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What Is The Secret Of LH?  
User currently offlineGonzalo From Chile, joined Aug 2005, 1988 posts, RR: 2
Posted (1 year 10 months 1 week ago) and read 15760 times:

I apologize since i'm almost sure this has been discussed in the past, but I would like to know your opinions under the light of the recent times, under the EU crisis environment.
From this part of the World, there are very, very few European airlines that look "healthy", and LH is probably the one with the best performance, in a smooth, constant way.
But at the same time, LH has to deal with basically the same problems of the other big airlines ( IAG, AF/KL, SK ), having strong unions, a very diverse fleet, high op costs, etc.

So, if they have to face the same kind of problems of the others, why are they having better results ? Are the managers doing a better work ? Is the route network better suited or designed ? Is the high yield traffic ? What is the secret of LH ?

Rgds.
G.


80 Knots...V1...Rotate...Gear Up...DC-3 / EMB-110 / Fairchild-227 / Ab318-19-20 / B732 / B763
43 replies: All unread, showing first 25:
 
User currently offlinePanHAM From Germany, joined May 2005, 9437 posts, RR: 30
Reply 1, posted (1 year 10 months 1 week ago) and read 15663 times:

A fast food manager would say: location, location, location. FRA is located near the geographic and the dmeographic centre of Europe. MUC is a bit off but not in a bad location either. same for DUS.

Another reason for success is the German system of "dual education". Regardless if maintenance technician or "Luftverkehrskaufmann" (airline management) , the apprenticeship usually is 3 days on the job, going through all parts fo the company and 2 days at school. This is a better foundation than college which give only theoretical training. A Luftverkehrskaufmann will also have additional semesters at the European Business School, he will be working at stations overseas and after the final exam have a deep knowledge of how the business works. Better than that, they even know WHY it works that way.

The dual system is mandatory for all kinds of trade ad is the backbone of the German indzustry, which is very diversified, often centred in small towns, producing world market leaders in places no one ever heard of.

.



E's passed on! That parrot is no more! He has ceased to be! E's expired and gone to meet 'is maker!
User currently offlinesteman From Germany, joined Aug 2000, 1393 posts, RR: 7
Reply 2, posted (1 year 10 months 6 days 23 hours ago) and read 15559 times:

I would add that LH exploits the very big and strong German economic structure.
Germany is one of the biggest exporter of goods in the world. This means lots of travel in high yield classes
for low/middle/top management of many many German Companies.
LH has a huge long haul fleet and a vast network that caters to this market.
I am not sure of this but I think the long haul network is highly profitable whereas the European and short haul one
struggle under the attack of low cost airlines.

And I think that, on average, the people of LH are great professionals, committed and motivated to do their
job. This certainly helps in keeping the image of the Company high among passengers and customers.
Of course you´ll always hear of bad experiences, complaints and so on.
Nobody´s perfect.


User currently offlinena From Germany, joined Dec 1999, 10748 posts, RR: 9
Reply 3, posted (1 year 10 months 6 days 23 hours ago) and read 15392 times:

I worked for and currently work for a number airlines, and I see a big difference between LH and "the others". That is the will to deliver quality everywhere. My experience (which also includes names such as Emirates) is that the Lufthanseaten are generally more professional and have a far superior company spirit. They have a higher degree of knowledge, and they have a higher sense for quality control. They strive for the best where others only say so. There is a high sense of continuity. Other airlines are ok with mediocrity where they think the public doesnt immediately see it. Other airlines also employ a higher degree of people not really being devoted to aviation, people who sell chocolate bars with the same sense of indifference as they "sell tickets".

A first class airline can only be run on the long run by people enthusiastic about what they do. This is my experience of two decades of work relationship with almost ten airlines. If I ever came over a company that I think is utterly trustworthy its LH.


User currently offlinesmbukas From Lithuania, joined Feb 2009, 205 posts, RR: 0
Reply 4, posted (1 year 10 months 6 days 23 hours ago) and read 15353 times:

Quoting PanHAM (Reply 1):
A fast food manager would say: location, location, location.

I think it is only part of reason. More important reason is strong and stable Germany economy and very good management of the airline. Forward thinking, fast adoption to new realities, etc. They are not leaders in service, product or price, but they always adopt new things fast and good change management.

If we compare to other big European legacy airlines they were first with cost cutting programmes, adoption to low cost reality (increased number of seats on LH short-haul fleet, now short-haul operations takeover by 4U "Direct4You" project, relatively good fleet management). They also have enough support from the government in protection of local market from MEB3, they were smart supporting TK in "Star Alliance" as alternative to MEB3. Overall, smart management.


User currently onlinelh526 From Germany, joined Aug 2000, 2372 posts, RR: 14
Reply 5, posted (1 year 10 months 6 days 23 hours ago) and read 15336 times:
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It has a lot to do with the german cliche of doing everything to the max, pushing the envelope, being commited and extremely into detail on most things ... and just that little portion of "german engineering in da house".

Not going with the mainstream, keeping a strong brand and positively living up to that german cliche ist just a side effect  

Mario
LH526



Trittst im Morgenrot daher, seh ich dich im Strahlenmeer ...
User currently offlineJU068 From Vanuatu, joined Aug 2009, 2650 posts, RR: 6
Reply 6, posted (1 year 10 months 6 days 23 hours ago) and read 15297 times:
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The answer is very simple. Lufthansa knows how important it is to have a satisfied customer. The first time I flew on Lufthansa was back in 2006, and since then I had over 40 flights with them. I have NO bad memories- something I can't say for SWISS or Austrian Airlines.

People want to come back and fly with them because they feel that they are in safe and professional hands.


User currently offlinesenatorflyer From UK - England, joined Jul 2012, 33 posts, RR: 0
Reply 7, posted (1 year 10 months 6 days 22 hours ago) and read 15156 times:

I would tend to disagree. Before you shoot me, I am German myself and have a Senator/Gold Status with them.

Lufthansa is very lucky in a few areas but management isn’t their strong point.

Lufthansa, the airline itself, is not that profitable. Austrian is a mess and if memory serves me right Germanwings didn’t have any profit since 2007. Other parts of the group are doing well, Swiss contributed the biggest profits over the last years.

The cost reduction program is nice but they could achieve much more if they would do it right. As a matter of fact, if they would sort our their structure and strategy then it could become one of the most profitable airline group.


User currently offlinena From Germany, joined Dec 1999, 10748 posts, RR: 9
Reply 8, posted (1 year 10 months 6 days 22 hours ago) and read 15059 times:

Quoting senatorflyer (Reply 7):
The cost reduction program is nice but they could achieve much more if they would do it right.

OMG. Of cause they could throw everything overboard that make them a classy airline. A cost reduction system while still delivering high quality that makes a top airline, not maximum profit at all cost. Saving to the max is a horrible thing, it ends in cheapness and misery. Profitability at all cost is a nightmare for employees and clients alike. Profit of cause is necessary, but reckless profit, profit, profit thinking is one of the worst things, as thought to the end it means nothing but huge profit for very few people and nothing for rest 99%.


User currently offlinesenatorflyer From UK - England, joined Jul 2012, 33 posts, RR: 0
Reply 9, posted (1 year 10 months 6 days 22 hours ago) and read 14891 times:

I agree with you, na, that’s why I said the management is not their strongest point. You will need to keep your clients and staff happy, and invest to be able to provide a good service and product. The management achieves the contrary with their cost reduction plan.

Efficiency in administration and strategy are their weakest points. Almost every company in their group is operating as a standalone. They haven’t even managed to alingn purchasing across the group among a million other things.

I do like Lufthansa but if they want to succeed, they need a change in leadership.


User currently offlineEagleBoy From Niue, joined Dec 2009, 1843 posts, RR: 2
Reply 10, posted (1 year 10 months 6 days 21 hours ago) and read 14819 times:
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Quoting na (Reply 3):
They strive for the best where others only say so. There is a high sense of continuity. Other airlines are ok with mediocrity where they think the public doesnt immediately see it.
Quoting na (Reply 3):
A first class airline can only be run on the long run by people enthusiastic about what they do
Quoting steman (Reply 2):
And I think that, on average, the people of LH are great professionals, committed and motivated to do their job.

I like this points. I currently work for an airline that publicly states things like 'customer experience' 'value product' 'brand awareness' 'customer centric'

But many of the decisions taken recently seem to benefit the cmopany more than the customer. I know the airline has to be profitable but it has to build a long term brand loyalty too. At the same time they are pushing tighter retrictions and demands on their staff to 'deliver targets' while missing the gaps that are developing in their product/organisation. When the staff raise objections to these 'initiatives' they are disregarded.

Quoting steman (Reply 2):
And I think that, on average, the people of LH are great professionals, committed and motivated to do their job.


User currently offlineSemaex From Germany, joined Nov 2009, 823 posts, RR: 2
Reply 11, posted (1 year 10 months 6 days 21 hours ago) and read 14793 times:

Quoting na (Reply 8):
Profit of cause is necessary, but reckless profit, profit, profit thinking is one of the worst things, as thought to the end it means nothing but huge profit for very few people and nothing for rest 99%.

I think this is a very good point you are making which destinguishes LH from similar companies.

Obviously LH and the entire network of carriers that complete the syndicate are bound to make profits at all times, since that is what shareholders ask for. As a publicly registered and stock market DAX30 player they would be foolish to not have profit as a goal. But it's not the ultimate goal.
The ultimate goal, and that's what I think every business should incorporate, is to make people happy. Not only costumers, but employees too. It's not a life goal to become rich, but to become happy.
People working at LH are, in all fairness, rather well off with their jobs. LH is a very good payer, even for low level jobs the salary is very fair. Not much, but fair. Flight Attendants and Pilots make good money, but they must deliver. It's just a fair system, which makes all sides - management and employees - happy. Simple as that.

The best example of fairness I can give is the way LH destributes it's end-of-year profits (in case they make some, of course) :
One third goes to the shareholders as dividend.
One third stays within the company for future growth.
One third is passed on to the employees as a salary bonus.

I think a lot of companies, whether airlines or not, can take an example of this.


And then of course what others have said already. The "german stereotype" has its uses when selling a product or service, the location in the heart of Europe is very fortunate and the strong ties between LH and the government (after all they used to be (partly) stateowned until less than 20 years ago) has its bonus.
Plus, right until Franz became CEO all the leaders of the company were "home-grown" Lufthanseaten, people from within the company who made a name for themselves. That said, I have my doubts if Franz is the right person for the job at LH.



// You know you're an aviation enthusiast when you look at your neighbour's cars and think about fleet commonality.
User currently offlinena From Germany, joined Dec 1999, 10748 posts, RR: 9
Reply 12, posted (1 year 10 months 6 days 21 hours ago) and read 14702 times:

Quoting Semaex (Reply 11):
That said, I have my doubts if Franz is the right person for the job at LH.

I agree, I also fear he´s not made of the same stuff as Mayrhuber and Weber which were excellent. But after one year, maybe its too early to tell.

Quoting Semaex (Reply 11):
I think a lot of companies, whether airlines or not, can take an example of this.

I agree. In the past I worked as an employee for three renowned American Companies, I talk about more than 15 years alltogether. Basically all I can say about them is greed, greed, greed. Everything thats good is delivered to the top brass, and everything bad was laid at the feet of the staff. Roughly said, the policy was that it was more important that there is enough money to pay for the private trainer of the shareholders wives than for the training of the staff.

All these three companies are in bad shape today.


User currently offlinePanHAM From Germany, joined May 2005, 9437 posts, RR: 30
Reply 13, posted (1 year 10 months 6 days 21 hours ago) and read 14613 times:

Quoting Semaex (Reply 11):
Obviously LH and the entire network of carriers that complete the syndicate are bound to make profits at all times, since that is what shareholders ask for.

shareholders are poor people, very often they got nothing. In all the years I keep LH stock I can only remember one year where the dividend was over one €

Quoting Semaex (Reply 11):
One third goes to the shareholders as dividend.
One third stays within the company for future growth.
One third is passed on to the employees as a salary bonus.

Normally so. But it is more complex, cash flow from depreciation is re-invested and hardly ever turned out as profit. In a bad year, cash flow is kept in the company and re-invested whereas shareholders get nothing.

LH is a publicly owned company, not a private outfit owned by some rich guy. Tens of thousands of share holders and institutional owners make up the company.

Profit is not an evil, profit is the necessity to keep a company going. Without profit the company wuld follow the path of PanAm and TWA who could, at the end, not even pay for the pain on the jet bridges.



E's passed on! That parrot is no more! He has ceased to be! E's expired and gone to meet 'is maker!
User currently offlineEagleBoy From Niue, joined Dec 2009, 1843 posts, RR: 2
Reply 14, posted (1 year 10 months 6 days 20 hours ago) and read 14490 times:
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Quoting Semaex (Reply 11):
The best example of fairness I can give is the way LH destributes it's end-of-year profits (in case they make some, of course) :
One third goes to the shareholders as dividend.
One third stays within the company for future growth.
One third is passed on to the employees as a salary bonus.

I never knew that, very interesting. And a great incentive for the staff to all work towards making customers happy. Even is 25% was towards staff it is still a gesture of appreciation that means a lot in the long term.


User currently offlinena From Germany, joined Dec 1999, 10748 posts, RR: 9
Reply 15, posted (1 year 10 months 6 days 20 hours ago) and read 14416 times:

Quoting PanHAM (Reply 13):
Profit is not an evil, profit is the necessity to keep a company going.

No one argues that. But profit at all cost is.


User currently offlineAAexecplat From United States of America, joined Sep 2009, 635 posts, RR: 4
Reply 16, posted (1 year 10 months 6 days 20 hours ago) and read 14400 times:

As a customer who just plunked down for 4 RT tickets FRA-LIS at a significant premium over flying TAP, I chose LH because I trust they will get me and my family to LIS on time, on a clean airplane, and with a decent onboard drink and snack/meal service. Safety, Relaibility, and Cleanliness is where LH excels in my opinion. As Star Alliance Gold, I get dedicated check-in at FRA and lounge access in FRA and LIS.

If I had to complain about one thing regarding LH, it's that their seat in some of the long haul Y configs can be somewhat uncomfortable, and that the IFE really doesn't compare to the Asian carriers or even UA at this point.

But I find that the service onboard usually makes up for this shortcoming.


User currently offlinechootie From Germany, joined May 2007, 290 posts, RR: 0
Reply 17, posted (1 year 10 months 6 days 20 hours ago) and read 14317 times:

Quoting na (Reply 8):
Saving to the max is a horrible thing, it ends in cheapness and misery. Profitability at all cost is a nightmare for employees and clients alike. Profit of cause is necessary, but reckless profit, profit, profit thinking is one of the worst things, as thought to the end it means nothing but huge profit for very few people and nothing for rest 99%.

Hi Folks!!!!
Wake up and smell the coffee------ Have you all not seen what is happening right NOW with all the outsourcing of those expensive, and motivated employees??? Direct 4U-- a great example of really giving all those High yielding passengers a reason to go to another airline/alliance.

The race to the bottom has begun, and as soon as all the expensive, expierinced workers are replaced with temporary handling agents, we can call the LH model sucessful or better than the rest. Blinded by profit,and it still is not enough for the management of Mr. Franz and co.



chootie
User currently offlinePanHAM From Germany, joined May 2005, 9437 posts, RR: 30
Reply 18, posted (1 year 10 months 6 days 19 hours ago) and read 13939 times:

No, it's rather the race to stay in business. Check the routes - point to point, which 4U is scheduled to fly, there's hardly always competition which does not already compete with Lh. More than a coffee and a snack is not served on these routes today.

It is either that way or no way. Either cut the costs for ptp routes or give them up completely. Now guess what happens to employees if the routes are given up? Right. They have no job.

LH is doing it exactly right and it seems to have been understood by the unions., After all, it's very simple, job or no job.

The 4U product will be better than that of FR or EZY and competetive to AB,

There are airlines in Europe that have given up the provinces almost completely. That would be difficult in polycentric Germany which is another reason why it is that way.



E's passed on! That parrot is no more! He has ceased to be! E's expired and gone to meet 'is maker!
User currently offlineETinCaribe From Ethiopia, joined Dec 2009, 734 posts, RR: 0
Reply 19, posted (1 year 10 months 6 days 19 hours ago) and read 13783 times:

Quoting PanHAM (Reply 13):
Normally so. But it is more complex, cash flow from depreciation is re-invested and hardly ever turned out as profit. In a bad year, cash flow is kept in the company and re-invested whereas shareholders get nothing.

I certainly don't know the exact cases of LH, but in general I know that companies can take their free cash and decide what is the best use of it - invest it themselves (either for organic growth, M&A or buyback of under valued stock) or give it back to the investor in the form of dividend. Many Fortune 500 companies nowadays have huge very strong balance sheet with tons of cash. I guess their goal (like all other officers with fiduciary responsibilities) is to maximize long term returns to their shareholders, but since they are big employers, are over leveraged, they may not have too much flexibility in maneuvering.

Now, one thing I thought LH did well is in taking equity stake in other carriers. I hope others know if the ventures with Brussels Airlines, Swiss, etc. were good investments and how the likes of LSG, LH Technik are doing???



Quoting AAexecplat (Reply 16):
If I had to complain about one thing regarding LH, it's that their seat in some of the long haul Y configs can be somewhat uncomfortable, and that the IFE really doesn't compare to the Asian carriers or even UA at this point.

I will find out in a couple of weeks myself as I will be flying MIA-FRA-ADD, with the TATL legs on the A380 in Y, which has had mixed reviews. But I guess that is the point - LH does what it needs to do to stay competitive and doesn't give anything away (case in point, only one checked suitecase per pax, less than most other carriers).


User currently offlinePanHAM From Germany, joined May 2005, 9437 posts, RR: 30
Reply 20, posted (1 year 10 months 6 days 19 hours ago) and read 13578 times:

Quoting ETinCaribe (Reply 19):

I certainly don't know the exact cases of LH, but in general I know that companies can take their free cash and decide what is the best use of it - invest it themselves (either for organic growth, M&A or buyback

Lufthansa goal was always to finance ggrowth and investments from thjeir own ressorúrces. Most aircraft are owned, many paid for and depreciated to 1 € . The current cost cutting program is aiming to keep costs in line to continue that way.

Another point which has not been mentioned is flexibility. The company can react to market developments on a very short notice. Another asset.



E's passed on! That parrot is no more! He has ceased to be! E's expired and gone to meet 'is maker!
User currently offlineSCQ83 From United States of America, joined Oct 2012, 958 posts, RR: 0
Reply 21, posted (1 year 10 months 6 days 19 hours ago) and read 13372 times:

Quoting AAexecplat (Reply 16):
As a customer who just plunked down for 4 RT tickets FRA-LIS at a significant premium over flying TAP, I chose LH because I trust they will get me and my family to LIS on time, on a clean airplane, and with a decent onboard drink and snack/meal service. Safety, Relaibility, and Cleanliness is where LH excels in my opinion. As Star Alliance Gold, I get dedicated check-in at FRA and lounge access in FRA and LIS.

If I had to complain about one thing regarding LH, it's that their seat in some of the long haul Y configs can be somewhat uncomfortable, and that the IFE really doesn't compare to the Asian carriers or even UA at this point.

But I find that the service onboard usually makes up for this shortcoming.

I certainly think that there is something to do with that.

First, as others have stated, the larger German economy and population and their location in Central Europe allow them to have a more extensive network, making more one-stop connections possible and expanding their reach.

And secondly, their brand success is that I don't think anybody raves about LH (like maybe some people do with the likes of SQ or EK) but they are seen as "reliable" and that do their job in time (call it German efficiency maybe?), which for many people is a plus when flying.

I was surprised, for instance in the Gulf / Middle East (which is not a very price sensitive market and that has not much relation with Germany), that some of my local acquaintances there would always fly LH on their way to the US, (some of them even knew the time schedules to FRA or MUC by heart!) despite the fact that they don't speak German, they seldom visit Germany (yet they travel frequently to London or Southern Europe) and they don't have any connections to the country. Yet they think LH is more likely to take them on time and offers a more consistent product than the likes of BA or AF. I have a Spanish relative who has been living in Eastern Europe for a few years... after trying almost every possible combination (no direct flights between the two cities) long ago she decided to "stick" to LH/LX because of reliability, even if she has to pay more.

Obviously this is based on anecdotal personal experiences, but I wouldn't be surprised that a good number of passengers (and not necessarily Germans) are willing to pay a small premium to fly with LH instead of BA/AF/KL/AZ... or that they will fly with LH when they have similar prices.


User currently offlineLimaNiner From United States of America, joined Oct 2006, 400 posts, RR: 0
Reply 22, posted (1 year 10 months 6 days 17 hours ago) and read 11873 times:

How much of LH's profits come from the airline's passenger ops, versus cargo, LSG (LSG-SkyChefs -- world's largest catering company, IIRC), LH Technik, etc.?

Quoting Semaex (Reply 11):
the way LH destributes it's end-of-year profits (in case they make some, of course) :
One third goes to the shareholders as dividend.
One third stays within the company for future growth.
One third is passed on to the employees as a salary bonus.

Wow -- neat!

As someone who works in Silicon Valley, I can tell you that giving employees a personal financial stake in the success of the business (through profit sharing or stock options, etc.) is one of the greatest ways to get employees to go the extra mile every time!

"Wir ziehen alle am selben Strang."


User currently offlinemusapapaya From United Kingdom, joined Apr 2004, 1092 posts, RR: 0
Reply 23, posted (1 year 10 months 6 days 14 hours ago) and read 9534 times:

For me, choosing to fly with LH group of airlines give me the confidence that I will get there with the minimum amount of (nasty) suprises. I know I will get there mostly on time and my baggage will arrive. Living in the UK I feel sick of the british saying 'with some luck, we will be there on time'. I like the confidence the Germans can give us.


Lufthansa Group of Airlines
User currently offlinelewis From Greece, joined Jul 1999, 3637 posts, RR: 5
Reply 24, posted (1 year 10 months 6 days 13 hours ago) and read 9233 times:

Because they are a German airline, they work with a German mindset that is always about being more than just adequate and their staff is in general very professional. The airline is very efficient and always strives to be covering all customer needs without the fancy shmancy service that can be plagued by overall delivery. Since I first flew them I have considered them one of the best to fly overall, not because they have the best food or best seats or best whatever but because they are 100%+ at delivering the standards they have decided to provide and they are always consistent. I have only had a couple of issues when flying LH - a missed connection and a lost (delayed) luggage and both times the customer service has been exceptional at offering a solution to me.

25 avek00 : Not really, it's more like playing a rather bad hand as best as they think they can. LH has fallen years behind peers in several areas, including lon
26 musapapaya : Initially the OP suggested LH is financially in a good shape compared to its peers. We cannot deny that, it seems their lie flat bed in their current
27 vanguard737 : I would agree, this is one of the most important factors of Lufthansa's success. The German work ethic and emphasis on not simply doing something, bu
28 aerokiwi : Wow, that's a lot of oversimplifications and generalisations. If it really was about being of the "german mindset", then all German airlines would be
29 brilondon : I don't agree. Profit is not a dirty word and I do think that if there was a profit to be made, then by all means they should go ahead and do what it
30 Viscount724 : I agree. When I worked for IATA (for 10 years through 2007) I dealt with airlines worldwide, mainly in areas involving pricing, revenue management, r
31 avek00 : The A380 does NOT have a lie flat bed in Business Class -- that's partly my point. LH is gambling that its lack of product competitiveness in certain
32 twa@fra : True, their product could be much better, still not all 744 have inseat IFE in Eco..... but I would say that is the point, they do not invest if it d
33 Post contains images TC957 : LH's success ? It's obvious - 4 engines 4 long-haul
34 Post contains images Semaex : You forget the secret agent named A330. Some cheeky tongues say that LH still has a couple of them. They are invisible to the naked eye, but bring gr
35 holzmann : A lot of good points being made in this thread that I can reiterate. -Dual-track vocational education system (that benefits all German industries and
36 SCQ83 : True... I also think that FRA (for my experience being the only airport I have ever transferred in Germany outside Schengen) immigration officers are
37 PanHAM : I have been asked these questions on arrival and departure at FRA as well and I carry a German passport. I could have told them that this is nothing
38 777way : Iif I could run an airline I would make it like Lufthansa, here in Pakistan Airblue has that feel in their early days not sure if they kept it up.
39 Post contains images SCQ83 : You are right about that... I somehow "suggested" them that it was not their business... however they certainly asked in quite an abrupt way... they
40 Semaex : I'm afraid you're right, it's not quite as simple as that. But to break it down to a universally-understandable level for people like me, without muc
41 PanHAM : Border police is not trained to be friendly, they are trained to detect falsified passports and people on the wanted list. It takes me usually not km
42 jfk777 : Germans don't necessariy build car people want, People want cars Germans build. People will also pay massive premuims for Germans cars, here in the U
43 flanker : easy..one word.. GERMANS LOL. But in all seriousness, I might be a little biased since I always fly with LH.
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