FD1971

Above expectations?

Who said something about "above expectations"

Face it, my friend, all your predictions were wrong, simply not correct and some insiders told you so years ago.

Once again, listen to the experts, do not listen to the fans and you should be fine. It is really that easy. So have a nice glass of milk and enjoy industry leading aviation management live from Kelsterbach.

Lack

It's management certainly feels so, with the creation of various LCCs, NEK, HBO, JUMP etc.

And LH will become cheaper (as in experience, not prices) until you can't tell those two apart. And like the saying goes about arguing with a fool, FR has way more experience on that field.

FD1971

They already tested the waters with their own LCC twenty years ago, so again I do not really see why creating new divisions, affiliates etc. should not be part of daily management.

Just relax, have a glass of milk and enjoy the game.

N1003U

Perhaps a small difference.

I am not sure what a "perfect" stage length is when one optimizes over a large multidimensional space. Perhaps someone could clarify?

I suppose there is a reason why the LH oil and energy club is still around, despite best efforts in the EU to kill carbon bonds as an energy storage medium.

I am sure there is fairly steady demand to/from IAH from/to FRA (modest, but steady) and via FRA (perhaps a bit larger from a few key nearby EU origin points. I suppose also no one understands the demand on that route (and beyond) better than LH.

OTOH, I suppose there is no one who understands the demand to/from DFW from/to DXB and (probably way more importantly) via DXB (and beyond) better than EK. Two dozen per day is clearly not an accurate number. Even 40% of an A380 is more than that.

One can look at historical demand, but of course that doesn't tell the whole story. Funny how in a horribly non-linear and stochastic environment how small changes in assumptions on demand (and more abstract concepts, like elasticity of substitution) can produce big changes in the economic result for one competitor or the other. But I digress.

One of the nice things about having a low cost basis and flexible management as an airline is that one has a bit more margin to try some new things and adjust quickly if they don't work out. Margin for error and the ability to adjust quickly are two areas where LH is not exactly a world-class benchmark. LH has other strengths, but anyone who with a straight face plans four years for the organizational restructuring of ~30-40 billion EUR in applied capital probably does not fully recognize the realities of market dynamics today.

While the extra training probably doesn't hurt, one certainly does not need a post-graduate degree in Air Transportation or Operations Management to be able to understand what works and what doesn't in airline pricing and network planning. A bit of economics, statistics, and cost accounting, along with a bit of experience in how an airline actually runs usually suffices.

It is funny how many unusual ideas (like starting A380 service to someplace like DFW from a remote hub of flying like DXB, or SYD) seem to work out when one can operate in an agile environment, while the tradition-bound incumbents look on dumbly and seem only to be able to whine that the world isn't the way it used to be.

What bits of necessary detail information that are still missing from a basic executive background to complete the strategic picture for an airline, for a fairly bright executive, can generally be bought by the kilo (or by the square meter if the data are rolled out thinly enough) to within 3 significant figures.

GBM.flights

Which of my predicitons were wrong?

Listen to experts ... like the one I quote below?

I can understand why you stopped sticking to the numbers and just engage on the rhetoric of A380's to DFW, FR afraid of LH and Menne hiding cash.

Rambuster

I see more and more A380s flying into BKK.
(I recently flew QR F on their A380 service to BKK. Quite a nice product, even though I'd argue the LH A380 F is a tad better, EK F also offers a bit more privacy).

N1003U

Here is one perspective on LCC market development in Germany,

and here is another...

Funny how not only the old hand in the LCC business Mr. O'Leary sees opportunity inside Germany, but also the new kid on the block over at U2, and neither is impressed by 4U. It is a good thing neither one of those LCC executives knows what they are doing, otherwise at LH I would be a bit concerned.

While the Crane is certainly not an endangered species, when the LCCs finally decide to open fire on the German domestic market with their heavy artillery, the game reserve will get smaller. The LH political connections might protect them for a while, but long term they need to do more than just re-arrange the deck chairs--that is if they want to remain the "leading carrier" in the EU.

For a preview of what LCCs can do to incumbent carriers in provincial outposts, one could take a look at my neighborhood airport, BSL.

N1003U

For those who might be interested to read more on some of the LH strategic woes in out of the local Frankfurt paper, here are a few more cheery stories:

Even the usually reliable hometown FAZ is not overwhelmed by the 4U strategy:

(at least they didn't show a picture of the A330 with a missing engine cowling)

"...Denn je mehr sie sich gegen Einschnitte sperren, desto eher werden bisherige Lufthansa-Strecken eingestellt und stattdessen günstiger unter Eurowings geflogen. Die Piloten würden sich zunehmend selbst überflüssig machen. Schon jetzt stellt der Konzern für die Kernmarke Lufthansa keine neuen Piloten mehr ein – eine düstere Perspektive für den Nachwuchs. Vorstand Garnadt beruhigt zwar: „Lufthansa bleibt die mit Abstand wichtigste Marke im Konzern...:
(unfortunately the quote doesn't translate well with Google Translate--even if one assumes that the Germanwings strategy will succeed, Garnadt doesn't think it will significantly cannibalize mainline traffic. Brave words)

I guess the head of Passage said LH mainline is still relevant, so it must be true.

Or, here a few examples of what happens when you can't convince your employees that the rules of engagement have changed, and you aren't capable of organizing their work so that they are productive enough to pay them their historical wages (in other words, this is the result of abdicating responsibility for effectively managing human resources):

http://www.faz.net/aktuell/wirtschaf...-13866921.html

http://www.faz.net/aktuell/wirtschaf...-13866249.html

http://www.faz.net/aktuell/wirtschaf...-13865874.html

oliver2002

FR/MOL thinks the tremendous success he undoubtedly has in the UK can be replicated ad naseum in every EU market. Evidently that is not possible in Germany because LH has more emotion tied to their domestic market than BA had.

Re: A380 into DFW: both LH and EK can buy data from IATA to see exactly where folks have been flying to from DFW and can base their strategy on that. The data costs money, but its relatively peanuts.

N1003U

This is a good point.

It will be interesting to see how many folks vote with their wallets when given a choice. I agree with you basic premise of an emotional component to the demand.

The FR strategy has certainly worked well in Italy, France, Poland, the wealthier parts of Iberia, and Greece. Granted the quality of the alternatives in most of those places left a lot to be desired. U2 seems in addition to many of the FR markets to be making good inroads in Switzerland, Austria and eastern Europe.

Germany does seem to have strong emotional ties to its domestic suppliers, the reasons for which would be fascinating to research sometime.

FD1971

The tremendous success was only partly based on flying passengers from A to B, most of it was based on massive capital gains from S&LB transactions and unreal subsidies from local politicians and airport managers who wanted to get on the map. Both sources are running dry resulting in the fact that Ryanair has to rethink its business model to the massive extent we see at the moment.

CRS usually offer more reliable and precise data broken down not only to fare classes but fare buckets.

Do you remember the time good old weero refused to believe that such data would be available for sale?

FD1971

No slots, no real access to business travelers, terrible reputation...even in el cheapo central aka Germany this is not a good foundation for a working business case on key markets....

I see some Milchbubies fly them on Schoenefeld - Malle though.

N1003U

It is amazing the kinds of deals you can negotiate with someone sitting on a huge fixed asset and a lot of excess capacity. @:-)

Although the idea of equating tax breaks to stimulate business with subsidies is certainly in line with the thinking of a lot of folks in the EU government, who wouldn't recognize a free market decision if it bit them on the behind.

oliver2002

But by that logic (airports willing to subsidize, people willing to fly from A to B for cheap) Germany also offers a lot of options with may regional airports begging for business (Kassel, Hof, Kiel etc). Still no big explosion.

N1003U

Indeed. One might reasonably conclude there is not so much convenient extra capacity in Germany at present, which would go a long way toward explaining why the invasion of the LCCs has not yet started en masse. @:-)

OTOH, I am sure there is already some money being made at places like STR, DTM, DUS, FDH, CGN, BRE, FKB, etc. by the Big2 LCCs. Note U2 does have a few token flights even to/from MUC.