Lufthansa Case Study
Lufthansa Case Study
Lufthansa Case Study I. External Analysis: Several large scale, interrelated conditions have affected the airline industry over the past several years in such a manner that every carrier has had to respond in order to remain viable and competitive. a. Environmental Analysis: The international war on terror, with its attendant rising cost of oil has created havoc in a number of ways (Lufthansa Annual Report, 2004). Rising costs have resulted from the increase in fuel prices. Customer check-in wait times and flight time delays have resulted from new regulations designed to ensure passenger and plane safety, including more rigorous bag searches, more extensive passenger screening, and the like. This has resulted in customers paying higher prices and a less enjoyable flight experience. Additionally, deregulation and liberalization has accompanied the globalization of the airline industry, so that companies have had to compete against each other in new markets, as well as to gain entry into new territories. The rise of low cost local and regional airlines has made the competitive environment difficult to maneuver for large, formerly-state-subsidized national carriers. This has resulted in the need for strategic alliances between airlines in order to attempt to protect market shares and profits (Friehe and Curti, n.d.). b. Opportunities and Threats: The increase in fuel prices is likely to continue into the distant future, requiring either reduced services to control costs or new technologies to accommodate. The threat of low cost, flexible companies entering the markets in a variety of places, cutting into market share in numerous small areas, taken as a whole, threatens to harm larger carriers unless they can find a way to compete with quick, cost-effective actions in local areas. Alternately, the large carriers must diversify operations and use their economies of scale and size to explore other
Lufthansa Case Study I. External Analysis: Several large scale, interrelated conditions have affected the airline industry over the past several years in such a manner that every carrier has had to respond in order to remain viable and competitive. a. Environmental Analysis: The international war on terror, with its attendant rising cost of oil has created havoc in a number of ways (Lufthansa Annual Report, 2004). Rising costs have resulted from the increase in fuel prices. Customer check-in wait times and flight time delays have resulted from new regulations designed to ensure passenger and plane safety, including more rigorous bag searches, more extensive passenger screening, and the like. This has resulted in customers paying higher prices and a less enjoyable flight experience. Additionally, deregulation and liberalization has accompanied the globalization of the airline industry, so that companies have had to compete against each other in new markets, as well as to gain entry into new territories. The rise of low cost local and regional airlines has made the competitive environment difficult to maneuver for large, formerly-state-subsidized national carriers. This has resulted in the need for strategic alliances between airlines in order to attempt to protect market shares and profits (Friehe and Curti, n.d.). b. Opportunities and Threats: The increase in fuel prices is likely to continue into the distant future, requiring either reduced services to control costs or new technologies to accommodate. The threat of low cost, flexible companies entering the markets in a variety of places, cutting into market share in numerous small areas, taken as a whole, threatens to harm larger carriers unless they can find a way to compete with quick, cost-effective actions in local areas. Alternately, the large carriers must diversify operations and use their economies of scale and size to explore other
Cited: Friehe, T., and Curti, H. (n.d.) Overrated remedies, weak competition: An analysis of the Lufthansa/Austrian Airlines alliances in Germany-to-Austria air traffic market. Retrieved 26 November 2006 from www2.jura.uni-hamburg.de/le/Overrated%20Remedies%20and%20Weak%20Competition.pdf. Lufthansa Annual Report. (2004). Retrieved 25 November 2006 at http://www.lufthansa-financials.de/servlet/PB/menu/1016861_l2/index.html. Moody’s Investors Service. Deutsche Lufthansa AG. Retrieved 26 November 2006 from www.lufthansa-financials.de/servlet/PB/show/1019581/Moodys%20Analysis%20LH%20092005.pdf. Standard and Poor. (2006) Research update: Deutsche Lufthansa outlook to stable on improved trading prospects. Retrieved 25 November 2006 from www.lufthansa-financials.de/servlet/PB/show/1019578/RatingStandardandPoors102006.pdf.