Lufthansa spend­ing bil­lions to re­main top

Finweek English Edition - - FEATURE -

THERE ARE STILL too many air­lines in the world, lim­it­ing the in­dus­try’s prof­itabil­ity. While con­sol­i­da­tion is tak­ing place, it is still not hap­pen­ing fast enough. Th­ese are the views of some of the world’s air­line bosses at the an­nual gen­eral meet­ing of the In­ter­na­tional Air Trans­port As­so­ci­a­tion.

Dr Christoph Franz, chief ex­ec­u­tive of Ger­man air­line group Lufthansa, says the in­dus­try still suf­fers from too much ca­pac­ity. “This is due to – in a size­able part – our in­abil­ity to con­sol­i­date. In the USA to­day we look at 4-5 play­ers run­ning 85% of the mar­ket. We see a bet­ter more sus­tain­able in­dus­try with grow­ing prof­its.”

Franz says air­lines have to adapt to a new and ever-chang­ing world. Lufthansa, be­ing prof­itable at group level at least, has set aside some core pro­grammes to in­crease the level of prof­itabil­ity to earn more money in or­der to fi­nance the fleet and in­vest­ment in on­board and ground prod­ucts.

“We op­er­ate from a coun­try where the cost struc­ture isn’t com­pet­i­tive. We’ve done what we can but at end of day we can’t re­ally es­cape from it. So when you can’t es­cape those costs you have to in­vest into the qual­ity of the brand and con­tinue to es­tab­lish as a pre­mium car­rier. That’s been the se­cret to our suc­cess but oth­ers are catch­ing on.”

Franz says over the next three years Lufthansa will in­vest an aver­age of €1m a day into the im­prove­ment of its prod­uct. As well as in­vest­ment into a new fleet, which will boast fea­tures like new lie-flat busi­ness-class seats and a new pre­mium econ­omy class.

Lufthansa is one of the world’s most prof­itable air­lines with about 120 000 em­ploy­ees. By com­par­i­son, SAA only has about 11 500 em­ploy­ees.

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