Leading Lufthansa: Airline Weekly speaks with the outgoing CEO of (still) the world’s largest airline group

Jan 13 3014It is still, by total company revenues, the largest airline group in the world—even if now (following the American-US Airways merger) by “only” a billion dollars or so annually. And because a majority of the Lufthansa Group’s business comes from longhaul flying, in many ways it remains more globally influential than even the now-giant U.S. carriers who, despite their impressive heft and profits and ever-expanding global focus, remain more shorthaul-oriented than Lufthansa, whose CEO Christoph Franz spoke with Airline Weekly.

Airline Weekly: Can you discuss some general demand trends you’re seeing throughout the network?

Christoph Franz: I think the trend is quite clear for all airlines worldwide, that the slowdown in growth in the Asian markets has had a reflection on the passenger demand and also on the cargo business. It means that these days, the demand and also then the profitability development in Asia is much more difficult than on the North Atlantic. On the North Atlantic, we see a much more consolidated market, basically three joint ventures competing against each other but having some reasonable capacity development aligned to the natural market growth. Whereas to Asia, you still have a lot of carriers, particularly those carriers from the Middle East growing at a speed which is completely decoupled from natural market development. That means the combination of quite sluggish economic development plus currency changes, which are affecting us particularly—markets like India with the rupee or the Japanese yen, both important destinations for the Lufthansa Group. And capacity growth of some Middle East and Asian carriers, that’s an unhealthy development, which we have to cope with.

AW: Is it correct to say that the Middle Eastern carriers hurt you more on the southern Asian routes, India in particular… maybe Southeast Asia? Are Japan, China and Korea more protected from that?

CF: Yes, they’re obviously more protected, but you also feel it in some Chinese destinations.

AW: People do connect [via the Middle East] from Germany to China?

CF: Yeah… particularly those who are very price sensitive… They basically do not care about arriving in the middle of the night.

AW: Willie Walsh [of British Airways/Iberia/Vueling] has said it’s difficult for European airlines to complain about unfair Gulf carrier competition while the European Union allows carriers like Alitalia to stay alive. Even SAS has received state aid.

CF: Inside Europe, we have a clear competition policy. If there is an ailing carrier, it is possible to give them support by state aid, but only once and if there is a decent business plan promising a turnaround. What we do not accept, and here I absolutely share Willie Walsh’s view, is if one of the other carriers then gets help again—it’s not the first-time/last-time approach, it’s the second-time/all-the-time approach. This is something which is, also from a Lufthansa perspective, clearly not acceptable. But I would not mix up, let’s say, intra-European development with regards to state aid with competition issues between the E.U. and non-E.U. structures. And here…

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