NA-Flyer

I am quite confused here!! I thought F and J is the cash cow for EK?

weero

It is true that the LH shorthaul C product is even worse than EK's. But EK's product zoo is a strong argument not to ever pay premium money of those routes as you can never be certain what you will actually get.
I am not fond of LH's C food ... but in Y??? I find the Y food quality on LH quite excellent (that is if they offer food, i.e. on longhauls). Food and lack of alliance is the my main reason not to fly EK.

And with LH introducing E+ and perhaps coming down to reasonable pricing sometimes in 2015, I won't ever have to fly EK again.

YuropFlyer

Well, on LH you get a guaranteed camping stool, on EK in the very, very worst, a deep reclaining chair.. (or skycruiser in F, which LH doesn't even offer) - for short/medium haul, all I want is a comfy seat in which I maybe can nap, I don't want/can't sleep for 8 hours anyway.. EK (and many others) do offer that. I would understand if you say you won't fly TK to IST because of their seat roulette (where you indeed can either get a proper short haul C seat, or just a blocked middle seat..) but EK's "worst" seats in C are about as bad as SQ's worst seats in C. Still I'll happily fly both on short hauls too (but not LH )

Sorry, no. I've flown too much with LH Y to find their food anyway acceptable, especially the breakfasts offered are usually better left behind. LX is slightly better, but I really prefer what EK offers. Not just tastier, but also more variety. And lack of alliance, well, if I fly C then I don't care about alliance, and since I'm EK Gold (which is easy to get anyway) so lounge access in Y all across the network - and that means on my most frequented airports the very decent EK Lounge (ZRH, SIN) - while with *A, I either get the junk LX SEN/Panorama, or the weary SQ Gold lounge (when in Y)

Coming down to reasonable pricing due to the cabins being empty (once rolled out) at their current non-reasonable pricing?

Well, you might try to ship a pig in the cargo hold, might work when they fly

TRAVELSIG

I have always been told or led to understand that it is J class that is the cash cow and that F is more for prestige. This could be my own misunderstood opinion. What I can see though is that as the A330 they (EK) were sending to my home airport was typically sold out in J- they have up gauged it to a 777 year round now- and according to the sales staff that is because there is more capacity.

oliver2002

Nope, eightblack had the info from the horses mouth. EK earns its keep from Y. J about breaks even. They have terrific low unit costs in Y thanks mainly to capacities on fuel efficient new aircraft. Yes labor and fuel is different, but not significantly higher. Saving 20% on crew serving hundreds in coach is not big, and 10% less fuel cost on super efficient new aircraft is nice, but not game changing.

EK is very strongly focussed on big capacities, flying nearly every where with 77W and 380 aircraft, with 110 and 50 in service respectively. Thats a bit over 300 and nearly 400 Y seats respective to fill on every frigging flight. If the average load factor drops below 70% even an airline looking to earn just variable cost has a tough time justifying flying to that destinations.

Sooo... if 'worldwings' or the LH 343 Jump services, snag 200 Y seats a day from the ME3 with a direct DUS-BKK flight, the idea is probably to lower the load factors by 10% on average and make it uninteresting to fly 2x daily A380s into a German destination. I get what they are thinking, but whether they can pull it off...

YuropFlyer

Sounds like shooting yourself in the head to achieve nothing to the ME3..

They'll, at the very most, achieve a light chuckle on their faces..

If LH really pulls this through, and offers cheap fares on FRA-BKK route (say, 400€ RT regularly, which is about what you can snag with the ME3 sometimes when on sale) this is what happens in my opinion:

LH (if still offering the route), LX and OS will lose some pax out, on top of that those 200 pax will be "taken" from about all competitors on the route equally.. which means, TK will lose some (I'm sure LH will be very happy about this!), TG will lose even more, some European competitors will lose a bit, and YES, the ME3 will also lose a few seats.. however, their combined seat capacity to BKK alone (not even counting HKT in) in Y is around 2500 seats - and that's the ME3 at the very moment, not what it might be in 1-2 years time - and even if we calculate in that they'll lose 100 pax a day (I doubt it will be more than 50..) that means they'll just lose 4% of the lowest yield pax. And "Worldwings" can increase their price as EK/EY/QR will be able during the high season, as they'll be seen as a discount-airline/ryan'air-style carrier, not a full-service quality carrier like the ME3.

So, LH needs to offer their flight cheaper (like a charter) with less services, at higher fixed costs, to attract some customers, which partially will hit the ME3 slightly..

Again, that's giving yourself a headshot will looking angrily at your competitor. Just won't work.

LH should concentrate on the (few) advantages they've, not further dilute their brand. They've their cash cow monopoly on the North Atlantic routes. They've some advantages to the North Asian boom/developed countries.

Yet they attack the ME3 somewhere, with something, that's not even a stick (and far from being pointy..) - it will net LH another nice red number, and in the end, damage their brand even further.. long haul Germanwings from FRA, it just won't work..

oliver2002

Taking the BKK example (terrible one, I know) what is relevant is the volume the ME3, TK and TG are flying out of the german airport that day.

So if LH were to offer DUS-BKK they are taking 200 seats out of TK & ME3 that day, which offer about 100TK+200EY+300EK+200QR seats. So you are taking away 15-25% load factor on the DUS-IST/AUH/DXB/DOH route which should hurt.

Lack

Question is who can take the hurt longer? I don't think LH shareholders want to play chicken with ME3 shareholders.

NA-Flyer

What is important in that scenario is to have LH keeps the ticket price advantage in the long run against the ME3+TK, which is something I believe won't stay for long time with the current LH management mentality

oliver2002

Germany - BKK pricing is brutal, EK and WY are at 500€ now. A colleague is looking to spend 3 weeks in S.E.Asia and prices are dropping every time he looks. EK is flying 2 A380s from here daily, EY 2x 77W or A346, QR 'only' 788. They are really struggling to fill the back of the bus and dropping to variable cost already.

YuropFlyer

http://www.dus.com/dus_en/turkish_airlines

"From 29th March Turkish Airlines is offering a fourth daily flight to Istanbul

Since modern Boeing 737-800 or Airbus A320/A321 aircraft are mainly used on all flights, capacity has risen by about a third by virtue of the additional flight. When required, wide-bodied aircraft such as the Airbus A330/A340 are also used on the route."

I would say we're talking more about 600+ seats in Y on TK alone, not 100 as per your assumption - and there is competition from other airlines, not just the ME3+TK on DUS, too.

So yes, LH "Cheap" might take away some revenue from TK/ME3, but the strategy for me sounds more like Russian early WW2 strategy. Send more men then the enemy has bullets.

And unfortunately for LH, I'm sure the ME3 (and TK) have plenty of "ammo"..

This is a play LH can't win. They should stop trying to compete where they simply can't, but they try to fight a battle that's lost already.

TRAVELSIG

And yet when I look at an upcoming business trip the lowest fare in J is 2904 EUR to BKK and 3970 to CAN. So- the ME3 aren't only about discounts. Somehow they are managing a higher average contribution margin per available seat mile than Lufthansa Group. Whether that be through business, economy, charter, first, or something else- the margin is there.

oliver2002

Business class sales is completely different animal. Our corporate rates to BKK of 2400€ are won by TG and TK, not EK. It seems EK is not in the business of discounting BKK or CAN (your examples) in J, there TG and TK are more eager.

Also note that EK has comparatively 'tiny' J cabins. The big 77W only has 42 J seats, the even bigger 380 only 72. So ex VCE they are under no pressure to discount J on their 77W.

YuropFlyer

Seems EK is going more the SQ way, ie quality over quantity (we're talking C, only)

86 C seats in SQ's A380 (or just 60 in their Y at upperdeck version) are about the level of EK (SQ upperdeck is all C, F is main deck) - far from the 98 seats that LH squeezes in about the same space than EK (98 vs. 72 is quite a difference)

I can understand that people still will pay premium for direct flights..

But then, if you're, for example, going from DUS to CAN, you would be crazy to choose LH for doing so. Changing twice, and including a codeshare (or a train ride HKG-CAN) while EK would you bring one-stop there (or TK, or TG..)

Now, I can see that LH is quite desperate - but instead of cooking such meals that will taste like a durian that was too long in the sun, why didn't they actually tried to listen to their customers?

By cutting benefits, introducing jokes like "Status Stars" or "Selection", they'll drive away customers, not "honouring our good customers". Unless LH really thinks that people who get a choice really will fly them.

They've their cash cow routes where people will either get to pay them, or fly truly horrible routings. But every other market, their competition isn't getting easier. Chinese carriers (especially Air China, but also China Eastern and Southern) will eat up quite a bit of LH's market share to China and further north asia as they're putting up their game.

Seems the current course which LH has been going for about the last 2 years (not that it wasn't like it before, but they've rapidly increased it since the slashing of Z earnings, P introduction etc.) is to increase fares and cash flow generally, without looking at the side effects it might create.

Zero'ing C and forcing customers to fare-up to J? Will certainly bring in a buck or two.. but might have the customer chose another carrier next time.

I remember when I absolutely had to get home asap with EK, and changing to the 7 hours earlier flight cost me a mere 130$, on a dirt-cheap saver ticket.

EK made some money out of it, gained a happy customer, and lost nothing. And then there was LH which preferred not to put me on an earlier flight, despite the later one being oversold. Well, couple if IDBs (might have been VDBs, didn't see the outcome) and Op-Ups later, they could send their later flight on the way.

Obviously, as customers we just see a (very) small piece of the cake. But from my impression, LH is really doing less well than the competition. And my travel patterns have been shifted from "LH group if possible, otherwise *A, otherwise EK" to "Best offer / Travel times" - which means that LX still gets a piece of the cake (due to direct flights Ex-ZRH) but most goes for EK, TK, SU etc.

weero

Let's say that they follow their competition and match BA & AF & SK and underbid CX and soon SQ.
While I won't return to M&M, I will still fly LH outside of the winter months.

I always looked at EK as the pig with lipstick ... ever since I have seen their 777 coach. Sure they have this prestige 380 bird where they even installed a humane mock-up coach cabin and a Disneyland interior in the premium cabins. But it's still mostly a Potemkin show and not a network wide brand. I am unconvinced that the LH and EK brand overlap all that much.