AirbusMDCFAN
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Watchdog group accuses Lufthansa of Price Hikes in wake of Air Berlin Bankruptcy

Thu Dec 28, 2017 7:34 pm

Source: https://www.thelocal.de/20171228/is-luf ... ing-prices


"Germany's Federal Cartel Office (FCO) is currently probing complaints that Lufthansa fares shot up on some routes after bankrupt rival Air Berlin stopped flying in late October."
"Lufthansa has denied changing its pricing methods, arguing that its fully-automated booking system was simply responding to a spike in demand following the Air Berlin collapse and displaying higher average prices as a result."
"But in an interview with the Sueddeutsche Zeitung daily, FCO president Andreas Mundt said that justification didn't hold up.
"That's beside the point. These algorithms aren't written by dear God in heaven," he said. "Companies can't hide behind algorithms."
Industry experts say Lufthansa ticket prices have jumped by 30 percent on some routes, according to German media."

How many routes did LH and AB compete on and which routes are now solely LH operated routes and are the prices now that Air Berlin has ceased operations
Last edited by qf789 on Wed Jan 03, 2018 2:54 pm, edited 2 times in total.
Reason: spelling in title
 
kiowa
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Re: Watchdong group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Thu Dec 28, 2017 11:52 pm

Darn watchdong groups.
 
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Re: Watchdong group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Thu Dec 28, 2017 11:54 pm

kiowa wrote:
Darn watchdong groups.


Amazing they can watch their dongs and LH prices at the same time...
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YVRing
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Re: Watchdong group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Fri Dec 29, 2017 3:49 am

I think that's how competition works...?
 
BlatantEcho
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Re: Watchdong group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Fri Dec 29, 2017 3:56 am

If Air Berlin wasn’t making any money, and that caused them to eventually go bankrupt, doesn’t it make sense that fares would increase?

Why is this news, and how is this a bad thing?
 
Nicoeddf
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Re: Watchdong group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Fri Dec 29, 2017 7:00 am

BlatantEcho wrote:
If Air Berlin wasn’t making any money, and that caused them to eventually go bankrupt, doesn’t it make sense that fares would increase?

Why is this news, and how is this a bad thing?


Absolutely agree. Prices artificially so low by subsidiy or other means that they are unsustainable aren't even in the consumer interest in the long term, as they kill otherwise functioning businesses.
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PanHAM
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Re: Watchdong group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Fri Dec 29, 2017 8:37 am

This watchdong bureaucrat does not understand the Airline Business. He manifested that already in August after AB went belly up. "LH cannot hide behind algorhythms" - how else can a yield management System work? By rollling the dice? The German domestic market is about 5% of the LH Business, the competition is by rail and by road. Outisde Germany competition between 2 Points is plenty.
Besides, one of the reasons why AB crossed the Jordan was the fact that they lost € 25 on each ticket sold.
Dong
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zeke
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Re: Watchdong group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Fri Dec 29, 2017 12:02 pm

It sounds like simple economics, if say 400 passengers were on a route, and they had 570 seats available between them, supply exceeds demand. A/B go under, now only 300 seats for 400 passengers, demand exceeds supply, prices go up.
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LTenEleven
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Fri Dec 29, 2017 12:55 pm

Fares on some routes from DUS have become absolutely outrageous. It’s like being back in the 1990s again (except now there are no discounts for Saturday night stays etc.).
 
727200
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Fri Dec 29, 2017 1:21 pm

Imagine, prices rise as competition decreases. Sounds like econ 101. And there is a 'watch dog' group whose entire job is to file complaints against this?
 
vfw614
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Fri Dec 29, 2017 1:41 pm

Just chill and relax, this all follows legal principles. Staff at the German anti-trust authority are top their class recruits, they are not dimwits. It goes without saying that all industries under scrutiny tend to argue that the anti-trust authority has no clue and does not understand the specific industry. The president has not hinted at a ruling, but he has simply rebutted the lame effort by Lufthansa to hide behind an algorithm. It should be plain obvious that in anti-trust proceedings the argument that "my computer is doing all that" is just as effective as the "my dog has eaten the homework" excuse was back in school.
 
WIederling
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Fri Dec 29, 2017 2:44 pm

LTenEleven wrote:
Fares on some routes from DUS have become absolutely outrageous. It’s like being back in the 1990s again (except now there are no discounts for Saturday night stays etc.).


that is the problem with active demand pricing.
you used to have fixed timetables and attached pricing. same for Rail. no special offers.
only differentiation was kid, adult, group.

( while today you may be presented with differing offers depending on the device you access by, geolocation and/or ISP ... "yuppies i-phone markup" )

compare to petrol in Germany. pricetags gyrate through the day by more than 10%. overlayed with 10..15% by region.
Murphy is an optimist
 
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Fri Dec 29, 2017 2:46 pm

I would strongly urge the customers and prospective customers of Lufthansa who believe that the fares charged are too high to express their displeasure by not flying. Lufthansa will get the message soon enough.

Regulators trying to control airfares? Bad policy.
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WIederling
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Fri Dec 29, 2017 2:48 pm

sccutler wrote:
I would strongly urge the customers and prospective customers of Lufthansa who believe that the fares charged are too high to express their displeasure by not flying. Lufthansa will get the message soon enough.

Regulators trying to control airfares? Bad policy.


Deutsche Bahn hasn't got their thing together yet for the new HSR rail connections. ( 2020, just after BER opening?)
so, the perfect alternative is walking.:-)
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Fri Dec 29, 2017 9:12 pm

AirbusMDCFAN wrote:
"These algorithms aren't written by dear God in heaven," he said

Apparently he's never met a software engineer before! :biggrin:
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PanHAM
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Sat Dec 30, 2017 12:52 pm

....and what does he expect`A small competitor of LH crosses the Jordan and the watchdog expects that LH manipulates it's yield Management System because Windfall profitts are verboten im Germany.
LH made about € 150 mio additional turnover from the demise of AB. They did not say what the costs are but even at a margin of 10% that wuld be 15 Million Profit which would be taxable. Hardly something even to raise an eyebrow.

The Windfall Profit for the state due to additional VAT collected must be greater.
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Sat Dec 30, 2017 1:34 pm

I don't mind certain regulation, but in other things, some more deregulation would be better because otherwise, it would stifle things. That being said, I'm sick and tired of consumer watchdog groups (e.g. Verbraucherzentrale) constantly whining about things. It doesn't matter what branch of the free economy, constant whining is what let me lose trust in them doing something good for a change.

As far as LH is concerned, when Carsten Spohr said that they wouldn't raise fares, in hindsight, I understood this as LH committing itself to not artificially inflate prices. Yes, airfares have gone up, but that doesn't mean that LH made those hikes on purpose. So while people see this with the "algorythims" as an excuse, I'm buying LH's explanation.

My former boss even found a solution for himself: He took advantage of a certain time of day (in this case, it was after 22:00 hrs CET) to book a flight. It turned out to be far cheaper than if he had booked it at say 11:00 hrs. It may not work all the time, but there's a possibility for anyone to find a deal, and sometimes, certain times of day may help.
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leghorn
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Sat Dec 30, 2017 1:41 pm

WIederling wrote:
compare to petrol in Germany. pricetags gyrate through the day by more than 10%. overlayed with 10..15% by region.

I don't dispute this. do you have a link where it is discussed?
 
ltbewr
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Sat Dec 30, 2017 1:45 pm

I am quite sure some competitors to LH or LH use its LLC divisions to provide some additional or replacement service to effectively lower overall fares on former Air Berlin routes.
 
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Sat Dec 30, 2017 2:03 pm

727200 wrote:
And there is a 'watch dog' group whose entire job is to file complaints against this?

No, not quite correct. (but I suspect you already knew that)

In Germany it is the FCO, in the UK it's called "Competition & Markets Authority" (CMA), and in the US it is the "United States Department of Justice Antitrust Division".

Obviously their brief varies slightly from country to country, but in general terms they encourage natural competition, discourage any monopoly situation, and if a monopoly is inevitable, ensure regulation to prevent the monopoly simply charging whatever it wants. At least that is the theory.

With the collapse of Air Berlin, LH find themselves (through no fault of their own) in a temporary monopoly situation. Hence the intervention.
Over time, other airlines (new airlines?) will fill the vacuum, and we will return to proper price-driven competition.

As I said; I'm sure everybody knows this already, so feel free to ignore my ramblings.
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aerogt3
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Re: Watchdong group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Tue Jan 02, 2018 3:08 pm

PanHAM wrote:
This watchdong bureaucrat does not understand the Airline Business. He manifested that already in August after AB went belly up. "LH cannot hide behind algorhythms" - how else can a yield management System work? By rollling the dice? The German domestic market is about 5% of the LH Business, the competition is by rail and by road. Outisde Germany competition between 2 Points is plenty.


Munich to Berlin by train, booking out as far in advance as possible right now, yields a €200+ round trip for the 4 hour train. Similar price from Stuttgart but 6 hours. Driving will be at least 7.5 hours under normal road conditions and a fuel stop. Road and rail are competitors to flying in the same way 1990s Nokia flip phones are competitors to a modern smartphone.

Anyone who's watched fares and priced flights has seen the impact of the effective LH monopoly, and it's not just on domestic. LH intercontinental fares originating in DUS are through the roof compared to AB times. There was a reason FRA-SEA, STR-SEA, MUC-SEA were all in the low €800s earlier this year, but DUS-SEA (via FRA!!) was €630. The reason was AB.

This price spike would normally be a temporary drop in supply while other airlines rush in and generate competition, but I fear it will stick as LH group now controls 90% of the market for many intra-german routes, at airports which are slot restricted enough to prevent other entries. (see first chart in link)
https://www.bloomberg.com/gadfly/articl ... passengers

Besides, one of the reasons why AB crossed the Jordan was the fact that they lost € 25 on each ticket sold.
Dong


The increase people are seeing from the AB era to now are way above €25.
 
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seahawk
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Tue Jan 02, 2018 4:23 pm

It is normal as the AB capacity is gone. And as airline has an interest to keep a few empty seats for people who need to fly on short notice.
 
Nicoeddf
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 10:29 am

I hazard a guess:

The money that LH lost due to artificially low prices during Air Berlins subsidizes years is by far more than now could have been possibly recovered by artificially high pricing during the short lived "monopoly".
And the monopoly isn't actually one as can be seen by PanHAMs numbers...
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WIederling
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 12:04 pm

leghorn wrote:
WIederling wrote:
compare to petrol in Germany. pricetags gyrate through the day by more than 10%. overlayed with 10..15% by region.

I don't dispute this. do you have a link where it is discussed?


general pricing trends:
https://www.tanke-guenstig.de/Benzinpreise
per station and day changes:
https://www.benzinpreis-aktuell.de/

couple of years ago after the big brands really went overboard with jo-jo pricing.
Rules were changed to force just in time publishing of price changes over day/time.

( I could drive to the next town on the way looking for the cheapest stations
and on the way back 1h later everything would have changed again.
the consumer was denied establishing pricing information for an educated buy.)
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WIederling
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 1:37 pm

SheikhDjibouti wrote:
I can only see a minority of city-pairs where I would choose to fly. Perhaps you see it differently?


https://de.wikipedia.org/wiki/Intercity ... chland.png
( no inline image as a.net sw balks at png.)

not a perfect map ...but...

Germany is a lot less "centric" than the UK or France. The bane of the pre Bismark political fragmentation.
( Nice that the Napoleonic (Law) reforms took hold in all regions. Imagine the strife ...)
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SheikhDjibouti
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 1:56 pm

WIederling wrote:
( no inline image as a.net sw balks at png.)
Not true, but I found the original image was too large for a.net's comfort - I selected a medium size version, but it's still png
(Achtung! I'm a self-confessed techno-dinosaur, so I might be talking absolute garbage)
.
Image

Germany is a lot less "centric" than the UK or France. The bane of the pre Bismark political fragmentation

I would love to discuss that more with you, but that would take us off-topic. Something for Non-aviation?
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 2:53 pm

Please keep the thread on topic
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PanHAM
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Re: Watchdog group accuses Lufthansa of Price Hikes in wake of Air Berlin Bankruptcy

Wed Jan 03, 2018 3:15 pm

Excuse me, but my contribution was on Topic. The Topic is an alledged Monopoly of LH in German domestic Services and my arguments have been that total mobility must be viewed and not only one of tree modal Options.
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aerogt3
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 3:28 pm

Nicoeddf wrote:
I hazard a guess:

The money that LH lost due to artificially low prices during Air Berlins subsidizes years is by far more than now could have been possibly recovered by artificially high pricing during the short lived "monopoly".
And the monopoly isn't actually one as can be seen by PanHAMs numbers...


His numbers don't actually address the issue of monopolies. But these do. Please tell me: how is owning 90% of the Berlin-Munich traffic, 80% Berlin-DUS, or 98% Berlin-FRA not a monopoly?
 
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 4:04 pm

aerogt3 wrote:
Nicoeddf wrote:
I hazard a guess:

The money that LH lost due to artificially low prices during Air Berlins subsidizes years is by far more than now could have been possibly recovered by artificially high pricing during the short lived "monopoly".
And the monopoly isn't actually one as can be seen by PanHAMs numbers...


His numbers don't actually address the issue of monopolies. But these do. Please tell me: how is owning 90% of the Berlin-Munich traffic, 80% Berlin-DUS, or 98% Berlin-FRA not a monopoly?



I have a question, and I'm just an observer. I have no interest in flying LH any time soon, nor will I be flying to Europe anytime soon, so I'm trying to be neutral in this. For air travel LH has a monopoly in Germany and other places in central Europe, that's not in dispute. Why?

Is LH such a good airline that nobody can compete with them? Was AB so tied to the failed BER its problems doomed the airline? Was AB run badly? Did the German government tilt the playing field so much in LH's favor that no airline can seriously compete with them?

My guess is that the latter is the real answer, the German government favored LH so much it made it very hard for AB or anyone else to compete with it. I would not be surprised if the government is also making it very hard for anyone to enter the market in a manner that can be a threat to LH's monopoly status.

Thank you for your answer.
 
WIederling
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 4:44 pm

StuckinCMHland wrote:
My guess is that the latter is the real answer, the German government favored LH so much it made it very hard for AB or anyone else to compete with it. I would not be surprised if the government is also making it very hard for anyone to enter the market in a manner that can be a threat to LH's monopoly status.


LH has seem quite some strife in the last years. That is not really what a "preferred child" would expect.

AB had a Full Service airlines cost structure and LCC ticketing. Expensive leases, expensive crews, ...
A period of spastic expansions. they shew losses since ~~2010.
Later most of those were buffered by their Shareholder Etihad Airways. for a while.
BER provided the head chop but did not put their primary limb on the block to begin with.

Germany has a reasonably well working social setup ( including things like sane health plans and save pensions, mitbestimmung )
Forces that try to trash that are not looked upon kindly.( the reason why Ryan Air has an upsstream battle here. )
This requires beyond other things that markets are not deformed by dumping. No tears for Air Berlin
and those clamoring for cheap fares should shut up.
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 5:32 pm

StuckinCMHland wrote:
aerogt3 wrote:
Nicoeddf wrote:
I hazard a guess:

The money that LH lost due to artificially low prices during Air Berlins subsidizes years is by far more than now could have been possibly recovered by artificially high pricing during the short lived "monopoly".
And the monopoly isn't actually one as can be seen by PanHAMs numbers...


His numbers don't actually address the issue of monopolies. But these do. Please tell me: how is owning 90% of the Berlin-Munich traffic, 80% Berlin-DUS, or 98% Berlin-FRA not a monopoly?



I have a question, and I'm just an observer. I have no interest in flying LH any time soon, nor will I be flying to Europe anytime soon, so I'm trying to be neutral in this. For air travel LH has a monopoly in Germany and other places in central Europe, that's not in dispute. Why?

Is LH such a good airline that nobody can compete with them? Was AB so tied to the failed BER its problems doomed the airline? Was AB run badly? Did the German government tilt the playing field so much in LH's favor that no airline can seriously compete with them?

My guess is that the latter is the real answer, the German government favored LH so much it made it very hard for AB or anyone else to compete with it. I would not be surprised if the government is also making it very hard for anyone to enter the market in a manner that can be a threat to LH's monopoly status.

Thank you for your answer.


AB died only because of their own faults. When they were doing their Mallorca Shuttle and sunny destinations thing they were making good money, but then the management dreamed of taking on LH and they started to buy competitors at over inflated prices and under less than favourable conditions to grow. Deutsche BA, LTU, HLX all those deals were bad. Either too much was paid or the agreements were not favourable for AB and all this was done with loaned money. They never made enough money to cover their liabilities after that.
And that was the downfall everything after was just delaying the end.
 
aerogt3
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 5:32 pm

StuckinCMHland wrote:
I have a question, and I'm just an observer. I have no interest in flying LH any time soon, nor will I be flying to Europe anytime soon, so I'm trying to be neutral in this. For air travel LH has a monopoly in Germany and other places in central Europe, that's not in dispute. Why?

Is LH such a good airline that nobody can compete with them? Was AB so tied to the failed BER its problems doomed the airline? Was AB run badly? Did the German government tilt the playing field so much in LH's favor that no airline can seriously compete with them?

My guess is that the latter is the real answer, the German government favored LH so much it made it very hard for AB or anyone else to compete with it. I would not be surprised if the government is also making it very hard for anyone to enter the market in a manner that can be a threat to LH's monopoly status.

Thank you for your answer.


Allowing LH to buy its competitors is certainly a mechanism for gaining such a monopoly.

And then beyond that is the natural consolidation of power that we historically have seen in almost all industries. How many car companies/banks/airlines/etc. were there 30 years ago? Today? Volkswagen used to be.... Volkswagen. Now it owns Seat, Audi, Porsche, Skoda, Bently, Ducatti, MAN, Scania.... which competes with PSA or GM, who themselves are a group of many brands consolidated into one group. Governments are supposed to protect consumers by stopping this from reaching monopolistic levels, but in the case of LH I think they haven't done their job.

WIederling wrote:
Germany has a reasonably well working social setup ( including things like sane health plans and save pensions, mitbestimmung )
Forces that try to trash that are not looked upon kindly.( the reason why Ryan Air has an upsstream battle here. )
This requires beyond other things that markets are not deformed by dumping. No tears for Air Berlin
and those clamoring for cheap fares should shut up.


Allowing competition is deforming the market? Should every country aspire to only have one airline providing service?

I think people in Germany sometimes forget that businesses exist to serve customers, not to provide wages for employees. The void left by air berlin should have been filled by airlines competing for its former customers, not by being given over to LH to dominate with 90-98% of traffic on major routes.
 
WIederling
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 5:38 pm

aerogt3 wrote:
I think people in Germany sometimes forget that businesses exist to serve customers, not to provide wages for employees. The void left by air berlin should have been filled by airlines competing for its former customers, not by being given over to LH to dominate with 90-98% of traffic on major routes.


No we don't. We keep in mind that competing by any means for customers to the detriment of the workforce
there will be no customers in the future.
See workforce and customers ( over all industries ) are the same people. ( Some other nations don't get that.)

i.e. no cheap fares on the backs of the workforce.
Look to the Swiss for that model being pushed even more.
Contrast to the US were the middle class is losing ground while very few get richer and richer.
That in all essence leads into a more or less feudal setup.
Murphy is an optimist
 
Nicoeddf
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 5:58 pm

aerogt3 wrote:
Nicoeddf wrote:
I hazard a guess:

The money that LH lost due to artificially low prices during Air Berlins subsidizes years is by far more than now could have been possibly recovered by artificially high pricing during the short lived "monopoly".
And the monopoly isn't actually one as can be seen by PanHAMs numbers...


His numbers don't actually address the issue of monopolies. But these do. Please tell me: how is owning 90% of the Berlin-Munich traffic, 80% Berlin-DUS, or 98% Berlin-FRA not a monopoly?


Okay, please, let's put this on a macro level.
Your numbers state AIR TRAFFIC ONLY, which is hardly the whole picture, especially in a country as tiny as Germany with excellent high speed rail and road traffic, as well as inter city busses.

Hence, while LH might enjoy a momentarily monopoly in AIR TRAFFIC on certain routes due to other players not yet being in the market (easyjet, ryanair), there is PLENTY of customer choice.
Door to door routes up to four hours easily are fully competitive between rail, car and flying. Above that, latest at 500km of distance, the plane will win on time. Not however always on appeal.
In most cases, people still drive or take the train.

But basically I am repeating what has been stated a thousand times. But the story is far more catchy if there is a bad LH to be had.
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 6:24 pm

Nicoeddf wrote:
Okay, please, let's put this on a macro level.
Your numbers state AIR TRAFFIC ONLY, which is hardly the whole picture, especially in a country as tiny as Germany with excellent high speed rail and road traffic, as well as inter city busses.

Hence, while LH might enjoy a momentarily monopoly in AIR TRAFFIC on certain routes due to other players not yet being in the market (easyjet, ryanair), there is PLENTY of customer choice.
Door to door routes up to four hours easily are fully competitive between rail, car and flying. Above that, latest at 500km of distance, the plane will win on time. Not however always on appeal.
In most cases, people still drive or take the train.

But basically I am repeating what has been stated a thousand times. But the story is far more catchy if there is a bad LH to be had.


I am so sick of this argument, a 7 hour drive/train ride is not an equivalent service to a one hour flight. In the same way a monopoly by a car company could not be excused just because "you can still by a truck/bus/motorcycle/roller blades/walk."

But that argument aside, the government's job is to prevent monopolies in AIR TRAFFIC, which is what it is allowing Lufthansa to achieve. A monopoly in air traffic alone is already unacceptable.

WIederling wrote:
No we don't. We keep in mind that competing by any means for customers to the detriment of the workforce
there will be no customers in the future.
See workforce and customers ( over all industries ) are the same people. ( Some other nations don't get that.)

i.e. no cheap fares on the backs of the workforce.
Look to the Swiss for that model being pushed even more.
Contrast to the US were the middle class is losing ground while very few get richer and richer.
That in all essence leads into a more or less feudal setup.


You cherry pick the US as an example, forgetting that Holland, Norway, Sweden, Iceland, etc. are countries with way more low cost service/market penetration than Germany and less wealth inequality as well. On top of that, you're justifying an LH monopoly by referencing Ryanair conditions. News for you: Ryanair is not the only airline that could cover the AB void.

There is no justification for one carrier controlling 90%+ of the domestic market. If you want "no cheap fares on the backs of the workforce," you achieve that with labor laws, not by having a monopoly in each industry. Monopolies are even worse for employees as a single industry employer gives consumers no choice on price and workers no other choice on working conditions.
 
fraT
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 7:20 pm

aerogt3 wrote:
Nicoeddf wrote:
Okay, please, let's put this on a macro level.
Your numbers state AIR TRAFFIC ONLY, which is hardly the whole picture, especially in a country as tiny as Germany with excellent high speed rail and road traffic, as well as inter city busses.

Hence, while LH might enjoy a momentarily monopoly in AIR TRAFFIC on certain routes due to other players not yet being in the market (easyjet, ryanair), there is PLENTY of customer choice.
Door to door routes up to four hours easily are fully competitive between rail, car and flying. Above that, latest at 500km of distance, the plane will win on time. Not however always on appeal.
In most cases, people still drive or take the train.

But basically I am repeating what has been stated a thousand times. But the story is far more catchy if there is a bad LH to be had.


I am so sick of this argument, a 7 hour drive/train ride is not an equivalent service to a one hour flight. In the same way a monopoly by a car company could not be excused just because "you can still by a truck/bus/motorcycle/roller blades/walk."

But that argument aside, the government's job is to prevent monopolies in AIR TRAFFIC, which is what it is allowing Lufthansa to achieve. A monopoly in air traffic alone is already unacceptable.

WIederling wrote:
No we don't. We keep in mind that competing by any means for customers to the detriment of the workforce
there will be no customers in the future.
See workforce and customers ( over all industries ) are the same people. ( Some other nations don't get that.)

i.e. no cheap fares on the backs of the workforce.
Look to the Swiss for that model being pushed even more.
Contrast to the US were the middle class is losing ground while very few get richer and richer.
That in all essence leads into a more or less feudal setup.


You cherry pick the US as an example, forgetting that Holland, Norway, Sweden, Iceland, etc. are countries with way more low cost service/market penetration than Germany and less wealth inequality as well. On top of that, you're justifying an LH monopoly by referencing Ryanair conditions. News for you: Ryanair is not the only airline that could cover the AB void.

There is no justification for one carrier controlling 90%+ of the domestic market. If you want "no cheap fares on the backs of the workforce," you achieve that with labor laws, not by having a monopoly in each industry. Monopolies are even worse for employees as a single industry employer gives consumers no choice on price and workers no other choice on working conditions.


Sorry but your argumentation is just wrong.
If somebody lives right next to the airport and needs to go to a place next to the destination airport, then of course neither train nor car can beat air traffic time wise but the reality is different. Take the Munich-Berlin example. It takes an hour to go from Downtown Munich to the airport (remember the famous Stoiber speech), then another hour for check-in plus one hour flight. Then you are at Tegel and need to take public transport (as far as I remember a bus) to go to the interesting Berlin areas. So if DB gets their act together with the new high speed track, then it isn't a big difference in time. And have a look at the pricing for these trains.

Same goes for most other intra German routes. For the shorter ones, driving becomes another alternative which is often quicker than flying. And you sound like those people who seem to blame LH for the bankruptcy of AB. Yes they were doing competitive pricing on wing to wing routes but that is the normal procedure worldwide. In the end AB went belly up because poor decisions over the last decade. It is just logical that the LH flights are filling up quicker and so the lower classes are closing bringing the fares up. If the competitor watchdog does not realize those simple things, it just proves that they are just whining to get attention.
 
StuckinCMHland
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 7:23 pm

WIederling wrote:
aerogt3 wrote:
I think people in Germany sometimes forget that businesses exist to serve customers, not to provide wages for employees. The void left by air berlin should have been filled by airlines competing for its former customers, not by being given over to LH to dominate with 90-98% of traffic on major routes.


No we don't. We keep in mind that competing by any means for customers to the detriment of the workforce
there will be no customers in the future.
See workforce and customers ( over all industries ) are the same people. ( Some other nations don't get that.)

i.e. no cheap fares on the backs of the workforce.
Look to the Swiss for that model being pushed even more.
Contrast to the US were the middle class is losing ground while very few get richer and richer.
That in all essence leads into a more or less feudal setup.


Thank you for all the replies so far, I appreciate them very much.

Wlederling, be careful about part part of your post, the US middle class is not as bad off as you think, but it is not in great shape, and much of the problem is the US government and it's massive overegulation of the economy.
 
zkeoj
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Re: Watchdong group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 8:32 pm

aerogt3 wrote:
PanHAM wrote:
This watchdong bureaucrat does not understand the Airline Business. He manifested that already in August after AB went belly up. "LH cannot hide behind algorhythms" - how else can a yield management System work? By rollling the dice? The German domestic market is about 5% of the LH Business, the competition is by rail and by road. Outisde Germany competition between 2 Points is plenty.


Munich to Berlin by train, booking out as far in advance as possible right now, yields a €200+ round trip for the 4 hour train. Similar price from Stuttgart but 6 hours. Driving will be at least 7.5 hours under normal road conditions and a fuel stop. Road and rail are competitors to flying in the same way 1990s Nokia flip phones are competitors to a modern smartphone.

Anyone who's watched fares and priced flights has seen the impact of the effective LH monopoly, and it's not just on domestic. LH intercontinental fares originating in DUS are through the roof compared to AB times. There was a reason FRA-SEA, STR-SEA, MUC-SEA were all in the low €800s earlier this year, but DUS-SEA (via FRA!!) was €630. The reason was AB.

This price spike would normally be a temporary drop in supply while other airlines rush in and generate competition, but I fear it will stick as LH group now controls 90% of the market for many intra-german routes, at airports which are slot restricted enough to prevent other entries. (see first chart in link)
https://www.bloomberg.com/gadfly/articl ... passengers

Besides, one of the reasons why AB crossed the Jordan was the fact that they lost € 25 on each ticket sold.
Dong


The increase people are seeing from the AB era to now are way above €25.


Sorry, but you are contradicting yourself. If a rail ticket is 200 Euro, why do you want LH to charge so much less? Apparently, Deutsche Bahn are allowed to have a monopoly (opn high speed, long distance routes), but LH is not?
 
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seahawk
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Re: Watchdog group accuses Lufthansa of Price Hikes in wake of Air Berlin Bankruptcy

Wed Jan 03, 2018 8:38 pm

And one should not forget that every European airline was free to bid for the remains of AB.
 
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zeke
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 11:03 pm

aerogt3 wrote:
But that argument aside, the government's job is to prevent monopolies in AIR TRAFFIC, which is what it is allowing Lufthansa to achieve. A monopoly in air traffic alone is already unacceptable..


Government should be providing public transport infrastructure such as roads, rail, and airports and the regulatory safety oversight. They should not be involved with restricting the capacity of that infrastructure.

If flying is too expensive, the market will find alternatives. Train fares I have purchased in Germany were far cheaper than €200, you don’t need to tr Abel first class on the ICE. If some routes are highly profitable, another market player will come along.
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LTU932
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Re: Watchdong group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Wed Jan 03, 2018 11:05 pm

zkeoj wrote:
Sorry, but you are contradicting yourself. If a rail ticket is 200 Euro, why do you want LH to charge so much less? Apparently, Deutsche Bahn are allowed to have a monopoly (opn high speed, long distance routes), but LH is not?
Last time I flew HAM-FRA and back (this was 2012), LH charged me like 180 Euros, while the train ride would've cost me around 200 Euros on the ICE. Honestly, it was all worth it to fly.

As far as Deutsche Bahn is concerned, most of the competition they have is in the regional market, where the regional governments are forced to start contests for the best bidders. Even they have to pay money to the Deutsche Bahn for certain fees like the use of their rail lines, etc. There have been competitors in the long distance markets but they hardly if ever survived. It seems that competition is not wanted by the federal government on ICE or IC routes. It would have been even worse had Deutsche Bahn been fully privatised (or at least had it gone public on the stock exchange) 10 years ago. Let's not forget how things went for Deutsche Telekom after their IPO (started great in the mid 1990s, ended in a fiasco in the 2000s).

Personally, LH doesn't have nearly the same monopoly that Deutsche Bahn and Deutsche Telekom have. Deutsche Bahn owns pretty much all of the railroad network through DB Netze and DB S&S (for the stations), Deutsche Telekom owns the final section of copper telephone lines which is why you'll always indirectly pay Deutsche Telekom if you have a landline phone and DSL in Germany through a competitor (not to mention bitstream DSL lines, where companies such as 1&1 lease the entire line from Deutsche Telekom as reseller), but the airways don't belong to LH.
Sometimes the only thing more dangerous than a question is an answer. - Ferengi Rule of Acquisition 208
 
aerogt3
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Thu Jan 04, 2018 9:46 am

fraT wrote:
Sorry but your argumentation is just wrong.
If somebody lives right next to the airport and needs to go to a place next to the destination airport, then of course neither train nor car can beat air traffic time wise but the reality is different. Take the Munich-Berlin example. It takes an hour to go from Downtown Munich to the airport (remember the famous Stoiber speech), then another hour for check-in plus one hour flight. Then you are at Tegel and need to take public transport (as far as I remember a bus) to go to the interesting Berlin areas. So if DB gets their act together with the new high speed track, then it isn't a big difference in time. And have a look at the pricing for these trains.


Ok, you've found one route where the train is time competitive, although there are only 6 of those 4 hour trains per day. What about Munich to Hamburg? Stuttgart Hamburg? Stuttgart Berlin? Munich Düsseldorf? These are 6 hour journeys by train, 7-8 by car.

Same goes for most other intra German routes. For the shorter ones, driving becomes another alternative which is often quicker than flying. And you sound like those people who seem to blame LH for the bankruptcy of AB. Yes they were doing competitive pricing on wing to wing routes but that is the normal procedure worldwide. In the end AB went belly up because poor decisions over the last decade. It is just logical that the LH flights are filling up quicker and so the lower classes are closing bringing the fares up. If the competitor watchdog does not realize those simple things, it just proves that they are just whining to get attention.


I have no problem with AB failing and believe it was mostly their own fault. But a full LH takeover should have never been allowed.

And yes, it is normal for airlines to have better pricing on wing to wing routes. But it's also normal for there to actually BE wing to wing routes, versus one airline monopolizing domestic travel.

zkeoj wrote:
Sorry, but you are contradicting yourself. If a rail ticket is 200 Euro, why do you want LH to charge so much less? Apparently, Deutsche Bahn are allowed to have a monopoly (opn high speed, long distance routes), but LH is not?


I am against monopolies period. But this is an aviation forum, so pardon me if I focus on monopolies in aviation. :roll:
 
fraT
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Thu Jan 04, 2018 10:08 am

aerogt3 wrote:
fraT wrote:
Sorry but your argumentation is just wrong.
If somebody lives right next to the airport and needs to go to a place next to the destination airport, then of course neither train nor car can beat air traffic time wise but the reality is different. Take the Munich-Berlin example. It takes an hour to go from Downtown Munich to the airport (remember the famous Stoiber speech), then another hour for check-in plus one hour flight. Then you are at Tegel and need to take public transport (as far as I remember a bus) to go to the interesting Berlin areas. So if DB gets their act together with the new high speed track, then it isn't a big difference in time. And have a look at the pricing for these trains.


Ok, you've found one route where the train is time competitive, although there are only 6 of those 4 hour trains per day. What about Munich to Hamburg? Stuttgart Hamburg? Stuttgart Berlin? Munich Düsseldorf? These are 6 hour journeys by train, 7-8 by car.

Same goes for most other intra German routes. For the shorter ones, driving becomes another alternative which is often quicker than flying. And you sound like those people who seem to blame LH for the bankruptcy of AB. Yes they were doing competitive pricing on wing to wing routes but that is the normal procedure worldwide. In the end AB went belly up because poor decisions over the last decade. It is just logical that the LH flights are filling up quicker and so the lower classes are closing bringing the fares up. If the competitor watchdog does not realize those simple things, it just proves that they are just whining to get attention.


I have no problem with AB failing and believe it was mostly their own fault. But a full LH takeover should have never been allowed.

And yes, it is normal for airlines to have better pricing on wing to wing routes. But it's also normal for there to actually BE wing to wing routes, versus one airline monopolizing domestic travel.

zkeoj wrote:
Sorry, but you are contradicting yourself. If a rail ticket is 200 Euro, why do you want LH to charge so much less? Apparently, Deutsche Bahn are allowed to have a monopoly (opn high speed, long distance routes), but LH is not?


I am against monopolies period. But this is an aviation forum, so pardon me if I focus on monopolies in aviation. :roll:


As far as I remember, every EU carrier can start routes to compete wing to wing with LH. Even Ryanair managed to get slots at FRA. So again, why are you blaming LH for their so called monopoly in air traffic within Germany? If basically nobody wants to compete with them, it's not their fault.
 
aerogt3
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Re: Watchdog group accuses Lufthansa of Price Hikes in wak of Air Berlin Bankruptcy

Thu Jan 04, 2018 10:13 am

fraT wrote:
As far as I remember, every EU carrier can start routes to compete wing to wing with LH. Even Ryanair managed to get slots at FRA. So again, why are you blaming LH for their so called monopoly in air traffic within Germany? If basically nobody wants to compete with them, it's not their fault.


I am not blaming LH for buying AB - what business doesn't try to increase its market share as much as possible? My issue is with the german government. No business should be allowed to buy their arguably only competitor to the point of having 90% market share. Various EU carriers starting routes to compete with LH is exactly how I would have liked to see the AB void filled.
 
PanHAM
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Re: Watchdog group accuses Lufthansa of Price Hikes in wake of Air Berlin Bankruptcy

Thu Jan 04, 2018 10:37 am

We have regulations and laws in this Country which all concerned, including the government, have to follow. The government is in no positio to "allow". The governmnt is also in no Position to force competition to build up a Network competing with an incumband carrier. For those who are able to think "intermodal", this is not an issue. Unfortunately have my thoughts been removed.

In conclusion, there s no law against a factual Monopoly simply because no Company can be forced to waste their resources. But we are in a lucky Situation that, as of the coming Weekend, there will be competition. At least something. If that works will be seen. If not we still have other modes of Transport providing for a variety of choice.Either way, pricing will adjust downwards without changing the Basic fares.
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Nicoeddf
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Re: Watchdog group accuses Lufthansa of Price Hikes in wake of Air Berlin Bankruptcy

Thu Jan 04, 2018 10:43 am

aerogt3 wrote:
Ok, you've found one route where the train is time competitive, although there are only 6 of those 4 hour trains per day. What about Munich to Hamburg? Stuttgart Hamburg? Stuttgart Berlin? Munich Düsseldorf? These are 6 hour journeys by train, 7-8 by car.


Sorry buddy, but you really need to broaden your mind if you like to have a serious and fruitful discussion.

There are PLENTY of routes intra-Germany where high-speed train is highly competitive. People are not basing their decision on time alone and, living here in Germany, I know plenty and plenty of people who would take the train over flying even if the journey would be substantially longer, simply due to the fact, that taking the train creates a lot less stress for many people.
Actually I just did that after New years eve, despite having access to very cheap flight tickets. One hour total travel difference isn't enough to outweigh the convenience of the train.

And your one hour flying to 7 hour train comparison is simply silly. Lets start door to door timings please, as nobody I know is living in the airports and has only airports as travel destination.

FRA-HAM - 3:40 travel time on train +1hour local travel --> 1:15h block time + 1h check-in+ at least 1.5h local travel time (and thats for experienced travellers)
FRA-MUC - 3h + 1h --> 1h+1h+2h
STR-HAM - 5h + 1h --> 1:15 + 1h+2h
CGN-TXL - 4:20 +1h --> 1:15 + 1h + 2h
MUC-HAM 5:30 +1h --> 1:30 + 1h +2h

Just some random, but far away city pairs. The difference is max 2h DOOR TO DOOR. By far not enough to make leisure travellers decide for the extra hassle of plane vs. train. At least not in the German market, as riding the train is by far more convenient for flight times around 1h.

But hey, I guess I have to concede that people can see things differently...
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aerogt3
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Re: Watchdog group accuses Lufthansa of Price Hikes in wake of Air Berlin Bankruptcy

Thu Jan 04, 2018 12:07 pm

Nicoeddf wrote:
Sorry buddy, but you really need to broaden your mind if you like to have a serious and fruitful discussion.


Likewise, you seem obsessed with comparing trains and planes when the real point here is that governments should not approve airline sales/mergers which lead to monopolies.
 
Economist
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Re: Watchdog group accuses Lufthansa of Price Hikes in wake of Air Berlin Bankruptcy

Thu Jan 04, 2018 12:29 pm

Allow me to put some structure to this discussion.

I agree with all of you that what happened is simple economics: Capacity was removed from the market, demand stayed the same, price went up (potentially significantly on some routes).

While this is nothing unusual, there is a legal question here (or so I am told, I am not a lawyer): According to German and EU law (see e.g. Art. 102 of the Treaty of the European Union) it would be considered abusive (i.e. illegal) if a company holding a "dominant position" in a market somehow imposed "unfair prices".

So there are two conditions - indeed just having a monopoly would not be illegal (but it also does not have to be a monopoly, being dominant is enough).

So there are multiple questions the Competition Authority has to look into:
    1) Does LH have a dominant position?
    2) Are its prices unfair?

Both are tricky things and I doubt the Competition Authority will be able to prove them. However, what I understand from a legal perspective is that LH cannot just say (like they have done) that this is their yield management system optimizing prices. The specific question is if LH, who - through no fault of their own - inherited a potentially dominant position, would have been required to adjust its pricing optimization to prevent unfair prices (in case they indeed had a dominant position).

Now I know some of you will say that this is stupid, and I might even agree. But that is the law imposed by governments/parliaments which were democratically elected (and which thought this would be a good way to protect consumers). So even if we do not agree, we probably need to take the above as a given.

So let's look at the facts then:

Does LH have a dominant position?

In order to assess that, you first need to define what the respective market is, e.g. answer the question if trains are part of that market or not. According to competition authorities, there is no such thing as the German domestic market. What authorities have typically done is look at O&D city pairs, e.g. HAM-DUS or HAM-MUC. They would then have to assess what viable alternatives to consumers on each route exist. This is very difficult as it is probably different for different consumers. E.g. a business passenger may not be able to substitute a morning HAM-MUC flight to make this 9am meeting by taking the train, as he would not get there before lunch. For a tourist, taking the train might be an alternative. On other routes (e.g. HAM-DUS), even business travellers might use trains instead as they do not take much longer than flights (when looking at city-centre to city-centre).

So it will need careful assessment what other modes of transport are viable substitutes on different routes and if they are part of the relevant market - and if LH has indeed a dominant position on certain routes.

I do not know the answer to that but just claiming that it is reasonable for any German domestic passengers to substitute flights for trains and cars is probably not correct. The fact that prices did go up significantly shows that passengers were willing to suddenly pay much higher prices for domestic flights. If trains are really such a convenient substitute, how could that have happened? (The answer probably is that there are many time-sensitive passengers who would just not take the train…)

Did LH charge unfair prices?

But even if the authority were to find a dominant position by LH, I doubt they can prove "unfair" prices. The whole term is very weak, and the airline business is very specific in its pricing model: On any one flight you may find passenger A having paid 300 EUR (on short notice) and passenger B who paid 30 EUR when booking three months in advance. The cost of moving A and B from the HAM to DUS will be the same for A and B, but it is not considered unfair that A pays a price ten times higher than B. To the contrary, it is considered very efficient as the 300 EUR passengers allows the airline to recover the fixed costs, while the 30 EUR passenger still contributes to revenue (as opposed to leaving the seat empty), as there are not enough time-sensitive passengers to sell all seats to for 300 EUR.

So what is likely to have happened here:
    - Yes, LH may be dominant on certain routes where trains are not an alternative for the majority of passengers. But that itself is not illegal.
    - Yes, LH was able to charge higher average prices. But I do think this would qualify as being "unfair". It improved LH's ability to recover its fixed costs and long-term investments (investments in planes, facilities etc). I personally do not think it allowed them make "unfair" profits when the full lifetime of the assets deployed is considered.
 
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SheikhDjibouti
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Re: Watchdog group accuses Lufthansa of Price Hikes in wake of Air Berlin Bankruptcy

Thu Jan 04, 2018 12:41 pm

Economist wrote:
Allow me to put some structure to this discussion......

A brilliant analysis.

And only your 9th post in 13 years. That must be an absolute record for "lurking" :rotfl:

But seriously; it was well worth the wait!
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