NEW YORK: Citing a need to respond to the growing competitive threat of low-cost airlines, Lufthansa German Airlines CEO Karl Garnadt today revealed that the flag carrier is studying a “proof of concept” that would see it fly high-density, low-fare Airbus A330-200 service.
While Lufthansa still needs to put an investment case in front of its supervisory board, the carrier’s current thinking is to “start with seven aircraft”, all A330-200s, which would be leased, says Garnadt. “There is a lease market out there for that kind of aircraft and that would be available.”
If the new ‘Wings’ concept is approved by the board – a decision that is expected to be made by December – Lufthansa envisages launching service in November 2015. The aircraft would not be configured with all economy class seats. Rather, Lufthansa is eyeing an old-fashioned cradle-type seat for premium class, and a “wider seat pitch” section of economy class seats. However, the “majority” would be economy seats.
“We don’t have the marketing decision yet on how we’ll put it,” says Garnadt. However, during an earnings call today Lufthansa management said the airline is in talks to make SunExpress – its JV partner with Turkish Airlines – a partner in Wings, reports Reuters.
Responding to Lufthansa’s news that it is specifically mulling a cradle seat for business class on high-density A330-200s, noted travel analyst Henry Harteveldt says, “If this is a way to tangibly differentiate the new ‘low fare business class’ from Lufthansa’s ‘mainline’ lie-flat seat, I see no problem with it.”
For the new Lufthansa CEO, “It’ important that one side maintain Lufthansa as the core brand of the Lufthansa Group, and [retain that] quality to make sure this is a positive future, but on the other side [we] work on different concepts, some of them even to try new things, which we have never done so far, and open ourselves to other customer groups.”
He adds that Lufthansa must “work diligently to be more efficient in the group, to control our cost base, do all the things which are not always shiny but are necessary to stay within the global aviation game.”
Lufthansa’s new proof of concept is separate from its now formal work to launch ‘Jump’, a new higher-density configuration for its A340-300s. Garnadt says the aircraft – which will be configured with 18 of Lufthansa’s new full-flat business class seats, 19 new Premium Economy seats and 262 economy seats – will launch “late August or early September 2015”, and will likely be available for booking before the end of the year.
Though destinations for Jump have yet to be announced, Garnadt confirms that Lufthansa is looking at Tampa, Panama City, Cancun and Cape Town. Southeast Asian destinations are also being studied.
“We still need some [of our] A340-300s to cover our traditional markets,” he says, and these “fortunately” will require more business class seats than the Jump concept. But Jump represents a “very contained risk because we’re using assets which we already have” and working in an environment that “we are familiar with” as it’s a product standard “synchronized with Lufthansa products”.
If Lufthansa didn’t launch Jump – which is simply the working title for the concept – then the carrier would have “had to take a decision to put those A340s out for sale or doing something reasonable, so we decided we extend the life of the aircraft with a product upgrade so to speak”.
This year Lufthansa has grappled with significant industrial action from its pilots, as it seeks to restructure its cost base. “The Lufthansa Group has about 10,000 pilots, [and] about 5,500 pilots are governed by the core labor agreement with Lufthansa. This consists of modules, including an early retirement module, which enables pilots to retire at the age of 55, at about 60% of their salary and for us it’s quite obvious that such an agreement – which is outstanding in the industry – is not sustainable, so we terminated that contract and offered talks with the pilots’ union to come to an agreement more in line with demographic developments which is long-term sustainable,” says Garnadt.
But the fall-out from pilot strike action has been fairly profound. “The sad truth is we see negative impact of EUR 170 million of the pilot issue. Fortunately we still have confirmed our forecast of EUR 1 billion operating result, but the industrial action really causes a big damage,” he says. Though Lufthansa has been able to rebook most passengers, its bookings have been impacted.
It remains to be seen if Lufthansa’s latest study into ‘Wings’ low-cost, long-haul, high-density service will further fuel industrial action. But Lufthansa believes shifting dynamics in the industry, including the threat of LCCs, means it must “find structures that are suitable to lead us in the next 10 to 20 years, to strategically position the group in a way that we are among the leading companies”.
Photo courtesy of Jason Rabinowitz, aka @AirlineFlyer