Swiss, Austrian, Lufthansa fight costs & competition

The three principle airlines of the Lufthansa Group all reported their independent results yesterday and not one of them could be described as good.

Swiss and Austrian both saw fuel costs rise a staggering 28%, and profits slipped as a result. Lufthansa reported similar issues.

Eurowings (which is a subsidiary of Lufthansa and not a separate group entity like Swiss and Austrian), is behaving dismally, and Lufthansa has had its own issues.

The biggest problem for all of them beyond fuel and labour costs, is staggering levels of competition.

Lufthansa said that the level of competition inside Germany and Austria was so severe, with easyJet and RyanAir fighting it out with the Groups main airlines and Eurowings, that it would accept high levels of losses to maintain its market share ‘no matter what’.

All of the airlines complained about over capacity, yet all of them are adding more even while retiring older aircraft. Austrian for example is ditching its entire Dash-8 fleet but adding A320’s.

RyanAir results are the most worrying for the Lufthansa Group airlines. If an airline based entirely on its massive scale and reach, with single type aircraft, relatively low labour rates and constant oversight of its costs is struggling to make profits? What are high cost higher fare airlines supposed to do to make it work?

Lufthansa Group is willing to compete inside Europe and any price. It’s by far the biggest airline group with the deepest pockets, largely because it has multiple ancillary businesses that do exceptionally well.

One estimate I saw showed the average European airline was making a loss of €3.03 per ticket sold. The only way of recovering that was through food & beverage sales on board, and luggage fees.

Nobody seems willing to budge or give a jot of space. Come the winter months when the cash flow falters and forward bookings are low, some of the smaller less agile airlines are going to be teetering on the brink.

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3 thoughts on “Swiss, Austrian, Lufthansa fight costs & competition

    1. I’m not entirely sure the competition is quite as healthy. Its long term consequences will be very poor for customers if smaller airlines are sqeeezd out and only the giants are left.

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      1. Ya that probability can’t be ignored purely but then too…if we look into history, business ultimately finds a way to grow and that too taking care of the customer…what say

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