LH to cut costs to compete with Budget Airlines [SCORE 2014 discussion]
Feb 16, 2012, 8:08 am
#46
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Feb 16, 2012, 8:19 am
#47
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It is not a positive commentary that the most loyal LH customers (HON circle members who are flying weekly) are forced to use different airlines. SCORE 2014 may accelerate this migration.
Feb 16, 2012, 9:40 am
#49
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As such, airlines are evolving in such a way that they are prioritizing what their customers will pay for (and very little else
). And the thing that C delivers that Y/Y+ will not is lie-flat. Full stop.The response from USA-based carriers to WN's downward pressure on margins over the past 30 years has been:
- improving the international C/F hard product while shaving corners on the domestic and international soft product
- "enhancing" FF benefits
- "enhancing" services by adding nuisance fees
- more slimline seats, packing more people in the Y cabin, reduced pitch
Does any of this sound familiar to you from your experiences on LH?
Feb 16, 2012, 11:43 am
#50
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I consider the hard product the core of what a class of service is- far more essential than soft product. Soft product can be changed on a whim, ripping out seats is quite expensive.
...
I think it's actually a quite relevant comparison- much of what has eviscerated service levels on USA-based carriers is the same thing that is putting pressure on LH's margins: a competitor capable of undercutting prices. In this case EK is playing the role of WN in longhaul markets, while FR is doing something similar on shorthaul.
The response from USA-based carriers to WN's downward pressure on margins over the past 30 years has been:
- improving the international C/F hard product while shaving corners on the domestic and international soft product
- "enhancing" FF benefits
- "enhancing" services by adding nuisance fees
- more slimline seats, packing more people in the Y cabin, reduced pitch
Does any of this sound familiar to you from your experiences on LH?
...
I think it's actually a quite relevant comparison- much of what has eviscerated service levels on USA-based carriers is the same thing that is putting pressure on LH's margins: a competitor capable of undercutting prices. In this case EK is playing the role of WN in longhaul markets, while FR is doing something similar on shorthaul.
The response from USA-based carriers to WN's downward pressure on margins over the past 30 years has been:
- improving the international C/F hard product while shaving corners on the domestic and international soft product
- "enhancing" FF benefits
- "enhancing" services by adding nuisance fees
- more slimline seats, packing more people in the Y cabin, reduced pitch
Does any of this sound familiar to you from your experiences on LH?
http://www.flyertalk.com/forum/conti...s-iad-ams.html
Yes, hard product is the first priority, but if I encounter a hostile FA who makes me uncomfortable, I certainly will not fly this airline any time soon if I can avoid it in spite of the great hard product CO has to offer. And I think here LH is still doing pretty good, in terms of cabin staff quality.
The main reason why I would not compare UA/DL/AA etc with European/Asian carriers is that why would anyone pay for their premium cabins anyway as long as for the same price you get better service elsewhere. And that's why they have to fill their premium cabins with upgrades and staff.
One more thing - yes, soft product can be changed on a whim for the worse; building up a reputation for a good soft product is much more difficult. That's why LH is on a slippery road down towards PE, not just on the hard but also the soft product.
Feb 16, 2012, 3:56 pm
#51
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Yes, it does indeed sound familar. With one big difference. Us-based airlines have already made enormous progress on the deterioration of the soft product over the past decade and more (calling it "shaving corners" is putting it very politely!) But again, this is not something recent!
http://www.flyertalk.com/forum/conti...s-iad-ams.html
Yes, hard product is the first priority, but if I encounter a hostile FA who makes me uncomfortable, I certainly will not fly this airline any time soon if I can avoid it in spite of the great hard product CO has to offer. And I think here LH is still doing pretty good, in terms of cabin staff quality.
The main reason why I would not compare UA/DL/AA etc with European/Asian carriers is that why would anyone pay for their premium cabins anyway as long as for the same price you get better service elsewhere. And that's why they have to fill their premium cabins with upgrades and staff.
One more thing - yes, soft product can be changed on a whim for the worse; building up a reputation for a good soft product is much more difficult. That's why LH is on a slippery road down towards PE, not just on the hard but also the soft product.
http://www.flyertalk.com/forum/conti...s-iad-ams.html
Yes, hard product is the first priority, but if I encounter a hostile FA who makes me uncomfortable, I certainly will not fly this airline any time soon if I can avoid it in spite of the great hard product CO has to offer. And I think here LH is still doing pretty good, in terms of cabin staff quality.
The main reason why I would not compare UA/DL/AA etc with European/Asian carriers is that why would anyone pay for their premium cabins anyway as long as for the same price you get better service elsewhere. And that's why they have to fill their premium cabins with upgrades and staff.
One more thing - yes, soft product can be changed on a whim for the worse; building up a reputation for a good soft product is much more difficult. That's why LH is on a slippery road down towards PE, not just on the hard but also the soft product.
My comment, though is that USA-based carriers are decades ahead of being exposed to the profit pressures from LCCs... but if you were to nose around the SQ/CX forums a bit, I think it wouldn't be TOO hard to find places where old-timers would point out places where service was being cut back, and benefits were being "enhanced". I would argue that they're going to feel the impact from AK, EK and the like, just as LH is feeling it from EK and FR.
The problem that I see is that there's a limited customer base for premium air travel, and that customer base depends on having a host of warm bodies filling up the cheap seats in back in order to support the frequencies needed to fly (unless we're talking LCY-JFK- very few airline routes could survive as premium only). LCCs siphon away those warm bodies- while the C/F cabins are where the profit margins come from (and even FR's CEO isn't daft enough to think he could fly across the Atlantic without a C cabin), the Y cabin makes it possible. So the problem EK represents to LH is quite real, and I don't think it's solved merely by showering love and attention on C and F. (It's notable that EK has some outstanding elements in their Y cabin, too...) And I think the thing the USA market has shown is that lots of people are VERY price-sensitive. Perhaps Europe and Asia are different... but given the success we've seen from AK, FR and EK, I have to wonder about that.
Feb 19, 2012, 8:38 am
#52
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Mar 9, 2012, 3:15 am
#53
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First town hall style discussion with cabin crew:
Code:
Klartext reden zu den aktuellen Themen und Veränderungen des Konzerns – das ist Ziel und Titel der neuen Veranstaltungsreihe für Purser und Flugbegleiter von Wolfgang Kolhagen, Leiter der Frankfurter Kabinencrews, FRA EK. Im direkten Dialog zwischen Top-Management und der Kabine hatten am 27. und 28. Februar zunächst die Frankfurter Purser Gelegenheit, mit Passage- Airlines-Chef Carsten Spohr, seinen Passage-Vorstandskollegen Dr. Roland Busch (Finanze & Personal) und Kay Kratky (Frankfurt & Flight Operations) sowie Wolfgang Kolhagen zu diskutieren. Die Vorstände stellten ihre Sicht der aktuellen Situation des Konzerns vor, um anschließend konkrete Anforderungen an die Kabine zu formulieren. Kolhagen betonte dabei: „Gerade heute ist es absolut wichtig, dass wir alle ein gemeinsames Verständnis der aktuellen Lage haben.” Er forderte die Purser auf: „Lassen Sie mich an Ihren Ideen teilhaben, um gemeinsam erste Lösungsansätze zu formulieren!” Intensive Diskussion Das Ergebnisverbesserunsprogramm SCORE, das Wachstum in Berlin und die anstehenden Tarifverhandlungen, genauso wie aktuelle kabinenspezifische Themen wurden intensiv diskutiert. Die Marschrichtung markierte Spohr mit den drei Eckpunkten der Passagestrategie: „Wir müssen mit dem Markt wachsen, unser Flottenalter darf nicht weiter steigen und wir dürfen unsere solide Finanzierung nicht verlieren.“ Dafür wurde das Programm SCORE aufgelegt, das strukturelle Veränderungen in alle Bereiche bringen wird, so Spohr weiter. Passagevorstand Busch appellierte an die Mitarbeiter: „Angesichts der Bedingungen des wirtschaftlichen und politischen Umfelds, ist es dringend notwendig, die Kostenstrukturen der Kabine zu ändern.“ Was dies konkret für die Kabine bedeute, machte Kratky deutlich: „Wir müssen unsere Produktivität steigern. Alle werden für das gleiche Geld künftig mehr arbeiten müssen, so wie es bei zahlreichen Wettbewerbern heute schon üblich ist“. Etliche Purser äußerten ihre Meinungen dazu. Dabei zeigten sie Bereitschaft, den Kurs mitzutragen. Allerdings gab es auch kritische Töne. So merkte eine Purserin an, dass einschneidende Veränderungen nicht nur ein wirtschaftliches, sondern auch ein sehr emotionales Thema seien. „Nur wenn die Kabinenkollegen emotional mitgehen, erreichen wir auch weiterhin die Passagiere.“ Eine Aussage, die breite Zustimmung fand. Erste Ideen Im Anschluss an das Gespräch mit den Vorständen diskutierte Kolhagen intensiv mit seiner Kabine. Die Purser sprachen über erste Ideen und Ansätze, um die anstehenden Anforderungen an die Kabine gemeinsam zu erfüllen. Dabei bestimmten die Themen ,Verhältnis von Leistung und Gehaltsstruktur‘ sowie ,effizientere Zusammenstellung der Crew‘ den Dialog. Kolhagen machte an dieser Stelle deutlich: „Wir müssen gemeinsam Potenziale ausmachen, wo wir zum Beispiel Komplexität im Service abbauen können und genau identifizieren, was für den Kunden wichtig ist.“ Auch in München gibt es Gelegenheit zum Dialog. Dort lädt Kabinenleiterin Heike Birlenbach, MUC EK, monatlich zu ,Open House‘ ein, um ihre Mitarbeiter auf dem aktuellen Stand zu halten.
Mar 9, 2012, 6:44 am
#54
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With the current earnings figures I can fully understand LH's need to change things to the better. But I question the ways they chose to go.
My background is in a company producing high quality electronics in germany for the european and US market, facing hard competition from eastern european, india and asia companies offering their services and products in europe, too.
Earning enough money is an always ongoing struggle and if you're passive for a year or two you're going under.
However if I look at practically every german company that is profitable in such an environment, their recipe is providing better service and superior products for the higher price they ask. And targeting those customers who are willing to pay a higher price for a better product and service and for a local presence and customer service, if something goes wrong.
How LH is dealing with the task leads into a wholly wrong direction IMO.
- frustrate your loyal frequent fliers with service and m&m programm cutbacks every single year. That's the reliability LH offers to customers nowadays.
- unsettle your customers with scaling down the quality of the eco cabin and the short/medium haul biz product to the level of a LCC airline for the same or higher price that they had to pay beforehand.
- providing service by callcenters abroad and answering to customer issues by auto-reply messages without any meaning.
Why should I pay a lot more (compared to the middle east carriers e.g. or some of the better european competitors for european flights) for a product that is not better (and sometimes worse) than that of the competitor.
LH's m&m program is a shadow of what it was years ago.
If you have a real and immediate problem go and find somebody that can offer you a creative solution - not possible anymore on LH.
So what's left? LH's still good name, a good First product (ground&air) and the extensive route network, especially if you originate in germany. I doubt that this will be enough for being profitable in the long run. Customers do have a choice most of the times...
My background is in a company producing high quality electronics in germany for the european and US market, facing hard competition from eastern european, india and asia companies offering their services and products in europe, too.
Earning enough money is an always ongoing struggle and if you're passive for a year or two you're going under.
However if I look at practically every german company that is profitable in such an environment, their recipe is providing better service and superior products for the higher price they ask. And targeting those customers who are willing to pay a higher price for a better product and service and for a local presence and customer service, if something goes wrong.
How LH is dealing with the task leads into a wholly wrong direction IMO.
- frustrate your loyal frequent fliers with service and m&m programm cutbacks every single year. That's the reliability LH offers to customers nowadays.
- unsettle your customers with scaling down the quality of the eco cabin and the short/medium haul biz product to the level of a LCC airline for the same or higher price that they had to pay beforehand.
- providing service by callcenters abroad and answering to customer issues by auto-reply messages without any meaning.
Why should I pay a lot more (compared to the middle east carriers e.g. or some of the better european competitors for european flights) for a product that is not better (and sometimes worse) than that of the competitor.
LH's m&m program is a shadow of what it was years ago.
If you have a real and immediate problem go and find somebody that can offer you a creative solution - not possible anymore on LH.
So what's left? LH's still good name, a good First product (ground&air) and the extensive route network, especially if you originate in germany. I doubt that this will be enough for being profitable in the long run. Customers do have a choice most of the times...
Mar 9, 2012, 7:26 am
#55
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Join Date: Jan 2005
Location: VCE
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With the current earnings figures I can fully understand LH's need to change things to the better. But I question the ways they chose to go.
My background is in a company producing high quality electronics in germany for the european and US market, facing hard competition from eastern european, india and asia companies offering their services and products in europe, too.
Earning enough money is an always ongoing struggle and if you're passive for a year or two you're going under.
However if I look at practically every german company that is profitable in such an environment, their recipe is providing better service and superior products for the higher price they ask. And targeting those customers who are willing to pay a higher price for a better product and service and for a local presence and customer service, if something goes wrong.
How LH is dealing with the task leads into a wholly wrong direction IMO.
- frustrate your loyal frequent fliers with service and m&m programm cutbacks every single year. That's the reliability LH offers to customers nowadays.
- unsettle your customers with scaling down the quality of the eco cabin and the short/medium haul biz product to the level of a LCC airline for the same or higher price that they had to pay beforehand.
- providing service by callcenters abroad and answering to customer issues by auto-reply messages without any meaning.
Why should I pay a lot more (compared to the middle east carriers e.g. or some of the better european competitors for european flights) for a product that is not better (and sometimes worse) than that of the competitor.
LH's m&m program is a shadow of what it was years ago.
If you have a real and immediate problem go and find somebody that can offer you a creative solution - not possible anymore on LH.
So what's left? LH's still good name, a good First product (ground&air) and the extensive route network, especially if you originate in germany. I doubt that this will be enough for being profitable in the long run. Customers do have a choice most of the times...
My background is in a company producing high quality electronics in germany for the european and US market, facing hard competition from eastern european, india and asia companies offering their services and products in europe, too.
Earning enough money is an always ongoing struggle and if you're passive for a year or two you're going under.
However if I look at practically every german company that is profitable in such an environment, their recipe is providing better service and superior products for the higher price they ask. And targeting those customers who are willing to pay a higher price for a better product and service and for a local presence and customer service, if something goes wrong.
How LH is dealing with the task leads into a wholly wrong direction IMO.
- frustrate your loyal frequent fliers with service and m&m programm cutbacks every single year. That's the reliability LH offers to customers nowadays.
- unsettle your customers with scaling down the quality of the eco cabin and the short/medium haul biz product to the level of a LCC airline for the same or higher price that they had to pay beforehand.
- providing service by callcenters abroad and answering to customer issues by auto-reply messages without any meaning.
Why should I pay a lot more (compared to the middle east carriers e.g. or some of the better european competitors for european flights) for a product that is not better (and sometimes worse) than that of the competitor.
LH's m&m program is a shadow of what it was years ago.
If you have a real and immediate problem go and find somebody that can offer you a creative solution - not possible anymore on LH.
So what's left? LH's still good name, a good First product (ground&air) and the extensive route network, especially if you originate in germany. I doubt that this will be enough for being profitable in the long run. Customers do have a choice most of the times...
The strategy of treating the customer badly, providing a worse hard product then EasyJet, and charging the same high prices has forced me to look for alternatives- something that as a loyal customer for more than 20 years I never did before.
Of course we could also mention the elimination of the excellent LHRelate here at FT as another example of staying close to your customers and providing good service.
Mar 9, 2012, 12:53 pm
#56
Join Date: Jan 2010
Location: In transit TATL
Posts: 230
With the current earnings figures I can fully understand LH's need to change things to the better. But I question the ways they chose to go.
My background is in a company producing high quality electronics in germany for the european and US market, facing hard competition from eastern european, india and asia companies offering their services and products in europe, too.
Earning enough money is an always ongoing struggle and if you're passive for a year or two you're going under.
However if I look at practically every german company that is profitable in such an environment, their recipe is providing better service and superior products for the higher price they ask. And targeting those customers who are willing to pay a higher price for a better product and service and for a local presence and customer service, if something goes wrong.
How LH is dealing with the task leads into a wholly wrong direction IMO.
- frustrate your loyal frequent fliers with service and m&m programm cutbacks every single year. That's the reliability LH offers to customers nowadays.
- unsettle your customers with scaling down the quality of the eco cabin and the short/medium haul biz product to the level of a LCC airline for the same or higher price that they had to pay beforehand.
- providing service by callcenters abroad and answering to customer issues by auto-reply messages without any meaning.
Why should I pay a lot more (compared to the middle east carriers e.g. or some of the better european competitors for european flights) for a product that is not better (and sometimes worse) than that of the competitor.
LH's m&m program is a shadow of what it was years ago.
If you have a real and immediate problem go and find somebody that can offer you a creative solution - not possible anymore on LH.
So what's left? LH's still good name, a good First product (ground&air) and the extensive route network, especially if you originate in germany. I doubt that this will be enough for being profitable in the long run. Customers do have a choice most of the times...
My background is in a company producing high quality electronics in germany for the european and US market, facing hard competition from eastern european, india and asia companies offering their services and products in europe, too.
Earning enough money is an always ongoing struggle and if you're passive for a year or two you're going under.
However if I look at practically every german company that is profitable in such an environment, their recipe is providing better service and superior products for the higher price they ask. And targeting those customers who are willing to pay a higher price for a better product and service and for a local presence and customer service, if something goes wrong.
How LH is dealing with the task leads into a wholly wrong direction IMO.
- frustrate your loyal frequent fliers with service and m&m programm cutbacks every single year. That's the reliability LH offers to customers nowadays.
- unsettle your customers with scaling down the quality of the eco cabin and the short/medium haul biz product to the level of a LCC airline for the same or higher price that they had to pay beforehand.
- providing service by callcenters abroad and answering to customer issues by auto-reply messages without any meaning.
Why should I pay a lot more (compared to the middle east carriers e.g. or some of the better european competitors for european flights) for a product that is not better (and sometimes worse) than that of the competitor.
LH's m&m program is a shadow of what it was years ago.
If you have a real and immediate problem go and find somebody that can offer you a creative solution - not possible anymore on LH.
So what's left? LH's still good name, a good First product (ground&air) and the extensive route network, especially if you originate in germany. I doubt that this will be enough for being profitable in the long run. Customers do have a choice most of the times...
LH Group is still the most sensible choice for my travel pattern. YMMV, but one can already see -- and feel -- the cumulative effects of decisions affecting ground-service (call center) and FA morale, and thus customer service, by an ever more remote senior management.
Mar 19, 2012, 2:55 am
#57
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Looks like SQ is doing some soul searching of their own:
http://edition.cnn.com/video/#/video...hoon-phong.cnn
http://edition.cnn.com/video/#/video...hoon-phong.cnn
Mar 19, 2012, 3:52 am
#58
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Looks like SQ is doing some soul searching of their own:
http://edition.cnn.com/video/#/video...hoon-phong.cnn
http://edition.cnn.com/video/#/video...hoon-phong.cnn
Apr 20, 2012, 9:04 am
#59
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LH Passage lead by Spohr (Antinori's successor) has presented the SCORE plan for their division today: http://www.faz.net/aktuell/wirtschaf...-11724656.html
900 million savings from operations, 300 mio gain from extra sales (
)
900 million savings from operations, 300 mio gain from extra sales (
)
Apr 20, 2012, 9:30 am
#60
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Tomorrow they will announce the merger of Germanwings and LH into a new airline.
All routes from CGN, DUS, TXL, HAM & STR will be operated by them.
Why do I have a feeling that this won't be good for passengers?
All routes from CGN, DUS, TXL, HAM & STR will be operated by them.
Why do I have a feeling that this won't be good for passengers?
Last edited by Rambuster; Apr 20, 2012 at 9:35 am