NA-Flyer

The thing that shocked me the most is that EK revenues are $22.5 billion

YuropFlyer

US airlines with their chapter 11 state-support should keep their mouth shoot.. (same for LH, which got their whole fleet for free from the German state)

Cry the loudest because you've to hide the most, as usual..

N1003U

I found this an interesting article:

http://www.nytimes.com/2015/06/16/bu...ound.html?_r=0

I found it particularly interesting that the CEO of U2 had no previous industry experience at the time she was hired. She focuses on operational parameters that correlate with customer satisfaction:

...“We’re not going to do something that reduces customer satisfaction.”...

... “To drive greater returns, you need to look at improving the quality of the revenue. So appealing to more business passengers and everything that goes with that — better network, better frequency — has turned out to be a virtuous circle.”...

...But despite her willingness to challenge airline industry conventions, Ms. McCall said she was unlikely to follow some of her rivals into budget long-haul flying. Norwegian Air Shuttle started flights to the United States and Asia last year and Lufthansa plans to test out the model as well this year....

So this is one strategy:

1.) Pick a couple of operational parameters that correlate strongly with customer satisfaction, and work like hell to make those parameters as good as possible.

2.) Add a few extra service features on top of an LCC model to attract more premium passengers.

3.) Spend a lot of time with end consumers and front-line employees to figure out what customers and employees need.

This is another:

1.) Build an low-cost overlay on top of a premium brand, to attract a broader customer base.

2.) Unbundle services so your customers can pick and choose what they want to pay for.

3.) Hire expert consultants from the industry to advise on the integration of the LCC model into the premium operation and to develop a set of value added features for your product to deploy across a non-homogeneous customer base.

Which strategy sounds more functional to you?

Hint: U2 had a 10% return on sales in FY2014 vs. a solid 3% for LH.


I will concede with their primary operating base in DACH, LH has the deck stacked against them in a lot of ways (note this is not arguing that their competitors are somehow "subsidized"). On the other hand, LH has a very impressive pool of resources, should they ever figure out how to exploit them.

GBM.flights

Q2 results out.
http://investor-relations.lufthansag...-deutlich.html

Results are pretty good but no sugar coating this time (bolding mine):
Details and presentation here

gojko88

When exactly did LH ticket prices drop since oil prices tumbled? If anything, YQ got worse.

FD1971

Expert comment.

Ticket prices are not decreasing since years.

Actually, flying has never as expensive as it is today.

Hence, we have to agree with yuropflyer after all those years.

Considering that the fares went up and that all the low cost carriers did not have any influence on yields, LH should have awarded a Sen Card after two segments in an el cheapo fare class.

I actually expect some Nekkies to become members of the board of the LH Group soon, it is simply amazing to see all their predictions come true eventually.

FD1971

Let's move over to the more relevant facts...



In the first half, operating cash-flow rose by almost 45 percent to EUR 2.5bn. At the end of the first half-year, a free cash flow of just over EUR 1bn was reported - almost double that of the previous year. Against this background, net indebtedness decreased substantially by 31 percent compared to the full-year 2014.

IAN-UK

YQ long since abandoned any link to fuel cost. Though when kerosene prices go north again, you might expect to see the YQ link re-established.

It's what's called a ratchet effect: moves only one way

Lack

Anecdotal evidence, but for me at least the cost of intra-europe and tatl flights have gone up about 50% in the last decade (with a cut in benefits and rewards). Some of it of course is destination specific, some is currency specific, some is country specific, but I can't say I see much in terms of lower prices.

Even the non-stop-you fares from BER are now almost 2x the price and come w/o a checked bag.

Did the RASM go down?

oliver2002

mother and father?

totti

Isn't it nice that Ryanair is both

LH has to be really scared that they will loose customers who what to go from the middle of nowhere to the middle of nowhere

oliver2002

Innovative use of hedging though... lock in fuel at 48$/bbl and start fare wars.

Grog

Yes, they do...certainly in terms of "their" customers when traveling on leisure with their families. Do you really believe that all ~100 million Ryan Air passengers this year never traveled on Lufthansa nor are they turning their back on LH for leisure?

YuropFlyer

Exactly. While there will ALWAYS be passengers that only fly because it was a great offer, most travellers actually have to fly. And they'll compare destinations, prices, etc. - it's a myth that a big amount of people will book on Ryanair from Memmingen to, say, Girona, if they're just 10€ cheaper than LH, when all they want to do is getting from Munich to Barcelona. A few might still get fouled, but that's not how Ryanair is doing business..

But if Ryanair is 100€ cheaper - and/or if someone actually wants to get where Ryanair is flying to (In the case of Girona, an example would be the F1 race circuit near Granollers, which is closer to that airport than BCN..), they'll pick Ryan most probably..

Not taking Ryanair seriously - or in fact denying the fact that they run a highly successful business compared to LH which will only run profitable thanks to much lower fuel costs - is a BIG mistake one could do.

weero

Currently yes. But with NEK stools which compare unfavourably with LCC seating, no miles for affordable fares, and the same miserable fellow passenger experience grace to the Nonstop Backpacker You dogma, I certainly see very direct competition. Add to this that mini-airports offer favourable parking and smooth passenger handling and the LCC paradigm may not work in LH's favour.