Lufthansa Respond to Competition

European flights can become profitable for Lufthansa with its low cost subsidiary, Germanwings. Credits:”THE VIEW FROM FEZ.” : German Wings Over Morocco. N.p., n.d. Web. 06 Oct. 2013.

In today’s globalized society, more and more people frequently travel between different cities and countries around the world for business and leisure purposes. Technology advance everyday to ensure the safety and security of passengers in which fatal accidents involving air travel are steadily decreasing. When consumers make a choice of which airline to pick for their travel plans, the majority would compare and select a lower cost airline considering if the comfort they receive do not greatly differ. This may apply less on an international long-haul flight where travelers are more likely to seek comfort over price, but the statement holds true for short-haul international and domestic flights where price thus becomes a more determinant factor.

As this trend started to grow, more and more low-cost and charted airlines are becoming more appealing to consumers. Airlines including Air Berlin and Ryanair are both very profitable low cost airlines emerging in the European air transport market. As these airlines flourish, less travelers are selecting Lufthansa, Europe’s second largest airline, which previously contained expensive business class seats for domestic travel which are no longer preferred by consumers.

July of this year, Lufthansa noticed that due to competition, their domestic flights and flights to rest of Europe must switch to a lower cost airline in order to boost profits. Germanwings, a subsidiary flight carrier owned by Lufthansa since 2009, now operate a majority of domestic and European flights under Lufthansa only except flights from the Frankfurt and Munich hubs and is likely to shrink their losses and aim to break-even by 2015, where profit to Lufthansa would thus increase to 2.3 billion Euros. Demand for Germanwings are expected to improve along with its occupancy of flights.

This move by Lufthansa is a direct response to its competitions incurred. The company had implemented the “Score Program” to change their cost and operating structures which they must reach their target to become a more profitable airline. Furthermore, Lufthansa proposed to scrap business class seats off of flights to Bangkok, Canada, India and Africa to increase seats and fly more condense planes, while on the other hand, invest in younger and significantly more comfortable larger flights such as the A380 super jumbos to Miami and Shanghai.

The success from these moves by Lufthansa is through customization to consumers. Flights to different parts of the world carry passengers which differ in values. Consumers prioritize price and comfort differently depending on their destination, their purpose of travel and the length of the flight. Evidently, Lufthansa generated enough statistical data to conclude that domestic and international flights in Europe would be better operated with a low cost airline such as its subsidiary, Germanwings.

Credits:

“Lufthansa to Fly into Profitable Zone with European Business.” DW.DE. N.p., n.d. Web. 06 Oct. 2013.
Weiss, Richard. “Lufthansa Sees Low-Cost Success as Cabin Upgrade Costs Rise.” Bloomberg.com. Bloomberg, 04 Oct. 2013. Web. 06 Oct. 2013.

 

Radioactive Fast Food

Yoshinoya Holdings to use produce from Fukushima lead to consumer fears.
Credits: http://blog.japantimes.co.jp/yen-for-living/tag/yoshinoya/

In March 2011, a major undersea earthquake with a magnitude of 9.0 forced a tsunami upon East Japan and the news had spread around the globe. Soon after, the disaster sparked yet another problem for Japanese citizens as the tsunami which stroke the Fukushima Daiichi Nuclear Power Plants resulted in heavy leakages of radioactive material after a severe meltdown and failures to equipment. The intensity of the nuclear disaster was rated a 7 on the International Scale and citizens living in a proximity of 30km to the power plants are evacuated from their homes.

Only two and a half years after the disturbing accident, Yoshinoya Holdings, which owns a popular chain of stores selling stewed beef rice named gyudons announced that they would use rice and vegetables grown only 60 miles from the power plants in support of farmers and the reconstruction of Fukushima.

The decision by Yoshinoya to change its key resources and partners was considerably not a beneficial move for the company. The Japanese government ensures the public that food are strictly monitored and are safe to consume, however, consumers are simply not buying this.  Yoshinoya is taking a huge risk in this decision that may result in a shift in consumer attitudes for their products. Fukushima’s fertile soil had been used to grow crops and produce before the disaster and Yoshnoya was hoping to revive this land through this action. Consumers however, are no less afraid than they had before and Fukushima’s produce had experienced incredible decreases in price due to decreased demands.

If Yoshinoya succeeds in maintaining or slightly lowering their sales but at the same time, lower their costs from switching to Fukushima produce, the company may earn higher profits. Yet if consumers stop demanding gyudons which has a possibility of containing radioactive substances harmful to their health in the long term, Yoshinoya would thus likely to suffer incredible losses.

Perhaps Yoshinoya is overconfident to Fukushima when only one day after its announcement, the Fukushima Power Plants suffered another leak of radioactive spills, causing water to contain over 6700 times the legal limit of radioactive material.

July of this year, a bass caught in Japan contained 10 times more cesium than the restricted ceiling.

Is Fukushima prepared to supply food to the alerted Japanese citizens or is Yoshinoya heading for a disaster to implement this plan?

Credits: – “Popular Fast-food Chain to Grow Food 60 Miles from Fukushima Plant.” NBC News. N.p., n.d. Web. 05 Oct. 2013.

-“Water 6,700 times More Radioactive than Legal Limit Spills from Fukushima.” NBC News. N.p., n.d. Web. 05 Oct. 2013.

-“Cancer Risk Linked to Radiation Levels in Fish Species after Fukushima.” Straight.com. N.p., n.d. Web. 05 Oct. 2013.

 

 

Allowance for Insurance

Above: Companies no longer use a group health plan in order to cut costs. Credits: http://www.democracyforvancouver.org/healthcare/life-preexisting-condition/

When Walgreens, the largest drug retail chain in the United States with nearly 8300 stores across the nation, decided that it was time to shift the health plan for its 160,000 employees, it foreshadows a revolutionary change in one of the most destructive expenses of a company.

Walgreens proposed that instead of having an insurance plan for all of its eligible employees, the company would subsidize their applicable workers to an insurance plan in the private health insurance market. This decision had been recognized by multiple other companies including Sears, which proposed to shift the previous year and IBM as well as Time Warner who desires to first move the retirees to the private market.

The effects of this decision to the employer, in this case Walgreens, is obvious. With rocketing prices on insurance, companies no longer need to be handcuffed by insurance companies. Giving the employees a subsidy for them to choose their own health insurance is simply to shift the inflation burden to their workers, thus giving employers greater control over their expenses which would become fixed instead of rising abruptly.

In the short term, employees may see a benefit from this shift. A healthy worker may not require certain benefits which were offered to them in the previous group plan and would now have more liberty to choose a less expensive plan and obtain the subsidy from their employers. However, for most employees in the long term, rising insurance prices would result in heavier personal expenditures to healthcare if their employers do not increase the subsidy they give out.

The decision would revolutionize the health benefits of employees as more companies switch to private health insurance markets for their employees, yet the workers are the ones who would likely look upon to higher expenses in the near future.

Credits:

KIM, SUSANNA Susanna Kim More from Susanna » Business Digital Reporter Follow @skimm. “Walgreens Moves Employees to Private Health Exchange.” ABC News. ABC News Network, n.d. Web. 01 Oct. 2013.

MORRISEY, ED “Video: Walgreens to Dump Employee Coverage for 160,000.” HotAir.com. N.p., n.d. Web. 01 Oct. 2013.