Lufthansa has made three public appearances in recent weeks, once involuntarily. The announcement that it wanted to buy the new Italian airline ITA Airways together with the shipping company MSC caused a stir. Group CEO Carsten Spohr had previously criticized the softened rules for take-off and landing times at major airports, which are forcing airlines to carry out thousands of uneconomical flights. Despite the corona slumps, the European Commission wants to slowly return to the old system, in which airlines have to return the slots if they do not use them at least 80 percent. And Lufthansa no longer wants to offer feeder flights for its competitor Condor – but the cartel office is currently stopping the plans.
What do things have to do with each other? Nothing at first glance, but a lot at second glance. It’s all about market access and market share again. When the old order in aviation threatened to collapse at the beginning of the pandemic, the EU Commission used exceptional rules to ensure that airlines were allowed to keep their slots even if they were not using them. The status quo was frozen and airlines like Lufthansa were happy that Ryanair and Easyjet couldn’t grow at their own expense. Now Lufthansa wants to attack itself, and if it means boarding another ailing airline, then that too.
The fact that the old ways of thinking still hold up is also astonishing because the results of the consolidation are very mixed. The Lufthansa Group is one of three large blocks that have formed over the past 15 years. The other two are Air France-KLM and British Airways parent company International Airlines Group (IAG). During this time, Lufthansa bought three airlines: Swiss, Austrian and Brussels Airlines. All three will continue to fly under their own brand and management, with some key functions within the group being managed centrally.
As far as the profitability of the subsidiaries is concerned, only Swiss is a success. In the years before the pandemic, it always achieved a significantly higher margin than the Lufthansa Group or the core brand – which says a lot about what really matters: A coherent, tightly drawn-out business model, competitive costs, solvent customers and – admittedly – a front too much competition well protected hub. More than ten years after the takeover, Austrian and Brussels Airlines are still loss-making problem cases with poor prospects. Despite the presence of Lufthansa, Vienna has developed into a paradise for low-cost airlines. The daughters only have a certain value as feeders for long distances.
The debate about “ghost flights” is daring
So now ITA is on the program, initially only a small part, later maybe more. The fact that MSC initially wants to bear the brunt is very convenient for Lufthansa. Founded only in October with massive state financing as the debt-free successor to the notoriously deficit Alitalia, ITA currently burns around 130 euros per passenger flown, easily twice as much as the turnover per seat of cheap providers.
Italy has always been an important market for Lufthansa, it gets many transfer passengers there for the hubs in Frankfurt and Munich, the possible ITA entry should secure that. Lufthansa also wants to prevent competitors such as Air France-KLM or Delta from gaining access. But Italy is like Vienna on a larger scale: Ryanair and Easyjet have long dominated the business, and there are good high-speed trains. It is doubtful whether ITA would really hurt that much with another Lufthansa owner.
Like the ITA deal, the debate about alleged “ghost flights” is daring. The slot regulation must not be misused to create artificial barriers to entry. In normal times, airlines have no problem flying some routes on which they do not make any money. For example, to keep competitors away. It is said that they have even bought into airlines for this reason and are still paying the bill to this day.