Deutsche Lufthansa AG

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Deutsche Lufthansa AG
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Agenda

• A Timeline of Lufthansa
• Time for a turnaround
• Lufthansa hones its alliance building skills
• Lufthansa faces the pressures of Globalization
  The New Philosophy
• Lufthansas EPG profile
• Conclusion

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A Timeline
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Fast Forward
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The Turnaround Phase I

• New CEO
• A reduction of 8,500 staff
• Pay freeze for everyone
• Company begins negotiating with Germany to become
  a private company

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The Turnaround Phase II

• Late 94, the German government dilutes its
  holdings in the firm to just 36
• In Jan 95, five new independent companies were
  created in an effort to decentralize operations
• Cargo
• Technik (maintenance)
• Systems
• Ground service
• Flight operations
• The five companies plus the remaining existing
  subsidiaries Condor (chartered flights),
  Lufthansa City Lines (domestic service), and LSG
  Skychef were now all wholly accountable for their
  own results

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The Turnaround Phase II

• Restructure the new organization and its
  subsidiaries, around six core principles
• Responsibility
• Accountability
• Alliance possibilities
• Third party business
• Flexibility
• Customer orientation

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The Turnaround Phase II

• These drastic measures helped make 1994 the most
  profitable year in Lufthansas history
• Despite this enormous success, yields continue to
  fall at around 2 per annum, down from 7 when
  the crisis began more soul searching is needed
• After the Gulf War and subsequent recession,
  international travel Lufthansas historical
  strength, takes a hit
• Industry over capacity and an intense price war
  heat up as national carriers in Europe and Asia
  begin to subsidize the further globalization of
  their national airlines
• In addition, Chapter 11 insolvency legislation in
  the US is allowing some airlines to operate as a
  loss

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The Star Alliance

• In May 1997, together with United Airlines, SAS,
  Thai Airways International and Air Canada,
  Lufthansa formed the Star Alliance
• Alliance members
• Handle each others passengers and their luggage,
• Honor each others frequent flier rewards program
  points,
• Harmonize their products and procedures,
• Share revenues as well as costs on shared routes,
• Jointly plan future routes and service offerings,
  and
• Harmonize their IT infrastructures and code
  share

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The Star Alliance

• Star Alliance, which now has sixteen members, is
  today recognized as the worlds leading aviation
  alliance
• The Alliance is helping its members globalize
  their operations efficiently
• The alliances Worldwide TimetableTM program for
  Mobile devices is an example of how the airline
  is leveraging its combined IT infrastructure

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The New Philosophy
We want to offer a seamless global connection
for the global passenger. -Senior VP, Lufthansa
AG
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Lufthansas EPG

• In order to understand our strategic partners we
  need employees from other culturesalthough we
  need to protect our own culture although we
  must not deny our history.
• there was never an explanation of the word
  Globalisation
• People like Lufthansa because we are German. I
  dont think its necessary to employ people from
  everywhere in the world to become a global
  airline.
• HR Manager
• Jürgen Weber considers the internationalization
  of management a critical factor
• German has a style. Just because a Singapore
  International Airlines stewardess is willing to
  do everything for a customer doesnt mean a
  Lufthansa stewardess should be.
• The Board members have town meetings all over the
  world. This is where the service quality
  imperative comes down.
• The intention is to develop other strategically
  based centres with teams led by skilled German
  staff who could coach local technicians.
• The downside is that the German civil aviation
  authority requires technicians to have particular
  qualifications.

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Lufthansas EPG
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Conclusions

• The company is in the midst of its third phase
  of re-structuring
• Re-negotiate with labor unions more concessions
  on the globalization of the workforce
• Customer-orientation is key in the airlines
  business traditionally not one Lufthansas
  strengths
• Define, Clarify, and Communicate the meaning of a
  global airline as Lufthansa sees it