FD1971

EK is certainly benefitting from very low interest rates and a spike here could have the same dire consequences as increasing fuel costs would have for AB or LO. Isn't it amazing that players like AB or LO are still around?

EK will be interesting to watch in the next couple of years, the first markets are already saturated, the revenue per seat mile is very very low, so they are many challenges ahead, if you take a look at their costs (and financing needs in the next couple of years)

Let's hope that the jug will not break anytime soon...

SMK77

At least some bits to discuss about. Good!

For LH, less revenue per seat mile and less revenue per seat can indeed generate the same 'profit'. The thing is that that 'profit' has been a loss for Lufthansa Airlines in the past three (?) years or close to zero. A profit out of 100 million passengers transported needs to be indeed a 1bn+.

While LH could further reduce cost (merge LH and LX outstations, cut duplications as two revenue managements hubs), it's unlikely that much of that will realize hence they only way to increase profit is to increase revenue and that's where Lufthansa has not done a convincing job in 2013.

So what's happening in 2014? Economy will still only sell at deep discounts thanks to an undesirable product with too much capacity and in Business people get fooled with inflexible fares in C and D and even by the end of 2014 more than 50% of the international Business Class seats will still be the old and outdated seats. Let's see how revenue management can fix that.

First Class will perform well but cannot significantly move the needle: Lufthansa would need 5* C and 5* Y to ask for the premiums they are looking at. Two years after the introduction of their New Business Class none of the flagship A380 has the new product. Growth in premium cabins will be slower than for competition - and that's where the money is made.

LonLH

Even F is often priced out of the market. I need 4 F seats to MIA shortly. LH was showing F8 A2 both ways, so I thought I will fly LH as they surely will release two extra A seats for a party of 4 (of which 3 are SEN) on a flight that is F8. It sat in waitlist for 2 weeks, did not clear and according to my TA LH kept telling him to wait as revenue management did not release any A inventory. F prices out at something like GBP 9800 per pax, so flying LH would have meant two F and two A tix and almost GBP 35K.
I gave up and asked my TA to look AA/BA or UA. UA is the same rip-off as LH (as they do revenue pooling) and an additional stop over, but BA/AA more reasonable at less than GBP 4000 for a P fare (change/cancel penalty of GBP 200 vs change cancel penalty of GBP 400 for LH A fare, same day changes free).
My total cost of 4 revenue tickets booked in A bucket with LH would have been about GBP 24000. My four revenue tickets with BA/AA cost me GBP 15000. LH flight still showing F5 A2 on outbound and F6 A2 on inbound, so LH revenue management lost GBP 24000 (had they released two more A seats) and I gained GBP 9000. And I am willing to suffer the AA service for the new flagship F hard product and GBP 9000 saving.

FD1971

Grosser Gott...

The anecdotes continue to fly..., unfortunately without accumulating any mileage.

Again, LH is on course for 1 billion in profits in 2014 and 1.5 billion in 2015, Franz has initiated major changes that will help LH reach that goal. And in the end, the investors do not care, how LH reached its goal, by having the best offense or the best defense, hence they do not really care, if LH Technik charges 10% too much or not resulting in the fact that LH Technik or Passage is profitable.

Sorry to tell, but Score is somehow old stuff nobody questions anymore, so please get over it.

For me the most interesting question is who will buy a chunk of M&M and how this will affect the program.

FD1971

LH sold 3 seats on the inbound flight and 2 seats out the outbound flight, so they did not lose anything, they sold five seats based on their prediction how a flight will perform.

But this is a good example. Only because their yield management does not comply with your wishes, it does not mean that they lost anything. Asking a vendor to give away 50% of the capacity at a discount in high season is maybe a bit unreasonable...

In the end, they have a million data points for that flight, you have 10 or 20.

Who would you trust more? And can you blame them?

TRAVELSIG

And which covering analyst(s) of Lufthansa is/are affirming this at the moment?

Crampedin13A

Just curious as to how LH will continue to make this type of profit. Will it be by gradually shrinking the size of the airline by retreating from markets and then attempting to extract higher fares from their strongholds as BA does with it's dominance on TATL? If so all it's premium products not just F are going to have to be very quickly improved. Will they introduce a PE cabin?

FD1971

According to the numbers posted by oliver, they offered 2.3% more RPK in 2013 vs 2012, so I do not see how 'they retreat from markets'.

I also do not see why customers pay more for a ticket, only because a product has been improved? That is wishful thinking, but in reality often very difficult to achieve.

But in general, I see more demand due to a stronger economic environment.

Lower costs due to Score should help as well, the one time charges in 2014 and 2015 arising from Score will also be lower in comparison to 2013, IIRC.

Not rocket science, just plain good management

LonLH

The funny thing is that they still have A2- so did they sell seats from F buckets or did they release two new seats when A seats were sold???
There is nothing to do with trust here- I offered EUR 30K to LH for four seats, they decided they might be able to make more than that. I decided I will fly someone else.
Can you blame me- unfortunately for LH I am not a captive customer and people have options.
Now the flights are showing F7 A2 and F8 A2 by the way.

LonLH

the same one who says Willie Walsh will make EUR 1.8 bllion operating profit in 2015.

Rambuster

Why?
The next time LH asks me to pay the fare difference from C to J when rebooking and I find out that on board there are 14 rows of "Business Class" available but only 2 of the 56 seats taken, I will ask them for a credit of the fare difference.
Mr Spohr even mentioned that they are in several court cases currently.
C class after all is sold as fully flexible.

I wonder what a judge would say when LH tells him that those 54 vacant "Business Class" seats are all J fare and not C fare compatible?

Lack

Why would they care? Afterall, they have all the data points to support their strategy!

htb

No, I meant exactly the opposite. LH forcing "perks" onto me even though I didn't want them. Maybe I'm too valuable for LH to let me go?

HTB.

htb

Because normally reputable companies care about their public reputation. So I agree with you: LH will not care because currently they do get their money.

HTB.

SMK77

I am glad that you are participating in a kind of discussion now. So much easier to demonstrate that you don't even get the basics right:

LH offered 3.7% less flights: that doesn't look like offering more destinations or more frequencies. As far as I know, they stopped KUL, SGN, and CGK - just to name what happened around Singapore.

LH sold 2.3% more RPK - that's due to bigger birds and higher seat loads. Success? No because they had to lure in the additional pax at heavily discounted prices. Any LH executive will confirm that (even to you). That's their biggest headache at the moment: Can we fill the capacity in 2014 and how?