FLUG REVUE May 2005: The Lufthansa aviation concern

May 2005

LUFTHANSA IS MORE THAN AN AIRLINE

By Volker K. Thomalla

Most people associate the name Lufthansa with that part of the company which operates passenger aircraft. But actually there is more to Lufthansa than just Lufthansa Passage Airline. Back in the 1990s, Lufthansa positioned itself under its then CEO, Jürgen Weber, as an aviation and technology company, and this helped it to survive the aviation crisis of the last few years better than many of its international competitors. Privatisation did the company a lot of good: had it still been in state ownership on 11 September 2001, it would have been ill-equipped to survive the aftermath of the terrorist attacks. The corporate strategy is quite clear: “As an aviation group, we operate in six business fields: passenger transport, logistics, engineering, catering, tourism and IT services.”

Airbus A321 - Lufthansa

Airbus A321 in the 50 year special livery

The individual group companies act in a flexible and market-oriented manner in their relevant markets. They do not have to take their lead from their parent company alone, but in some cases they even offer their products and services to competitors of Lufthansa Passage. This means they can achieve better capacity utilisation than would have been possible as a division of the company and contribute to the increased productivity of the Group as a whole.

One example of this is Lufthansa Technik, whose main base is situated at Hamburg Airport. Its shares are 100 percent owned by Lufthansa AG. It is one of the biggest technical service providers in air transport and business aviation, and also looks after aircraft owned by airlines that are direct competitors of Lufthansa. These include several no-frills airlines. Lufthansa Technik has a workforce of over 10,500, and operates four bases in Germany (Hamburg, Frankfurt, Munich and Berlin). The number of its outposts abroad has risen to over 50. Lufthansa Technik for its part also has a number of subsidiaries and affiliates of its own. Over 12,000 additional staff work for companies in the Lufthansa Technik Group world-wide.

Lufthansa Cargo AG, which became an independent company in November 1994, covers the logistics business field. 100 percent owned by Lufthansa AG, it not only markets the freight capacity of all the Lufthansa and Thomas Cook aircraft, but it also operates its own fleet consisting of 19 McDonnell Douglas (Boeing) MD-11F's. The Boeing 747-200F's that were operated in the past have been sold, but can be re-chartered as required. In 2004, Lufthansa Cargo transported 1.8 million tonnes of cargo and mail, up 10.9 percent on the previous year. Together with Singapore Airlines Cargo, SAS Cargo and Japan Airlines Cargo, LH Cargo formed the cargo alliance WOW in 2001.

Lufthansa's stake in Thomas Cook AG is only 50%. This is the tourism arm of the company and operates a fleet of 77 aircraft. The company is currently undergoing a recovery programme, having been loss-making in the last few years. The strategy of dropping “Condor” from the brand name under which the company's aircraft flew did not work and has been abandoned. Condor aircraft are now allowed to bear the “Condor” logo once more. According to Thomas Cook CEO, Wolfgang Beeser, the company's results took a turn for the better in the 2003/2004 business year. “We achieved all the intermediate goals that we had set ourselves without exception. Passenger and revenue figures rose again, the operating result is positive once again, and pre-tax losses have been halved.”

LSG Sky Chefs is responsible for catering within the Lufthansa Group. With a turnover of around $2.7 billion per year, the company is the biggest provider of airline catering in the world. Despite this, the company was badly hit by the airline crisis in the last few years and is currently also in the midst of a restructuring programme. LSG Sky Chefs boasts some 270 airlines as its customers.

Ten years ago, the Lufthansa Group hived off its internal IT department into a new, independent company known as Lufthansa Systems. As a provider of IT services to the airline industry, the company has steadily increased its turnover from year to year and today is involved in many fields outside aviation. It offers its customers tailored solutions covering every aspect of electronic data processing, from network management through to the establishment of a trunk mobile radio network. One of LH Systems' biggest and most spectacular projects was the introduction last year of new, electronically generated maps in the Lufthansa cockpits. Only four weeks after the initial rollout, half of Lufthansa's takeoffs and landings were already being performed with the aid of the new maps. LH Systems maintains the map data in a separate navigation database. Its specialists are currently working on the electronic processing of navigation information for 1500 airports so that other airlines will be able to use the system as well. In Kelsterbach, LH Systems operates one of the most modern and biggest computer centres of Europe, with 6,500m3 of computer space.

From FLUG REVUE 5/2005

Last updated 14 April 2005

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