The recent economic crisis has accelerated the pace of structural market shifts. Travel and booking patterns have undergone lasting changes, particularly in European traffic. It cannot be assumed that average yields here can be lifted back up to any considerable extent in the short term. Lufthansa’s response has been a structural adjustment to its formation in European traffic and a reduction in unit costs, see the chapter . The productivity gains have led to an increase in capacity at stable average yields.
The success of a network carrier with global operations depends largely on its worldwide, closely meshed route network. Together with our Star Alliance partners and the airlines in the Lufthansa group, we give our customers access to the largest flight network in the world. Systematic network and alliance management enable risks to be identified at an early stage and opportunities used effectively. We are well placed in the growth markets of Asia, and in Africa, too, Lufthansa’s positioning has been improved decisively by the networks of SWISS and Brussels Airlines. We believe we still have good development prospects in both regions. In Latin America our formation has been improved substantially with the accession of TAM to the Star Alliance and the planned membership of Avianca-TACA and Copa. After the merger between TAM and oneworld member LAN Airlines a decision will need to be taken on which alliance the new company should belong to. Extended cooperation in the growth region Latin America would mean enormous growth potential for Lufthansa.
Lufthansa has played an active role in the consolidation of the industry. The expansion of the Passenger Airline Group adds to the weight of the airlines in Lufthansa’s portfolio. It also means that risks specific to the airline business, such as pressure on average yields and oil price movements, become more important for the Group.
Lufthansa continues to invest in renewal and growth. The Group’s order list at year-end alone included 168 aircraft to renew and expand the fleet. A wide range of investment decisions need to be taken today so that market opportunities can be exploited tomorrow. Risks arise from the generally volatile environment of the sector. Despite this, global market opportunities are to be expected based on the sector’s forecast growth path. Strategic opportunities are available to us thanks to our alliance partners with their sites in the various regions of the world and to enhanced cooperation both in transatlantic traffic (Atlantic++joint venture) and in Japanese traffic (Japan+). Risks can ensue from shifts between different alliances or in the broader operating environment.
We are pursuing further the customer-focused, multi-market, multi-hub and multi-brand strategy. It promotes local entrepreneurship and combines the typical strengths of a large company with the advantages of largely autonomous units focused on their local regions and marketplaces. The successful execution of the airline group strategy depends to a considerable extent on whether the potential synergies within the airline group can be realised. The opportunities for the group are to be seized by further extending the scope of cooperation. The Airline Development Board set up for the airline group, which includes the CEOs of the group airlines plus the Executive Board of Lufthansa, as well as the Group Development Board, on which the CEOs of the Group’s other business segments are also represented, have proven their worth and provided a vital impetus for the further integration of the passenger airlines and the generation of more synergies in the entire Group.
Where expectations of sustainable financial success have not been met, the Group has ceased operations (Lufthansa Italia) or, as in the case of bmi, is attempting to find a lasting solution both for the company and for the Group by means of a disposal.
Now and in the future the significance of Lufthansa Cargo and the service companies will depend on their potential for financial and strategic development and their relevance to the strategic business segment Passenger Airline Group. Thanks to their positions in their respective markets and their profitable growth, Lufthansa Cargo and the service companies make a vital contribution to the Group’s success.