While the US legacy carriers have been doing as well as ever lately, the same can’t be said about major carriers in some other regions. That’s especially true in Europe and Australia, where some of the dominant carriers have unsustainable cost structures while being faced with competition from low cost carriers.
In a way, it’s not that different than when Uber begins service in a new market. The taxi mafias haven’t done anything to innovate in decades due to lack of competition, and then find themselves totally unprepared to compete when they no longer have a monopoly.
It’s no secret that I love Lufthansa, though I can’t help but feel like they’re having a bit of an identity crisis. It’s understandable that the major carriers in Europe sort of have to try to be all things to all people, at least to some degree:
- They need to be able to compete with the low cost carriers on short-haul flying
- They need to be able to compete with the Middle Eastern and Asian airlines on longhaul flying
- They need to offer a competitive premium cabin product to still lure business travelers
But I can’t help but feel like Lufthansa is going about it wrong.
Lufthansa is regressing with their new business class
As I wrote about yesterday, Lufthansa is continuing to cut first class capacity, even more so than they first announced at the beginning of last year.
As much as I’m personally not happy about that since I love their first class product so much, I get it. I actually think Qatar Airways’ CEO is onto something when he says that first class is obsolete and that the way of the future is to create a “super business class.” Back in the day business class seats were rarely fully flat, which made first class seats much more justifiable, since it was easier to get a good night of sleep in them. Now that most airlines have flat beds in business class, first class is getting harder and harder to justify.
But here’s what I think Lufthansa is doing wrong. They’re eliminating first class throughout their 747-400 fleet. You would think they would install the same business class product they have on their 747-8. The product is fine but not great… hardly cutting edge, and frankly a bit behind the times.
Lufthansa’s new business class product
They’re not exactly doing that, though. While they’re installing the same general product, they’re actually adding one more seat per row. So the new business class product they’re installing will be in a 2-3-2 configuration, meaning there will be a middle seat. Here’s the seatmap:
Lufthansa’s new business class product
While most airlines nowadays are aiming for direct aisle access from all business class seats, Lufthansa can’t even claim not to have middle seats in business class. It’s just embarrassing.
I would get if Lufthansa installed a new business class product and claimed there was no longer a need for first class. But to get rid of first class and in 2014 install a business class product with a middle seat is just… puzzling.
Lufthansa’s new low cost longhaul operation
Lufthansa will soon launch “Jump,” which is what they’re internally calling 14 of the 19 A340-300s that they’ll be reconfiguring in a high density configuration without first class.
Lufthansa A340-300
These planes will be based primarily in Frankfurt, and will primarily be flown to leisure markets. They’ll offer a small business class cabin, along with a premium economy and economy cabin.
Via Flightglobal:
Lower costs are key to Jump. Lufthansa has negotiated a roughly 20% reduction in costs compared to its core operation from airports, catering, labour and maintenance, says Bischof.
In addition, the decision to use older A340s eliminates any potential capital costs, he adds.
“If we want to participate in growth fields – different markets in the emerging markets but also some more solid markets – we have to add a new production platform at lower costs to make ourselves profitable and participate in those growth fields,” says Bischof.
Some possible initial destinations for Jumpy include cities like Chennai, the Seychelles and Tampa.
I’ve always dreamed of Lufthansa flying to Tampa (not that I live there anymore, so it’s a bit of a moot point now), and it looks like that might finally come true. Unfortunately it’s not on my terms, though. 😉
In and of itself I don’t think the low(er) cost operation is a bad idea. What’s interesting, though, is that this is separate from the real low cost carrier that Lufthansa is hoping to launch in the coming years:
Jump is separate from Lufthansa’s plans for a new long-haul low-cost subsidiary under its “Wings” plan. Bischof calls this a “second line of defence” against the likes of the Gulf carriers, Turkish Airlines and expanding European low-cost carriers.
While the intercontinental LCC plans are still in development, it will include a new brand, different ground and onboard product, and different staffing, he says. The operation will be based in Germany and operate from a base at either Cologne, Dusseldorf or Munich airports.
“We aren’t doing tricks like hiring in Ireland, going through an employment company in, I don’t know, the Caymans and trying to let them fly from Germany,” says Bischof, in a reference to Norwegian’s attempt to create a new long-haul LCC with such a complicated organisation structure.
Is Lufthansa trying to be all things to all people?
While I can appreciate the challenge of trying to operate in the current European aviation environment when you have to compete with airlines like Norwegian, Lufthansa’s strategy leaves me a bit puzzled.
They recently bought Germanwings, which I can rationalize, as they can compete in the ultra-low cost European market without devaluing their own brand. Similarly, I can see the benefit of them launching configurations that are more adaptable for certain markets.
But what leaves me puzzled is that they seem to be destroying the high end of their product as well. To eliminate first class in roughly half of your fleet and actually regress on your “new” business class product by adding middle seats is puzzling. Lufthansa’s new business class already isn’t exactly competitive, so I’m not sure I get their play here.
Is it just me that thinks Lufthansa is having a bit of an identity crisis?
Just flew Biz class Munich to Toronto on Lufthansa. All in all a pretty good product, I fully understand the need to become more cost efficient, which includes less First Class. There were only 3 seats occupied in the FC cabin, an expensive waste of space. BC was full. The new BC configuration has some drawbacks, like how does the person in the window seat get out if the person next to them has put...
Just flew Biz class Munich to Toronto on Lufthansa. All in all a pretty good product, I fully understand the need to become more cost efficient, which includes less First Class. There were only 3 seats occupied in the FC cabin, an expensive waste of space. BC was full. The new BC configuration has some drawbacks, like how does the person in the window seat get out if the person next to them has put their seat down into a bed? And those in the 2 centre seats had better be friends because they have to share a foot stool. But the service and food was excellent. And I loved the little extras like a handy place to hang your reading glasses! Who hasn't searched for their glasses on a flight?
Great post Lucky, it sure got us talking. I totally agree with Ron's & Andrew's positions, simple enough!
@ Lucky -- It's a little baffling to see LH J being so behind their sister companies (OS and LX). I honestly can't wait until one (or both) of them starts flying to Texas (Houston or Dallas). Any idea why a *A hub, IAH, isn't getting any love -- is United scheming to keep *A partner options to Europe limited? *sigh*
LH have definitely lost their mind. Their strategy is such a gigantic waffling that it boggles the mind.
Businesses are usually not going to succeed unless they are able to communicate a clear and unique value proposition. And the more commoditized the service becomes the more problematic things get since they progressively lose pricing power.
If LH was smart, they would do what made them successful in the first place...namely to follow their positioning as...
LH have definitely lost their mind. Their strategy is such a gigantic waffling that it boggles the mind.
Businesses are usually not going to succeed unless they are able to communicate a clear and unique value proposition. And the more commoditized the service becomes the more problematic things get since they progressively lose pricing power.
If LH was smart, they would do what made them successful in the first place...namely to follow their positioning as a leader in reliability, safety, engineering and soft product. That can command yield premiums.
Dealing with LCC business will destroy them.
@ Andrew -- I believe a bigger issue is not a few middle seats but rather having not having direct isle access in J. Most airlines are doing some variant of 1-2-1 in J but LH is doing either 2-0-2 or 2-3-2 except for rows 3 & 4 with a single middle seat.
Maybe I am just out of touch but I don't know anyone who would ever pay for first class at the rates Lufthansa charges. I know plenty of people who could, just don't know anyone who would. I understand that frequent flyers love those awards but I doubt the economics of first class these days, for all the reasons stated above. Business class has gotten good enough that it's just not warranted to sit in...
Maybe I am just out of touch but I don't know anyone who would ever pay for first class at the rates Lufthansa charges. I know plenty of people who could, just don't know anyone who would. I understand that frequent flyers love those awards but I doubt the economics of first class these days, for all the reasons stated above. Business class has gotten good enough that it's just not warranted to sit in First, especially not for a 6-7 hour flight between Germany and the eastern US. The differences in comfort and service are marginal. I have no data but I find it hard to believe that more than half the FC passengers paid for their tickets. In fact it seems like several of Ben's FC reviews in the past 12 months have noted that the FC cabin was fairly empty. If they are not selling those seats they should be replacing them with Business or PE seats as quickly as possible, because those do sell.
As a matter of fact, in some cases the differences between premium economy and business class are narrowing so much that it would be hard to justify even paying for business class. I flew Lufthansa old business class last year, and BA WT+ this year, honestly I did not find them terribly different. No way I would pay for Lufthansa old business over BA WT+, not on a 9 hour flight to the west coast. I think the real competition in the next 5-10 years is going to be in the business and PE markets - not First. The premium economy cabins for my flights have been packed, and I'll bet 90% of those people paid cash. In most markets I bet they can sell 40 seats at $2000/ea in PE a lot more consistently than they can sell 8 first class seats at $10,000/ea. It's all about revenue/square foot, just like in retail.
Just to flip this a bit to a positive, given that for work I can only purchase business class on longhaul and the United devaluation makes it not worth using miles for First on Lufthansa, I'm at least glad this means they'll have more new business class coverage. While the new product is not great, I still can't get over how absolutely horrendous the old business class is. I would fly United over Lufthansa's old...
Just to flip this a bit to a positive, given that for work I can only purchase business class on longhaul and the United devaluation makes it not worth using miles for First on Lufthansa, I'm at least glad this means they'll have more new business class coverage. While the new product is not great, I still can't get over how absolutely horrendous the old business class is. I would fly United over Lufthansa's old biz class any day. What an embarrassment for such a major European airline.
Could not agree more with Ron.
Much ado about not much.
The real story is they are planning to fly to Tampa?!? So Europeans heading to the US for a long holiday can't just do the hour or so drive from Orlando, which is already well served?
That makes no sense.
@ Greg -- While I agree with your logic, I don't think that's necessarily how people rationalize travel. For example, there are plenty of airlines that fly to both Newark and Kennedy, since they're for many people considered different markets. I think people thinking of vacationing in Clearwater or St. Petersburg wouldn't necessarily think of flying into Orlando.
No more limo to the plane : (
I believe the seat maps only show the 53 seat configuration and not the 67 seat configuration, without the mini-Y cabin. That version will have an additional of two rows with 2-3-2, making the total number of middle seats 4. Still not bad in my opinion seeing that most seats are still 2-seaters.
@Andrew: you make a good point and actually, there's the upper deck too. 52 business class seats in total, only two of which are middle seats. Granted, perhaps the four people sitting around those middle seats might be slightly more uncomfortable too -- so, 6 seats which are less good than the remaining 46. I think it's not the end of the world! They'll probably be the last to get chosen anyway and Lufthansa's business...
@Andrew: you make a good point and actually, there's the upper deck too. 52 business class seats in total, only two of which are middle seats. Granted, perhaps the four people sitting around those middle seats might be slightly more uncomfortable too -- so, 6 seats which are less good than the remaining 46. I think it's not the end of the world! They'll probably be the last to get chosen anyway and Lufthansa's business class is rarely completely full since they don't upgrade much.
I'm just happy they're installing lie-flat seats, this is a big improvement which can't come soon enough.
The main downside is that the number of business seats decreases from 66 & 80, to just 52. This could make getting awards tougher!
agree with andrew, actually 2 out of more than 50 seats upper and lower together are middle seat. Really don't see the issue, there will always be a couple traveling that doesn't mind stepping over their lover's feet...
I love you Ben but too much drama on this one. There are 6 rows of BC with 14 pairs of seats. Only 2 seats are in the 2-3-2 configuration. That is 2 of the 14 pairs. You made it appear that all rows have the 2-3-2 set up. Not a big deal in my view.
Regardless of premium cabins, I think the root of the problem is much deeper, not only for Lufthansa but for All European legacy airlines. The short haul is gone, they are taking a beating on Asian routes and the only way the can generate traffic America-Asia is cannibalizing their premiums on the America-Europe routes.
Lucky,
If I were running an airline I would be doing a lot of what Lufthansa is doing. I love the mileage game and I understand the love for premium travel, but it makes zero sense for a for-profit airline to fly with a half empty first class and/or minimal "cash purchased" seats. Revenue per square foot matters.
A large percentage of frequent flyers seem to think that their needs should be placed ahead of...
Lucky,
If I were running an airline I would be doing a lot of what Lufthansa is doing. I love the mileage game and I understand the love for premium travel, but it makes zero sense for a for-profit airline to fly with a half empty first class and/or minimal "cash purchased" seats. Revenue per square foot matters.
A large percentage of frequent flyers seem to think that their needs should be placed ahead of all other customers, and I think that's a misunderstanding of their financial importance to an airline. Does a frequent flyer have more importance than a single customer? Yes, but not significantly more. The need of a frequent flyer to be upgraded to domestic first or international business, does not outweigh the need for the airline to maximize revenue per square foot. If keeping frequent flyers happy means sacrificing 3 seats of economy in order to have a single business class seat, then that's not a fair trade for the airline.
If the business class seat or first class seat is purchased outright, then it probably does make sense to sacrifice 3+ economy seats, but without the internal data that airlines have showing purchased vs. upgraded vs. award, it would be foolish to second guess any airline that seems to be properly focused on efficiency.
My guess is the number of purchased premium class seats just isn't there. Do you really think there are anywhere near the 88 paying business and first class passengers on the majority of these 744 routes? I would guess the proposed 53 seats is much closer to reality.
I would think the low cost subsidiaries are more a reflection of keeping labor costs under control in order to compete in all phases of the economy market, than anything else. As Allegiant and Spirit prove, people will complain, but they'll still buy a ticket.
By the way, you've mentioned the middle seat in a couple of posts now.... come on man... it's only two rows out of twelve.
Ben- It's called cost cutting. First Cl was never profitable. Putting an extra seat in bus. cl per row adds rev. I agree, though, their bus cl is not competitive.
Weirdly, it seems that the 7 across business class layout is intended to be an improvement from the 747-8 format. The 747-8 launched the / \ style seats that left people playing footsies, and in the a330 they have avoided that, wisely, opting for a slightly different style (perhaps simply because of the narrower cabin). Now, with the 747-400, they don't to repeat past mistakes, but can't use the new seat in a 2-2-2 layout...
Weirdly, it seems that the 7 across business class layout is intended to be an improvement from the 747-8 format. The 747-8 launched the / \ style seats that left people playing footsies, and in the a330 they have avoided that, wisely, opting for a slightly different style (perhaps simply because of the narrower cabin). Now, with the 747-400, they don't to repeat past mistakes, but can't use the new seat in a 2-2-2 layout without seats pointing toward one another. So, the regression on the 747-400 from 2-2-2 to 2-3-2 is actually an attempt to improve the product, after spending a bunch of money designing a bad business class seat. It is a shame that they lag behind many airlines in Europe for their new business class seat (air france, alitalia, Austrian, Swiss, Brussels, finnair, iberia, air berlin all have better new hard products, and klm is equivalent to lufthansa).
I agree with everything you posted here Lucky. I find it absolutely ridiculous they are installing 2-3-2 in business class. Even US based airlines are shifting towards diect aisle. Who is LH trying to compete with, air koryo???
There are only two middle seats in the entire business cabin, not like the plethora of middle seats in J on United. These two seats seats will probably be the last to be booked, giving the aisle seats even more room and comfort.
@Miro, I have a strong feeling they will keep the FC terminal in Frankfurt given the high number of elites who live there. All HON Circle members have access to the FC terminal even if they're flying business or economy class.
I wonder what are the plans with FC terminal in Frankfurt? Given that they will trash half of FC capacity... do they still need it?