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Austrian Airlines is the national airline of Austria and is based at Vienna International Airport. Along with its charter arm, Lauda Air, the carrier operates both domestic and international networks, particularly to Eastern Europe and the Middle East. Austrian's regional carrier, Tyrolean Airways, merged with Austrian on 01-Apr-2015.
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1,157 total articles
71 total articles
Lufthansa, Singapore Airlines respond to Gulf competition with a limited JV. There is scope for more
The rise of the Gulf carriers continues to pressure airlines that were once formidable individual competitors into joining forces to combat a more effective rival. And so the Lufthansa and Singapore Airlines groups have been forced to compromise their previous independence. One new strategy is to form a revenue sharing joint venture. This method of cooperation is becoming more common between Europe and Asia, having already been established in the trans-Atlantic and trans-Pacific markets. Most JVs were established to enhance a position of strength built on pre-existing solid footing. In comparison, Lufthansa and SIA are setting aside differences in this time of duress to respond to the Gulf carriers that have changed their business profoundly.
Although Lufthansa and SIA account for about 27% of non-stop Western Europe-Southeast Asia capacity, their share of flown passengers is around 13%. Emirates alone has 12%; adding Etihad and Qatar now has 27% of the market transitting via the Gulf. But SIA and Lufthansa are the only airlines operating non-stop service between their respective countries.
Despite the severe situation, perhaps bordering on crisis, the response from Lufthansa and SIA is limited. Their JV will only cover routes from Singapore to Germany (the hub of Lufthansa) and Switzerland (the hub of Swiss). This is only one third of their Europe-Southeast Asia market. Lufthansa and SIA will remain competitors on many other market pairs - and this could become a source of friction, or at least suspicion. A Singapore-London passenger, for example, could go non-stop on SIA outside the JV or via a German/Swiss hub under a JV. Both airline groups will compete for a Kuala Lumpur-Amsterdam passenger.
Results for 3Q2015 again demonstrated IAG's superior profitability compared with rivals Air France-KLM and the Lufthansa group. IAG's 3Q operating margin of 18.5% was around 6ppts higher than those of the other two. However, all three enjoyed sharp year on year improvements in profits, mainly thanks to lower fuel prices. Both IAG and Lufthansa raised their FY2015 profit targets, but Air France-KLM has not gained sufficient confidence to set a target for the year, in spite of posting the greatest increase in operating profit in 3Q.
The unit revenue environment continued to be weak for Europe's big three legacy airline groups, although it improved slightly in 3Q2015 relative to 2Q. This weakness partly reflects a hazy economic outlook and partly reflects strong levels of competition, particularly on routes to emerging markets. Unit revenue weakness is also a function of management decisions on capacity growth. On the North Atlantic, where capacity growth is tightly contained and competition is less fierce, unit revenue weakness has been more limited.
This is Part 2 of a report reviewing European airline comments filed in the US-Gulf airline dispute. This instalment examines AF-KLM and Lufthansa's supposed claims of damage from Gulf carriers: a long list of statistics about market share and closed destinations. Some imagination has been applied here. For example Lufthansa attributes its 1995 exit from the Sydney route on Gulf carriers- despite the first Gulf carrier not arriving in Australia until 1996; Lufthansa and Swiss cite closed destinations ranging from Busan to Monastir despite their not having service from the Gulf airlnes.
AF-KLM notes Gulf carriers have gained market share in Europe, but AF-KLM fails to note its own internal cost challenges, along with the impact of LCCs, that have seen it decline in parts of the world while IAG and Lufthansa grow. AF-KLM argues it suffered damage from two fewer Bangkok frequencies – despite KLM's up-gauging which produced 12% growth for the group. Lufthansa says "there is no evidence that the Gulf carriers meaningfully stimulate market growth". But Western European visitors to Bangkok are up 9.6% partially due to Gulf carriers, which are also stimulating growth from Africa and the Middle East.
US-Gulf airline dispute - Europe Part 1: IAG opposes "subsidy" of US airlines, AF-KLM on 5th freedom
Of the thousands of comments the US government has received about the US-Gulf carrier debate, those from Air France-KLM, Lufthansa and International Consolidated Airlines Group stand out. They are the JV immunised partners of US carriers, and while this may suggest shared interests, the three European carriers show nuances – and even contradictions – compared with the positions of their respective US partners.
Part 1 of this report examines two aspects: Air France-KLM boldly believes the US-Gulf dispute should embrace Europe since US-Gulf traffic has the potential alternative of hubbing over Europe. Further, AF-KLM fears greater Gulf fifth freedom trans-Atlantic flying.
By AF-KLM's logic, IAG should have an even greater say: IAG is the single largest group operating between the US and Western Europe with a 16% capacity share, more than Lufthansa Group's 13%, AF-KLM's 9% or Delta's 14%. Yet IAG denounces the US carrier White Paper, saying: "To shield US airlines from their competitors would be to grant them the biggest subsidy of all."
Gulf airlines continue Southeast Asia push. Should Lufthansa & Singapore Airlines respond with a JV?
Lufthansa and Singapore Airlines have steadily been losing market share to the Gulf carriers. The two carriers have tried to use product upgrades to improve their position in the Asia-Europe market but have enlisted little help from potential partners – for example, each other.
Despite their Star Alliance membership, partnership is hardly the core of their relationship. Should they – and more critically, can they? – set aside their differences to combat their greater enemy?
Lufthansa and SIA together account for about 27% of non-stop Southeast Asia-Western Europe seat capacity. But when also counting passengers flown through all connecting points their share of the market is only 13%, according to OAG Traffic Analyser data. Emirates alone has 12% of the market, and once Etihad and Qatar are added, 27% of passengers between Southeast Asia and Western Europe now transits with the three Gulf carriers.
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.