The aviation industry has changed in the recent years rapidly. Twenty to thirty years ago the aviation was too expensive for the most people and a network of international air connections often did not exist. Nowadays the aviation belongs almost to an everyday business, whether professionally or privately.
At the end of the 70s there was an air traffic revolution, the concept of the low cost carrier (LCC) started. The LCC is a provider of the basic products, such as low service on board, seat comfort and free baggage drop off. 1 The first LCC was the southwest airlines from the USA. Up to the 90s Southwest offered LCC connection in US; without competitors in this business area. In 1990 the Irish airline Ryanair was founded and was the first LCC in the European (EU) area.
The airlines are facing new challenges: more clientele, more fair flight prices in comparison to the competition and in addition high margins. For a long time such scheduled airlines like LH Group, KLM- Air France and British Airways-Iberia were the representative airlines in the EU. People have spent a lot of money for having a full service on Board (luggage, food, etc.) and were often dissatisfied about constantly rising prices for the flight tickets. With the origin of LCC, the market has changed enormously. Yearly scheduled airlines announce customer decline and decreasing profits. What is the reason for that? Are the LCC responsible for it? Do the scheduled airlines have to rethink their strategies to be still competitive in the market?
Table of Contents
1. INTRODUCTION
1.1 PROBLEM DEFINITION
1.2 OBJECTIVES OF THE WORK
1.3 STRUCTURE OF THE WORK
2. THEORETICAL PART OF STRATEGIC MANAGEMENT TOOLS
2.1 PEST ANALYSIS
2.2 PORTER'S FIVE FORCES
3. INTRODUCTION OF LUFTHANSA AND EUROWINGS
3.1 ANALYSIS OF STRATEGIC DECISIONS BY LUFTHANSA
3.2 FEASIBILITY OF EUROWINGS WITH PEST ANALYSIS
3.3 FEASIBILITY OF EUROWINGS WITH PORTER’S FIVE FORCES
4. CONCLUSION AND RECOMMENDATIONS
Objectives and Topics
This work aims to evaluate the strategic decision of Lufthansa to launch Eurowings as a low-cost carrier (LCC) for long-haul flights. The research investigates the feasibility of this concept by analyzing competitive positioning, external market factors, and internal strategic drivers within the aviation industry.
- Strategic analysis of Lufthansa's decision-making process for the Eurowings expansion.
- Application of PEST analysis to assess the external macro-environment.
- Utilization of Porter’s Five Forces to evaluate industry rivalry and competitive threats.
- Investigation of the strategic advantages of using Cologne Bonn Airport (CGN).
- Assessment of potential risks, including labor disputes and competition from established LCCs.
Excerpt from the Book
1. Introduction
The aviation industry has changed in the recent years rapidly. Twenty to thirty years ago the aviation was too expensive for the most people and a network of international air connections often did not exist. Nowadays the aviation belongs almost to an everyday business, whether professionally or privately.
At the end of the 70s there was an air traffic revolution, the concept of the low cost carrier (LCC) started. The LCC is a provider of the basic products, such as low service on board, seat comfort and free baggage drop off. The first LCC was the southwest airlines from the USA. Up to the 90s Southwest offered LCC connection in US; without competitors in this business area. In 1990 the Irish airline Ryanair was founded and was the first LCC in the European (EU) area.
The airlines are facing new challenges: more clientele, more fair flight prices in comparison to the competition and in addition high margins. For a long time such scheduled airlines like LH Group, KLM- Air France and British Airways-Iberia were the representative airlines in the EU. People have spent a lot of money for having a full service on Board (luggage, food, etc.) and were often dissatisfied about constantly rising prices for the flight tickets.
With the origin of LCC, the market has changed enormously. Yearly scheduled airlines announce customer decline and decreasing profits. What is the reason for that? Are the LCC responsible for it? Do the scheduled airlines have to rethink their strategies to be still competitive in the market?
Chapter Summary
1. INTRODUCTION: Covers the evolution of the aviation industry, the rise of low-cost carriers, and defines the problem of Lufthansa's profit turbulence leading to the creation of the Eurowings concept.
2. THEORETICAL PART OF STRATEGIC MANAGEMENT TOOLS: Introduces PEST analysis and Porter's Five Forces as the core methodologies used to evaluate the external environment and competitive landscape.
3. INTRODUCTION OF LUFTHANSA AND EUROWINGS: Provides an overview of the Lufthansa Group and details the strategic shift towards the Eurowings point-to-point concept, including a feasibility study using the previously defined management tools.
4. CONCLUSION AND RECOMMENDATIONS: Synthesizes the analysis, concluding that while the LCC strategy is viable, successful implementation requires ongoing marketing optimization and strategic cooperation.
Keywords
Lufthansa, Eurowings, Low Cost Carrier, LCC, PEST Analysis, Porter's Five Forces, Strategic Management, Aviation Industry, Long-haul Flights, Cologne Bonn Airport, Point-to-Point, Market Share, Competition, Profitability, Airline Strategy
Frequently Asked Questions
What is the primary focus of this research?
The paper focuses on analyzing the strategic rationale behind Lufthansa's decision to launch the long-haul low-cost carrier Eurowings and evaluating its market viability.
What are the core themes explored in this work?
The core themes include the competitive landscape of the European LCC market, strategic management tools, external macro-environmental factors, and the operational challenges of transitioning to a low-cost long-haul business model.
What is the central research question?
The work seeks to understand why Lufthansa launched the Eurowings concept, how it intends to compete, and why Cologne Bonn Airport was selected as the base for these operations.
Which methodologies are employed to analyze the topic?
The author uses two primary strategic management frameworks: PEST Analysis for external macro-environmental assessment and Porter’s Five Forces for industry competition analysis.
What topics are discussed in the main body?
The main body introduces the Lufthansa Group, explains the strategic decision to adopt the point-to-point (PtP) model, and performs a feasibility analysis of Eurowings in the context of political, social, economic, and technological factors and competitive rivalry.
Which keywords best describe this study?
The study is characterized by terms such as LCC, Lufthansa, Eurowings, PEST analysis, Porter's Five Forces, and airline strategy.
How does the Eurowings point-to-point (PtP) model compare to the traditional hub-and-spoke system?
The PtP model is identified as a cost-efficient strategy that avoids transit taxes and allows for greater flexibility, whereas the hub-and-spoke system relies on stopovers at major hubs like Munich or Frankfurt.
What specific competitive risks does Eurowings face?
Key risks include competition from established LCCs like Ryanair, easyJet, and Norwegian Air, as well as external pressures such as fuel price volatility, labor strikes, and restrictive airport regulations.
- Quote paper
- Maxim Lachmann (Author), 2015, Strategic Analysis of Lufthansa's Introduction of Eurowings, Munich, GRIN Verlag, https://www.grin.com/document/313106
