The air is thick at this year’s Lufthansa Annual General Meeting. The shareholders express clear criticism of the strategic course and the quality management of the airline.
This year, too, the Lufthansa Annual General Meeting will take place virtually. This time, the management of Germany’s largest airline is facing a lot of criticism from shareholders. The large fund companies Deka and Union Investment are particularly bothered by the strategy of the aviation group.
The premium brand Lufthansa will be diluted by the handling of its flights by the subsidiaries Eurowings and Eurowings Discover as well as external leasing airlines. In addition, the group with eleven flight operations is too complex. “The brand jungle confuses customers and poses considerable reputational risks,” said Deka sustainability chief Ingo Speich.
“No clear strategy”
CEO Carsten Spohr has “no clear strategy,” criticized Henrik Pontzen, head of sustainability at Union Investment. A simplification of the complex group structure is not in sight. “And it is unclear whether Lufthansa wants to position itself as a low-cost airline or as a premium airline.”
Institutional investors are also critical of the planned takeover of Italy’s ITA Airways, the reorganized successor to the ailing Alitalia. A hub in southern Europe makes sense, but not expansion in the domestic Italian market, which is dominated by low-cost airline Ryanair, Speich said. It is questionable why Lufthansa believes in ITA’s commercial success, while previous owners could not have stopped the airline’s decline. “We do not believe that the takeover of the loss-making Italian ITA will pay off for the shareholders,” warned Pontzen. “More complexity eats into returns.”
Mouthpiece for small shareholders
With their Lufthansa shares of less than one percent, the two fund companies do not have much influence on voting. But they are traditionally a mouthpiece for criticism from small shareholders.
They also complain about the quality of the premium airline – from many flight cancellations and delays, especially in last year’s chaotic summer, to the care in the lounge or the food on board. “The airline is currently disappointing in many areas from a qualitative point of view,” complained Bernardo Loewenstein, owner of a travel agency. Poor availability of the service hotlines, ticket prices that are too high, technical problems with rebooking on the Lufthansa app or long waits for refunds are denounced.
“Premium quality is in the DNA”
Lufthansa promised improvement through more staff, a new app, more automation and self-service or the extensive renewal of the equipment in Business Class in the coming years. Offering premium quality is in the DNA of the Lufthansa Group, explained Spohr. The head of the company also defended the strategy adopted and once again promoted the planned entry into ITA.
As in the previous three years, the management is again proposing to the shareholders that they forego a dividend for the past year. Lufthansa reported a profit of 791 million euros for 2022 after the Corona crisis was overcome. Decisive for a dividend payment, however, is the conclusion of the stock corporation according to the German Commercial Code, which was determined to be a loss of 2.7 billion euros, mainly because of pension burdens to be assessed differently. Only for the current financial year does the DAX group hold out the prospect of a dividend again.