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.