Lufthansa: Dreamliner and Airbus A350 threaten business model ()

07/15/18 09:00
Motley Fool

Most do not know it, but global aviation is in full swing. This will also affect Lufthansa (WKN: 823212) in the coming decades

Investors should think early enough what this means for the business model of the largest European airline.

The Dreamliner Changes Everything

In the fall of 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 consumes a Dreamliner about 20% less fuel, which fundamentally changes the cost accounting of airlines.

Boeing compared Airbus (WKN: 938914) with its huge 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 the same reduction in operating costs per pbadenger-mile

Many reports claim that these new models are real long-haul routes, making possible flights direct 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, since the airline has many advantages, such as existing infrastructure and good time slots.

With Dreamliner and A350, however, the profitability of long-haul flights is fundamentally altered because of 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 has no monopoly on direct flights to Japan from airports German. 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. However, if the demand is particularly high, Japanese airlines could offer flights much easier than in the past and thus increase the pressure on prices.

Development has just begun

The two new long-haul aircraft are not ready Market and as a result no large quantities have been delivered. The more they will be represented in the airline fleets, the easier it will be to directly compete 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.