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?
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.
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.
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.
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)