10,000 employees -- employed by Alitalia in 2019. ITA's results in '22 with an EBITDA of minus EUR 338 million, with EUR 1.5 billion of revenue reflects the fact that ITA is a start-up company in the midst of a speed ramp-up so far without the backing of a major airline group. I will discuss in a minute, we have identified multiple levers to improve the company's performance. But the restructuring has been done and has been done successfully. It has no financial debt, only the operating lease obligation of EUR 1 billion related to the current fleet. As all amounts -- sorry, to almost EUR 1 billion on a pro forma basis, that means when adding the financing by the MEF and the Lufthansa Group to the position at year-end '22. Airways is in a good and structurally cost competitive position to break even in the short to medium term. Gentlemen, we have spent considerable time the team in a Rome to analyze ITA's business in depth and to find concrete measures on how we can contribute to ITA becoming profitable as quickly as possible. First, it's ITA's network, which we plan to closely link to our existing multihub network. We will rebalance ITA's short and long haul business. We'll optimize in parts also right size short-haul feeder network so that it supports growing a larger, profitable long-haul business out of Rome Fiumicino, where we obviously intend to grow our share. This will also include exploiting the potentials of intermodality, especially on the access Bologna, Florence, Rome, Naples with the alliance or existing with [indiscernible] allow to shift traffic to the high-speed train network. Secondly, we drive profitable growth based on ITA's favorable cost position growth will be measured and at least initially purely lease-based limit investments and maintain far reaching flexibility. Based on the planned growth, we will also expand and invest into ITA's workforce nurturing the entrepreneurial and hence on culture of the business. Last but not least, we will generate significant synergies in terms of both revenues and costs. Let me discuss 3 of these elements in some more detail, starting with network. And we emphasize our focus is on growing a profitable long-haul business out of Rome with a complementary feeder network, enabling to grow the long haul. ITA will be focused on strategic feeder markets. This will also include feeding more Lufthansa Group passengers into the hub. This is the close linkage of the networks to optimize choice and connectivity for our joint customers. Focus on the long-haul business out of Rome will be on core North and South American destinations with the upcoming integration of ITA into our Atlantic++ joint venture with United and Air Canada and our global sales network will offer greater connectivity and a much wider commercial reach. However, we will also build on ITA's established strength on routes to Asia, Northern Africa and the Middle East such as Tokyo, [ Delhi, Cairo, Algiers and Athens ]. ITA's second mainstay is Milano Linate, which is a key destination for corporate and premium leisure point-to-point travel due to this ideal location very close to the city center of Milan. Obviously, the economic powerhouse of Italy's North. We see good potential to expand the touristic offering, especially on the weekends This purpose, we will jointly work on upgrading the current infrastructure and customer service offerings in Linate. Business plans for ITA provides for profitable growth in the coming years. In '23, the business expected to significantly reduce its EBITDA loss. Revenues will grow by more than 50% based on the continuous ramp-up of operations, which only really started in '22. This favorable cost position is the enabler for the planned growth. Labor costs are particularly advantages with a gap of 30% to 40% compared to the Lufthansa sample of mainland pilots. In addition, productivity is a group leading level due to mixed fleet flying preserving also the lean overhead structures and largely variable cost base, we expect ITA to have a sustainably lower unit cost compared to the whole rest of the group in a few years from now. Then modernization of ITA's all Airbus fleet will yield additional cost advantages related to lower fuel consumption and less emissions. Homogeneity enables further efficiency gains in operations and maintenance, also obviously, given its complementary nature to the existing Lufthansa Group fleet. By '27, the fleet is planned to grow to 94 aircraft, more than 80% of the fleet will then consist of new generation aircraft depending on the progress made in improving ITA's results and cash flow, we'll gradually shift towards more outright buying of new aircraft instead of leasing. Over the short term, the business model will remain operating lease based to enable the generation of free cash flow. That's why we do expect business to have sufficient liquidity to finance its planned expansion, no need for other external financing, be debt or equity at least for the foreseeable future. Ladies and gentleman, our investment in ITA is further evidence that consolidation in the European air industry is continuing and know my view, necessary, especially against the current macro backdrop. Economic success depends on scale and the ability to combine the strength of different air operations under one roof. Strong players are getting stronger and it becomes more complicated for the smaller ones. ITA is becoming part of our group, the business gains access to know-how and a large platform providing scale. The access to our global airline partner network, first and foremost, the Atlantic++ joint venture I already mentioned with United Airlines and Air Canada, will greatly enhance ITA's attraction as a transatlantic carrier. The Integration into our global distribution channels with improved visibility and flexibility of ITA's offer. ITA's access to our digital products and services that our customer service innovation push and services and enables better revenue and pricing management. Joint procurement, including aircraft leasing and buying, purchasing the joint contracting of brand services, just to maybe a few examples, provide for significant cost synergies. Also in corporate and administration functions and processes, it will be able to benefit from the know-how of a large global airline group, which obviously we have grown over the last decades. Ladies and gentlemen, let me conclude by highlighting that our decision to invest in ITA is driven by the conviction that this investment will create value for all stakeholders. First, it consolidates and experience our strong market position, diversifies our group of airlines and open up those -- opens up growth opportunities, which we could not have developed organically and it's a perfect fit for our multibrand and multihub strategy. There's no surprise that we always have said comes to conservation ITA is our top priority because we do believe this is the perfect addition to our current portfolio. Nonetheless long enough that we are conscious of the challenges ahead of us. We have spent considerable time analyzing and stressing them, structure of the transaction you were presented here today shows you that we have done everything to minimize the financial risk at the same time as we create optionality. And ITA is a fully restructured and cost-competitive airline, jointly now turned profitable based on a sound business plan. We're confident that we can make the combination a success with the support of the whole group. And now Remco, I look forward to discuss this with you further. We look forward to your questions. Thanks for listening. Allow me to giving you a 360 on this transaction, and now we look forward to your questions. Dennis back to you.

Operator, we'll now be happy [ to take questions ].

[Operator Instructions] Our first question today is from Jarrod Castle from UBS.

Congratulations to the Lufthansa team on today's announcement. I just wanted to ask about in the short-term the synergies for the Lufthansa Group because, at the moment, you've got this 41% stake which you're not consolidating, but you want to reinforce the Italian markets such as more long haul from Fiumicino. So what does that mean in terms of traffic that you were directing through your other hubs like Frankfurt from the Italian market? Will there be some leakage away from Frankfurt into the Italian market in the short term, even though you don't have 100% of ITA at the moment?

This is a very good question because I think one key element of the transaction is that we already have passed [ more or so ] 100%, which will allow us exactly in the nature of your question and as soon as transaction closes to treat every hub the same. And we can then optimize the flow of our passengers. So if somebody from Brussels now goes via Zurich or in the future goes via Rome, will go to Buenos Aires will commercially basically be the same for us, which is how our system works, even if we have not yet 100%, which 1 day, we'll will have. The other way around is well, of course, we can bring passengers from Italy -- additional passengers from Italy. Just think about the frequent flyer program, which of course will be harmonized via existing hubs into destinations which are not served, for example, out of Rome directly. So the basic synergy of our multihub model and start as soon as we've closed the transaction, not only where we have reached 100%, that's why it was so important to agree on pricing beforehand.

So there will be some leakage.

I don't get the term leakage because it's all some of all parts. So at the end, all the money, the passenger pays will end up with Remco anyway long term. So it doesn't matter if a passenger from [ Bologna ] went via Rome or if he goes by Zurich, contribution margin is always what ends up in our cash box long term because also the contribution going to ITA, knowing that we buy 100%, if things go well, ends up Remco and the value of our shareholder creation.

Okay. sorry, if I'm not mistaken, and there could be some short-term leakage while you're kind of accounting for 41%. But eventually, you'll capture that benefit if and when you take over the remaining stake?

Remco here. I understand your question in the logic of 41%, correct? And of course, if there's 41%, we consolidate only -- we have only 41% in our results, although we don't consolidate it yet. But we have also to see that there are some synergies coming very quickly. So yes, if you have a passenger which goes through a Swiss and we have 100% of the results and now it goes by Rome, we have only 41%. You're absolutely correct in that shortage, but it's -- but there are also synergies on the short term on the cost side and other elements, which otherwise wouldn't have come, correct, also the rest of the group is benefiting from. So -- and for us, of course, the most important is to make sure that ITA gets as quickly as possible profitable, and that is also included in the price mechanism we have agreed later on. So if you would only look at the passenger and then 41%, you are absolutely right, but you have to look as well at the rest of the synergies which are benefiting the group, plus the purchase price mechanism on which we take it over later. And we believe that the net of that is certainly much more remain in our favor.

The next question comes from Jaime Rowbotham from Deutsche Bank.

Congrats on the deal. Can you talk a bit more about the long-haul market out of Milan and Rome. Before COVID, I think ITA or Alitalia back then had over 25% market share on the transatlantic. But with the scaling back, that's fallen below 20%. Would it be fair to say that part of your plan is to try to redress the balance a bit there?

Indeed. And the market share of the Lufthansa Group long range was almost the same as the one of ITA. So combine those, I think you are reaching the market share usually a national carrier has in a way we are helping ITA to go back to the natural balance of what usually now one carrier has. This market is, first of all, underserved, truly in a way in terms of percentage overserved outbound carriers, which was allowing Lufthansa, for example, to take such a high share of intercontinental especially by Avionics. So I'm sure we'll see a rebalance there. As I explained, we see definitely potential long haul. We bring it up to 24 aircraft in our business plan, the long-haul fleet over time. And that will rebalance again the market share of a carrier which surely has not had international market share for quite some time.

The next question is from Sathish Sivakumar from Citi.

My question is a clear on the loyalty program. Obviously, the predecessor, Alitalia, was part of the SkyTeam Alliance. And now how does that has actually transitioned into ITA? And how does the current loyalty program of ITA would fit in the void of a Star Alliance program? Any color on that would be really helpful.

Sorry, I had some acoustic problems. Obviously, we are evaluating now to bring ITA -- us from Sky into Star. That was the question of the frequent fire programs will be brought up a lot. So how we exactly deal with the current program? We have not yet detailed out, but it's obvious like every airline we have integrated, there will be full integration of frequent travelers excluding the existing ones.

Okay. And do you see any revenue opportunity there as it stands clear from ITA? What is the size of the ITA's loyalty program as it has actually shrunk versus compared to Alitalia?

Remco here. Yes, of course, correct because integrating in our loyalty program, correct? There are clear benefits which also benefits the group, so of course, but we don't have the plans concrete yet. We were looking how we integrate [indiscernible] on balance, this should have a benefit for both the ITA as well as the Lufthansa Group cannot comment yet on this point in time. It's too early.

The next question comes from Neil Glynn from Air Control Tower.

Just a question on long-haul revenue. You mentioned Rome long-haul is profitable, but I guess probably not very profitable at this point. I recall many years ago when Air France-KLM was talking about the old Alitalia. It talked about a revenue problem rather than a cost problem, which I think is probably the opposite to how many people think about the business. So I was wondering, can you give us some sense as to where the long-haul RASK for ITA is relative to Lufthansa standard today to give us a sense for the improvement need or even potential?

Remco here. It's too early for us to comment on that particular question.You have to wait for the closing, some more work to be done here. Of course, it's also clear that when ITA gets integrated in our network, that also the pricing and the whole commercial thing will be aligned to our network. But it's too early to comment on exact RASK figures towards the rest of the group. We just have to work on the closing, further continue on the business plan. But clearly, we have looked at this, of course, as part of the overall plan.

And I think compared to those days because I was around those days as well, the inbound strength of the Italian market has increased quite a bit. We see the Americans, as I just explained -- more Americans go in our airplanes to Italy than to Germany. Yet, on top to that, China -- very strong from China to Italy and now the Indians are also coming. So I think compared to those days, something has changed very much when it comes to the element. This is why we have more Italian-bound Americans onboard than German-bound Americans onboard. We never had that in the history. Also certainly more airports in Italy right now than we serve airports in Germany, people always forget that as well.

The next question comes from Muneeba Kayani from Bank of America.

I just wanted to understand on the staff side. So for the 4,000 employees now, what are agreements at this point? Just some color on kind of the union structure have pay deals been done? And how does that factor into kind of your cost outlook here?

The staff numbers, I think we pointed out, there are obviously significant growth because we are growing the fleet. That number looks high for ITA. At the same time, the whole growth is about what we are hiring for months in Lufthansa. So I think it's also -- it should be to put that in relative terms. So for the overall growth of the group in terms of staff, this is not that much. And for the existing staff, you probably know, there were some reductions of their salary structures just a few weeks ago, which, of course, we were aware of. And there's basically just the key team on board of ITA. Pilots, fire attendance, some overhead. All the others are outsourced, very high level of outsourcing after the transfer of the market from Alitalia to ITA. Airport staff is ground handling is a service company. So it's basically the key or team only, which we are here investing in.

And If I may add to this, we also to make a distinction, I'm not sure on your question between Alitalia and ITA. So ITA is the restructured company. So in Alitalia, there are many different unions that's much more simplified in its current space. And then exactly, of course, in the business plan going forward, we have certain assumptions on cost increases as we have with our other airlines. There's no difference here in ITA and that really depends on how things are going. Of course, there is a relationship between inflation and also what yield developments are. And we will take that along once we are in and we co-manage this.

By the way, the collective bargaining agreement is lasting until '26, probably the longest one we have in the whole group one -- lasting one.

The next question comes from Harry Gowers from JPMorgan.

You mentioned, I think there was no financial debt, about EUR 1 billion worth of leases. So I was wondering if you could share what level of net debt to EBITDA you expect it to achieve over the coming years as profitability grows, including the leases, obviously?

Remco here. I think first, let me start still by saying what the cash position, right? So by the end of last year, we put it also out in our publication, the cash position of ITA was slightly above EUR 400 million and MEF put another EUR 250 and EUR 325 million for our share goes also on the cash position. So if you do that on a pro forma, as Carsten said in his speech, we come close to EUR 1 billion to start with, right. And the company as operating leases of about EUR 1 billion right now. We know that there's a little bit of ramp-up and the free cash flow for the coming years will still be negative, correct? Overall, so this level will go down. But then, of course, we have to see how fast we can ramp up once we would consolidate -- how we move on to the cash CapEx and then finding a new balance. Overall, we expect for ITA also the mid- to longer term, an EBIT margin of 8%, what we have for the rest of the group. That is clearly our target. And therefore, overall -- and the overall position also with the net debt ratio to come the targets where we are overall in the group once we also built out a little bit at operating lease number, really the same financial discipline as we have for the rest of the group. But as I said before, it will take a little bit of time at there, which we have included in the plan and also in the way our financing and our remaining purchase of the remaining shares, valuation as...

The next question comes from Andrew Lobbenberg from Barclays.

Carsten, congratulations. I know you've been after this big fish for some time. My question is about the fleet. I mean if we look at the current fleet, 55 of the 68 aircraft are old generation, old 320 family aircraft with an average age of 16 or 17 years. And then you spoke about building out the long-haul fleet to 27 going from 14 aircraft to 24. So that's an awful lot of shiny new birds that you're trying to bring into ITA. And we know, and it's a key part of your equity story, so the aircraft market is super tight at the moment. So -- to what extent is ITA procured these aircraft already? How confident are you on the pricing of them because, obviously, the tightest part of the aircraft market are less old, leasing out new generation aircraft because that's a super tight part of the market? So are the planes sourced? How expensive are they? Can that sustain the low unit cost performance at ITA that you've got? And equally, as you're bringing in so many shiny new aircraft, what's that going to do to the debt, which looks very moderate at the moment? But if you're refleeting to such an extent, how high is that debt going to go?

Great question because, believe it or not, the secured aircraft slots ITA has, we believe, are an asset of the company, not because we going to buy them, but on the positive side. So in more detail, there's 4-0, 40 old aircraft ITA will retire by 2027 fleet plan. And for that, has already ordered an order coming in of 10 330neos, 11 320neos, and 7 220. To answer the second part of your question, yes, indeed, the prices of those airplanes are secured. And we even believe that with the leading companies in between, which of course is leasing companies, we know might have some room for renegotiate those deals, but we'll take that after the closing additional opportunity. Obviously, the lease liabilities will increase. They're currently EUR 1 billion, and they will increase to EUR 2.6 billion in 2027, which is due to the fleet size going up. We got some rebate -- everywhere, but that, as you know.

Yes. Carsten, just to understand that the 10 330s, and the 11 20s and the 220s, they're all secured off the order books of lessors? Or are they orders belonging to ITA?

No, they are actually -- most of them are coming, I think, from Air Lease. [ John Plueger ] was very active with ITA and secured some deals there. And these deals were secured, I think, in '21 when the aircraft market was not anywhere as hot as it is now. So I think to be honest, so I don't know by detail. I think this is not reflecting how hot, as you call it, the OEM market is today. So these deals were secured in '21 when ITA was started. And they are obviously -- so -- and of course -- and once we own the company, of course, we can play around with aircraft either anyway. We can move aircraft from one airline to the other or orders to lease them anywhere. So I think the room to optimize with incoming aircraft for the Lufthansa Group will grow by ITA in 2 ways to put aircraft there, but also because they're bringing along a nice order book.

We have 2 more questions from the analysts before we start with the journalist session. The next question comes from Stephen Furlong from Davy.

Congrats on the deal. Just was wondering just maybe talk about the plans for Linate, I mean I know you talk about growing the premium point-to-point trough. Is that short haul, media haul, long haul? And I know you'll interconnect with the other networks. It's obviously very competitive in that market. And then I mean I've been around a while, and I just want Carsten, maybe you might just talk about where do you see this deal of all the deals that Lufthansa have done? I mean obviously, Swiss is up there is probably were the best ones you've done, but -- or has been done in the last 10 years.

Linate, unfortunately, has no license for long-range flights. There's a maximum nautical mile radio surrounding Linate as part of the operating certificate. So there's no such thing as a long ways from Linate. And therefore, ITA currently has its only long-range flight out of Milano from Malpensa which goes to New York. But we need to look at that. I think it's perhaps a week or every day. But there's also competition on that route from the Gulf. So that route obviously served, everything else is short haul. And there, we do believe that we can optimize the network, let's put it that way. Our data we have on [indiscernible]. And your second question, you asked me again in a few years. But I think when you look at the strategic importance, look at the size of the market, I definitely think that ITA can be our #2 after Swiss, one day, a full mature environment. But let's also use this opportunity to let you know which some of you probably know, P&L, we're running our airlines by high degree reflects the optimization we do via multihub. But there's also elements which don't show up on the individual P&L. Our best example is when we bought Brussels, many people in Belgium love to travel via a French speaking hub. Obviously, Zurich is more or less considered to be, where you see a lot of increase in market share of connecting passengers from Belgium after we bought Brussels Airlines in the results of Swiss, don't show up in the P&L of Brussels. Of course, you have these effects all across the group. So I think for us, it's always 2 things. The P&L of the individual airline, which we obviously run our company by. And If you look at my competitors in IAG, they only do it that way because they don't really have overlapping hubs. In our case, with a strong overlap of the hubs, we also see overlapping effects. And surely in Italy, which similar to Germany, is a market where the wealth is very well distributed. It's not all in Milan or not even in Rome, like it is in Paris or London. It's more like Germany where you have many commercial centers. You see a huge effect of our success buying ITA, also showing up in the other hubs and not all of that showing up in Rome. And of course, again, some of the market share increases we have done through our purchasing over the last 20 years in Belgium, Austria and so on will show up by additional passengers in Rome. That maybe is -- I know that was not your question, but maybe it was a nice occasion to explain that because, I guess, it's a little bit more complex for U.S. analysts from the outside to see that in our data. It probably is when our competitors are running their hubs more independently than we do.

The next question comes from Sumit Mehrotra from Societe Generale.