Lufthansa’s CEO, Carsten Spohr, has made some controversial comments today about the cheap fares charged by some of the carrier’s major European ultra low cost rivals.
Lufthansa’s issues with cheap fares
Spohr has said that airlines selling flights for less than 10EUR (~11USD) is “economically, ecologically, and politically irresponsible.” He said that “flights for less than 10EUR shouldn’t exist.”
Not surprisingly, Spohr has motivation for what he’s saying — Ryanair and EasyJet have been growing significantly in Germany, and have been selling very cheap tickets from there. Spohr says that “nobody is going to push us out of our home markets” and that “the price war leaves its traces with us as well.”
He also states that Ryanair and EasyJet are “losing a massive amount of money” as they try to grow market share in Germany. The impact of this has been felt so much that it has caused Lufthansa to lower their profit forecast.
Rather conveniently all of this comes as Lufthansa’s low cost Eurowings division is restructuring, and I’m guessing that’s not unrelated to EasyJet and Ryanair.
My take on Spohr’s comments
Spohr’s comments are both outrageous and self-serving, in my opinion, and are one of the sillier ways I’ve seen Lufthansa attack their ultra low cost carrier competitors (and they’ve tried a lot of methods).
Is selling cheap fares economically, ecologically, and politically irresponsible?
Economically irresponsible?
Maybe we’ve been looking at different annual reports, but both EasyJet and Ryanair are exceptionally profitable. They just have a different way of selling tickets than Lufthansa, and that should be totally fine.
Most people aren’t actually paying 10EUR to fly — they may pay for seat assignments, bags, beer, lottery cards, etc. And the business model works for them.
If his suggestion is that the airlines aren’t making money as they grow market share in Germany, isn’t that the case for many airlines? Typically routes aren’t profitable from day one for airlines — it takes time to grow market share, and that’s something Lufthansa should be well aware of here.
Ecologically irresponsible?
To me this is the most interesting point. There’s no denying that travel has become a lot more accessible globally thanks to ultra low cost carriers, and nowadays there’s a lot of debate over whether that’s a good thing or not.
With governments increasingly trying to decrease airline emissions, and with KLM even encouraging people not to fly, times are different than in the past.
But Lufthansa seems to be taking the position here that the correct way to lower emissions is to eliminate cheap ways to fly? That’s convenient. Where’s their campaign encouraging their full fare business class passengers from having an e-meeting, rather than flying out to meet face-to-face?
Ironically Ryanair has a significantly more fuel efficient short haul fleet than Lufthansa does (they exclusively operate 737s that are an average of under eight years old, while Lufthansa operates all kinds of planes, many of which have a higher per seat cost), so Ryanair’s per passenger emissions are lower.
Politically irresponsible?
I’m not 100% sure what Spohr is referring to. My guess is that he’s referring to how EasyJet and Ryanair have some creative ways they’ve set up their business to lower costs. If that’s the case, there are plenty of airlines where that’s the case, and it’s telling that he’s only singling them out after they expand in Germany.
Bottom line
In my opinion Spohr is off base with his comments. For so long, Lufthansa has taken Germany for granted, and now EasyJet and Ryanair are finally giving them some competition on short haul flights.
There’s nothing economically irresponsible about this, because the airlines selling cheap flights are profitable.
As far as ecological responsibility, there’s no doubt we’re seeing a trend towards trying to lower emissions, but I don’t think cheap tickets is the problem. A person paying 10EUR to fly Ryanair has just as much of a right to fly as someone paying 60EUR to fly Lufthansa, in my opinion.
What do you make of Spohr’s comments? Is it irresponsible for airlines to sell super cheap tickets?
(Tip of the hat to Niko_jas)
The suggestion that prices being more expensive to be environmentally friendly is bizarre.
As an example I’m going from London to Dublin next week Tuesday - I found a flight with Ryanair for £20, great! But I also checked BA, are lingus and city jet prices. I wanted to go anyway, and the cheapest price for what is pretty much 45/50 minutes in the air is fine for me.
The same flight is...
The suggestion that prices being more expensive to be environmentally friendly is bizarre.
As an example I’m going from London to Dublin next week Tuesday - I found a flight with Ryanair for £20, great! But I also checked BA, are lingus and city jet prices. I wanted to go anyway, and the cheapest price for what is pretty much 45/50 minutes in the air is fine for me.
The same flight is now on sale for £40 up to £107 - so would I be a better global citizen for paying more when I had the option to pay less? Of course not!
It’s not dissimilar to suggesting we should make red meat more expensive because of the carbon created from cows. If I want a steak, I’ll buy a steak - increasing prices won’t make me vegetarian!
Next up will be the suggestion that airlines shouldn’t offer super discounted staff travel rates ...
1- not everyone in a flight pays 10€.
2- when you buy ticket at 10€ it doesn't mean you spend 10€: seat, luggage, food, lottery.... how many end up spending only 10€?
3- when a company like LH spends millions on, say, marketing this impact every ticket they sell: so is it ok to sell ticket at15€ (of which 5€ is a marketing expence) but it is not ok to sell ticket at 10€? (I wrote marketing but it could be everything - main airport - food - miles - etc)
I completely agree that these fares are ecologically irresponsible. The aviation business model in which carbon offset fees are optional should be abolished, and these fees should become mandatory parts of a ticket price. Sure, that means some people will not be able to fly (as much), but let us not forget that drastic action is needed to solve the changing climate.
It's funny many people here are complaining (yes you one sided mind environmentalist) about $10 fares but forgot that many other on the same plane paid $250 for it.
Airlines are not public service, they make money, they make profits. So NO THEY DON'T LOSE MONEY for selling few seats at $10.
Before you try to ground fuel efficient planes, start dealing with cow farts first just like AOC.
Just a quick one, why do I get on a bus Everytime I deplane in FRA on a LH flight? This is the worst experience, no US carrier I've ever flown has had this! For me, this brings LH into LCC territory, certainly not 5 star.
Keeping LH’s ulterior motives aside, it is economically and ecologically irresponsible to be selling tickets so cheap. It won’t even cover the basic costs of the airline, let alone the cost of all the externalities of air travel. The cost of air travel needs to and will increase by a lot.
It’s not just KLM asking people not to fly. Many EU governments are realizing that the current model is untenable. Work is underway to...
Keeping LH’s ulterior motives aside, it is economically and ecologically irresponsible to be selling tickets so cheap. It won’t even cover the basic costs of the airline, let alone the cost of all the externalities of air travel. The cost of air travel needs to and will increase by a lot.
It’s not just KLM asking people not to fly. Many EU governments are realizing that the current model is untenable. Work is underway to revitalize the rail network and we’ll see a lot more short-distance intra-Europe travel done by train in the next 5-10 years.
Sounds like the big three carriers here. Just whining. As for not paying living wages, its harder to be a flight attendant than to get into some good schools.
Lufthansa CEO: your US marketing is abysmal and your frequent flyer program is rubbish
But yeah your competitors are in fact selling tickets for too little
I hate being criticized for flying. I was confronted at Heathrow (during the Extinction Rebellion protests that shut half of London) by a protestor. They asked how many flights I take a year. I told them the truth somewhere in the region of 200 and was treated with horror. My favourite line was "How could you spend this money to fly for nothing". Out of all the flights I take maybe 5% are for personal...
I hate being criticized for flying. I was confronted at Heathrow (during the Extinction Rebellion protests that shut half of London) by a protestor. They asked how many flights I take a year. I told them the truth somewhere in the region of 200 and was treated with horror. My favourite line was "How could you spend this money to fly for nothing". Out of all the flights I take maybe 5% are for personal use and I pay for. I work in relations so I have to fly to have face to face meetings in order to keep our clients happy. So her point was completely invalid to me and just wasted my time as I walked to my car.
Technically, the man's not wrong. If you see the taxes charged by UK airports on departure, selling tons of $11 flights is not economically feasible.
On the other hand, the man is the equivalent of a US3 Ceo whining about how all the other (new) kids are mean to him.
Sounds like something Doug Parker would say.
LH and other legacy airlines need to quit trying to beat Ryan Air at their own game and instead offer a product that is worth the extra cost. The regional “Business Class” seat, an economy seat with an empty seat in the middle, is an insulting product. Why would anyone pay the outrageous cost for that? The economy product on these legacy carriers isn’t any better than the LCCs product but costs more. If they...
LH and other legacy airlines need to quit trying to beat Ryan Air at their own game and instead offer a product that is worth the extra cost. The regional “Business Class” seat, an economy seat with an empty seat in the middle, is an insulting product. Why would anyone pay the outrageous cost for that? The economy product on these legacy carriers isn’t any better than the LCCs product but costs more. If they can’t differentiate themselves by offering a better FF program, better perks, better soft product, and/or better hard product then they can’t compete because they will always have higher labor costs. And one can’t forget the competition from high speed rail within the EU. I use rail a lot over there because I find it a better value proposition- good price, comfortable seat in Business Class, electrical outlets and free WiFi with no hassles of going through security, transiting to airports (which are not close to the cities where I work), no baggage issues and most importantly, they are more reliable, running on time and without cancellations. The legacy airlines need to change the formula or they will slowly get chocked out of the regional markets.
@Phil Duncan so spot on.
Based in Munich i get teary at times when i look at fares from MUC which is heavily dominated by LH. They managed to squeeze Transavia out and the only LCC we have is Easyjet which offers routes to just 5 markets where LH also competes with them. Ryanscare also has about 2 destinations. Vueling has a i think a single slot to Barcelona. We pay horrendous prices to reach...
@Phil Duncan so spot on.
Based in Munich i get teary at times when i look at fares from MUC which is heavily dominated by LH. They managed to squeeze Transavia out and the only LCC we have is Easyjet which offers routes to just 5 markets where LH also competes with them. Ryanscare also has about 2 destinations. Vueling has a i think a single slot to Barcelona. We pay horrendous prices to reach even the shortest of destinations. So unfortunately LH continues to get lots of my money me.
Carsten Spohr is bully! These days i no longer even listen to what he says because nothing sensible comes out of his mouth! But the Lufthansa Lobbyist in Berlin are very loud and active and Germany will for a long time continue to be majorly dominated by LH while competitors are kept at bay.
Spohr’s decisions are the reason for Ryanair and EasyJet rise in Germany.
You can’t offer a horrible economy experience (no seat back IFE’s, hard slimline seats, no legroom, strict carryon requirements) but charge a lot for it.
Then their inter-Europe business class is a joke. Same economy seat with no amenities and no room. Why would anyone pay a premium for this experience.
They should follow Delta’s lead and be a real...
Spohr’s decisions are the reason for Ryanair and EasyJet rise in Germany.
You can’t offer a horrible economy experience (no seat back IFE’s, hard slimline seats, no legroom, strict carryon requirements) but charge a lot for it.
Then their inter-Europe business class is a joke. Same economy seat with no amenities and no room. Why would anyone pay a premium for this experience.
They should follow Delta’s lead and be a real premium airline, where people want to pay a premium price to fly them.
Instead of hosting posh, expensive get away meetings at Grand Hotel Heiligendamm every November maybe this jackass CEO should shut up and change their new livery.
We are close to the day where EasyJet, Ryan Other ULCCs will have $0 fares, or even negative fares (where a credit is issued against seat assignments, boarding, baggage food and drink fees.). This will be for some, not all seats on planes. They can declare the negative fares as “adversiting costs” because of the huge noise it will make.
The revenue is made on advertising on planers, etc. (Sound familiar?)
It’s coming, and I...
We are close to the day where EasyJet, Ryan Other ULCCs will have $0 fares, or even negative fares (where a credit is issued against seat assignments, boarding, baggage food and drink fees.). This will be for some, not all seats on planes. They can declare the negative fares as “adversiting costs” because of the huge noise it will make.
The revenue is made on advertising on planers, etc. (Sound familiar?)
It’s coming, and I think It’s good. This is why LH’s Spohr is puckered so tight.
Lufthansa have objected at every turn to any carrier coming in to the German market and in some cases succeeded.
First it was the ME3 who are limited to the number of destinations they can serve in Germany and the number of slots they may use. I think it's four destinations and three slots at each.
Then TK who are on a different footing because they are included in the EU open skies arrangement so...
Lufthansa have objected at every turn to any carrier coming in to the German market and in some cases succeeded.
First it was the ME3 who are limited to the number of destinations they can serve in Germany and the number of slots they may use. I think it's four destinations and three slots at each.
Then TK who are on a different footing because they are included in the EU open skies arrangement so could not be limited. They offer a better product particularly in business class on short haul and have excellent fares. Lufthansa couldn't touch them legally so instead they treated them differently in the M&M programme where you only earn 25% with TK of what you would earn with any other *A carrier. They also moved them out of the *A terminal at MUC, the only airline moved out apparently because of capacity, those three TK A320s a day must have brought T2 which has more than doubled capacity in the last five years to breaking point.
They then introduced P fares in business class, quite high fares that earn nothing in other *A programmes and as a consequence, lost *A frequent flyers who now just avoid Lufthansa and even though they have a dominant place in Europe for short haul, a little creative thinking means you can avoid them in total if you want to.
In the shorthaul market LH has been dominant for a long time. AB were not serious competition and never would be. They were allowed to operate from Berlin and to a point Munich as long as they didn't tread on the toes of LH. On the demise of AB Lufthansa fares went through the roof overnight on domestic services and they objected to Easyjet buying up the left overs of AB's operation. On that they did not win.
Berlin in particular is now orange and getting more orange every time I visit. Fares are what you would expect of a low cost carrier and quite reasonable. Lufthansa fares are much higher.
The differences between the two in Germany are negligible in economy class. You get a hard seat with little or no leg room on an over crowded plane. Lufthansa will give you half a sandwich that you probably wouldn't eat because it has a shelf life of something like 120 days and a drink so you pay a lot of money for a drink. The sandwiches are not even made in Germany but shipped in from a food production facility in the Czech republic.
Lufthansa business class is also very poor for the money with a minimal offering claiming to be a full meal. It's more like a spoonful of something for each course. You will pay a great deal more for that.
Lufthansa is profitable but they are complaining. They might do well to invest in their short haul product instead of constantly cutting it and wondering why no one is now buying it. Surely a whole sandwich which has a shelf life of 24 hours would not be too much to expect and a reasonable choice of drinks. In business, offer a meal, not a dysfunctional tasting plate and watch customer satisfaction rise. They might then begin to justify their fares.
Spohr might do well to take the fight to Easyjet rather than whinging and whining about them.
Let's not forget Ryanair is so profitable because they employ portugees/Romanians under Irish Labour law for Bosnian or polish bases. There is a reason they can fly so cheap, and that's not because klm/ba/lh are wasting money everywhere.
What he means is that mainly Ryanair, is running flights that lose money, just to take market share. I don't know about fra, but here in Amsterdam they sell tickets to Dublin lower then the actual airport tax, just to screw over aer lingus.
Sounds a bit like admitting defeat here. LH with its bloated structures cant compete with Ryanair, Easyjet and the lot. Not even Eurowings can and their cost is quite a bit higher than the other LCCs. So, he cant compete so he´s looking to have them regulated by means of ecological responsibility or whatever he can find. Reminds me a bit of KLMs request to rather use the train on shorthaul. Same story.
Lucky, why don't you just have the headline match the quote (i.e. 10 Euro)
You don't need to convert currency in the headline. Everyone knows what a Euro is.
Excellent article + opinipn piece, with bonus of some excellent comments so far, finally some content that doesnt involve debates about being gay (in/or) the middle east, Trump, USA etc...
Were the fact that LH delivers a superior product, I would accept it. But NO! Over the past 3 years I have found that every boarding of a LH flight within Germany elicits a predictable argument regarding the size (and validity) of my carry on. I have taken to now have prepared a tape measure to prove my measurements. In one hilarious case my bag fit into the measuring frame ad still was refused. These...
Were the fact that LH delivers a superior product, I would accept it. But NO! Over the past 3 years I have found that every boarding of a LH flight within Germany elicits a predictable argument regarding the size (and validity) of my carry on. I have taken to now have prepared a tape measure to prove my measurements. In one hilarious case my bag fit into the measuring frame ad still was refused. These were not individual decisions; these were obviously corporate decisions and orders.
LH wants to have it both ways. You are completely correct in saying that Lh has taken the German market for granted. As a Berlin based flyer, I would have loved to flown exclusively with Lufthansa, but they scrapped all but their MUC and FRA shuttle services. They are a pathetic shell of an airline, and as much as I have easy and Ryan, they are willing to fight for my business. Any trip with Lufthansa in Europe takes twice as long.
The way I can see that it is economically irresponsible is that it is difficult to pay employees living wages when the fares for flights are $11. However, Easyjet and Ryanair probably hide behind their $11 fares to justify not paying employees living wages, while being extremely profitable.
I have to agree with the CEO on this one. Bottom of the barrel cheap flights drives the market down, which also affects the pay/compensation of employees working for these airlines. Another analogy would be Walmart in the US. Yeah they can survive and even thrive on low priced goods, but at the cost of terrible worker compensation and buying everything from China.
The LH group lacks agility in dealing with the market. And their idea of being "entitled" creates aberrations in their perception. As LCC's start to impact them on their home turf they should be paying more attention to the LOYALTY of Premium Cabin clients. They don't do that. In fact their arrogant approach to business, their lack of common sense and their lack of agility make their most loyal customers (HON CIRCLE here) move away...
The LH group lacks agility in dealing with the market. And their idea of being "entitled" creates aberrations in their perception. As LCC's start to impact them on their home turf they should be paying more attention to the LOYALTY of Premium Cabin clients. They don't do that. In fact their arrogant approach to business, their lack of common sense and their lack of agility make their most loyal customers (HON CIRCLE here) move away from them....They may have a better F Class product than BA (both LH & LX) but...they charge more, have less frequencies, and don't care to preserve the loyalty of their top clients due to arrogance and rigidity. I can do away with Caviar or Balik Salmon as long as I am comfortable and get safely from point A to point B and get treated with the dignity that my loyalty and a premium cabin ticket deserves.
Good luck to them
@lucky... Exactly this!
I'd be curious to ask Mr Spohr at which price these irresponsible tickets he talks about become responsible!? Since Eurowings has tickets at £24.99($29) where does he draw his random and hypocritical line?
His fleet of A340s isn't doing the environment much favours either, is it.
“Concerting” should be “converting”
God knows why autocorrect thought that change made any sense.
EasyJet and RuinAir should double down with 5 euro fares. When they start squealing you know you've got their manhood in a vice. I can't think of anything better than a legacy airline going under. This industry need renewal and competition more than anything.
@ Ray
“It’s also irresponsible to:
...
-converting your loyalty program to make it revenue-based”
I can see your other points, but how on Earth is that “irresponsible”?
People on here actually boast about scoring points for the least spending, whereas literally the only reason airlines run loyalty programmes is to increase their profitability. Surely concerting loyalty programmes to a revenue basis is actually very, very responsible?
Spohr just few months ago was proudly writing on the LH magazine that Lufthansa is the most profitable airline group...all at the expense of customers who have seen service been slashed while costs have risen...
Main advantage of LH over competitors is the lack of alternatives for long haul out of continental Europe. AF is not reliable and CDG is a nightmare to connect, KLM & SK have a small network, BA and IB are too much west, AZ is broken...
So German, lecturing everyone else for their ‘transgressions’ whilst oblivious to your own obnoxious behaviour
Most economists would agree that the best way to deal with the environmental impact of flying is to make flying more expensive by means of a carbon tax. (cf., for example, https://en.wikipedia.org/wiki/Pigou_Club )
Basically, you are internalizing the environmental costs of flying because the fact that people don't bare the environmental cost of their flying themselves makes them fly inefficiently much. (When you take a flight, the emissions affect millions of people and the part...
Most economists would agree that the best way to deal with the environmental impact of flying is to make flying more expensive by means of a carbon tax. (cf., for example, https://en.wikipedia.org/wiki/Pigou_Club )
Basically, you are internalizing the environmental costs of flying because the fact that people don't bare the environmental cost of their flying themselves makes them fly inefficiently much. (When you take a flight, the emissions affect millions of people and the part of the emissions affecting you personally are like a millionth of the total environmental impact so the cost is essentially zero.)
The great advantage of an eco/carbon tax that it leaves the decision of dealing with the pollution to market participants. People can fly less, they can fly on more fuel-efficient planes, they can use more environmentally friendly modes of transportation etc. Or they pay the tax if the flight is important.
Luftansa: LCC's are irresponsible! They are taking over market share!
Also Luftansa: grins when Air Berlin folded, conquers Condor, lobbies hard while monopolizing central Europe with LX, SN, OS...
The fact that Spohr is the one making these statements makes me chuckle
It's also irresponsible to:
-adopt protectionist measures for your country's commercial aviation market
-buy a fake Scamtrax 5-star rating years before doing anything to remotely deserve it
-install 2-2-2 business class seats even on newer planes like the A350-900
-converting your loyalty program to make it revenue-based
What else am I missing?