What was most interesting was that they included a link to the latest news, including - Lufthansa: Crisis in the industry burdens economic result
Lufthansa wants to explain that its financial results are a product of the worsening economy.
Which is somewhat true with a couple of minor exceptions.
Lufthansa's profit centers are focused around cargo and premium air travel. Keep in mind, Business Class travel is taken by "business-people" whose byproduct often is the shipping of goods or services on that airline.
For years Lufthansa has offered a sub-standard product in their profit focused business class. Their seat keeps you at an angle thus creating the "great slide" while you sleep. Whoever thought that idea was good should be smacked a couple of times.
I could cut them slack for having a crappy seat if they priced it correctly - they don't. Lufthansa, like other airlines, offers their seat for an insanely high price (~$7,500 R/T FRA-DEN). This means that on a 9 hour flight you are essentially paying $13.88/minute. This number is crazy when compared to a coach ticket (~$900 R/T FRA-DEN) which pulls in a $1.66/minute (both numbers are based on a 9 hour flight time).
They could get away with crazy and outrageous business class ticket prices when there was a supply side scarcity because there were only so many seats across the Atlantic ocean and companies (such as my former employer) needed the seats.
Lufthansa (and the other airlines) would then "discount" their Business Class to a more reasonable rate (for reference: AA gave us a 25-30% discount off published fare) and we promised to send anyone at an executive level in business class and push all other company travellers onto that flight.
This of course was great for my employer because we thought we got a deal. It was great for the airline because they got steady customers and it was awful for those people who would have paid a reasonable price to the airline but were priced out of the market.
When the economy hit the skids - customers & companies stopped buying business class tickets and in many cases stopped travel altogether. This meant that keeping prices high and discounting them wasn't going to work - in fact discounting them altogether wouldn't work either. When money got scarce - people got smart. Was paying the extra $12.22 worth the business class seat. Clearly the market said NO and thus the horrible business conditions Lufthansa experienced came true.
So Lufthansa here is some free business advice for you:
Stop whining about the economy. Get some cost controls in place, fix your corporate discounting model and start acting like a business. If you want loyalty, earn it the old fashioned way by treating your customers (all of them, not just the Fortune 500) with respect. Nobody want's to trust the guy whose screwing you at ~$12 a minute.
If you want to charge a price thats based on supply/demand do it evenly and make it reasonable or at least "sort-of" reasonable. You could pack every business class seat if you priced it at $3,500 a seat and offered a $500 discount for 2 weeks and then 4 weeks. That model would give you reliable results and steady profit. If you prefer boom-and-bust...then don't whine when the bust happens - tell your shareholders this is the bust and they will get busted until things get better. Don't be surprised when they bail for a stable and solid investment.
I am skipping the part of this blog where I talk about why we want an airline to be stable and solid.
Take some lessons from Nissan and Infiniti. Nissan took their Altima/Maxima (think coach/economy seat) and added some serious upgrades in the engine, the comfort and the features. They then priced this new offering at a maximum of 2.5x the Altima/Maxima price. This gave us the Infiniti, a premium car that was just premium enough to get them profit but without being too premium that nobody bought it.
You fly 3/4 of a certain x86 chip company back and forth between Austin/Sunnyvale and Dresden. Send your execs on one of those flights and have that company explain the concept of commodity, volume, pricing and capacity. You might be shocked what you can learn from a customer.
For now, I'll pay for coach and either grin and bear it or upgrade. I have no loyalty during a recession, especially to companies that wanted to screw me over when we weren't in one.
Just know every international flight I take --- could have earned you an extra $1,000-$1,500 and I wouldn't have complained about the German granny flight attendants you have barking at me during seating.
This is a simple commodity/volume issue.
