The purpose of this assignment was to analyse the Lufthansa Group's new strategy, evaluate the opportunities and the weaknesses of this concept, and to develop further recommendations for action.
Table of Contents
1 Introduction
2 Introduction to the Lufthansa Group
3 Market Analysis
3.1 Low cost airlines
3.2 Premium airlines
3.3 Point-to-Point vs. Hub-and-spoke
4 Lufthansa's new strategy
4.1 Eurowings
4.2 Lufthansa
5 Competitive evaluation
5.1 Theoretical background
5.2 SWOT analysis
5.2.1 Strengths
5.2.2 Weaknesses
5.2.3 Opportunities
5.2.4 Threats
6 Conclusion
Objectives and Topics
This work aims to provide a strategic assessment of the Lufthansa Group's transition towards a dual-brand structure, specifically analyzing the impact of introducing Eurowings alongside its core premium operations. The primary research objective is to evaluate the effectiveness of this strategic shift in regaining competitiveness against both low-cost carriers and premium-service Arabian airlines.
- Strategic realignment of the Lufthansa Group through multi-pillar segmentation.
- Comparative analysis of low-cost carrier (LCC) versus hub-and-spoke business models.
- Evaluation of Lufthansa's competitive position using SWOT analysis.
- Analysis of market dynamics, including long-haul, low-cost expansion and premium service requirements.
Excerpt from the Book
3.3 Point-to-Point vs. Hub-and-spoke
A frequent difference between LCCs and premium airlines are the different types of route networks utilised. The common systems are the point-to-point model (P2P) and the hub-and-spoke-model (H&S) (Fig. 3).
LCCs usually make use of the P2P-model. In this system, origin- and destination cities are connected directly without a stopover. Passengers benefit from a faster nonstop-connection and the non-existent risk of missing a connection flight. The profitability of this system, on the other hand, strongly relies on a very high demand on both sides. In addition, it requires a larger number of flights in order to cover an entire region.
In the H&S-model, the airlines use one or a few central hubs, which serve as transit cities for most of their flight connections. The advantage of this system is that regions or connections with lower passenger demand, that usually would not be profitable, can be connected as well. Due to the centralisation of the company’s aircrafts at these hubs, it is possible for them to select appropriate sized airplanes based on the current demand. As a result, higher capacities can be offered with simultaneous good overall capacity utilization. The number of flights, furthermore, can be much lower compared with the P2P-system with the same level of regional coverage. On the other hand this system requires complex and sophisticated planning and extends the overall flight-time for the passengers.
Summary of Chapters
1 Introduction: Provides an overview of the radical changes in the European air transport industry and introduces the Lufthansa Group's strategic response to competitive pressures.
2 Introduction to the Lufthansa Group: Describes the organizational structure of the Lufthansa Group as of 2014, highlighting its key business segments.
3 Market Analysis: Examines the competitive environment, specifically contrasting the business models of low-cost carriers and premium airlines, and evaluating network strategies.
4 Lufthansa's new strategy: Details the "7to1 - Our Way Forward" program, focusing on the separation of operations into Eurowings and the premium core brand.
5 Competitive evaluation: Utilizes a SWOT analysis to identify internal strengths and weaknesses and external opportunities and threats facing the group's new strategic approach.
6 Conclusion: Summarizes the findings, suggesting that while the Eurowings model is a promising step, significant challenges remain for the core Lufthansa brand regarding costs and competitiveness.
Keywords
Lufthansa, Eurowings, Low Cost Carrier, LCC, Hub-and-spoke, Point-to-point, Strategy, SWOT analysis, Aviation industry, Competitive advantage, Operational costs, Market analysis, Premium airlines, Airline management, Infrastructure
Frequently Asked Questions
What is the core focus of this research?
The work provides a strategic assessment of how the Lufthansa Group adapted to increasing competitive pressure by introducing the low-cost brand Eurowings and restructuring its core business segments.
Which central themes are discussed?
Key themes include the shift in European aviation models, the dichotomy between point-to-point and hub-and-spoke operations, cost management in the airline industry, and the strategic positioning of legacy carriers.
What is the primary objective of this study?
The main objective is to analyze the effectiveness of Lufthansa’s "7to1" strategy in improving competitiveness against Ryanair, easyJet, and major Gulf-based airlines.
Which methodology is applied?
The author uses a market analysis approach combined with a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to evaluate the success factors and risks of the company’s new strategic direction.
What content is covered in the main section?
The main sections cover the evolution of the airline market, a detailed comparison of flight network models, the specifics of Lufthansa’s restructuring, and an evaluation of its competitive capabilities.
Which keywords characterize this paper?
The paper is characterized by terms such as strategic management, LCC, hub-and-spoke, market leadership, and operational cost reduction.
How does the Eurowings model differ from Lufthansa's traditional hub system?
Eurowings operates on a point-to-point model designed to offer direct connections without hub transit, whereas the core Lufthansa brand utilizes a hub-and-spoke system to manage global traffic through central locations like Frankfurt and Munich.
What specific risk does the author highlight regarding labor relations?
The author identifies that potential strikes by labor unions, driven by disputes over wages and operational changes, pose a significant risk to the group's reputation and financial stability.
- Quote paper
- Erik Somssich (Author), 2017, Strategic assessment of the Lufthansa Group's introduction of Eurowings and its associated new strategy, Munich, GRIN Verlag, https://www.grin.com/document/358598
