Lufthansa Group SWOT: largest European airline group, strong brands, but progress may stall

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In 2017 Lufthansa Group's achieved record profits and passenger numbers and its operating margin was its best this century.

Europe's largest airline group by passengers, revenue, ASKs and fleet size has made solid progress since the global financial crisis. However, although it was the only big three European legacy airline group not to fall into an operating loss in 2009, it has not matched IAG's margin improvement since then (but has easily beaten Air France-KLM's).

Lufthansa, the group's largest airline, is the only airline in Europe to be rated by Skytrax at five stars, a certification achieved in Dec-2017. This confirmation of its service quality is important to a brand that operates at a high unit cost and must generate a yield premium to be profitable.

Nevertheless, the group is seeking unit cost reductions, both within each airline and also through flying a growing share of traffic via the lower cost Eurowings. Eurowings itself is also targeting cost reduction in order to bring its unit cost closer to genuine LCC levels.

Lufthansa Group's prediction of a slightly lower result in 2018, due to higher fuel costs, highlights the elusiveness of further margin improvement in Europe's highly competitive airline sector.

This report considers Lufthansa Group's strengths, weaknesses, opportunities and threats.

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