Lufthansa Ditches First Class in A Third of Fleet

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This topic contains 112 replies, has 22 voices, and was last updated by  KSHaggag 8 Feb 2014
at 06:33
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Viewing 15 posts - 1 through 15 (of 113 total)

  • Anonymous

    SergeantMajor
    Participant

    Lufthansa lost €204 million in the first half of this year.

    In response to the continuing need to restructure, the airline is ditching First Class on a third of its long haul aircraft.

    http://www.businessweek.com/articles/2013-10-04/lufthansa-finds-first-class-seats-dont-always-pay

    [erroneous link updated] thanks for the heads up!


    TominScotland
    Participant

    [edited] SM, this is no surprise and has been trailed before. Indeed, Lufthansa are finding it particularly difficult to compete on some Asian routes and are looking to substitute low cost alternatives for their mainline services.


    AMcWhirter
    Participant

    As TominScotland says, there is nothing new here. For some years now LH has already been removing F class from some of its A340 fleet.

    I also wonder about the accuracy of the piece. It talks about AF having made business class “its top-of-the-line product.” It talks about AF having “seats that convert into fully flat beds.” Really ?


    SergeantMajor
    Participant

    There is plenty new, as this announcement is far more drastic than the limited removal of F from a single aircraft type.

    It would help if journalists and airlines would be consistent in their use of the phrase “lie flat” = wedgy bed vs. “fully flat” – horizontal.

    Unfortunately, no doubt with some calculation, the two have become blurred.


    Senator
    Participant

    I would agree with SergeantMajor that it is extraordinary news that after a major upgrade to the B747-400 fleet in terms of the innovative First Class Seat/Bed option on the upper deck, having almost finalised this, and then scrapping it in less than two years from completion is newsworthy.

    This past Friday, Lufthansa executives met with the Financial Analysts community to give an update on the SCORE programme, and here this news was very clear:

    http://investor-relations.lufthansagroup.com/fileadmin/downloads/en/charts-speeches/LH-SCORE-Expert-Session-2013-10.pdf

    The real news should be the dismantling of the B747-400 fleet, not the move itself. 13 of roughly 20 remaining B747-400s will have First Class removed. The bigger question is whether these will get Premium Economy or not.


    FormerlyDoS
    Participant

    Lufthansa is not one of my favourite airlines, but they are strategic in intent and decisive.

    If the board decide they have made a decision that is no longer valid, they will take action to fix that, regardless of the bad press.

    Likewise, if F no longer works on a route, it will go, which is a shame as LH do F well.

    Strategic management consists of many attributes, but recognising changes in the external environment is a keystone and this latest news is an example of this in action.

    LH Group thinks a lot further ahead than this or next year’s results and is fortunate enough to be based in a country where this longer term thinking is well regarded and accepted.


    MarcusUK
    Participant

    Alex, i think the AF reference has been taken from the new CEO of Air France, who has stated just that, for the future. they are planning revamps of their Business cabins again, and we know KLM’s is coming, slowly but surely.

    I also agree with the term “Fully flat”, being used properly.
    one good example everyone merely goes along with, isthe Malaysia Airlines seat on the A380. It is not fully flat 180, yet it is promoted as that. I have flown them several times, great as the A380 and MH are, the seat is NOT 180/ horizontal/ flat!
    Many BT readers have done reviews and has been the subject of much discussion, but none say it is fully flat who have made reviews.

    Again, No European Airline enables the facilities that the Gulf carriers do in First, lounges, bars, showers, larger bathrooms, galleries. Business Class for most of Europe suffices for the market, when compared to Ek coming in and offering what they do for First.

    It seems obvious, the battle now is who can keep or generate customers for their Business class, or lose out to others.
    With First having been phased out on many Airlines over a few years, perhaps a better profit will come from developing a better Premium Economy Cabin. KLM i think miss out on much revenue for this, and AF benefit much.
    The better the Business cabin facilities, and availability of PE cabins, could make a huge difference in the current market, to an Airline.


    superchris
    Participant

    Taking a slightly different angle for a second, with Lufthansa bringing in premium economy next year, has anyone else wondered that from a product perspective, we are simply where we were about 10 years ago?

    I did a lot of flying on LH at the start of my career and their C seat was a cradle type seat with 38 – 40 inches of pitch, probably what their new Y+ will be. At the time, their first class used to be a lie flat seat in a 2 – 1 – 2 configuration on the Airbus A330’s / 40’s. So in conclusion, First has largely disappeared, business is offering what first used to, premium economy business and so on. The same story is there for most other legacy carriers. products have got better, but in effect been ‘re-named’ to a lower cabin.

    What we have removed is the word ‘First’ from the product offering, which in a post recession austere world is deemed unacceptable to many companies and certainly in the public sector.


    TimFitzgeraldTC
    Participant

    If certain observations about BA are true in that only 2 to 3 passengers flying First are full F paying passengers and the rest are on upgrades through Avios – or just being bumped, or on promotions such as the current one (Pay a high/full Business class fare and get first one way) – a few other carriers have this at the moment including Etihad then one can see why Lufthansa will look at dropping First on many non-prime routes. They don’t have First on many routes already so this isn’t really that major. Even airlines like Qatar have said First Class is not a major part of there future strategy and that it is only viable on a few core routes. With the advance in Business class cabins in the last decade it is no wonder that First Class has less appeal. The Middle Eastern and Asian carriers have fantastic Business Class products (let alone First) that trumps most European / American carriers products.

    When you get this most customers don’t see much need for first in comparison to the size of the market for Business & First. Once the European / US carriers actually catch up with the Business Product (Carriers as a whole – not the odd good plane on carrier X) then I reckon demand for First will diminish even further, especially with corporates rarely sanctioning First Class. From where I am I have done less than a handful of First Class sectors out of nearly 800 tickets issued this year. Business Class numbers are much much higher in comparison. I find more of my clients get First because they are bumped up, than me selling first. If this is the case then airlines rightly have to look at there strategy, and if it is more profitable to turn this capacity into larger Business Class cabins and/or better Business Class seats and product (hard & soft), then this only seems logical and sensible.


    FormerlyDoS
    Participant

    “With the advance in Business class cabins in the last decade it is no wonder that First Class has less appeal.”

    I agree, Tim.

    I spent 6 hours in a J class seat on an EK 77W yesterday and when the plane stopped to drop off/pick up in Larnaca, had a look at first. Yes it was 2 x 2 x 2, not 2 x 3 x 2 and yes the seats had mini bars for soft drinks (but I had a call bell and a responsive cabin crew team) and the TV screen was larger.

    But worth the price differential? Not a chance; the angled seat on these aircraft is so shallowy angled that it feels very close to lie flat and is comfortable to sleep on – that’s why I pay for a premium cabin.


    AMcWhirter
    Participant

    Hello Marcus: I believe you’re correct. The reference was to the AF/KL Group as a whole.

    Hello Tom: I wouldn’t say that LH “doesn’t have First on many routes already.” Most of the carrier’s flights offer first class at the present time. The main exception is that first was removed from some of its A340 fleet.

    The seating chart on lufthansa.com enables anyone to quickly identify which aircraft have or haven’t got first class seating.

    http://www.lufthansa.com/uk/en/Seat-maps


    superchris
    Participant

    Are we missing the point though, Is having a F class a key enabler to filling the business cabin and driving loyalty? Being able to use miles for F class tickets is a big reason I personally choose BA over Virgin for example.


    TimFitzgeraldTC
    Participant

    Hi SuperChris

    When airlines are struggling to make money which they always seem to be, they have to be able to balance the books and make a profit (for none of us on here work for free do we?). If that means it is better overall to get rid of First and improve Business Class then that is the path they will follow. Whilst I see your point and it is valid, I think in the overall scheme of things it isn’t a big enough factor or argument to keep First Class on routes where it isn’t viable. First class seems to be a luxury that many people/companies can’t or won’t to pay for, and it is an expensive cabin to run if not being fully utilised with fare paying passengers.


    AnthonyDunn
    Participant

    @ FormerlyDoS – 07/10/2013 17:16 GMT

    LH Group thinks a lot further ahead than this or next year’s results and is fortunate enough to be based in a country where this longer term thinking is well regarded and accepted.

    Indeed. From the “Economist” dated 5 October 2013 “The profits prophet” is a review of a book written by the contrarian economist Andrew Smithers seeking to explain why, when corporate profits in the US/UK are so high, investment is so low and productivity falling.

    READS:

    PROFITS have been booming in America, reaching the highest proportion of GDP since the second world war. Given such buoyant conditions, you might imagine that businesses are investing like crazy to take advantage of all those great opportunities.

    Not a bit of it. The ratio of business investment to GDP has picked up since the depths of the financial crisis, but is still close to the lows of previous cycles. Instead, businesses are handing cash back to shareholders, a tactic once reserved for executives who had run out of ideas. In 2011 the value of American share buy-backs was equal to 2.7% of GDP; in Britain, the figure was 3.1%.

    In the early 1970s American companies invested 15 times as much cash as they distributed to shareholders; in recent years the ratio has dropped back to below two. What has driven this change? In his new book, “The Road to Recovery: How and Why Economic Policy Must Change”, Andrew Smithers, an economist, argues that the main cause has been management incentives.

    Executives are now paid largely in the form of bonuses rather than salary. These bonuses are often tied to the share price, which in turn depends on the ability of the company to meet its quarterly earnings-per-share target. Buy-backs tend to boost earnings per share; investment plans may dent them. Smithers writes that “The result of the increased importance of bonuses and the use of these measures of performance is that managements are now less inclined to take short-term risks, such as cutting profit margins, and more inclined to take the longer-term risks involved in lower investment and the possible loss of market share that will result from higher margins.”…. ENDS

    It helps explain why Germany will continue to pull ahead of the UK in its economic performance in future years and why the question of EU membership is an utter irrelevance. Germany thrives inside the EU because of the way it organises itself and because there is a broadly common economic philosophy which is accepted across the spectrum.

    Oh and one point regarding the OP, LH will NOT be installing Premium economy; they have made it clear that it will be a two-class only configuration: Business and Economy classes

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