Originally Posted by
ded0r
I really disagree here. LH management does not get a lot of credit from me these days, but I don't think they are complete idiots. If they make decision to cut service on certain routes, then because these are unprofitable and capacity can be used more profitable somewhere else.
This would only apply if LH decides to leave the aircraft parked instead of reutilizing freed capacity somewhere else. And I don't think that reflects reality
If one examines published data from LH, or when one observes load factors anecdotally, it is hard to argue that LH is capacity constrained.
The essential question is whether one gets more money from customers by flying to/from, for example, Guangzhou than one spends in flying those customers to/from Guangzhou. If yes, then for many several reasons, it makes sense to continue to fly to Guangzhou.
Whether or not the route is earning some kind of acceptable "margin" is not particularly relevant in light of stated strategic objectives of "connecting the world" and the goal of actually earning money.
Flights to Guangzhou are almost certainly not cannibalizing revenue on other routes, and if these flights produce positive cash flow, then it is probably not a good idea to abandon them because they are "less profitable" than other routes.
If capacity is not constrained, the "more profitable capacity" argument is not relevant. If flights to Guangzhou are actually cash flow negative (which is possible, but I doubt), then yes, kill them. Otherwise, the service broadens the customer base and meets the objectives of "making money" AND "connecting the world."