LHs strategy: discussion thread for customers, investors, consultants & armchair CEOs
May 6, 2016, 1:03 pm
#2311
Join Date: Jul 2010
Location: BSL/FRA or PHL
Programs: LH Miles and More, DL SkyMiles, Bonvoy, Hilton
Posts: 2,335
I remembered this when I saw an interview on Bloomberg with Delta's CEO
http://www.bloomberg.com/news/articl...edging-for-now
http://www.bloomberg.com/news/articl...edging-for-now
“The reason we haven’t hedged for the last year-and-a-half is there’s just too much volatility, and we’ve been burned,” Bastian said. “We’ve lost over the last eight years about $4 billion, cumulatively, on oil hedges.”
One might argue under what market conditions hedging makes sense, but complaining about "losing" money on hedges strikes me like complaining about "losing" money on insurance premiums. Of course when you lock in a price, and then the market tanks, you lose...but if the market price goes the other way...
Jun 16, 2016, 5:44 pm
#2312
Join Date: Jul 2010
Location: BSL/FRA or PHL
Programs: LH Miles and More, DL SkyMiles, Bonvoy, Hilton
Posts: 2,335
So, it seems time to bump this thread again.
After reporting an OK 2015 against the background of a booming industry environment (i.e., 2015 should have been a great one for LH), the current numbers at LH seem to be moving in the opposite direction of the rest of the industry. Or maybe someone made a sign error in the calculations. Most major hub airlines saw a roughly 5% increase in traffic in May of 2016. LH Group (ex EW, which has its own problems) saw a ~5% decrease.
Articles like this seem to be on the increase again:
https://global.handelsblatt.com/edit...ufthansa-plans
Meanwhile, apparently after one too many exercises in changing depreciation schedules, re-planning capital investments, and re-adjusting the adjusted EBIT (or whatever the Vorstand is trying to claim as operating income this week), the CFO quietly asked to be let out of her contract early.
Are there any adults making decisions at the Aviation Center these days?
Amazingly, despite the slow torture of the staff by a thousand cost-cutting paper cuts, I still (occasionally) manage to find an LH employee or two who still cares enough to actually ignore their strict job description and flow charts and creatively solve customer problems and provide actual customer service. It is the small but noticeable differentiation, and it is enough to keep me from giving up on LH completely. Or maybe it is the fact that I O&D principally from FRA and there is often no better choice. Or maybe it is the potato salad in the lounges. For whatever reason, I remain at least a bit of a fanboi.
However, despite my cheerleading, there are apparently not enough customers still willing endure the changes LH is forcing on them to even keep up with the overall market. At least the trends are not looking good right now. When will someone finally ignore the overpriced consultants (who only know how to say "cut more costs") and start to really think about a reasonable value proposition for LH, validate it, and pivot in new direction?
Come on Lufthansa, you can do it! You are never going to succeed as a low cost supplier, and you have some great resources to be a value-added premium airline, perhaps with enough value add to overcome even your horrible structural cost disadvantages.
After reporting an OK 2015 against the background of a booming industry environment (i.e., 2015 should have been a great one for LH), the current numbers at LH seem to be moving in the opposite direction of the rest of the industry. Or maybe someone made a sign error in the calculations. Most major hub airlines saw a roughly 5% increase in traffic in May of 2016. LH Group (ex EW, which has its own problems) saw a ~5% decrease.
Articles like this seem to be on the increase again:
https://global.handelsblatt.com/edit...ufthansa-plans
Meanwhile, apparently after one too many exercises in changing depreciation schedules, re-planning capital investments, and re-adjusting the adjusted EBIT (or whatever the Vorstand is trying to claim as operating income this week), the CFO quietly asked to be let out of her contract early.
Are there any adults making decisions at the Aviation Center these days?
Amazingly, despite the slow torture of the staff by a thousand cost-cutting paper cuts, I still (occasionally) manage to find an LH employee or two who still cares enough to actually ignore their strict job description and flow charts and creatively solve customer problems and provide actual customer service. It is the small but noticeable differentiation, and it is enough to keep me from giving up on LH completely. Or maybe it is the fact that I O&D principally from FRA and there is often no better choice. Or maybe it is the potato salad in the lounges. For whatever reason, I remain at least a bit of a fanboi.
However, despite my cheerleading, there are apparently not enough customers still willing endure the changes LH is forcing on them to even keep up with the overall market. At least the trends are not looking good right now. When will someone finally ignore the overpriced consultants (who only know how to say "cut more costs") and start to really think about a reasonable value proposition for LH, validate it, and pivot in new direction?
Come on Lufthansa, you can do it! You are never going to succeed as a low cost supplier, and you have some great resources to be a value-added premium airline, perhaps with enough value add to overcome even your horrible structural cost disadvantages.
Aug 3, 2016, 2:13 pm
#2313
FlyerTalk Evangelist
Join Date: Aug 2000
Location: London
Programs: Hilton, IHG - BA, GA, LH, QR, SV, TK
Posts: 17,008
The Times and Lufthansa
A rather rather .....y commentary on Lufthansa's disappointing financial performance in the business section of today's Times.
The journalist referred to some crap treatment he'd had travelling on Lufthansa
, then had the temerity to compare LH's financial performance with that of British Airways....
I'd like to provide a link, but I have access only to my paper copy.
The journalist referred to some crap treatment he'd had travelling on Lufthansa
, then had the temerity to compare LH's financial performance with that of British Airways....I'd like to provide a link, but I have access only to my paper copy.
Aug 5, 2016, 11:02 am
#2314
Join Date: Jul 2010
Location: BSL/FRA or PHL
Programs: LH Miles and More, DL SkyMiles, Bonvoy, Hilton
Posts: 2,335
A rather rather .....y commentary on Lufthansa's disappointing financial performance in the business section of today's Times.
The journalist referred to some crap treatment he'd had travelling on Lufthansa, then had the temerity to compare LH's financial performance with that of British Airways....
I'd like to provide a link, but I have access only to my paper copy.
The journalist referred to some crap treatment he'd had travelling on Lufthansa
, then had the temerity to compare LH's financial performance with that of British Airways....I'd like to provide a link, but I have access only to my paper copy.
If one wishes to look over the past 4-5 years, one could make a case that IAG group has performed better.
As for "crap treatment"by LH, I can only speak from personal experience, which is that the customer experience is a random variable, with a slightly-above-the-industry mean, and a wide variance. Over the past few years, the effects of relentless cost cutting efforts have started to show, and I think the overall experience is slowly reverting to the industry mean (variance has not to me perceptibly changed). This slip in average service level may be a problem for an airline that depends on a price premium to maintain financial and market competitiveness.
Aug 5, 2016, 5:51 pm
#2315
Join Date: Jul 2010
Location: BSL/FRA or PHL
Programs: LH Miles and More, DL SkyMiles, Bonvoy, Hilton
Posts: 2,335
An old FT friend brought this article to my attention. It seems Lufthansa is beginning to reap the rewards of its incessant cost cutting efforts (which, except fuel, over which LH has little control, seem to be largely ineffective):
http://centreforaviation.com/analysi...for-all-295344
The financial results for Lufthansa for 1H16 were not particularly impressive. When a company affirms at the end of June it's full-year earnings projection, then a few weeks later issues a profit warning (essentially reversing itself on projected earnings), sort of makes one wonder who is in charge. Yes, the industry is dynamic, but nothing is happening that is out of the ordinary or unforeseeable.
The lack of understanding of your near-term earnings potential usually does not go over well with stockholders.
The decline in load factor was accompanied by a similar decline in passenger yield per RPK (-2.7%) and the two combined to produce a 5.9% fall in passenger RASK. This was adversely affected by currency movements and the ex currency RASK performance of -4.1% was an improvement from a drop of 6.6% in 1Q2016.
A decline in reported RASK was felt in every region of the group's passenger network, although, at constant currency, Europe RASK increased by 0.6% and Middle East/Africa RASK was up by 3.3% (helped by an ASK cut of 11.5%).
The heaviest RASK decline, at constant currency, was in the Americas, where it fell by 11.4%. This is not split between North America and South America, but Lufthansa said that its constant currency yield decline of 7.8% for all of 1H2016 was driven by a 24.0% drop in South America and a fall of only 3.0% in North America. Latin America has been weak for all the major European airlines operating to the region, reflecting economic weakness, particularly in Brazil.
The group also suffered a significant constant currency RASK decline in Asia Pacific (-5.7%), in spite of a modest ASK cut (-1.7%).
Personally, I am wondering how long it will take to admit the whole German-/Eurowings concept was a horrible mistake, and either quietly shut it down or sell it to a real LCC that can make something out of the broken pieces.
http://centreforaviation.com/analysi...for-all-295344
The financial results for Lufthansa for 1H16 were not particularly impressive. When a company affirms at the end of June it's full-year earnings projection, then a few weeks later issues a profit warning (essentially reversing itself on projected earnings), sort of makes one wonder who is in charge. Yes, the industry is dynamic, but nothing is happening that is out of the ordinary or unforeseeable.
The lack of understanding of your near-term earnings potential usually does not go over well with stockholders.
The decline in load factor was accompanied by a similar decline in passenger yield per RPK (-2.7%) and the two combined to produce a 5.9% fall in passenger RASK. This was adversely affected by currency movements and the ex currency RASK performance of -4.1% was an improvement from a drop of 6.6% in 1Q2016.
A decline in reported RASK was felt in every region of the group's passenger network, although, at constant currency, Europe RASK increased by 0.6% and Middle East/Africa RASK was up by 3.3% (helped by an ASK cut of 11.5%).
The heaviest RASK decline, at constant currency, was in the Americas, where it fell by 11.4%. This is not split between North America and South America, but Lufthansa said that its constant currency yield decline of 7.8% for all of 1H2016 was driven by a 24.0% drop in South America and a fall of only 3.0% in North America. Latin America has been weak for all the major European airlines operating to the region, reflecting economic weakness, particularly in Brazil.
The group also suffered a significant constant currency RASK decline in Asia Pacific (-5.7%), in spite of a modest ASK cut (-1.7%).
Personally, I am wondering how long it will take to admit the whole German-/Eurowings concept was a horrible mistake, and either quietly shut it down or sell it to a real LCC that can make something out of the broken pieces.
Last edited by N1003U; Aug 6, 2016 at 5:20 pm
Aug 7, 2016, 12:37 am
#2318
Join Date: May 2009
Location: SIN (with a bit of ZRH sprinkled in)
Posts: 9,455
But those 2cm of snow will make for some terrible delays 
In fact, whats happening now is what most "amateurs" here on FT were saying: Just cut costs isn't going to work in the area of the market where LH wants to position itself. They've still a name (similar with LX) that quite some people believe is good, and in fact in some areas they're still fairly good. But overall, the product has more and more holes and the average traveller does feel it more and more.
In a world where more and more products are becoming the same (intra-europe, the difference between legacy carriers and LCCs have become really tiny) LH should focus on their advantages, not complain about "unfair conditions" and see further "enhancements" as their only way out. Because it isn't.
In this week's Spiegel, there was an article about the "strategy" of Lufthansa and the continued cutting of destinations. While I don't agree with all of it, the fact is, LH is cutting more of it's network than ever, in a market that generally still grows.
In fact, whats happening now is what most "amateurs" here on FT were saying: Just cut costs isn't going to work in the area of the market where LH wants to position itself. They've still a name (similar with LX) that quite some people believe is good, and in fact in some areas they're still fairly good. But overall, the product has more and more holes and the average traveller does feel it more and more.
In a world where more and more products are becoming the same (intra-europe, the difference between legacy carriers and LCCs have become really tiny) LH should focus on their advantages, not complain about "unfair conditions" and see further "enhancements" as their only way out. Because it isn't.
In this week's Spiegel, there was an article about the "strategy" of Lufthansa and the continued cutting of destinations. While I don't agree with all of it, the fact is, LH is cutting more of it's network than ever, in a market that generally still grows.
Aug 23, 2016, 12:32 am
#2319
Join Date: May 2009
Location: SIN (with a bit of ZRH sprinkled in)
Posts: 9,455
Lufthansa doing rather terrible, stock still close to 10€, not recovering (SCORE works trully great.. 
guess they should have listened to most people here )
http://www.deraktionaer.de/aktie/luf...ter-266110.htm
Lufthansa is thinking of giving up LX's GVA base and replace it with some kind of "Eurowings"
LX (obviously) is against the idea, but then it's LH who does decide..
I wouldn't be too surprised if LX is forced to give up GVA (again, last time Easyjet pretty much took their position and still is the #1 airline..)
guess they should have listened to most people here )http://www.deraktionaer.de/aktie/luf...ter-266110.htm
Lufthansa is thinking of giving up LX's GVA base and replace it with some kind of "Eurowings"
LX (obviously) is against the idea, but then it's LH who does decide..
I wouldn't be too surprised if LX is forced to give up GVA (again, last time Easyjet pretty much took their position and still is the #1 airline..)
Aug 23, 2016, 1:34 am
#2320
Join Date: Jul 2013
Location: AMS/RTM
Posts: 2,827
I wonder how long until also LUG gets the axe. In particular, the GVA-LUG connection is truly great, as it cuts travel time from 5.5h to less than one, but I guess it really was too good to be true at ~69CHF each way.
If only LH had kept MXP in better shape! If someone has a good link as to why LH Italia failed miserably I'd be interested in reading it. LH planes connecting in MUC are chock-full of italians travelling for work.
If only LH had kept MXP in better shape! If someone has a good link as to why LH Italia failed miserably I'd be interested in reading it. LH planes connecting in MUC are chock-full of italians travelling for work.
Aug 23, 2016, 8:13 am
#2321
FlyerTalk Evangelist
Join Date: Feb 2002
Location: Montreux CH
Programs: FB Platinum, M&M FTL, BA Blue
Posts: 11,623
Well the thing is, ZRH-LUG will be largely redundant when the new Gotthard base tunnel opens for business in December. The train will be much quicker and it's already a borderline case now.
From Geneva to Lugano is a heck of a long overland journey on the other hand, so hopefully that city pair will remain.
From Geneva to Lugano is a heck of a long overland journey on the other hand, so hopefully that city pair will remain.
Aug 23, 2016, 9:39 am
#2322
Join Date: Jul 2013
Location: AMS/RTM
Posts: 2,827
For O&D it's different, that's clear.
Sep 9, 2016, 3:54 am
#2323
Moderator: Lufthansa Miles & More, India based airlines, India, External Miles & Points Resources
Join Date: Dec 2002
Location: MUC
Programs: LH SEN
Posts: 48,184
Spohr answers a few questions for 'Bilanz': https://www.bilanz.de/maerkte/carsten-spohr-interview
Sep 9, 2016, 5:30 am
#2324
Join Date: May 2009
Location: SIN (with a bit of ZRH sprinkled in)
Posts: 9,455
One has to love it
Spohr: "Die Lufthansa ist Qualitätsführer weltweit und muss damit leben, dass sie kopiert wird. "
Translation: Lufthansa is the leader in terms of quality, we're getting copied and have to cope with that.
So LH isn't just 5*, it's actually (at least) 7*, the new Füssel 2-2-2 C is the best product in the world (rather clearly.. one wouldn't even compare them with crap like the 1-2-1 that SQ offers for about 10 years now..), their F product with never-ending Champagne, always available wines as on the menu and totally different meals than in C is copied by everyone in the Business, and let's not even talk about Y, where LH always offers the best IFE, the best seats, and clearly the best meals
Seriously though, I think Spohr should try to fly some other airlines to understand what's going wrong.. for reasons, Antinori does fly other airlines rather frequently to keep his mind open for other's offerings..
Spohr: "Die Lufthansa ist Qualitätsführer weltweit und muss damit leben, dass sie kopiert wird. "
Translation: Lufthansa is the leader in terms of quality, we're getting copied and have to cope with that.
So LH isn't just 5*, it's actually (at least) 7*, the new Füssel 2-2-2 C is the best product in the world (rather clearly.. one wouldn't even compare them with crap like the 1-2-1 that SQ offers for about 10 years now..), their F product with never-ending Champagne, always available wines as on the menu and totally different meals than in C is copied by everyone in the Business, and let's not even talk about Y, where LH always offers the best IFE, the best seats, and clearly the best meals
Seriously though, I think Spohr should try to fly some other airlines to understand what's going wrong.. for reasons, Antinori does fly other airlines rather frequently to keep his mind open for other's offerings..
Sep 10, 2016, 2:48 am
#2325
Join Date: Dec 2013
Programs: NZ Airpoints GE, Qantas Platinum, Accor Diamond, Hilton Diamond
Posts: 967
I can't understand German too well but today I saw a headline in SudDeutsche Zeitung about LH leasing 100 Air Berlin aircraft from the winter season to curb the growth of LCCs.
So is it a done deal - perhaps our German speaking friends can assist?
So is it a done deal - perhaps our German speaking friends can assist?