Originally Posted by
whiskey_sk
OK has been cutting routes for quite some time now, not leaving aircraft parked, thinking it can make more money elsewhere, and yet they are far from being profitable today
I am sorry but this is a very narrow minded perspective on this matter. And what do you mean by far from being profitable? You do realize that last year LH posted an operating profit of over 800 Million Euros and had a small net loss of about 13 million euros due costs incurred from the sale of BMI? Profitability does not automatically happen within a short period when one single decision is made, especially in such an economic climate and I am sure you are aware of this. Also, an operating loss at the second quarter of a financial year does not predict that the company would not post a profit and this has been witnessed several times (LH's 2010 results for example). LH even fared better than it had forecasted for Q2 earnings and I am very positive that happened as a result of some of the “controversial” measures that have taken.
Originally Posted by
TRAVELSIG
To cut a city like Guangzhou is not a strategic decision. The reason LH was not making money in Guangzhou is because their business class product is not competitive at all. Full stop.
What solid facts/evidence do you have to suggest this as the absolute reason why LH cut CAN? I am really interested in the facts you have based this comment on. If this is the case, why does LH still fly to HKG despite having strong competition from EK, QR, BA and CX? Why did AY stop CAN despite having a very good J product that outclasses LH’s? Granted, Guangzhou has an economy that is growing but that does not mean majority of its flying population can afford to fly J class. Why does AF send 772s/A343s with small premium cabins to CAN? Does that not imply that the route is not heavy on premium traffic? At this point, it would not be very smart of LH to continue to fly to a destination that does not provide enough yields and this has most likely been caused by low premium demand and rising fuel prices. Yes, the competition would have had an impact in the decision but it certainly does not narrow down to an inferior J product. It is already a known fact that CAN is a de-facto SkyTeam hub. CZ has a huge presence there and hence AF continues to serve the route due to the connectivity CZ offers them. Why isn’t BA eyeing CAN for services in the near future and why is AF the only European airline flying there? At the end of the day it is in fact a strategic decision and has very little to do with its J class not being up to the competition. If that was the case, LH would not be flying to three quarters of its intercontinental destinations by now.