Background on planned BKK/MAA/NKG cut
#1
Moderator: Lufthansa Miles & More, India based airlines, India, External Miles & Points Resources
Original Poster
Join Date: Dec 2002
Location: MUC
Programs: LH SEN
Posts: 48,132
Background on planned BKK/MAA/NKG cut
It seems the cost of flying longhaul to BKK is too high that even with a load of 90%+ routes they yield doesn't justify it, especially since EK flies there 4 times a day. The article in this weeks LH employee magazine:
Code:
Am rasanten Wachstum des Luftverkehrs in Asien können europäische Airlines nicht mehr in gewohntem Maß teilhaben. Vor allem in der wirtschaftlichen Entwicklung haben die asiatischen Carrier ihre Wettbewerber aus Europa abgehängt. Die IATA erwartet für 2012 Milliardengewinne der Airlines in Asien – während für Europa ein Verlust der Branche in Höhe von 600 Millionen US-Dollar prognostiziert wird. Auch Lufthansa kann sich nicht mehr auf die Führungsposition unter den europäischen Airlines in Asien/ Pazifik verlassen und musste zuletzt drei unprofitable Strecken nach Hyderabad, Kolkata und Guangzhou einstellen. Drei weitere Lufthansa-Destinationen stehen zur Disposition, wenn sie keine positiven Ergebnisbeiträge erwirtschaften: neben Chennai und Nanjing auch das Ziel Bangkok, das Lufthansa seit über 50 Jahren anfliegt. Eine Einstellung dieser Destinationen in Asien gelte es „unbedingt zu verhindern“, appellierte Carsten Spohr in seinem offenen Brief. Dabei ist die Welt für die Lufthansa Passage in Asien/Pazifik auf den ersten Blick in Ordnung: Die Sitzladefaktoren sind hoch, der Verkaufsanteil im Markt Asien/Pazifik wächst und beträgt insgesamt schon über 30 Prozent. Mit Shenyang und Qingdao kann Lufthansa seit März sogar neue Zielorte ab Frankfurt anbieten. Große Sorgen „Was uns große Sorgen macht ist, dass wir immer weniger vom Wachstum in profitable Ergebnisse für uns umsetzen können, weil das Angebot und der Wettbewerb es dem Kunden derzeit leicht macht, nicht mit uns zu fliegen und dabei Geld zu sparen“, sagt Steffen Harbarth, Vice President Asia/Pacific, der als SIN EA das Passagegeschäft in der Region verantwortet. „Dabei ist es gar nicht so, dass wir die Strecken einstellen, weil wir zu wenige Passagiere haben. Wir mussten Strecken einstellen mit einem Sitzladefaktor von durchschnittlich über 90 Prozent.“ Kosten senken Viel stärker als etwa in Europa oder auf dem Nordatlantik haben es europäische Airlines in den asiatischen Märkten mit sehr ungleichen Wettbewerbsbedingungen zu tun. Wer zum Beispiel von Frankfurt nach Hongkong fliegen möchte, hat auch viele asiatische Carrier und Golfairlines zur Auswahl. Aggressive Preisführer sind hier aktuell Airlines aus Ostasien und den Golfstaaten. „Diese Airlines sind ernsthafte Wettbewerber, die ihre sehr günstigen Kostenstrukturen im wahrsten Sinne des Wortes über alle Grenzen hinweg in unsere Heimat und unsere Kernmärkte fliegen“, so Harbarth. Wer im asiatischen Markt erfolgreich sein wolle, müsse hohe Qualität zum günstigen Preis anbieten. „Die Marktpreise, die ,wir hier erzielen können, decken sich leider nicht mehr mit unseren hohen Produktionskosten“, analysiert Harbarth. Positiv sei aber das bisherige Investment der Lufthansa in die Marke und die Entscheidung für eine Interkont-Teilflotte in der Zwei-Klassen-Konfigura - tion. „In Shenyang, Qingdao und Nanjing gibt es so gut wie keine First-Class-Nachfrage. Wenn es uns jetzt noch gelingt, die Kosten für unseren Betrieb wirklich zu senken, dann sehe ich großes Potenzial für Erfolg und Wachstum in Asien“, so der Lufthansa-Area-Manager. Derzeit wächst der Druck auf die Asienstrecken allerdings weiter und selbst eine klassische Destination wie Bangkok steht wegen fehlender Wirtschaftlichkeit unter der Beobachtung des Vorstandes – trotz hervor - ragender Auslastung der Flugzeuge. „Die Passagierzahlen stimmen. Das wirtschaftliche Ergebnis macht uns Sorgen“, sagt Bernd Hildenbrand, Stationsleiter in Bangkok. „In Bangkok haben wir es mit einem sehr preissensiblen Markt zu tun.“, ergänzt Lufthansa-Verkaufsleiter Dirk Grossmann, BKK GG. „Hinzu kommen die hohen Produktions- und Treibstoffkosten wegen der langen Flugzeit – und da ein Wettbewerber wie Emirates inzwischen viermal täglich nach Bangkok fliegt, geraten die Preise enorm unter Druck. Die höheren Produktionskosten können wir aber kaum noch an die Kunden weitergeben,“ erläutert Grossmann. Air Berlin habe die Bangkok- Flüge bereits einstellen müssen. Nur wenn es Lufthansa gelinge, den „Teufelskreis der neuen Kostenschrauben zu durchbrechen“, werde sie auch künftig erfolgreich sein, sagt Harbarth. „Carsten Spohr hat die Ziele für die Lufthansa beziffert: Eine fünfprozentige Kostenreduzierung bei relevanten Faktoren wie Gebühren, Treibstoffverbrauch und eben auch Arbeitskosten macht uns zukunfts- und wettbewerbsfähig. Wenn wir in der Globalisierung Erfolg haben wollen, müssen wir zu den Qualitätsmerkmalen Sicherheit und Zuverlässigkeit auch noch Preiswürdigkeit und Wandlungsfähigkeit hinzufügen.“
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European airlines can no longer participate to the same extent as before in the rapid growth of air traffic in Asia. In terms of economic development, Asian carriers have clearly outpaced their European competitors. For 2012 IATA expects Asia-Pacific carriers to deliver a profit of 2.3 billion dollars, while for Europe it predicts an estimated loss of 600 million dollars. Lufthansa can also no longer rely upon being the leading European airline in the Asia-Pacific region, and has recently shut down three unprofitable routes – to Hyderabad, Kolkata and Guangzhou. Three more Lufthansa destinations in Asia also face the chop if they do not make a positive contribution to our result: Chennai, Nanjing and Bangkok, which Lufthansa has served for more than 50 years. “We must do everything possible to prevent services to these destinations from being discontinued,” Carsten Spohr said in his open letter to Lufthansa staff. At first sight, Lufthansa appears to be doing well in the Asia-Pacific region. Passenger load factors are high, while Lufthansa’s share of the market already exceeds the 30 per cent mark. Since March, it has been offering flights from Frankfurt to two new destinations in China: Shenyang and Qingdao. “It is not that we do not not have enough passengers. We have had to abandon routes with a passenger load factor of over 90 per cent,” says Steffen Harbarth, Vice President Asia/Pacific, SIN EA. If you want to be successful in the Asian market, he explains, you have to offer high quality at a reasonable price. “Unfortunately, the market prices we can achieve no longer cover our production costs.” Mounting pressure To date, Lufthansa’s investment in its brand has been positive, he says, as has its decision in favour of a sub-fleet with a two-class configuration. “In Shenyang, Qingdao and Nanjing there is virtually no demand for First Class, and customers are price conscious.” Meanwhile, pressure is still mounting on routes to Asia, and even a classic destination such as Bangkok, which Lufthansa has been serving since 1959, has come under the sharp eye of the Executive Board because it is not profitable enough – in spite of the excellent load factors. The Thai capital is a good example of how several small negative factors, when they come together, can jeopardise even the most successful route. “Bangkok is a very price-sensitive market,” explains Dirk Grossmann, General Manager Passenger Sales Thailand, BKK GG. “On top of that, there are the high production and fuel costs. And given that a competitor like Emirates now flies four times daily to Bangkok, prices are coming under enormous pressure,” he adds. “In his open letter, Carsten Spohr said that a five per cent reduction in the cost of relevant factors such as fees, fuel consumption and also labour costs would make Lufthansa viable and competitive in the future. If we want to be successful in Asia in the long term, we must change now. If we want to succeed in a globalised world we must add value for money and adaptability to Lufthansa’s longestalished quality standards: safety and reliability,” said Harbarth.
#4
Join Date: Sep 2000
Location: Stuck on this planet - mainly in STR and LAX
Posts: 5,019
I believe the problems LH has in Asia are self inflicted. Customers in premium classes with paid tickets have a choice of several airlines.
Airlines make money in business class and first class.
Looking just at the hard product in business class: Most of the asian carriers are moving to some kind of full flat herringbone layout where every seat has aisle access. This is usually 3 across on the A3x0 or 4 across on the 777. Compare this to LH where (at least from the pictures i have seen) LH will have 6 across with (also just from pictures) significantly less space.
Some airlines (NH for example) has a staggered layout with 8 seats (all seats with direct aisle access) on the 777. LX has 9 seats across on the 3x0, with is less wide.
Same is true for First. The CX seats in F are fantastic. One seat is big enough that 3 people can have a meal - two sitting on the seat and one on the footrest. LH has 4 across in the smaller 3x0 or the smaller 380 upper deck. Most other airlines have 4 across on the 777 - which also results in significantly more space for the passenger.
Don't get me wrong. I like the new LH F product, l like the new LX F product even better. But when i pay for a ticket and price/connections are similar I normally pick one of the asian carriers over LH/LX without thinking - especially in business class.
To make things worse: even American Airlines, an airline i usually try to avoid just announced their new business class seats: they are similar to CX, 4 across on a 777 with (difficult to judge from the pictures) around 50 % more space. Pictures here: http://boardingarea.com/blogs/viewfromthewing/
I believe LH needs to rethink their premium strategy, especially their decision for the hard product in Business Class. Otherwise they will go in a downward spiral similar to what the US carriers went thru where at the end a significant portion of business class and first class will be filled with free upgrades or employees (like it is now on US carriers) and the paying customers will take their money elsewhere.
It will be interesting to see over the next few years if the asian carriers will become more profitable and LH will be going in the direction of the US carriers.
Airlines make money in business class and first class.
Looking just at the hard product in business class: Most of the asian carriers are moving to some kind of full flat herringbone layout where every seat has aisle access. This is usually 3 across on the A3x0 or 4 across on the 777. Compare this to LH where (at least from the pictures i have seen) LH will have 6 across with (also just from pictures) significantly less space.
Some airlines (NH for example) has a staggered layout with 8 seats (all seats with direct aisle access) on the 777. LX has 9 seats across on the 3x0, with is less wide.
Same is true for First. The CX seats in F are fantastic. One seat is big enough that 3 people can have a meal - two sitting on the seat and one on the footrest. LH has 4 across in the smaller 3x0 or the smaller 380 upper deck. Most other airlines have 4 across on the 777 - which also results in significantly more space for the passenger.
Don't get me wrong. I like the new LH F product, l like the new LX F product even better. But when i pay for a ticket and price/connections are similar I normally pick one of the asian carriers over LH/LX without thinking - especially in business class.
To make things worse: even American Airlines, an airline i usually try to avoid just announced their new business class seats: they are similar to CX, 4 across on a 777 with (difficult to judge from the pictures) around 50 % more space. Pictures here: http://boardingarea.com/blogs/viewfromthewing/
I believe LH needs to rethink their premium strategy, especially their decision for the hard product in Business Class. Otherwise they will go in a downward spiral similar to what the US carriers went thru where at the end a significant portion of business class and first class will be filled with free upgrades or employees (like it is now on US carriers) and the paying customers will take their money elsewhere.
It will be interesting to see over the next few years if the asian carriers will become more profitable and LH will be going in the direction of the US carriers.
Last edited by Unterwegs; May 10, 2012 at 6:57 am
#5
FlyerTalk Evangelist
Join Date: Jan 2005
Location: VCE
Posts: 14,165
I believe the problems LH has in Asia are self inflicted. Customers in premium classes with paid tickets have a choice of several airlines.
Airlines make money in business class and first class.
Looking just at the hard product in business class: Most of the asian carriers are moving to some kind of full flat herringbone layout where every seat has aisle access. This is usually 3 across on the A3x0 or 4 across on the 777. Compare this to LH where (at least from the pictures i have seen) LH will have 6 across with (also just from pictures) significantly less space.
Some airlines (NH for example) has a staggered layout with 8 seats (all seats with direct aisle access) on the 777. LX has 9 seats across on the 3x0, with is less wide.
Same is true for First. The CX seats in F are fantastic. One seat is big enough that 3 people can have a meal - two sitting on the seat and one on the footrest. LH has 4 across in the smaller 3x0 or the smaller 380 upper deck. Most other airlines have 4 across on the 777 - which also results in significantly more space for the passenger.
Don't get me wrong. I like the new LH F product, l like the new LX F product even better. But when i pay for a ticket and price/connections are similar I normally pick one of the asian carriers over LH/LX without thinking - especially in business class.
To make things worse: even American Airlines, an airline i usually try to avoid just announced their new business class seats: they are similar to CX, 4 across on a 777 with (difficult to judge from the pictures) around 50 % more space. Pictures here: http://boardingarea.com/blogs/viewfromthewing/
I believe LH needs to rethink their premium strategy, especially their decision for the hard product in Business Class. Otherwise they will go in a downward spiral similar to what the US carriers went thru where at the end a significant portion of business class and first class will be filled with free upgrades or employees (like it is now on US carriers) and the paying customers will take their money elsewhere.
It will be interesting to see over the next few years if the asian carriers will become more profitable and LH will be going in the direction of the US carriers.
Airlines make money in business class and first class.
Looking just at the hard product in business class: Most of the asian carriers are moving to some kind of full flat herringbone layout where every seat has aisle access. This is usually 3 across on the A3x0 or 4 across on the 777. Compare this to LH where (at least from the pictures i have seen) LH will have 6 across with (also just from pictures) significantly less space.
Some airlines (NH for example) has a staggered layout with 8 seats (all seats with direct aisle access) on the 777. LX has 9 seats across on the 3x0, with is less wide.
Same is true for First. The CX seats in F are fantastic. One seat is big enough that 3 people can have a meal - two sitting on the seat and one on the footrest. LH has 4 across in the smaller 3x0 or the smaller 380 upper deck. Most other airlines have 4 across on the 777 - which also results in significantly more space for the passenger.
Don't get me wrong. I like the new LH F product, l like the new LX F product even better. But when i pay for a ticket and price/connections are similar I normally pick one of the asian carriers over LH/LX without thinking - especially in business class.
To make things worse: even American Airlines, an airline i usually try to avoid just announced their new business class seats: they are similar to CX, 4 across on a 777 with (difficult to judge from the pictures) around 50 % more space. Pictures here: http://boardingarea.com/blogs/viewfromthewing/
I believe LH needs to rethink their premium strategy, especially their decision for the hard product in Business Class. Otherwise they will go in a downward spiral similar to what the US carriers went thru where at the end a significant portion of business class and first class will be filled with free upgrades or employees (like it is now on US carriers) and the paying customers will take their money elsewhere.
It will be interesting to see over the next few years if the asian carriers will become more profitable and LH will be going in the direction of the US carriers.
#6
Join Date: Aug 2001
Location: Berlin
Programs: LH/BA/DL
Posts: 832
Same here. And I have often observed that Lufthansa in business class is one of the more expensive options ...
#7
Join Date: Nov 2002
Location: All arround the world
Posts: 194
I agree with the views, and have some more to add.
As LH Miles and More scheme of "loyalty" they had been working hard to give us the reasons of asking why I should spend my money with them if they are keeping the rules more and more difficult just to get a "free" ticket or even to get upgraded.
True this is a business and they can't afford to lose money. But the ones who can pay a Z fare (or the new P one) are the ones who can spend more money on them if they feel rewarded. Now this is changing (just a quick review of the latest threats can give the "mood") and with better products to go to BKK or South East Asia, I preffer to pick the ones that won't make me feel unwanted.
As LH Miles and More scheme of "loyalty" they had been working hard to give us the reasons of asking why I should spend my money with them if they are keeping the rules more and more difficult just to get a "free" ticket or even to get upgraded.
True this is a business and they can't afford to lose money. But the ones who can pay a Z fare (or the new P one) are the ones who can spend more money on them if they feel rewarded. Now this is changing (just a quick review of the latest threats can give the "mood") and with better products to go to BKK or South East Asia, I preffer to pick the ones that won't make me feel unwanted.
#8
FlyerTalk Evangelist
Join Date: Jun 2005
Location: Point Place, Wisconsin
Programs: LH HON, BA Gold, EK Gold
Posts: 14,505
By discussing the possibility of cutting the BKK route, they are making it into a self fulfilling prophesy.
Which regular on this route won't to be scrambling for alternatives now?
I certainly am...
I fly this route every 3 weeks, but it looks like TG will be my new home once their A380 is on the FRA-BKK route. Amazing that LH can't make it work.
In this case I see a bleak future for ALL of their Asia routes!
Which regular on this route won't to be scrambling for alternatives now?
I certainly am...
I fly this route every 3 weeks, but it looks like TG will be my new home once their A380 is on the FRA-BKK route. Amazing that LH can't make it work.
In this case I see a bleak future for ALL of their Asia routes!
#9
FlyerTalk Evangelist
Join Date: Jan 2005
Location: VCE
Posts: 14,165
By discussing the possibility of cutting the BKK route, they are making it into a self fulfilling prophesy.
Which regular on this route won't to be scrambling for alternatives now?
I certainly am...
I fly this route every 3 weeks, but it looks like TG will be my new home once their A380 is on the FRA-BKK route. Amazing that LH can't make it work.
In this case I see a bleak future for ALL of their Asia routes!
Which regular on this route won't to be scrambling for alternatives now?
I certainly am...
I fly this route every 3 weeks, but it looks like TG will be my new home once their A380 is on the FRA-BKK route. Amazing that LH can't make it work.
In this case I see a bleak future for ALL of their Asia routes!
The rationale makes about as much sense as the justifcation for reducing the HON circle membership.
Who are the advisors please currently of LH management? I am really curious now.
#10
Moderator: Lufthansa Miles & More, India based airlines, India, External Miles & Points Resources
Original Poster
Join Date: Dec 2002
Location: MUC
Programs: LH SEN
Posts: 48,132
That EK & co will seriously threaten LH & co on everything to SEA and OZ is not new, its been in their presentations since 2008-09 when EK place the mega orders for their 777 and A380 fleet. The India market was seen to be relatively safe due to inconvenience/diversion of transiting in DXB/DOH/AUH. The same applied/applies to China. The example of MAA/HYD/CCU shows that EK/QR just puts in 5-14x frequencies on mediocre A330/A320 equipment with low price points and just drags the market price down 10-20%. At that price point you expand the market (folks who never thought of spending money on international travel now do) and you smoothen over product deficiencies (trust me I've done MUC-DXB-CCU in Y, its not nicer than even LH/9W Y MUC-DEL-CCU or MUC-FRA-CCU).
I think LH will continue to fight for markets/destinations worth fighting for: India (BLR/DEL/BOM), China, SIN, etc Letting routes go is normal, we've seen that type of consolidation to Oz with the advent of *A in 1997 or with the dropping of hooping/tag flights to S.America and Asia in the 90s.
#12
Join Date: Dec 2009
Posts: 1,752
I think this is mainly internal PR in order to convince unions and work groups of the need for cost savings and efficiency gains, and external PR to ensure no political support for EK's request to fly to additional German airports.
That said, if no cost savings can be achieved then I am sure LH would drop BKK (and other routes that make a negative profit contribution) and reroute passengers on OS or LX.
That said, if no cost savings can be achieved then I am sure LH would drop BKK (and other routes that make a negative profit contribution) and reroute passengers on OS or LX.
#13
Join Date: Jul 2008
Programs: EBG4Life, EBD, 1MM
Posts: 1,397
Does anyone have an idea when these cuts are expected to occur? My wife just booked our family Christmas trip with a return MAA-FRA-CPH. I am curious to know the chances of that sticking as I need to make other travel arrangments during our stay in India/Sri Lanka.
#14
Moderator: Lufthansa Miles & More, India based airlines, India, External Miles & Points Resources
Original Poster
Join Date: Dec 2002
Location: MUC
Programs: LH SEN
Posts: 48,132
#15
Moderator: Lufthansa Miles & More, India based airlines, India, External Miles & Points Resources
Original Poster
Join Date: Dec 2002
Location: MUC
Programs: LH SEN
Posts: 48,132
I doubt they will axe MAA this winter. If they do, they will have alternative reprotection agreements to move you onto.