SInGAPORE_AIR
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Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 6:46 am

Financial Times Extract

----
Lufthansa threatens to start budget flights
By Uta Harnischfeger in Frankfurt
Published: January 22 2002 19:25 | Last Updated: January 22 2002 19:30

Lufthansa, the German flag carrier, on Tuesday said it might make good on repeated warnings that it would set up its own low-cost airline to fend off the growing competition from budget airlines such as Ryanair, Europe's biggest low-cost carrier, and Germania Fluggesellschaft.

Separately, Lufthansa was forced to clarify remarks by a board member whose performance forecast for the company sent the stock sharply lower in early morning trading. Instead, Lufthansa reiterated that it hoped to break even in its operating result, but would probably report a net loss of about E400m ($354m) in 2001.

Ralf Teckentrup, the airline's marketing chief, said Lufthansa could pull plans for a low-budget airline out of the drawer at any given moment. "The concept for our own low-budget airline is fully ready and we can carry it out at any time."

Budget airlines such as Ryanair have been winning business from full- service airlines. Ryanair, which has launched aggressive marketing campaigns across Germany, plans to make Frankfurt-Hahn, a former army base, its new European flight hub.

"In view of Ryanair's aggressive marketing campaigns, it shouldn't astonish anyone that such ideas [about a no-frills Lufthansa airline] are coming to life again," a Lufthansa spokesman said. Nevertheless, Lufthansa played down Mr Teckentrup's comments and said they did not mean that it had imminent plans for such a move.

Industry analysts echoed Lufthansa's view and warned that the German market was already full of no-frills airlines. "If you include the charter airlines [serving highly-frequented tourist destinations from regional airports] then the German low-fare market is already more than saturated," said Uwe Weinreich at HVB.

The German cartel office warned Lufthansa over what it said were excessively low ticket prices on the Frankfurt-Berlin Tegel route.

Ulf Böge, cartel office president, argued that Lufthansa's actions were unfair and cited as evidence the fact that it did not cut prices on other internal flights where Germania, a domestic budget carrier, was not present.

Separately, a local appeals court in Cologne said on Tuesday that it would take until February 12 to adjudicate in a battle between Lufthansa and Ryanair regarding the latter's pricing and advertising methods.

In addition, Lufthansa's pilots' union warned that it might go on strike following a ballot running until February 15. The strike warning comes after wage talks with the management of City Line, a unit of Lufthansam, failed.
Anyone can fly, only the best Soar.
 
donder10
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 7:03 am

Go Lufthansa!
 
Hoffa
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 7:06 am

AH-HA!!! Big grin

"I told you so" is in order for Andreas, Flying Tiger, and anybody else who didn't believe Lufti would take this step!

And where will the new baby-LH be based? My guess is HHN.  Big grin
 
prebennorholm
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 7:06 am

Did they really say so? I mean "Lufthansa threatens to start budget flights...

I could accept "Lufthansa is happy to announce that we now introduce budget flights".

What would you say in case Cadilac announced: "We threaten to produce cars cheaper than $60,000".

There is a customer base and demand for budget flights. If you want to be a supplier to that market, then go ahead and do it.

But don't threaten your customers.

Regards, Preben Norholm
Always keep your number of landings equal to your number of take-offs
 
greenjet
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 7:12 am

Good for them but they'll regret it. BA failed with Go. Continental didn't exactly succeed with Continental Lite, nor did United with Shuttle or US Airways with Metrojet. What makes Lufthansa think they can succeed? Sounds to me LH are about to throw away money and at the wrong time too. Good luck to them.
 
teahan
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 7:22 am

Hello,

Well I won't say no to more fare wars and cheap fares.

Jeremiah
Goodbye SR-LX MD-11 / 6th of March 1991 to the 31st of October 2004
 
Guest

RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 8:07 am

Sounds to me like Lufthansa is admitting that their product is over-priced.
 
LoneStarMike
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 8:15 am

Has any low-fare airline within an airline ever been successful? Just curious.

LoneStarMike

 
Guest

RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 8:34 am

GO actually made profits whilst part of BA although not as great as Ryanair or Easyjey but then they are not as big as Ryanair or Easyjet.
 
Hoffa
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 12:32 pm

Agreed...selling Go was probably the biggest mistake BA made considering Go is making money and BA is losing it hand over fist.
 
airblue
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 5:32 pm

Is Delta Express a successful low fare airline, isn't it??
They are inside a major airline.
 
Andreas
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 6:00 pm

LOL!!! No they didn't threaten to do a lowcost carrier, what a great translation mistake, hehehe!!
Mr. Teckentrup only said, they were thinking about it, and they have been doing so since years. Especially the latter remark should give you an idea about LH's real intention to go "Baby-Crane": Don't count on it in the nearer future, I'm quite sure about that (Hoffa, don't make a bet on it, you'd probably lose money!).

There are several things that go against such a project:
Babycrane would be a direct competitor to Big-crane, and quite a few business travellers probably don't find it so funny to pay high airfares if they can fly LH light for low fares. Furthermore there'd still be the dumping pricing problem, as Baby crane would still be LH group and there'd always be suspicions about cross-subsidies in order to keep airfares low.

Overall I don't really think they'll do it!

Regards
Andreas

But Hoffa, we can still make a bet! *ggg*
I know it's only VfB but I like it!
 
vfw614
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 6:46 pm

What's the difference ? Lufthansa had a disguised low-fare operation when they were trying to fight off Ryanair and Go at Stansted - cheap flights with literally no in-flight service from FRA, MUC and HAM using bmi A321s and B146s and LH mainline a/c. It is probably just a question of economics - utilising some mainline or leased aircraft and cross-subsidise them with mainline revenues or setting up a true subsidiary which you finance with exactly the same money. I doubt that LH would really consider establishing such an airline for the long run. If - if - they have finally driven FR or others out of the German market, they would probably close that ugly duckling down before you can count to three.
 
LJ
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 7:42 pm

Parra, GO wasn't profitable under BA. Only when 3i took over it became profitable (at least that's what I've heard)

Andreas, you're right about the cross subsidy problem as BA discovered when they started GO.

Hoffa, BA was ordered to sell GO and given the lack of profitability it was a hard sell.

BTW why does LH has to set up a low cost operator. Can't they use BMIbaby for this purpose (or are we going to have a collection of Baby airlines in the Star Alliance)

Regards
Laurens
 
Guest

RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 8:24 pm

It was certainly not a mistake to sell GO-and a good thing that BA got rid of it before Sep. 11, otherwise they would have been in a mightier mess than they are now.

BA and GO have completely different strategies and aims, and are mutually exclusive in that respect-each airline should concentrate on what it does best.

So the case with LH. There is room for both types of airlines. I know it's been said before, but I think it's true.

LH offers a reliable, and generally good business-orientated service & schedule. There will always be executives who will stay loyal to LH, because they know exactly what they are going to get, even if something goes wrong-and they are willing to pay a premium for 'peace of mind'.

Let LH concentrate on that market, and not wate time & money on something which it clearly would rather not get into....

Germania and Ryanair should be allowed to play-let them concentrate on what they do best-carrying mainly leisure travellers for a weekend in London etc.

The main carriers will have to adapt to the new, vicious competition, but LH and BMI's strategies aren't going to last that long, imo.

Still, great news for the average traveller in the short-term.

Regards
 
Andreas
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 8:39 pm

Captain Picard I'm afraid it's not that easy. There is research that proves that up to 60% of the passenegrs of so called low-cost carriers are more or less on business (whatever more or less means!). If that is true, even LH needs to rethink its strategy. Still I don't think, a baby-crane would be the answer, and I still don't believe they will actually go ahead with that.
I think the success of the low-costs is a striking proof that cost-cutting and restructuring of the majors is proceeding way too slow, that goes for BA and LH, both frontrunners among the majors concerning cost-cutting and restructuring, as well.
Regards
Andreas
I know it's only VfB but I like it!
 
qantas744
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 9:38 pm

As an aside to the comment above,I was on easyJet yesterday (Luton-Glasgow),and in the departure lounge for the 0935 flight were 50-60 pax suited up to the nines,plus around a dozen pax in casual gear.I know that isn't a very scientific way of making a point but it illustrates how corporate travel account managers are just as cost conscious as the rest of us.


Matt
you can't buy time but you can sell your soul and the closest thing to heaven is to rock'n'roll
 
Guest

RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 10:14 pm


Didn't Lufthansa already fail with their LUFTHANSA EXPRESS a few years ago ? Wasn't that just something like a low-cost alternative ??
How could they be able to succeed if the wages for the crew will be the same as on mainline LH ???? Only droping the 3 € food + newspaper ?? Mhhhhhh. Dunno.

But it of course would be cool to have a LH low cost airline. Would they go international are just within Germany ?
 
airsicknessbag
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 11:29 pm

RE: crew wages:

LH have one advantage over BA, CO, US... that more or less failed when trying to build up a low cost operation: All LH have to do is make "LH light" an eastern German company - and presto, you save 10-15% on personal cost. That´s, by the way, the reason why Condor´s low cost airline CondorBerlin have their HQs at SXF, in East-Berlin. And CondorBerlin must have success to a certain degree, or else they wouldn´t still be alive and kicking in their fifth year.

Daniel Smile
 
Guest

RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 11:34 pm

Sorry for this long post, I feel I am in a converstaion....

Yes, it's not as easy as that, but my comment was more general in nature.

I too have seen businessmen on my flights with Ryanair, and who knows, maybe in the future we'll see more of them electing to save big money by flying with Easyjet etc.

I still think there are and will be, plenty of 'core' BA, LH, AF etc. customers in the future-I may be totally wrong, but I just have doubts about the main carriers disappearing completely from Europe-as I said earlier, I beleive there will always be high-yield demand on certain 'key' business routes (Frankfurt & London, London & Paris, Zurich & Milan etc. etc...)

That's why I think BA will shortly be announcing cuts in it's European network-but only on routes where it clearly has no future, ie. the smaller Euro cities such as Naples, Zagreb, Venice etc.; at the same time, I'm pretty certain all the main routes will still be there.

As an example, my father travels regularly on business within Europe, using Heathrow as a base. Ok, he's not paying the fare, but his employer expects him to be in Frankfurt on-time, and for his ticket to be fully-flexible. In their eyes, BA provides exactly what they need-reliability, flexibility and a nice choice of schedules every day.

Heathrow is no problem, as it's well-connected by the Heathrow Express train to Paddington (15 minutes). BA flies into FRA; again, it's close and convenient.

Many of you have said this already, but HHN is just a bit too far from FRA to be attactive to people such as my father-and my dad simply isn't interested in Stansted.

And whilst I don't care about no food (saves money!), he actually enjoys his glass of morning champagne and 'herb' salad on a 6am flight out to Athens, or wherever.

I'm all for Ryanair, I think they're great, although I don't think they are really a problem on core business routes within Europe, such as those I mentioned above.

No-frills airlines are mainly eating up the more peripheral routes in my mind.

Ok, I'm ready to be proved wrong now, or in the future!  Laugh out loud

Regards
 
Andreas
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RE: Lufthansa Threatens To Start Budget Flights

Wed Jan 23, 2002 11:41 pm

Hmmmm, the idea Eastern Germany is not bad, though I still don't believe they'll do it. Besides it would take pressure from LH to accelerate their cost restructuring, which they obviously need urgently (compared to the low-costs, not the majors).
btw Condor had to go to SXF, the idea was to gather all charter flights in SXF, in TXL (though LH basis in Berlin), they were a company "non grata". It serves them right, but it was not entirely what they originally wanted.
Regards
Andreas (Berliner!! or to be precise: Wilmersdorfer!!!)
I know it's only VfB but I like it!
 
LJ
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RE: Lufthansa Threatens To Start Budget Flights

Thu Jan 24, 2002 12:41 am

Capt Picard, easyJet probably does have more business people onboarad because they serve the "better" airports like LGW, AMS, GVA and MAD (airports where you won't see a Ryanair plane).

LH is probably worried that once a low cost operator may set up FRA-LGW, FRA-MAD or FRA-GVA. I think this worry is justified and not very strange that LH is already thinking about what to do when it happens. Fortunately for LH it's very difficult to get slots at FRA.

Regards
Laurens
 
Guest

RE: Lufthansa Threatens To Start Budget Flights

Thu Jan 24, 2002 1:26 am

Actually both UA Shuttle and US' Metrojet are profitable. It's because the sharp decline on travel after the 9.11 attack, UA and US shuts them down.
 
airsicknessbag
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RE: Andreas

Thu Jan 24, 2002 1:50 am

I don´t know about animosities between LH/CIB on the one side and TXL and/or SXF on the other. But the operations and administrative respective HQs need not necessarily be located at the same airport. The decision to have CIB´s administrative HQ in the east was indeed primarily for financial reasons. I´m just trying to figure out where I read that; might be an article from one Berlin newspaper, might be a Lufthanseat article from late 97/early 98 (when CIB was launched).
BTW, I was on CIB and DE mainline flights three days apart - and it´s really identical service. So the only cost cutting measure must be wages.

Daniel Smile
 
Andreas
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RE: Lufthansa Threatens To Start Budget Flights

Thu Jan 24, 2002 2:00 am

Still it seems strange to me, that LH Baby would fly to Gatwick for, say, € 99, while LH senior would go to Heathrow with a much higher price.
Instead should any such route be served by a low-cost carrier, it must be allowed to LH to attack with comparable prices (what I call competition, not dumping), but I guess, that brings us back to our yesterday's discussion.
Regards
Andreas
I know it's only VfB but I like it!
 
Andreas
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RE: Lufthansa Threatens To Start Budget Flights

Thu Jan 24, 2002 2:13 am

Yes it was probably a nice external effect for Condor that Berlin-Brandenburg.-Flughafenholding threw them out of the city, and maybe they would have moved HQ anyway, but my "father-in-law-to-be" is a former Technical Director of Tempelhof Airport, in the days when it was still Nr. 1 in Berlin, and though he's retired, he's still deep inside the scene, he just can't let go, and he told me that story of Condor and a few others (one of the few decisions in Berlin aviation, that were agreeable, according to him. btw: Behind the scenes Berlin Senat and Brandenburg government tried to convince LH to go to SXF, too, as there is already a big LH Technik Overhaul site in Diepensee, southern part of SXF. Fortunately they didn't go!! If they'd decided otherwise, Germania would be King now on the FRA-BER market).
Regards
Andreas
I know it's only VfB but I like it!
 
airsicknessbag
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RE: Lufthansa Threatens To Start Budget Flights

Thu Jan 24, 2002 2:28 am


Very interesting. I guess it would have been a powerful political signal for a Berlin/Brandenburg merger if LH had set up their Berlin ops at an airport situated in Brandenburg state but dedicated to serving Berlin.

Anyway, I wouldn´t have minded LH continuing to serve SXF (they even had transatlantic flights from there in the early 90s I believe). Up to now, the only Berlin airport I used is THF (quite naturally if you´re coming from MHG or DTM) which is of course unbeatable location-wise; but I did some sightseeing at both TXL and SXF, and I found SXF actually easier to reach than TXL, by public transport, that is. I mean you´re at Ostbahnhof in 16 minutes from SXF, and then on to the other Stadtbahn stops, all with a relatively fast RegionalExpress. TXL, while geographically closer to the centre, only has this terrible bus service. And for a decent bus you have to pay extra, no thanks

Daniel Smile

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