Business and strategy

Leading airline group in Europe

The Passenger Airline Group consists of the companies operating in the Lufthansa airline group, i.e. Lufthansa Passenger Airlines, SWISS, Austrian Airlines and Germanwings, together with its equity investments such as Brussels Airlines and offers its customers important benefits. The increasing harmonisation of products and processes gives passengers considerable added value by enabling seamless travelling within the Group’s route network with 246 destinations. In addition, the multi-hub strategy offers them maximum travel flexibility at the hubs of the airline group, such as Frankfurt, Munich and Zurich. For Lufthansa the strategy represents additional cost synergies as well.

With this strategy each home carrier can play to its strengths in its respective home market. At the same time, the airline group profits from the special know-how of individual members in niche markets with growth potential, such as Brussels Airlines in West Africa. The use of synergies within the Lufthansa airline group constitutes a major competitive advantage, especially in a challenging environment. Lufthansa Passenger Airlines and Germanwings are exploring new territory in combining their business models. The two companies have worked together closely since early 2011 and offer their customers additional travel advantages: combinable tickets, Miles & More mileage accrual on Germanwings flights and joint offers in corporate sales. In December the scope of cooperation was extended further by including a coordinated flight plan from Stuttgart. Synergies are not only created in the airline group, however, but also in collaboration with the service segments, such as MRO and Catering.

Lufthansa’s aim is to expand its position as leading independent group of European quality carriers and to exploit market opportunities. At the same time, topics such as safety, punctuality, reliability and professional service remain a high priority. The companies in the airline group are united in their search for profitable growth. This enables them to make investments in modern aircraft, achieve financial stability in a volatile industry and create secure jobs with attractive development prospects. The companies also strive to assume their responsibility for conserving natural resources by their sustainable business practices.

Efficiency gains and profitable growth are mutually reinforcing

Lufthansa is the number one player in Europe in its industry today and intends to preserve this status in future. To do so, the Group will consolidate and build on its current position while taking a leading role in competitive markets worldwide. Lufthansa’s home market is Europe, while Germany is the core location and the Group’s largest single market.

Growth potential lies primarily in global long-haul routes, however. In order to optimise connections between them and the European network, the key is to safeguard and expand our position in the home market. A leading position in Europe makes the range of services attractive to customers for one thing, and also increases the Group’s relevance as a partner for opening up growth markets outside Europe.

Profitable growth is a cornerstone of this strategy. It is enabled by lower costs and efficiency increases to be achieved in the course of expanding route networks and strengthening the airline group’s hubs. The multi-hub strategy offers a comprehensive route network for the hubs’ respective catchment areas. Feeder flights from Europe also improve the load factors for intercontinental flights and expand the range of destinations on offer to local customers. Unit costs are being lowered at the same time, by modernising the fleet and increasing its productivity for example. In this context Lufthansa particularly enjoys the benefits of its largely unencumbered fleet and the related flexibility in terms of capacity and cost management.

The most celebrated example of the ongoing fleet renewal was the successful introduction of the first eight Airbus A380s by the end of 2011. This made it possible to achieve cost-effective growth combined with a very high level of customer satisfaction. The Group’s order list contains other ultra-modern aircraft, such as the Boeing 747-8i for long-haul routes, the Airbus A320neo for European routes and the C-Series from Bombardier for regional traffic.

Joint venture models gaining in importance

Lufthansa and the group airlines follow a diversified network strategy in all global sales markets. In Europe it is based on multiple hubs and catchment areas. Frankfurt and Munich are the largest hubs and cover the full range of products. Since the new runway was opened in October 2011 the Frankfurt hub has used the growth opportunities to maximise transfer options for customers. Moreover, the hubs in Zurich, Vienna, Brussels and Dusseldorf mainly serve local demand in their respective catchment areas and offer very good connections to the main European cities, economic centres and niche destinations. The network is increasingly being extended to tourist destinations as well. In the important German catchment areas like Hamburg and Berlin, Lufthansa offers direct flights to an attractive range of short and medium-haul destinations.

In addition to the Group’s own expanded production platforms, the scope of cooperation agreements and alliances was also extended further in 2011. Ethiopian Airlines joined the Star Alliance in December 2011 and bolsters Lufthansa’s market position in East Africa substantially. Star Alliance remains the world’s leading global alliance, currently flying to 1,290 destinations in 189 countries.

Joint venture models are gaining in importance in the competition between the airline alliances. Lufthansa positioned itself successfully for this trend at an early date. Based on the positive experience gained in the leading North Atlantic joint venture with United Airlines and Air Canada (Atlantic++), which SWISS and Austrian Airlines joined in mid-year, Lufthansa has established a strategic joint venture with the Star Alliance partner All Nippon Airways. The programme for Europe-Japan traffic is due to start operating in April 2012.

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