oliver2002

The new seat will come 2020 fleetwide: http://www.flyertalk.com/forum/lufth...79-2020-a.html

gum

Thanks for this kindly reminder about a post I made some years ago.

Shows a very good memory and that the posts here at flyertalk have some emotional value.

Very sorry that I was and I am yet not able to predict the exact time when the ME3 bubble will explode.

But you see the first signs of disintegration: With the problems of Alitalia, Air Berlin etc. the ME3 will soon loose some of the European (feeder) partners.

The growth limits for the ME3 seem to be reached. Just have a look on all of those special prices which Emirates & Co. continuosely advertise.

And compare this with the epic performance of Lufthansa and its share:

It seems that Lufthansa is one of the rare airlines which really make profit and generate value not only for the travellers but also for the society as a whole:

https://www.comdirect.de/inf/aktien/...timeSpan=1Y&e&
Source: Direct broker comdirect, chart tool/informer

I sometimes exaggerate a bit and I am saying that the ME3 bubble could last so long until one of the deciders/sheiks looses the interest/fun in having such huge airlines.

LH401

Gum, it is perfectly fine. The prediction itself is right, The Marshall Plan of airlines resulted in unprecedented losses for the ME3, most of it camouflaged under a potpourri of side activities and bucket case affiliates parked in some rather obscure financial creations. We should give the rulers in the Near East a lot of credit though. No one in the history of mankind has ever supported backpackers in such a gracious way, we are talking about subsidies to the extent of a three digit billion range that brought millions of people closer to their dream holiday in desirable places like Phuket or Bangkok. Only 20 years ago, such holidays were out of reach and the money was merely enough to reach PMI on LTU.

Indeed, but I do not know which action underscores the brilliance of Hogan the absolute most perfect way. The quasi takeover of Alitalia, Hunold’s bunten Krämerladen or flying load restricted A345 to Sydney out of the mid-day heat in AUH?

All of those actions are masterpieces in Aviation Management and I do hope they put a statue of Hogan somewhere close to Fiumicino, Tegel or maybe even Sylt. Word on the street, Hogan and Hunold will meet at a certain bar on the island of Sylt to discuss how to recapture world leadership in Aviation soon.

Absolutely, but again, the vast majority of experts predicted this a long time ago. It was obvious that both Franz and Spohr are taking steps into the right direction, especially if you take a look at the key financial parameters like Wacc, Eacc Roce or Ebit you see a clear direction. The outlook for 2017 is stable again, resulting in a predicted operating cash flow in excess of € 3 billion and profit close to € 1.75 billion.

As predicted by experts as well years ago, they will suck up most of AB and what is desirable (i.e. slots at certain airports) to take care of the demand for leisure flights from the core markets. Other core markets will be strengthened, i.e through the brilliant JV with China, which resulted in placing a few A380 in MUC already, a decision, which should facilitate the export of certain products from Switzerland to China...

San Gottardo

[redacted]

And: yawn. Taking low fares as evidence for subsidies. Seriously? So tell me, when Lufthansa offers tickets for EUR 399 return from Europe to NYC, who has subsidised them? When easyJet offers EUR 34 for Berlin-Paris, who has subsidised them? British Airways, Zurich-London for CHF 47 - who subsidised them? And so on.... So no, I do not agrees that low fares are evidence for state subsidies.

I think it's widely established that EK has received startup capital, but has afterwards run a successful business, which now comes under pressure - as have so many other airlines. QR is heavily subsidised up to a point, but if you were a tiny bit familiar with what is going on in Qatar (the country) since the new Emir came into power, you wouldn't just repeat that old lore about QR being blindly subsidised. EY is heavily subsidised without limit, and on top of that has made numerous stupid strategy mistakes. Buying stakes in a bunch of clinically dead carriers (AZ, AB) just didn't work out.

gum

Thank you for your contribution. There are two completely different airline strategies between Lufthansa and Emirates.

The "390s" offers of Emirates are in contrast to the rare Lufthansa offers. Emirates combines this with a strategy of capacity increase. if you have a look on the 3 A 380s to Munich per day this is an insane and crazy capacity increase.

You could - however - argue that Emirates is a kind of flag carrier and the whole society of Dubai profits from the travellers enticed by that offers.

So the national accounts will have an enourmous inflow of the money the tourists spent during their stay. But I am not convinced that this strategy is allowed under the international regulatiry framework. This could be a state aid case.

But on the long run I have to stick to my opinion that this is an artificially inflated bubble leading to a high risk potential. For all parties involved. I simply don't believe in a strategy of extreme growth with the negative impacts on fares.

San Gottardo

I am confused. A country is not allowed to have more tourists because the local airline flies them there? Where does that come from? And how is that state aid??

And which "international regulatiry framework" do you have in mind that would not allow "this" (where I am not quite clear what it is that you're saying is not allowed)?

Thank you for enlightening us.

LH401

It turns out that Score was really the wrong approach and did not work at all.

So sad that experts like yourself do not work in the industry, just imagine the possibilities and returns for shareholders...

Just picture how profitable LH could be without Score relying on the recommendations of real experts on internet forums.

Even without those real experts and with Score & Spohr, the average estimate for operational profit in 2017 is around $ 3 billion according to a recent Bloomberg story.

sw1x

Honest question as I don't have time to dig it up myself: How much of the USD 3bn is a contribution from lower fuel prices?

oliver2002

Hardly any, as LH hedges its fuel....

N1003U

I might argue the "experts" here have a significant impact on returns. However the impact is more on the credit side than the debit side of the ledger.
(for those of you on the Kaiserstuhl, that means people here in the forum actually provide revenue to the industry by buying tickets rather than creating expenses in their attempts to "manage" the industry.)

LH's 1. half year numbers are due out tomorrow. I personally don't expect any huge surprises, but low fuel prices are certainly providing "tailwinds" for the industry. Personally, I will be looking for evidence that EW is starting to pull its own weight, or not, and the development of revenue/expenses at LH Passage.

Anecdotally, based on pricing I have seen recently, I am guessing that bookings ex-DE are particularly strong this summer, but the markets seem unimpressed with recent announcements out of LH.

N1003U

I suppose LH's cost structure still benefits from lower fuel prices, they just pay some extra premiums to lower the price volatility. An important additional question to answer is if they can maintain the revenue side with downward pressure on fares due to lower fuel costs.

The unit fuel costs vs. last year didn't seem to change all much in the first quarter.

N1003U

Lufthansa Slumps As Unit Revenue Concerns Overshadow Strong Earning

I think the fears are a bit overstated here, as the core DACH market is holding up, but the point about maintaining revenue is valid.

YuropFlyer

A very big amount (to speak Trump-ish)

http://www.investopedia.com/ask/answ...e-industry.asp

25-30%

When your margin is relatively low, and your turnover is fairly high (32 billion €), even a (relatively) small reduction in cost can mean your earnings are jumping across the boards.

Assuming fuel is just 25%, and on average (fuel hedge included - fuel hedging basically does "soften up" the spikes, but not remove the influence from lower or higher fuel prices over several years.. if Oliver 2002 believes otherwise, I'd be VERY interested to see some hard facts about that ) it got only 40% cheaper (Probably the percentage of the costs is higher and the savings were a bit higher.. let's be conservative here) that means that around 8 billion € fuel costs got lowered 40% which means.. well, around 3.2 billions

That's obviously a VERY rough estimate, but I guess it fits just perfectly to explain why LH's earnings suddenly went all the way up.

oliver2002

Take a moment to read their financials... they clearly report the up/downsides of hedging fuel and how much it costs/benefits them. Yields on TATL, their main cash cow, have gone down significantly in the back of the bus, mainly because of overcapacity in the market and a new price point of 400€ for entry level fares. That would pretty much eat up their fuel gains. The EW/AB deal made with EY where they get A320 at 1600€/h ACMI is a killer deal which should have made EW roughly break even, a big relief for LH management.

LH401

Actually, the fuel bill was significantly higher in comparison to the same period of the previous year, around € 220 million

Thank you for your 'very rough' estimate though.