High fliers18 December 2018
The aviation market is booming, and many airlines, such as those owned by the Lufthansa Group, are having to grow rapidly in order to keep up with demand. Carmine Frisk speaks to Alex Tolweth, director of sales for eastern Germany at Lufthansa, about advances and opportunities in the aviation industry.
Following from the company’s rebranding, and 100-year anniversary of the crane, how is Lufthansa planning growth in terms of new short and long-haul routes in the foreseeable future?
Alex Tolweth: The aviation market continues to grow significantly. Last year’s passenger figures worldwide grew by around 8%. Aviation experts are forecasting that passenger figures will double within the next 20 years.
In 2017, the Lufthansa Group transported 130 million passengers – more than ever before in the history of the company. Between January and August 2018, the Lufthansa Group increased its capacity by 8% (available seat-kilometres) and transported 11.2% more passengers compared with the same period in the previous year. Lufthansa Group continues to show growth across all airlines.
A big share of our network growth is currently taking place with our pointto- point airline Eurowings, which is the fastest growing airline in Europe. We acquired 77 aircraft after the insolvency of Air Berlin, which will be integrated into the Eurowings fleet by the end of the year, amounting to a total of 210 aircraft for the Eurowings fleet.
Eurowings is also our platform for airline consolidation in Europe – we are currently in the process of integrating Brussels Airlines into the Eurowings platform. Growth is also taking place within the network airlines Lufthansa, SWISS and Austrian Airlines.
As a leading European aviation group, the Lufthansa Group airlines continue with modernisation and innovation as well as the fleet renewal programme, which is one of our biggest projects at the moment. In 2017, we received a new aircraft nearly every week of the year, and this year we are receiving a new aircraft every two weeks. Overall, we have ordered 176 aircraft for the Lufthansa Group, with a list price of €30 billion, which will be delivered by 2025. Some of the aircraft include Airbus A350, Airbus A320neo, Boeing 777 and C-Series, all of which have lower CO2 emissions, are quieter and have up to 20% lower operating costs.
What main considerations are analysed before a new route is considered? What makes a new route commercially viable?
As a network carrier, we always consider the possible connections at our hubs in Frankfurt and Munich. There are several daily ‘waves’ in our hub schedules, with flights coming into our hubs from around 200 destinations, allowing transit of the connecting passengers to departing flights. Flight planning is strongly linked to fleet and partner airline planning, and is seeking to optimise our route network and hub from a commercial perspective. In doing so, we evaluate new routes and frequency increases, but also reductions and suspension or discontinuation of unprofitable routes. We continuously monitor our performance route by route.
Furthermore, we screen the market development, trends and competitor actions. All this takes place in close coordination within our network and partnership process community and other commercial, operational and technical departments and areas, such as revenue steering, sales, marketing, maintenance, ground operations and flight operations, among others. All these departments provide feedback to us whether a new route is viable from an operational and commercial point of view.
Can you detail the investment involved in opening new routes, especially as the demand for greater accessibility to and from China, for instance, increases?
The investment to open a new route is very high – thus it is necessary to do a thorough analysis as described above. We are always planning long term and look for customer demand. We have been flying to hundredes of destinations for over 60 years, so we are very committed to our markets.
Can you describe the mutual benefits for new destination cities and the airline itself when a new route opens? And what factors do you consider when a route is no longer feasible?
Destination cities and airlines need to work together in order to introduce a new route successfully. We usually work closely together with destination cities and airports to promote new connections.
Airlines can have the ability to have a major impact on the economy. Not only do they enable local people to connect to the world through the hubs but they also bring tourists and business people into a country.
We always try to plan for the long term, and open up routes where there is a high demand. As I mentioned before, we commit to the market and have been flying to many destinations for decades. We rarely cancel routes, but when we decide to stop operating somewhere, it is usually due to commercial reasons.
One good thing about the Lufthansa Group is that we have many different carriers that can operate in different areas, in order to meet various customer needs. With our diverse strategy, Eurowings, for example, is quite flexible and can serve point to point or more leisure destinations whereas the other three premium carriers serve a customer base out of our hubs. This is another reason why Eurowings is growing so quickly – it enables us to operate routes that we could not serve with Lufthansa, Austrian Airlines or SWISS.
Traffic at Munich Airport has seen impressive growth recently, for which Lufthansa is greatly responsible. Airport CEO Michael Kerkloh called the decision by Lufthansa to have its A380 fleet based there “a remarkable success story” saying, “This is a very convincing demonstration of the excellence of Lufthansa’s route planners and sales experts.” What is unique to Lufthansa in terms of finding the right balance between risk and opportunity when opening new routes?
Munich is a good example where our multihub structure is working very well. In recent years, the Lufthansa Group has established a competitive and flexible hub system with its four in Frankfurt, Munich, Vienna and Zurich, and with this new integrated processes, we are able to easily relocate fleets and traffic to the locations where we find the best conditions for quality and growth. As Munich is a very good airport in terms of costs and quality, we decided to move parts of our A380 fleet there.
Our customers like transferring in MUC – this is why the airport gets voted again and again as the best airport in Europe. This is a good example where a close cooperation between the airline and the airport can ensure a very good customer experience.
As aircraft become more nimble, like the A350, how does technology weigh in to determine new routes that might not have been considered before?
The Lufthansa Group is continuously investing in new aircraft, the technology of which not only enables an improved flight experience for the customer but also enables lower operating costs, quieter engines and less CO2 emission. The introduction of the A350-900 is a good example for that. It is the world’s most advanced, environmentally friendly long-haul aircraft. It uses 25% less kerosene, produces 25% fewer emission and is significantly quieter on take-off. Similar figures are valid for the A320 Neo and our order of the Boeing 777-9X that will come into our fleet in 2020 with a brand-new business class. These aircrafts enable us to look at new destinations, but also to relook at destinations that we had to cancel because costs were too high.