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Lufthansa grows 2Q result; continues Eurowings expansion & labour talks; introduces GDS fee


The Lufthansa group grew its adjusted EBIT by 52% in 2Q2015, in spite of the negative impacts of pilot strikes and currency movements. Lower fuel costs were a significant factor in the improved result. The Passenger segment was the biggest contributor to the improvement and MRO also helped, but Lufthansa Cargo suffered a fall in its result in 2Q after an advance in 1Q. For FY2015, the group still aims for an adjusted EBIT of more than EUR1.5 billion and perhaps now has a little more headroom for this aim.

Meanwhile, the Lufthansa group is attempting to push forward with a number of important developments. It is expanding its Eurowings subsidiary, which will progressively take over from Germanwings on short haul point to point routes. In addition, Eurowings will launch low cost long haul leisure routes this winter, using wet lease capacity from SunExpress (jointly owned by Lufthansa and Turkish Airlines). This LCC initiative runs in parallel with ongoing attempts at improving mainline labour productivity. The group is also introducing a new commercial strategy, including charging a fee for GDS ticket sales.

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Understanding the Asia Pacific growth opportunities: Tony Fernandes explains the market

No-one doubts that Asia will become the dominant world aviation market over coming decades. North America and its airlines will necessarily be major beneficiaries of that expansion. For the time being however, the US-China market is only one third the size of US-UK’s and much lower yielding; Asia’s two biggest markets, China and Japan combined are still smaller than the UK market. But China-US capacity will double in the two years to Jul-2017, a trajectory that is likely to continue.
Meanwhile the nature of the Asian aviation markets has evolved greatly over the period of a decade. In Southeast Asia, nearly two thirds of all airline seats are on low-cost airlines, none of which existed a decade ago, implying a highly price sensitive underlying market.

In North Asia, this low-cost, price sensitive phenomenon is starting to take hold as well, albeit from a much lower market share. But it is growing fast, with many new entrants.

To understand fully how these forces will influence Asian consumer demand, we hear from Malaysia based Tony Fernandes, the man who sparked the LCC revolution in Asia and whose airline, AirAsia, has now carried 50 million passengers. In doing so, he has effectively deregulated international aviation across much of Asia.
The remarkable airline, with 9 operating entities, including cross border joint ventures in various countries, also includes three long-haul low-cost operators.

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