COLOGNE- Lufthansa Group CEO Carsten Spohr has identified Lufthansa (LH) as the “problem child” within the company’s diverse airline portfolio.
During a recent media briefing, Spohr emphasized the critical need to revitalize Lufthansa, setting a goal for the carrier to reclaim its flagship status by its centennial in 2026.
Lufthansa CEO Remarks
The CEO’s strategy for profitable expansion focuses on leveraging other airlines and subsidiaries within the Lufthansa Group. This approach includes acquiring a stake in Italy’s ITA Airways (AZ), which boasts a lower cost structure than Lufthansa, potentially boosting margins and strengthening revenue.
Lufthansa Group’s expansion plans target regions like Africa and Latin America. However, rather than utilizing Lufthansa’s own fleet, the company intends to deploy aircraft from Brussels Airlines and Discover Airlines for these routes.
Spohr has highlighted significant challenges Lufthansa Group facing as it approaches its third-quarter results announcement on October 29. Investor concerns have intensified, reflected in a 10% decline in the group’s share price over the past six months.
The aviation conglomerate, which includes Lufthansa, Austrian Airlines, Swiss, and Eurowings, has issued two profit warnings this year. These warnings stem from escalating wage costs, pressure on ticket prices, and a challenging aviation market, all of which are hampering the group’s recovery efforts.
Spohr emphasized that delayed deliveries of new aircraft are exacerbating existing problems. He stated that Lufthansa has been “disproportionately” affected by these delays, particularly in its fleet modernization plans.
The airline is still awaiting the arrival of 41 new Boeing planes, including the 777x jets, which are facing multi-year delays. This situation has forced Lufthansa to continue operating older Airbus aircraft that it had intended to retire before the pandemic.
Extension of Old Planes Amid Delays
Spohr attributed Lufthansa’s challenges to significant delays in new aircraft deliveries, particularly the Boeing 777X. These setbacks have forced the airline to continue operating 23 older aircraft, impacting operational costs and hindering expansion into profitable markets.
This situation stems from significant delays in new aircraft deliveries, particularly from Boeing, affecting not only Lufthansa but other European carriers like Ryanair (FR) as well.
To revitalize Lufthansa’s performance, Spohr is focusing on international growth strategies. A key component of this plan is the company’s stake in Italian carrier ITA Airways. This investment aims to strengthen Lufthansa’s market position and financial stability.
The airline has faced intense competition on its transatlantic and Asian routes. Recently, Lufthansa cancelled its Frankfurt to Beijing flights due to increased capacity from Chinese carriers.
Chinese airlines have been gaining market share on international routes, benefiting from factors deterring foreign competitors, such as weak Chinese travel demand, rising costs, and extended flight times caused by the need to avoid Russian airspace due to the Ukraine conflict.
In response to these challenges, Lufthansa is eyeing expansion into Latin America and Africa, markets where the airline believes it can gain a competitive advantage.
The company is also considering the development of new hubs with lower cost bases, such as in Italy, to bolster revenue and improve profit margins.
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