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mercure1
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Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 5:17 am

Things looking difficult for LH Group esp its German home market.


"Lufthansa Group delivered a 2019 first-half net loss of €116 million ($132 million), reversed from a €713 million net profit a year ago. The German carrier said the results were primarily attributed to intense LCC competition and higher fuel costs. “We are operating in one of the most challenging markets,” CFO Ulrik Svensson said on an analyst call. “Our earnings are feeling the effects of tough competition in Europe and sizeable overcapacities."

https://www.aerotime.aero/aerotime.team ... in-h1-2019
https://atwonline.com/airline-financial ... fuel-costs
https://www.dw.com/en/germanys-lufthans ... a-49815660
 
AWACSooner
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 6:43 am

Well when they won’t merge Germanwings and Eurowings, while still not having a solid plan for what exactly the finished product will look like at EW...and that’s before we even get to the Brussels Airlines/Swiss/Austrian messes
 
Blerg
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 6:54 am

I suppose the biggest problem for LH are OS and EW. Both are struggling in highly competitive markets. To make things worse, Wizz Air is showing no signs of slowing down in Vienna which will further erode yields for OS. I think when it comes to Vienna, in the end the three airlines (Austrian Airlines, Wizz Air and Lauda) will have to consolidate and rationalize their operations there, they will win some and they will lose some. I think Level will suspend their operations there, they seem to be lagging behind their competition and I can only imagine how unprofitable their operations must be.

I think a much bigger problem is EW which seems to be running all over the place, spread out over various markets trying to capture passengers from already well-established carriers. No wonder they had such a bad Q1.
 
PhilInBRN
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 7:05 am

AWACSooner wrote:
Well when they won’t merge Germanwings and Eurowings, while still not having a solid plan for what exactly the finished product will look like at EW...and that’s before we even get to the Brussels Airlines/Swiss/Austrian messes


Just wondering, but how can you describe Swiss as a mess when the airline has delivered the best EBIT margin numbers of all airline units in LH Group? Anything that undermines the current business model of LX/WK will put at risk its dominant market position in Switzerland and its ability to exploit the enormous purchasing power of the Swiss travelling public. The only real threat to LX is the oversaturation of its ZRH hub (for the most part due to German (!!) overflying restrictions). But as long as LH Group holds up to 65% of the slots in ZRH they will constantly deliver above-average profit numbers (albeit at slower than average growth rates).
 
Delta777Jet
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 7:05 am

I think has nothing to do with competition, thats just a lame excuse. In my personal opinion, they destroyed the brand within the last years. On short haul flights people don`t see a reason to pay a premium price for a product which comes very close to a Ryanair product. Secondly, I believe with the many changes in strategy and within the companies, they completely confused the employees and passengers and costs totally got out of control. Instead of saving money they even spend more. With their merger plans to merge something bad into something potentially very good they completely missed the chance to develop Eurowings to become a cost saver and machine against the growing competition. Even Air France saw very quickly that the Joon experiment did not succeed, before sinking more good money after bad.
 
steman
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 7:08 am

Eurowings has become what Air Berlin used to be: a bit of everything and good at nothing. There´s much to improve there.
As far as I´m concerned, Eurowings does not represent a valid option in Berlin, with few flights and on average much higher prices
than the competition. They´re probably much stronger in DUS but if they want to compete with the likes of U2 and FR, they need to step up their game in
other parts of Germany too.
 
bhxalex
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 7:08 am

Using knackered old aircraft can't be helping OS and their margins surely?
The 787/330neo Vs the very old 767s and ageing 777s must be night and day in terms of operating cost. It's not like they're doing a BA or UA and fitting them with new high J cabins either.
The same could be said to a lesser extent for the 320neo vs their predominantly old 319/320/321s.

It does seem they're waiting to turn OS into EW eventually, the arguement of OS needing to improve profitability before they get new aircraft is ridiculous. It will be something along the lines of 'we gave OS years to become profitable, they didn't, so now they've become EW'. Slowly starving OS by denying it the tools to become profitable, yes aircraft alone aren't the be all and end all for OS but I doubt things would look so bleak with newer aircraft.
 
SCQ83
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 7:30 am

I think the worst thing that happened to Eurowings is Air Berlin/NIKI's bankruptcy.

In many routes in Germany, Eurowings/Air Berlin+NIKI used to have a duopoly with relatively high fares. With AB gone, that meant Ryanair/Lauda starting a million routes out of FRA/Berlin/VIE/CGN/HAM... so it is not uncommon now to see Germany/Vienna-Palma/Greece flights in August at 10/20 EUR with Ryanair. That was unthinkable 3 years ago when Air Berlin was operating.

Interestingly, Lufthansa seems to fight better with Ryanair where they compete. This winter Ryanair is cancelling many of their HHN/FRA routes to Spain (AGP, GRO and SCQ out of HHN; and making HHN-PMI seasonal; out of FRA they are cutting MAD and SVQ) so it seems that the problem is not Lufthansa out of FRA/MUC (where they can connect) but Eurowings where they compete point-to-point with Ryanair/Lauda/Wizzair.
 
Blerg
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 7:43 am

bhxalex wrote:
Using knackered old aircraft can't be helping OS and their margins surely?
The 787/330neo Vs the very old 767s and ageing 777s must be night and day in terms of operating cost. It's not like they're doing a BA or UA and fitting them with new high J cabins either.
The same could be said to a lesser extent for the 320neo vs their predominantly old 319/320/321s.

It does seem they're waiting to turn OS into EW eventually, the arguement of OS needing to improve profitability before they get new aircraft is ridiculous. It will be something along the lines of 'we gave OS years to become profitable, they didn't, so now they've become EW'. Slowly starving OS by denying it the tools to become profitable, yes aircraft alone aren't the be all and end all for OS but I doubt things would look so bleak with newer aircraft.


If I remember correctly, years ago when LH bought OS, they immediately wanted to transform it into Germanwings. There was such major backlash that they gave up on the idea. They tried the same in Belgium with SN Brussels and they didn't succeed. I think by now it's obvious that these brand replacements won't go down easy. What they can do in Vienna is to slowly start replacing some OS operated routes with EW ones, Rome being a good example. However I don't think removing the Austrian Airlines brand all together will be that easy.

At the end of the day, the current situation in Vienna is not sustainable so all LH has to do is to wait out for the storm to pass before OS can start recovering. Even LCCs can't continue dumping seats forever.
 
juliuswong
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 7:55 am

The ever changing business model in EW and 4U has not been helping LH Group at all. The management needs to decide what they want to do with both brands. I guess most of us, as many have stated here, have lost track how many time they have dabbled with different direction for both entities. Let's not forget they wanted to turned SN into EW, then backed out. Added A343 then removing them. Then add-on A333 intended for SN. Painted aircraft only to revert to back or into new operating certificate. For OS, let's not even start. Wonder who gave them such horrid idea, "no new airplane until we see profit". As Blerg has stated above, it is just matter of time Wizzair chokes OS to death.........Geez, I wonder what is happening in their board room. They need a new management team to revive the Group.
 
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seahawk
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 8:29 am

The expectations are bit high when it comes to EW. The operation expanded massively at the end of 2017 when AB went bust, so this is a normal problem especially if you see that FR is also feeling the over capacity in the market and the rising fuel costs.

EW will get sorted and OS too. Especially as they now learned that low cost long haul does not work.
 
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OA940
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 8:44 am

LCCs didn't do that alone, but the group's higher-ups are always quick to blame it on them. It's becoming very similar to the US3 and ME3
 
Bongodog49
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 8:45 am

How times change, a decade ago LH was regularly swallowing up smaller airlines and experts were stating that BA had missed the boat on European integration
 
leghorn
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 8:59 am

seahawk wrote:
The expectations are bit high when it comes to EW. The operation expanded massively at the end of 2017 when AB went bust, so this is a normal problem especially if you see that FR is also feeling the over capacity in the market and the rising fuel costs.

EW will get sorted and OS too. Especially as they now learned that low cost long haul does not work.

Ryanair aren't feeling the overcapacity, they are making it. They are on the attack hoping that incumbents will cede ground to them. The only reference overcapacity because they are frustrated that they haven't driven more competitors to the wall yet.
Ryanair cut routes where it makes financial sense for them. If it makes financial sense to sell an old airframe to a Chinese freight company 6 months earlier they will do it as their labour costs are more variable than the incumbents. They have a steady stream of new planes coming next year(hopefully) and can add capacity where they see the best possible return which might be the routes they cut 6 months earlier.
 
Blerg
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 9:11 am

LOT just had a press conference in Budapest and they announced a large expansion from summer 2020 with STR, BRU, BEG, PRG, SOF and OTP being launched. This will come as horrible news for OS as until recently they were the dominant player in the Balkan transfer business.
 
ewt340
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 10:02 am

It seems like LH Group need to realized that LCC is the way forward for Domestic and Regional Flights.

It's been proven over and over again that Majority of passengers want cheaper fares for short flights, sometimes even on longer flights. They don't want free drinks and Cold turkey sandwich that add €50 to their ticket prices. Majority of flights in Europe are extremely short anyway.

They need to properly expand Eurowings and actually convert the aircraft with LCC configuration. How come Eurowings A320 have less seats compared to Austrian's A320.
Rather, they need to cut down capacity of these Full Service airlines and expand the LCC especially for domestic and regional flights between Europe.
 
AirwayBill
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 10:15 am

Bongodog49 wrote:
How times change, a decade ago LH was regularly swallowing up smaller airlines and experts were stating that BA had missed the boat on European integration


Massive acquisitions of smaller airlines isn't always a sign of good health.

Look at the Swissair Group and their megalomaniac madness and poor management in the mid-90s.

Just like stars becoming massive red giants before turning into white dwarves.
 
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seahawk
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 10:25 am

If you consider the end of AB and LH taking control of a larger part of the remains as a merger, nobody would complain that they have not worked it out 1,5 years after the merger. I takes time to re-configure the aircraft (especially if you consider the Lauda leasing roulette) and bring the organisation into form. With Germanwings now being integrated, the long haul part taken away and the mission clearly defined EW should do better in 1-2 years.
 
senatorflyer
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 10:30 am

LH Group was always a bit of a mess when it comes to strategy.

Looking at the reports and numbers it seems LH Group was very selective in what to publish. You can find EBIT numbers for all their fields but not the actual profit/loss of each airline, devision.

By the looks of it, LH and Swiss earned money while Austrian and Eurowings burned it.

I understand that Austrian is willing to fight for their market share but Eurowings is just crap. LH never made money with Germanwings and I am sure they won’t with Eurowings. In my opinion they should transfer some of the routes back to the Network Airlines and give up on Eurowings. The whole cost structure of Eurowings isn’t LCC comparable so it naturally only goes one way.
 
Blerg
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 10:38 am

ewt340 wrote:
It seems like LH Group need to realized that LCC is the way forward for Domestic and Regional Flights.

It's been proven over and over again that Majority of passengers want cheaper fares for short flights, sometimes even on longer flights. They don't want free drinks and Cold turkey sandwich that add €50 to their ticket prices. Majority of flights in Europe are extremely short anyway.

They need to properly expand Eurowings and actually convert the aircraft with LCC configuration. How come Eurowings A320 have less seats compared to Austrian's A320.
Rather, they need to cut down capacity of these Full Service airlines and expand the LCC especially for domestic and regional flights between Europe.


Yet Eurowings, an LCC, is the biggest problem for LH Group and they are bleeding money. So not so sure about your idea of transforming LH and LX into typical LCCs especially not if they are currently making money.
 
MIflyer12
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 10:53 am

bhxalex wrote:
Using knackered old aircraft can't be helping OS and their margins surely?
The 787/330neo Vs the very old 767s and ageing 777s must be night and day in terms of operating cost.


A business needs to earn its cost of capital. If they don't think OS can make money they won't give it new aircraft.
 
Blerg
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 11:19 am

MIflyer12 wrote:
bhxalex wrote:
Using knackered old aircraft can't be helping OS and their margins surely?
The 787/330neo Vs the very old 767s and ageing 777s must be night and day in terms of operating cost.


A business needs to earn its cost of capital. If they don't think OS can make money they won't give it new aircraft.


Yes, that's true when a business fails to be profitable under regular circumstances while that's not the case in VIE.
 
mutu
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 12:35 pm

well they need to get a clear strategy. The LCC market share is growing in central/eastern Europe and has some way to go before it reaches the saturation levels seen in UK and Spain for example, where arguably that segment is now mature and growing market rather than poaching.
Sad but true reflection of a very competitive marketplace. Fares from £19 including taxes don't sit well with legacies who bury their heads in the sand. But inevitably to lower the gap in fare, costs need to be taken out and efficiencies found.
Those of us who value the network strength of the legacies clearly don't like it when they strip out services/costs/products to compete, but it is the only way. The (shorthaul) LCCs are not going away.
That is the way of the world. Its all about fares and value for money for a large part of the consumer market.
 
Thibault973
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 2:05 pm

PhilInBRN wrote:

Just wondering, but how can you describe Swiss as a mess when the airline has delivered the best EBIT margin numbers of all airline units in LH Group? Anything that undermines the current business model of LX/WK will put at risk its dominant market position in Switzerland and its ability to exploit the enormous purchasing power of the Swiss travelling public. The only real threat to LX is the oversaturation of its ZRH hub (for the most part due to German (!!) overflying restrictions). But as long as LH Group holds up to 65% of the slots in ZRH they will constantly deliver above-average profit numbers (albeit at slower than average growth rates).


I wouldn’t say that LX is dominant in Switzerland. Yes they are the market leader but the only market they dominate is ZHR. They left BSL altogether and they trail far behind U2 in GVA. From what I understand LX operations in GVA are indeed lost making and they wanted to scale way down which prompted outrage from the local government.
 
LH982
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 3:13 pm

Are Eurowings actually a LCC. From a customer point of view I've travelled with them about 20 times in the last two years and I can only remember one fare below €200.
If I look at BER-STR for Feb next year, i see EW for 159 and U2 for 67, so i don't see any amazing bargains.

On top of this I would also say that I've never been on a EW flight that was less than 80% full, so they don't appear to be low cost from either a customer or owner point of view.
 
Varsity1
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 4:41 pm

Too many airlines in Europe. More than North America, South America, China and India combined! It's absolute madness.
 
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cirrusdragoon
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 7:51 pm

Varsity1 wrote:
Too many airlines in Europe. More than North America, South America, China and India combined! It's absolute madness.


Europe has an estimated population of 741.4 million. They certainly need capacity , perhaps the question is how many airlines are truly needed or sustainable in each separate European country.
 
Delta777Jet
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 8:10 pm

LH982 wrote:
Are Eurowings actually a LCC. From a customer point of view I've travelled with them about 20 times in the last two years and I can only remember one fare below €200.
If I look at BER-STR for Feb next year, i see EW for 159 and U2 for 67, so i don't see any amazing bargains.

On top of this I would also say that I've never been on a EW flight that was less than 80% full, so they don't appear to be low cost from either a customer or owner point of view.


Perhaps you flying the routes which making money for them. Flew with them two weeks ago a longish 3 hour sector on a holiday destination flight which was 60 pct. loaded , booked same day for 70 Euro including seat assignment. I noticed that they changed their service concept a little , so that on higher fares you now need to pay for drinks and the little snack. Their product is very inconsistent , having so many different service levels , a sort of business class etc. I wonder what their flight attendants must be thinking doing so many different levels of service. Same I also observed on Tuifly, where some people with tour operator get service for free , then some who booked it on website get something else and then they start their regular sales. I think Tuifly must be also a carrier loosing money. By the way , the 737 of Eurowings is the expensive wet lease of Tuifly , they took over from Air Berlin. Why on earth they taking so expensive airplanes if they suppose to be low cost.
 
ethernal
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 8:51 pm

ewt340 wrote:
It seems like LH Group need to realized that LCC is the way forward for Domestic and Regional Flights.

It's been proven over and over again that Majority of passengers want cheaper fares for short flights, sometimes even on longer flights. They don't want free drinks and Cold turkey sandwich that add €50 to their ticket prices. Majority of flights in Europe are extremely short anyway.

They need to properly expand Eurowings and actually convert the aircraft with LCC configuration. How come Eurowings A320 have less seats compared to Austrian's A320.
Rather, they need to cut down capacity of these Full Service airlines and expand the LCC especially for domestic and regional flights between Europe.


I agree and disagree.

LCC will make up the bulk of the European market. But Lufthansa will never be able to compete with them due to their higher cost base. So they either need to exit intra-EU flying and figure out code-shares with a true LCC (aka not Germanwings) or they need to actually differentiate their product.

I have no desire to fly Lufthansa over a LCC. Why? Because their service is like a LCC. Their seats are ultra-slimline, their pitch - even in the fake Euro-J product with blocked middle seats - is 30 inches. I can fly Easyjet and pay up to extra legroom seats for less than a LH ticket. Why would I ever fly LH?

If LH actually provided at least the OPTION to buy a decent seat - and no, Euro-J is not a decent seat - then I'd fly them over a LCC. But honestly the experience on a LH flight is worse than a LCC. The idea that they can charge any sort of market premium when they deliver a product just as bad - if not worse - than a LCC is an absurd supposition.

I am taking an extended vacation in Europe this fall. I am flying exclusively easyJet over any of the legacies (despite having top tier alliance status on both StarAlliance and SkyTeam airlines). Why? Because I could get a nonstop ticket on easyJet, pay for a checked bag that I would have gotten complementary on the legacies, pay for priority boarding, AND pay for the extra legroom seats all for a lower cost than a LH, AF, or AZ ticket. Why would I ever choose them?
 
Delta777Jet
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 9:05 pm

Exactly, it was a big mistake to jump on the extra revenue train like the LCC are doing. With this the legacies made their product perfectly comparable. Sometimes I get to laugh and cry how flights of legacies getting delayed when they are busy labelling hand luggage to go into the hold.
 
DDR
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 10:54 pm

LH would be way better off if they sold OS and somehow managed to get rid of Brussels Airlines. Swiss could be the premium brand. Keep it as it is. LH could focus its European operations as connections for its mid and long haul services from the Americas, Asia, Africa, and Middle East. Throw in a few extra frequencies on key business routes for local European traffic. Have one dedicated "express" carrier for the smaller markets which have to be served. Let the ULCC carriers have the low yielding tourist markets.
 
PhilInBRN
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Wed Jul 31, 2019 11:29 pm

Thibault973 wrote:
PhilInBRN wrote:

Just wondering, but how can you describe Swiss as a mess when the airline has delivered the best EBIT margin numbers of all airline units in LH Group? Anything that undermines the current business model of LX/WK will put at risk its dominant market position in Switzerland and its ability to exploit the enormous purchasing power of the Swiss travelling public. The only real threat to LX is the oversaturation of its ZRH hub (for the most part due to German (!!) overflying restrictions). But as long as LH Group holds up to 65% of the slots in ZRH they will constantly deliver above-average profit numbers (albeit at slower than average growth rates).


I wouldn’t say that LX is dominant in Switzerland. Yes they are the market leader but the only market they dominate is ZHR. They left BSL altogether and they trail far behind U2 in GVA. From what I understand LX operations in GVA are indeed lost making and they wanted to scale way down which prompted outrage from the local government.


Sure, easyJet is the largest and IMO only serious competitor of LHG in Switzerland. In 2018 they transported about 14.5 million passengers, mostly from BSL and GVA. However, they have not expanded by much in the past year (pretty much stable at GVA, last expanded in July 18 in BSL).
LX has apparently managed to bring their GVA ops back to being (slightly) profitable thanks to a good mix of business and leisure destinations and thanks to the increased efficiency of the CS100/300 fleet. LX has actually stabilized their GVA ops and they are adding destinations here and there to further strengthen their portfolio. They are still not even half as big as EZS/EZY but I would say that they‘ve found themselves a sustainable position in the market. BSL was given up as LX destination several years but the market (in particular business pax) is well served with 16 daily flights to MUC/FRA/VIE/BRU/DUS and quick train connections to ZRH.

While GVA itself is a very premium, high-yielding market, ZRH also excels in this category and by capturing a large junk of the long-haul market LX has managed to become the cash cow of LH group.
 
Max Q
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 1:07 am

Well, I’m a big fan of four engine aircraft but lufty has so many of them and they’re not the thriftiest on fuel
 
Varsity1
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 1:34 am

cirrusdragoon wrote:
Varsity1 wrote:
Too many airlines in Europe. More than North America, South America, China and India combined! It's absolute madness.


Europe has an estimated population of 741.4 million. They certainly need capacity , perhaps the question is how many airlines are truly needed or sustainable in each separate European country.


Less than half that of China.

Far fewer. Half at most.
 
Blerg
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 6:20 am

Varsity1 wrote:
cirrusdragoon wrote:
Varsity1 wrote:
Too many airlines in Europe. More than North America, South America, China and India combined! It's absolute madness.


Europe has an estimated population of 741.4 million. They certainly need capacity , perhaps the question is how many airlines are truly needed or sustainable in each separate European country.


Less than half that of China.

Far fewer. Half at most.


Yes but the aviation market in China is highly regulated and most of it is government owned. We don't know what the situation would be like if the market was fully liberalized. Apples and oranges in this case.

Europe overall is not saturated, certain markets in the West are. Hugh difference.
 
RvA
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 6:27 am

ethernal wrote:
ewt340 wrote:
It seems like LH Group need to realized that LCC is the way forward for Domestic and Regional Flights.

It's been proven over and over again that Majority of passengers want cheaper fares for short flights, sometimes even on longer flights. They don't want free drinks and Cold turkey sandwich that add €50 to their ticket prices. Majority of flights in Europe are extremely short anyway.

They need to properly expand Eurowings and actually convert the aircraft with LCC configuration. How come Eurowings A320 have less seats compared to Austrian's A320.
Rather, they need to cut down capacity of these Full Service airlines and expand the LCC especially for domestic and regional flights between Europe.


I agree and disagree.

LCC will make up the bulk of the European market. But Lufthansa will never be able to compete with them due to their higher cost base. So they either need to exit intra-EU flying and figure out code-shares with a true LCC (aka not Germanwings) or they need to actually differentiate their product.

I have no desire to fly Lufthansa over a LCC. Why? Because their service is like a LCC. Their seats are ultra-slimline, their pitch - even in the fake Euro-J product with blocked middle seats - is 30 inches. I can fly Easyjet and pay up to extra legroom seats for less than a LH ticket. Why would I ever fly LH?

If LH actually provided at least the OPTION to buy a decent seat - and no, Euro-J is not a decent seat - then I'd fly them over a LCC. But honestly the experience on a LH flight is worse than a LCC. The idea that they can charge any sort of market premium when they deliver a product just as bad - if not worse - than a LCC is an absurd supposition.

I am taking an extended vacation in Europe this fall. I am flying exclusively easyJet over any of the legacies (despite having top tier alliance status on both StarAlliance and SkyTeam airlines). Why? Because I could get a nonstop ticket on easyJet, pay for a checked bag that I would have gotten complementary on the legacies, pay for priority boarding, AND pay for the extra legroom seats all for a lower cost than a LH, AF, or AZ ticket. Why would I ever choose them?


I fly around Europe all the time and EasyJet has not proven much cheaper for me at all. Depends on time, route etc. I found J seats on a few flights on the legacies at a reasonable price so happily accepting the euro J people like to talk crap about. If the price is right, a blocked middle seat, meal, drinks and the extra luggage makes perfect sense for my needs. On a 1 hour flight? Not worth it, though I got an upgrade on LHR-AMS on BA once for about $40 and I ate and drank my money’s worth in the lounge.

Absolutely nonsensical to say nobody wants a sandwich in eco like some people have. You cannot speak for everyone. Seen it hundreds of times being well appreciated along with the free drink (incl beer & wine). LHG has had a tough first half (how is Ryanair doing?) this year but they will
Bounce back. Armchair CEOs here always know best :-)
 
mxaxai
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 8:58 am

RvA wrote:
how is Ryanair doing?

Profits down by 21 %, ticket prices down 6 % but ancillary revenue up 14 % (!). Accuses Lufthansa of "excess capacity at below cost prices".
I've also read elsewhere that Ryanair wants to fire ~1500 employees, many of which would be pilots and flight attendants.
https://www.bbc.com/news/business-49149151

RvA wrote:
I fly around Europe all the time and EasyJet has not proven much cheaper for me at all. Depends on time, route etc.

A short check shows why: The airlines are forced to offer cheap tickets if there is LCC competition. For end of August: Flights STR - HAM (multiple daily, Eurowings only) cost 65 € and (much) higher. Flights STR - TXL (multiple daily, Eurowings and Easyjet) can be had for 40 € on almost any day.
 
aw70
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 9:51 am

It really comes down to who the leaders of a corporate group are. And Carsten Spohr... when was the last time you heard that chap deliver a speech in which he outlined, calmly, precisely and without too many buzzwords, what the strategic way forward for LH group is? You know, a statement by which one can judge subsequent actions, to see whether they actually fit into this plan?

Exactly.

CS is a prime specimen of the contemporary German CEO: you never heard him say anything out loud that could be construed as having an opinion, a concrete plan, so that nothing can be ever pinned on him. Visions? If you have those, you need a doctor. At least in the world of these guys - never go near a microphone without having gone through several layers of corporate PR vetting. The only thing they are really good at are boardroom power politics, the more brutal, the better. Of course only in secret - manners do matter... if there is a cardinal sin in this world, it's visibly rocking the boat, as it were. Stiff upper lip, and all that. If it only were so that these skills map 1:1 to the skillset needed to run a large, complex group of companies which is in dire need of a corporate vision.

Contrast that with people like O'Leary: sure, that dude is a nutcase, with a Scrooge McDuck-like fixation on reducing costs, borderline (?) legal crew contracts, screwing over the competition, and (presumably) later on taking a bath in a pile of cash. Or something. But hey, that IS at least SOME sort of vision.
 
SCQ83
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 11:59 am

mxaxai wrote:
A short check shows why: The airlines are forced to offer cheap tickets if there is LCC competition. For end of August: Flights STR - HAM (multiple daily, Eurowings only) cost 65 € and (much) higher. Flights STR - TXL (multiple daily, Eurowings and Easyjet) can be had for 40 € on almost any day.


The routes that see the cheapest flights are those with Ryanair competition. For instance, Ryanair is selling right now CGN-PMI from 19.99 EUR every day in the week of August 12-18. Eurowings has flights those days starting at 49.99 EUR (August 15), and 59.99 and 69.99. Those are not as cheap as FR but very cheap for peak season to Mallorca. When Air Berlin was around, those fares would have been simply unthinkable.
 
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Erebus
Posts: 1167
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 12:13 pm

Alright, since no-one's mentioned it.... Looks like their financials have finally caught up with their new livery. :white:
 
Elementalism
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 12:53 pm

It is amazing to me how a company can post a loss in this economy. What will their bottom line look like when a recession hits????? Bad management imo.
 
MartijnNL
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 1:02 pm

ethernal wrote:
Why would I ever fly LH?

Because they operate the A340-300, the A340-600, the A380, the B747-400 and the B747-8? Because they serve complimentary beers in glass bottles? Because they fly multiple times daily to destinations which LCC's don't serve or just once daily? Because they are a very safe and punctual airline? Because they offer real value for money? Like my 119 EUR return fare on Amsterdam - Malta? Or 379 EUR for Amsterdam - Seattle round trip?
 
airbazar
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Joined: Wed Sep 10, 2003 11:12 pm

Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 1:10 pm

Delta777Jet wrote:
I think has nothing to do with competition, thats just a lame excuse. In my personal opinion, they destroyed the brand within the last years.

I agree that the brand has been destroyed but there are other factors.
LH used to command higher fares and people paid it because they expected a level of service above normal. They still have higher fares but their product has been watered down significantly and today is as generic as anything.
In addition I feel that the newer generation of customers has less loyalty. I see it in my German/Austrian friends and family. The older ones will only fly LH and they're skeptical of any other airline. Usually because of the language barrier. The younger kids are all fluent and comfortable English speakers and don't care what airline they fly.
Then there's the Indian market which LH once had a leading position in but is now lost. My Indian friends and co-workers absolutely hate LH even tho some have never flown with LH but the perception among the Indian crowd (true or not it doesn't matter), is that Indian passengers are poorly treated by LH.
 
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lesfalls
Posts: 3548
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 1:15 pm

airbazar wrote:
Delta777Jet wrote:
I think has nothing to do with competition, thats just a lame excuse. In my personal opinion, they destroyed the brand within the last years.

I agree that the brand has been destroyed but there are other factors.
LH used to command higher fares and people paid it because they expected a level of service above normal. They still have higher fares but their product has been watered down significantly and today is as generic as anything.
In addition I feel that the newer generation of customers has less loyalty. I see it in my German/Austrian friends and family. The older ones will only fly LH and they're skeptical of any other airline. Usually because of the language barrier. The younger kids are all fluent and comfortable English speakers and don't care what airline they fly.
Then there's the Indian market which LH once had a leading position in but is now lost. My Indian friends and co-workers absolutely hate LH even tho some have never flown with LH but the perception among the Indian crowd (true or not it doesn't matter), is that Indian passengers are poorly treated by LH.

How was inter-european and long haul service before? I'm wondering if it's just that people say it was better then compared to today but in truth actually is that they have kept their product the same while competitors have improved their product over time?
 
SCQ83
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Joined: Wed Oct 03, 2012 8:32 pm

Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 1:18 pm

Elementalism wrote:
It is amazing to me how a company can post a loss in this economy. What will their bottom line look like when a recession hits????? Bad management imo.


And the German economy is slowing down with a recession looking inevitable.

https://www.bloomberg.com/news/articles ... eads-water

That will means less corporate travel. Also Germans tend to be relatively cautious with spending (at least in the past before their current economic bubble). If the German economy goes into a recession, I expect Germans to cut a lot on leisure travel or travelling as cheap as possible.
 
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Mortyman
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 1:44 pm

If anything goes wrong during flight or with the luggage etc, I for one would always want to be on a Lufthansa flight, than a Easyjet or Ryanair flight.
 
ethernal
Posts: 503
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Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 1:45 pm

MartijnNL wrote:
ethernal wrote:
Why would I ever fly LH?

Because they operate the A340-300, the A340-600, the A380, the B747-400 and the B747-8? Because they serve complimentary beers in glass bottles? Because they fly multiple times daily to destinations which LCC's don't serve or just once daily? Because they are a very safe and punctual airline? Because they offer real value for money? Like my 119 EUR return fare on Amsterdam - Malta? Or 379 EUR for Amsterdam - Seattle round trip?


I was obviously talking about their intra-EU product, not their long haul product. I fly LH regularly internationally.

Their intra-EU product is absolute garbage. It is a LCC product. Having a flight attendant throw a cold sandwich to me doesn't make up for the terrible hard product. I'm 6' 4". 30" pitch being the only option is just not going to work.

Agree that there is a network piece here, but if I am paying for connectivity, why are they trying to compete with a non-differentiated product? The reality is that I am going to take the nonstop once a day easyJet flight than try to take the (more expensive) connect-in-FRA/MUC and have to deal with not just one but TWO legs of miserable LCC product (because that is what intra-EU LH is - it is a LCC product and don't try to pretend it is not).
 
sabby
Posts: 478
Joined: Fri Jun 01, 2018 5:11 pm

Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 2:04 pm

ethernal wrote:
LCC will make up the bulk of the European market. But Lufthansa will never be able to compete with them due to their higher cost base. So they either need to exit intra-EU flying and figure out code-shares with a true LCC (aka not Germanwings) or they need to actually differentiate their product.

I have no desire to fly Lufthansa over a LCC. Why? Because their service is like a LCC. Their seats are ultra-slimline, their pitch - even in the fake Euro-J product with blocked middle seats - is 30 inches. I can fly Easyjet and pay up to extra legroom seats for less than a LH ticket. Why would I ever fly LH?

If LH actually provided at least the OPTION to buy a decent seat - and no, Euro-J is not a decent seat - then I'd fly them over a LCC. But honestly the experience on a LH flight is worse than a LCC. The idea that they can charge any sort of market premium when they deliver a product just as bad - if not worse - than a LCC is an absurd supposition.

I am taking an extended vacation in Europe this fall. I am flying exclusively easyJet over any of the legacies (despite having top tier alliance status on both StarAlliance and SkyTeam airlines). Why? Because I could get a nonstop ticket on easyJet, pay for a checked bag that I would have gotten complementary on the legacies, pay for priority boarding, AND pay for the extra legroom seats all for a lower cost than a LH, AF, or AZ ticket. Why would I ever choose them?


You hit the nail properly. With the success of so many LCCs around the world, most legacy thought to compete with them at price and so watered down all hard products & services to lower cost and capture/keep market share. But they never thought that they'll never match the cost base of LCCs and by lowering their products to make prices similar to LCCs, they erased what differentiated them from LCCs and gradually changed the behavior of many people who now book at cheapest cause they know all airlines in Y are mostly same in domestic / short hauls.

It is true that the number of people flying have grown exponentially and many of them are price sensitive. At the same time, the number of people with disposable income also grew and they would pay for better facilities, service and product. Look at the way airlines are introducing premium economy at their long haul aircraft. An airlines (I forget which) recently even said Premium Economy generates most profit per space. And this is when many airlines charge a 70-100% premium for 20% additional space and maybe 10-20% better service. Branding and marketing also play a factor. Most general flyers think there's little difference between various airlines. If Legacy airlines had a strong brand and marketing campaign clearly distinguishing them from others, people would be more aware - at least people who are the target with higher yield and looking for better service. This obsession with market share needs to stop if they want to make profit.
 
Blerg
Posts: 5114
Joined: Tue Jan 09, 2018 11:42 am

Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 2:06 pm

ethernal wrote:
MartijnNL wrote:
ethernal wrote:
Why would I ever fly LH?

Because they operate the A340-300, the A340-600, the A380, the B747-400 and the B747-8? Because they serve complimentary beers in glass bottles? Because they fly multiple times daily to destinations which LCC's don't serve or just once daily? Because they are a very safe and punctual airline? Because they offer real value for money? Like my 119 EUR return fare on Amsterdam - Malta? Or 379 EUR for Amsterdam - Seattle round trip?


I was obviously talking about their intra-EU product, not their long haul product. I fly LH regularly internationally.

Their intra-EU product is absolute garbage. It is a LCC product. Having a flight attendant throw a cold sandwich to me doesn't make up for the terrible hard product. I'm 6' 4". 30" pitch being the only option is just not going to work.

Agree that there is a network piece here, but if I am paying for connectivity, why are they trying to compete with a non-differentiated product? The reality is that I am going to take the nonstop once a day easyJet flight than try to take the (more expensive) connect-in-FRA/MUC and have to deal with not just one but TWO legs of miserable LCC product (because that is what intra-EU LH is - it is a LCC product and don't try to pretend it is not).


Excuse me but what do you expect from LH? Do you want them to serve caviar and champagne in economy class? Furthermore, you seem to be missing the point, Lufthansa mainline doesn't seem to be the issue for LH Group, it's rather Eurowings, it's LCC branch and Austrian Airlines.
 
ethernal
Posts: 503
Joined: Mon May 06, 2019 12:09 pm

Re: Lufthansa Group posts 1H loss on LCC competition, fuel costs

Thu Aug 01, 2019 2:35 pm

Blerg wrote:
ethernal wrote:
MartijnNL wrote:
Because they operate the A340-300, the A340-600, the A380, the B747-400 and the B747-8? Because they serve complimentary beers in glass bottles? Because they fly multiple times daily to destinations which LCC's don't serve or just once daily? Because they are a very safe and punctual airline? Because they offer real value for money? Like my 119 EUR return fare on Amsterdam - Malta? Or 379 EUR for Amsterdam - Seattle round trip?


I was obviously talking about their intra-EU product, not their long haul product. I fly LH regularly internationally.

Their intra-EU product is absolute garbage. It is a LCC product. Having a flight attendant throw a cold sandwich to me doesn't make up for the terrible hard product. I'm 6' 4". 30" pitch being the only option is just not going to work.

Agree that there is a network piece here, but if I am paying for connectivity, why are they trying to compete with a non-differentiated product? The reality is that I am going to take the nonstop once a day easyJet flight than try to take the (more expensive) connect-in-FRA/MUC and have to deal with not just one but TWO legs of miserable LCC product (because that is what intra-EU LH is - it is a LCC product and don't try to pretend it is not).


Excuse me but what do you expect from LH? Do you want them to serve caviar and champagne in economy class? Furthermore, you seem to be missing the point, Lufthansa mainline doesn't seem to be the issue for LH Group, it's rather Eurowings, it's LCC branch and Austrian Airlines.


No, I want the opposite. Why would I want cavier and champagne while I am sitting in a 30" ultra-slimline seat? Drop the pathetic attempt at catering food and put in real seats. Not ultra-slimline, have 31" in economy, and have a 34" legroom section. I'm even fine with not having US domestic-F-like product - I get it, it doesn't work in Europe.

At the end of the day, hard product does matter. A Lufthansa intra-EU flight is not comfortable. Full stop. If I am not going to be comfortable, giving me champagne is further down the list of my worries. And if my decision is 'not comfortable' vs 'not comfortable, except maybe with a sandwich worth 1 euro', you're darn right I'm going to purchase based on price.

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