Lufthansa Group SWOT: Opportunities in an industry downturn
Lufthansa Group's operating profit margin slipped slightly in 2018, although 2018 was still the second best year this century (after 2017).
The group's most dynamic unit, the point-to-point brand Eurowings, absorbed significant capacity from airberlin, while also more closely integrating Brussels Airlines. Eurowings made a loss in 2018 but has proved its strategic value to the group, in spite of its higher unit costs than pure LCCs.
Lufthansa's network airlines have made progress with cost reduction and embraced direct distribution and a digital strategy. Nevertheless, they still have high cost bases versus other European legacy airlines. True, they also have strong brand value, but further cost cuts are important.
As Europe's biggest airline group, Lufthansa Group is well placed to remain a leader in the (still slow) process of industry consolidation. The group's 2019 guidance highlights the likelihood of a further margin decline this year, adding to the sense that the industry's cyclical peak is in the past. However, Lufthansa should not fear a downturn if it comes, since this would provide opportunities.
This report considers Lufthansa Group's strengths, weaknesses, opportunities and threats.
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