Shaping The Industry – Lufthansa Group In Times Of Change

Transcript

Harry Hohmeister:In my mother language, moin moin, or hello. And how can I say, I'm really happy to be here. Thank you for inviting me, and it's really great to be together with so many people who are enthusiastic about aviation and travel experts. and the thing, the world my heart is beating for. Whatsoever, I'm looking also forward then later on for a nice and exciting discussion regarding low-cost intercont, whatever this means, or low-cost long-haul. But please let me start with some aspects regarding the current challenges of the industry and of course our Lufthansa Group strategy strategy to it, against it, whatever it means. Because I think one thing is clear, and you have seen it there as a headline, we want to shape the industry in a changing time. And all of us who are longer than a few days in the industry know that the industry always was changing. But we don't just want to be part of the change, but we want to design the change. And I think This is something we have as an obligation as one of the biggest, if not the biggest aviation group, at least in Europe. So what are the current topics? Clearly, all of us, and who had thought that a year ago, have to argue and to do a lot now regarding CO2 emission and regarding global warming. How does this affect the air traffic? How does this affect the people living in and from air traffic? And how does it really affect the environment? I think one thing is clear: people want to fly. And when I look at our own numbers, we never have transported more passengers during the summer season as we did this year. So even this discussion is not stopping the need for flying, and the need for flying of course has a good reason. First of all, air transport of course connects cultures and contributes to an international understanding and creates prosperity. So we are not just flying for fun, we fly people to make business, we fly people to meet relatives and family, we fly people to meet friends and to keep a global community alive. Of course, some also fly for fun in the sun, but of course not all of them. Air transport is, by the way, also contributing to the prosperity of the governments by taxation, because when you see how much this industry is taxed compared to other mobility industry, we have a quite high share of taxation. And therefore, we believe people will not just never give up to fly, they contribute to a better society and they contribute to a better way of living through what we offer. But if it is so, we have a high degree of responsibility to make the world also in terms of environment protection better. Flying definitely affects the climate, there's no debate about that, and we never were debating it in a different way. And therefore we will take the responsibility, I think, in 3 manners. One, on short term, we invest every year more than €3 billion as little Lufthansa into new technology. When you compare, compare the investment to earning or to revenue ratio, we invest much more than any other mobility industry into improvement of the CO2 pollution. With the new technology, we will have more than 25% less of CO2 in the air in the future. In medium term, of course, we have to work on more efficient air traffic systems and more efficient air traffic management, and there, of course, the governments are invited to help, as they are already for more than a decade. This would save another 15— 10 to 15%, but sorry to say, there we do not see any movement. And on long term, and this is where we have to work together with those who do the F&E on this side, is synthetic fuels. To reconvert CO2 through the power-to-liquid procedures to carbon-neutral flying fuel. This is what we are targeting for. And Lufthansa already today was doing great steps in terms of taking responsibility regarding environmental and CO2, and this long time before Friday for Future existed. First, nationally, we are not just getting every 2 weeks a new aircraft, as I mentioned already, with billions of investment, but we, in addition to this, carry the burden of national taxes like Luftverkehrsteuer, which is nothing else when you look at the legislation like a CO2 taxation. Secondly, we are participating already since 2012, so since more than 7 years, in carbon-neutral growth through EU ETS. And third, we especially as Lufthansa Group through IATA and ICAO were forming Corsia, which is then the future for carbon-neutral growth from 2021 on a worldwide level. So we are really already since years engaged in that. So this is one point of the industry. Second, and those who like to read newspapers today read already a lot about it. Second is consolidation in Europe. Of course, Lufthansa is part of the consolidation factor, and of course in Europe it's far from over regarding consolidation. Fact is that some of our colleagues were leaving the scenery in the last weeks, like Adria Airways, XL Airways, Agile Azur, Germania, and many others. And these are just the recent examples. Most probably more future examples will come. For an airliner, this is very disappointing. But as it is disappointing, it's also a huge task. Consolidation will and must continue. And as I said, we will participate in that in a way that it's making sense. So we will not just gather capacity and metal, but we really have to bring a new level of fundament to this industry like it was taking place in the US, for example, with 47 airlines compared to 107 in Europe, with the top 5 airlines having a market share of close to 90%, whereas in Europe it's a little bit above 60%. The stronger for sure will become stronger through that and the weaker, weaker. But we have to find a way that consolidation is not just taking place segment by segment, so discount airline to discount airline and premium airline to premium airline. Of course, what is taking place now is that we even have a mixture in consolidation over the segments. And Lufthansa, of course, was having the premium airlines like Lufthansa, Swiss, Austrian, and in addition to this, being in the discount segment with Eurowings is an innovative part of that. Why? The fact is the customers asking for that. I'm coming to this later. But this is only one side of the change. This is the metal side. What also is changing, and many experts are sitting around here, is the distribution side. So the times when I was growing up in this industry, Sabre, Amadeus, Travelport were the heroes in distribution. In these days, not just but in addition to this, we have the Googles, the Ctrips, the Airbnbs, the Expedias, I don't know what. This is also a dramatic change in terms of globalization of the industry, and the Lufthansa Group of course is very well prepared for that through a flexible and scalable multi-hub system, through a multi-brand segmented and nationalized system, and through a multi-channel competency which is outstanding in the industry. So integration, of course, through that is part of our genes, and I think we are very, very much dedicated to, as I said, participate in that. The 3rd point which is on the agenda for us is a brutal price war in Europe. How stupid we are in the industry to give all we have, and this is our best product, away for free. I will not further comment on that, but one thing is clear. Airfares which are below €20, €10 are not sustainable. And especially in the environment we are living in, in the political environment we are living in, we have to ask ourselves if these things we are doing there are really good. Is it really good to discount the, the product you have in a way that it's not just not making money anymore, but that it is generating demand which normally would not be there, that is generating demand which is starting a climate discussion which industry should not have, and which is generating an overfull infrastructure with artificial traffic which anyhow is too tight and too expensive. We will not be part of that, that's for sure, and we mentioned that as a Lufthansa company already several times. But one thing is also for sure, we will defend our home markets in Germany, Austria, Switzerland, Belgium, because they are really good markets with good customers. And for sure, it's not that we will— not for sure that we will leave the market. And for even losing market shares, I think we are not acting, but we are acting for, as I said before, further consolidation. And with this, I'm with the needs for the customer. And the customer of these days is completely different to compared maybe a decade ago. When you look at the customers a decade ago or the beginning of the 2000s, of course, discount was everything. And not just in our industry. Yeah, when you were going around here in the shopping mall, discount was everything. And these days, it's not discount anymore. And some of us have not understood it so far. What is much more important these days is individualization. And of course, you want to choose if you go discount or not, if you go premium or not. And this is why the cross-segment consolidation is getting in progress and is getting more and more accelerated, as I said already before. What is our response to the customer? Our response is, of course, as I said already, the multi-brand approach and the multi-channel approach. But in addition to this, that the customer can choose through the journey what they really want to have, have through personalized digital offers, through short and simple transfers, through choice of different travel options, through fast response and services if help is needed, and of course through product offers which are based on individual preferences and on choice. Offered by qualified and trained people. So we believe very much that in regard to the customer, who by the end is paying the whole show here, we have the right strategy with what we have designed in the last 3 to 4 years, offered by well-trained people with really warm-hearted approach to the customer, with warm-hearted colleagues. And based on this, we decided just recently that we will have a huge product offensive, the biggest most probably Lufthansa Group ever had for the next years. We will invest something like 2.5 billion in new seats, in differentiation of services, in differentiation and modernization of call centers. of lounges and of expansion of our digital services, enhancing the service environment and the training of people wherever and however we can. And this— and then we come to the panel discussion later on— also includes the innovation and invention of a second product line intercontinental fleet, which is based on the Eurowings long-haul fleet now offered out of Frankfurt and Munich and Düsseldorf and will go on to expand in the future. That's for sure, because there is a market and it's not just a touristic market, it's not just a leisure market. There is really a market segment which is besides a premium segment asking for additional offers out of the hubs. This we will do by integrating these kinds of offers within the Network Airlines competencies, especially on the commercial side. So it will have an own brand, but it will be part of a global and one-process-fits-all approach regarding technology, but it will be different in terms of product and market approach. And we are already doing good experiences on that because those who are longer in the industry might remember that the Lufthansa Group has bought Edelweiss Air in Zurich in 2008, which is wing-to-wing flying to Swiss out of the same catchment in different segments and doing this very, very successful and profitability. Because by the end of the day, whatever consolidation means, profitability of course, is our first target besides fulfilling the customer needs. And therefore, we will focus also in future on the most important things we have to defend. First is the customer through customer centricity, through segmentation, through differentiated products, through innovation, and through digital integration. Second, and I think this is also clear for this industry, through this we want to grow further with own metal as much as possible, but maybe also through consolidation, but only if it makes sense and if it is bringing additional value to the Lufthansa Group. Just gathering metal is not consolidation. And last but not least, also through improving workforce environments, the place to work which has to be organized and renovated in a way that we can work with the modern talents, the talents of the future in a way that we also meet their targets. As you see, the world of aviation is changing and maybe Lukas Interkont is already a dinosaur, who knows. Perhaps we will soon be experiencing a completely new era of flying And definitely I'm not thinking about autonomous flying. Things like that are much too far away that I will experience it. But whatever this means, we are there to shape the industry. We are dedicated not just to ourselves but also to our customers, to our employees, and to our shareholders through, as I said, customer interaction, through taking responsibility not just and only in regard of CO2 emission, but also in regard of social responsibility and governance and compliance responsibility, as well as being an active global actor in sales partnerships and in aviation where our heart beats. We are number one in Europe. We will stay number one in Europe for the benefits of our customers and for the benefits of those who are working with us. who are the employees and the shareholders. And with this, I'm delighted now to participate in this nice panel discussion, which is discussing the dinosaurs of the future. Thank you. Thank you, Harry.

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