The Lufthansa Group positions itself among the largest airlines in the world and assumes the role as the leading European airline group. In this role, the Lufthansa Group aims to continue to play a part in actively shaping the global airline market. It strives to follow the mission statement: the Lufthansa Group connects people, cultures and economies in a sustainable way. In doing so, it aspires to set standards in terms of sustainability and customer-friendliness. It uses the potential of innovation and digitalisation to develop customer-focused products and increase efficiency. Corporate responsibility and identity are put into practice locally and supported by overarching functional processes that enable synergies and economies of scale. A strict focus on costs, operational stability and reliability in all areas are firmly established in the DNA of the Lufthansa Group. The safety of flight operations is and will always be the top priority.
Structuring the Group along the airline value chain helps to maximise synergies between segments and makes it possible to scale business from external markets at the same time. The airlines form the core of the Lufthansa Group, with their comprehensive networks in their home markets of Germany, Austria, Switzerland, Belgium and northern Italy. In two business models – network airlines and point-to-point airlines – they serve the relevant customers and market segments with dedicated brands and differentiated quality promises, connecting Europe with the world. The passenger airline business is supplemented by Aviation Services that have synergies with the airlines. The aim is to continue strengthening the role of the airlines in the portfolio of business segments over the long term.
The aviation industry is defined by dynamic markets and competition, even when not facing a pandemic. The main drivers of this dynamic are exogenous uncertainty, changing customer demands and shifts in the value chain. These include new data-driven decision-making tools that have an increasing influence on airlines’ distribution and increased activity from aircraft and engine manufacturers in the maintenance business. To meet these challenges, continuous transformation and the modernisation of the Lufthansa Group are core principles of the corporate strategy. The aim is to safeguard the Lufthansa Group’s leading market position and economic success by developing it into an agile and flexible organisation that is even more competitive.
The coronavirus pandemic has had an unprecedented impact on the aviation industry. The Lufthansa Group has responded quickly and comprehensively to set up the “ReNew” restructuring programme as a reaction to the crisis-related market collapse and the changed financial situation. Liquidity outflow was successfully reduced or stopped, fixed costs were reduced in the short term by over 30% and capital expenditures reduced by around two-thirds compared with the original planning.
By 2024, annual costs should structurally be around EUR 3.5bn lower than before the crisis. In addition to reducing material expenses across the board, adapting the headcount in flight operations and administration to future demand is an important instrument for achieving this goal. For this purpose, voluntary programmes have already been successfully implemented in Deutsche Lufthansa AG and Lufthansa Technik AG in particular and staff surpluses reduced in a fair and socially responsible manner. The necessary job reductions are also taking place as part of restructuring programmes at other airlines and companies in the Group.
In addition, the Lufthansa Group has actively used the crisis to accelerate the Group’s transformation and create a good starting position to be successful in the future competitive environment. For example, the complexity was reduced by simplifying the base and AOC structure – among others by ending the flight operations of SunExpress Deutschland and passenger flight operations at Germanwings. Economies of scale will be realised consistently and flight operations with competitive structures and a good operating performance will be scaled up.
Production flexibility was also improved by reactivating temporarily parked aircraft and the use of seasonal wet-lease capacities, for example, to better compensate for market volatility and seasonality. At the same time, operational efficiency was increased, for example through the increased harmonisation of plane maintenance and processes and the implementation of digitalisation measures. Accelerated phasing out of old plane models and the simplification of the fleet structure contributed to lowering emissions, increasing fuel efficiency and reducing maintenance and staff costs.
In addition, the focus on the customer was sharpened by the digitalisation of customer touchpoints. The customers of Lufthansa Group have also benefited from the inclusion of new destinations in the route network and expanding the tourist segment via Eurowings Discover.
The transformation will continue into the future. The focus here is on exploiting market opportunities, further increasing customer orientation, accelerating digitalisation, corporate responsibility and sustainability and modern forms of work organisation.
The strategic objective of the Lufthansa Group is to continuously align its services, business models and organisational structures with the complex and dynamic market environment. This will make it possible to systematically make use of the opportunities arising from trends and changes to the market. Key success factors are a strict focus on customer needs, close attention to costs and responsible, sustainable business practices. Flexibility and adaptability are increasingly important as the market becomes more dynamic.
In view of changes to the structures of supply and demand, an even greater focus on the customer is a core element of the Group strategy. The aim is to put customers, with their individual wishes and needs, at centre stage and further increase customer loyalty by implementing holistic measures which offer direct and tangible customer benefits. At the same time, the intention is to make the travel experience as simple, flexible and individual as possible.
For this reason, all the products and services along the travel chain are continuously reviewed – even during the coronavirus pandemic – and new, innovative and sustainable in-flight and ground products and services are developed. The three most important aspects here are digitalisation, individualisation and sustainability. The aim is to offer tailor-made customer information and self-service elements through digitalisation and to make the travel experience even more comfortable through increasing personalisation of products and services along the whole travel chain. Sustainability plays an increasingly important role, for example to meet the customer’s wishes for CO2-optimised flying.
A particular focus of the further development of the offering is on a seamless digital travel experience for the customer, which is linked with personal appreciation. By concentrating on products and services with direct purchase decision relevance that the customer is willing to pay for, costs are simultaneously managed. An example of this is the introduction of the new short-haul catering concept by the Network Airlines for which a range of high-quality food and drink is offered for a fee.
The automation of customer services, such as rebooking and providing additional digital information through various challenges, will be further improved. Customer-facing employees will also have greater decision-making authority in order to offer passengers an even better, more solutionoriented and individual service. Products will continue to be aligned with the respective needs of the customers, as with the different types of seat in Business Class, for example.
Consistent use of the potential for innovation and digitalisation is the foundation for increasing customer satisfaction and boosting efficiency in an operating environment determined by higher customer expectations and pressure to be efficient. Modular solutions will increasingly feature in product and service development to limit investment risks. The products and services of partners will also be used in areas in which the Lufthansa Group cannot provide them cost-effectively itself.
Responsibility is the basis for commercial activity in the Group. The Lufthansa Group aspires to lead the airline industry with high standards in this area too. It therefore builds continuously on its environmental commitment, is dedicated to many social issues and treats its employees responsibly and fairly.
In terms of environmental policy, the Lufthansa Group aims to cut its net carbon emissions in half by 2030 compared with 2019 and supports the objective of making aviation carbon neutral by 2050. Within the framework of these net goals, the Lufthansa Group will set even more specific efficiency targets for reducing carbon emissions in the core business segment that are line with the Paris Agreement and the rules from the internationally reputable Science Based Targets Initiative (SBTi) supported by the UN. The official registration for an evaluation from the initiative was submitted in November 2021 and an evaluation is expected in the third quarter of 2022.
In order to achieve these objectives, the Lufthansa Group is investing continuously in fuel-efficient aircraft accompanied by operational efficiency measures at the airlines. The newly created “CleanTech Hub” platform also bundles innovative technological initiatives, supports efficient flying and enables systematic cooperation with internal and external stakeholders. The Lufthansa Group also works with policymakers and partners in industry, technology and research to promote the industrialisation and use of sustainable fuels. The expansion of intermodal transport, in which the Lufthansa Group is already a market leader, is also being driven forward systematically in all home markets.
In addition, the Lufthansa Group includes sustainability aspects as a key factor in the design of its products and services. The Lufthansa Group platform Compensaid offers passengers with the Group’s own airlines and those travelling with other airlines the option of reducing CO2 emissions by purchasing sustainable fuels (SAF) or offsetting them with high-quality climate action projects. The Lufthansa Group’s own business trips are also compensated for by this method.
In its product and service development, the Lufthansa Group systematically applies the principles “reduce – recycle – reuse – replace” to avoid waste. Here the aim is to replace disposable plastic products with environmentally friendly products wherever possible and to reduce plastic packaging overall. The focus here is increasingly on avoiding food waste.
In terms of responsibility for its employees, the Lufthansa Group attaches great importance to offering its staff an attractive working environment with transparent structures, efficient processes and a wide range of social benefits. In terms of social responsibility, the Company promotes greater equality of opportunity for disadvantaged people worldwide via the financial and material support for educational establishments and training provided by help alliance, the Group’s own aid organisation.
The central importance of sustainability for the Lufthansa Group is reflected in the fact that it is represented at the Executive Board level. Implementation of the sustainability strategy is further supported by its embeddedness in the remuneration of the Boards and the management levels and by the audited disclosures in the combined non-financial declaration. The Lufthansa Group also actively supports the measurement by numerous international ESG ratings, such as MSCI, Sustainalytics, CDP and Ecovadis, to ensure transparency about activities and progress at all times. In 2021 the Group also reported for the first time in line with the TCFD and SASB standards.
Dialogue with the Company’s stakeholders is also a component of sustainable corporate governance. This continuous exchange gives the Lufthansa Group a better understanding of its different interest groups’ needs, expectations and wishes, which permits their inclusion in the Company’s business practices.
The airlines form the core of the Lufthansa Group. They are positioned in the relevant market segments as high-quality carriers. Their nationwide presence in their home markets enables them to offer an attractive range of flights and route networks. The Lufthansa Group aims to maintain the leading market position of its airlines going forward. To this end, the Lufthansa Group’s traffic system is being transformed into a multi-traffic system, consisting of hubs, point-to-point traffic and intermodal offerings.
Lufthansa German Airlines and SWISS will continue to set standards for quality and cost-effectiveness in future. With their wide range of destinations and frequent flights, they offer the greatest connectivity of all the European airlines.
Austrian Airlines and Brussels Airlines connect their home markets with Europe and the world. At the same time, they combine a high-quality and attractive product with a low cost base, which can hold its own against low-cost carriers at the bases in Vienna and Brussels.
With Eurowings, the Lufthansa Group has an innovative and competitive offering in point-to-point traffic, which addresses both price-sensitive and service-oriented customers with low-cost basic fares and additional service options that can be booked flexibly.
The ongoing optimisation of the Group fleet has been accelerated as a result of the crisis. Key targets are the systematic renewal of the fleet to cut fuel consumption, reduce carbon emissions and trim the number of aircraft models by retiring and phasing out older, less efficient aircraft. Phasing out large aircraft, in particular the Airbus A380, also increases operational flexibility. In return, short-term opportunities were used to strengthen the Lufthansa Group fleet by additional new technology long-haul aircraft of the types A350-900 and Boeing 787-9.
In order to exploit opportunities in the long-distance leisure travel market, the range of long-haul connections from the hubs in Frankfurt and Munich targeting private travellers is being expanded. Eurowings Discover has supplemented and strengthened the touristic portfolio of the Lufthansa Group since July 2021 with a range of short-, medium- and long-haul routes. The passengers are thus able to benefit from the wide feeder network and the established ground processes of the Lufthansa Group Network Airlines. It also makes use of the global distribution strength of Lufthansa German Airlines.
It is precisely in the post-pandemic phase that cooperation with partner airlines is becoming more important, in order to strengthen market presence in key traffic regions. This is why the successful joint ventures in the Lufthansa Group are being developed and partnerships extended in all important markets. The range of intermodal transport solutions that are seamlessly integrated into the travel chain is also being extended. Although the pace of consolidation in the airline industry has slowed temporarily but significantly as a result of the coronavirus crisis, the Lufthansa Group still aims to drive the consolidation of the airline sector actively in line with strategic and financial objectives.
With its Aviation Services, the Lufthansa Group includes several companies that are global leaders in their respective sectors. In order to secure and build on their successful positioning, the Aviation Services are permanently adapting their business models to changing markets and competitive environments. Lufthansa Cargo is increasingly participating in international eCommerce shipments through the planned use of the pure freight version of the medium-haul aircraft A321. Miles & More is the central programme for customer loyalty and is developed continuously by means of systematic alignment with customers’ interests. This entails adapting the programme structure and making the Miles & More partnerships broader and deeper, for example.
In view of the fundamental impact of the coronavirus crisis, restructuring programmes are also being implemented at the Aviation Services companies to increase efficiency, cut costs and strengthen their competitiveness.
The value contributed to the Lufthansa Group by every one of the Aviation Services is reviewed and refined continuously. In connection with its positioning as an airline group, the Lufthansa Group not only assesses the attractiveness of the individual market segments, it also determines whether it is the best owner for the respective company on the basis of existing or potential synergies. It may therefore make sense for certain Aviation Services companies to further develop outside the Lufthansa Group or together with partners.
Following the sale of LSG group’s European business in 2020, the disposal of the LSG group’s international business and AirPlus will be taken forward. The sale timing will depend on the recovery of the relevant markets that are key to achieving a fair valuation for the sale. (Partial) disposal and partnering options for Lufthansa Technik are also under review, taking into account the necessary capital expenditure, synergies and value creation potential.
In order to fully exploit potential synergies between the sub-areas and to minimise the coordination effort, the organisational structure of the Lufthansa Group is being developed further. The aim of the development is to achieve lean, flexible and efficient structures as well as quicker decision-making processes. This also aims to support cultural change and promote an agile and enterprise-based mentality. The airline management holding company being created will focus on maximising synergies in airline core processes.