Lufthansa: Dreamliner and Airbus A350 threaten the business model

Investors should think early enough what this means for the economic model of Europe's largest airline.

The Dreamliner changes everything

In 2011, the first Dreamliner of Boeing (WKN: 850471) was delivered. The aircraft, also known as the Boeing 787, has for the first time in decades brought together a host of fundamental technological innovations in a new model. Particularly important for the aviation industry is that it can cover long distances with significantly reduced fuel consumption. Compared to other models of the same size, a Dreamliner consumes about 20% less fuel, which fundamentally changes the cost accounting of airlines.

Boeing contradicts Airbus (WKN: 938914) with its gigantic A380 much more on efficiency than on capacity. A Dreamliner is smaller compared to the usual long-haul jet. But Airbus has followed suit and since 2015, it delivers the A350, a model very similar to the Dreamliner – not too big, but modern and efficient. According to Airbus, an A350 consumes 25% less fuel and has the same reduction in operating costs per pbadenger mile

Many reports claim that these new models are real long-haul routes, making possible Direct flights between Europe and Australia, C is an interesting innovation that can hit the golf airlines, but should not be a major change for Lufthansa. Paradoxically, the high level of efficiency rather threatens the economic model

More competition in Germany

The Lufthansa Group serves nearly 300 destinations in more than 100 countries. Many routes are served by Germany only by Lufthansa. Of course, aircraft carriers from other countries fly to German airports, but Lufthansa dominates significantly, even in terms of long-haul flights. This is also logical because the airline has many advantages, such as existing infrastructure and good time windows.

With Dreamliner and A350, the cost of long-haul flights is now fundamentally changed due to their low operating costs. Foreign airlines can now offer direct economic flights to Germany and compete directly with Lufthansa.

The Japanese market is an interesting case study

This development is illustrated by flights to Japan. Eight years ago, Lufthansa commissioned the first giant A380 jet, launching the carefully selected Frankfurt-Tokyo Narita line. This route is now run with a 747 because the request was apparently not important enough.

This is not necessarily surprising, after all, for years, especially the Japanese airline ANA has spread to Germany. At Frankfurt Airport, it even offers two daily direct flights to Tokyo, one more than Lufthansa. Especially interesting are the smaller airports Munich and Düsseldorf, where ANA offers direct flights with the Dreamliner. Lufthansa does not leave Düsseldorf at all and even the A350 from Munich because the need for a bigger plane does not seem to exist. The Dreamliner even makes room for a third airline, Japan Airlines flies daily from Frankfurt to Tokyo

So Lufthansa does not have the monopoly of direct flights to Japan at German airports . What remains of the German airline are direct flights from Frankfurt to Osaka and Nagoya, as well as direct flights between Zurich and Vienna to Tokyo. If the demand is particularly strong, Japanese airlines could offer flights much easier than before and thus increase the pressure on prices.

The development has just begun

The two new long-haul aircraft are coming soon Market and therefore no large quantities have been delivered. The more they are represented in airline fleets, the easier it will be to compete directly with Lufthansa

Many long-haul routes may therefore be more competitive in the coming years and decades, which will not make Lufthansa's job easier. .

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Marlon Bonazzi does not own any of the mentioned actions. The Motley Fool does not own any of the mentioned actions.