2. Lufthansa Hub Management · PDF fileLufthansa Hub Management & ... Adjustment of night...

Lufthansa Hub Management &Management of Hubs

Karl Ulrich GarnadtExecutive VP Services und HRLufthansa German Airlines

MUC, Terminal 2June 25, 2008

Lufthansa Group2

Agenda

Development of system and governance: Lufthansa‘s multi hub system

Comparison to competitors‘ approaches

Lufthansa on the right track

Lufthansa Group3

The Lufthansa Group is attracting more customersthan ever

Frankfurt 1970 Frankfurt 2008

Munich 2008

7,013,9

20,6

47,0

62,9

0

20

40

60

80

1970 1980 1990 2000 2007

Passengers in Mio.

* Deutsche Lufthansa AG, Lufthansa Regional, and incl. SWISS from July 2007 on

*

Duesseldorf 2008

Lufthansa Group4

Frankfurt

2,813 weekly frequencies to 169 destinations in 75 countries

Fleet: 105 short-haul aircraft, 70 long-haul aircraft

FRA

MUC

ZRH

Munich

2,649 weekly frequencies to 109 destinations in 40 countries


Direct Services1,733 weekly frequencies to 67 destinations in 26 countries


Zurich

76 destinations in 42 countries


* Direct flights onlyFleet as of May 2008. Includes Regional Aircraft. Long-haul fleet includes Wetlease (Privatair). LX Fleet (Regional) includes Wetlease.

Starting with one centre hub, Lufthansa is movinginto a true multi hub system

DUS

… plus 57 destinations* and 1.724 weekly frequencies a dditionally via STAR

Lufthansa Group5

The advantages of a hub system are still mostappealing…

In theory the most efficient way to organise trafficIn theory the most efficient way to organise traffic

45 aircraftCost: 100

Point-to-point

9 aircraftCost: 20

Hub-and-spoke „Horses for courses“comparative unit costs

Seats

CRJ200

CRJ700

CRJ900

AvroB737-500

B737-300

A319

A320 A321

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

40 90 140 190

Lufthansa Group6

… but to respond to our customer base, we have to combine a multi hub yystem with direct (point-to-point) services

From single-hub to multi-hub 360o-offer for our customers

2-Hub Modell

Kapazitätsb

indung von 17 A

/C

Kostenbindung: D

M 598 M

io.

FRA

MUC

HAM

FRA

MUC

Multi hub transferoptions plus

direct services

DUS

Lufthansa Group7

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PHLJFK

CLTATL

IAD

ORD

EWRBOS

DTW

YYZYUL

FRA

MUC

IAHDFW

DEN

YVRYYC

LAX

SFO

PDX ZRH

PNQ

BOM

BLR

MCOMIA

CCU

DEL

HYD

LHE

MAA

SEA

FRA 184

MUC 70

ZRH 55

FRA 48

MUC 10

ZRH 14

The Lufthansa network matches important flows of traffic, our multi hub system guarantees high connectivity

Example: number of frequencies per weekfrom a Lufthansa hub to North America andIndia/Pakistan respectively

Source: Flash, Summer 2008 (Calendar week 38)

Lufthansa Group8

From „Hub Management“ to „Division“: Core operational, se rviceand management functions have been assigned to decentrali zedunits, closer to the customer and the competition

History 2004 - 2007

+

+

+

Station management

+

Infrastructure+

Costs of infrastructure

+

Crew MUC (Cabin/cockpit)

+

Network management

Now/future

+

...

Fleet (Dedicated tailsigns)

+

„Divisions“ (FRA, MUC and Direct) have increasing resp onsabilities

Lufthansa Group9

FRA

MUC

ZRH

Each division is taking over a specific role, theentire system benefits from an increased sense of entrepreneurship

DUS

Lufthansa Group10

Strenghts

� Lufthansa as dominant hub carrier� Broad destination portfolio (360 degree) � Highest number of flights per day� Strong value for the region as the largest employer in the state

of Hesse

Frankfurt, backbone of the Lufthansa system: strongLH position, but limited growth due to capacityrestrictions

Requirements

� Expansion of infrastructure urgently needed: Terminal capacity and runway

� Adjustment of night curfew

Perspectives

� A380 operation from autumn 2009� Administration approval of extension plans� Extension of runway and terminal capacity expected for

autumn 2011

Lufthansa Group11

Munich: Europe´s highest rated hub by customerswith dynamic growth

Requirements

� Expansion of infrastructure urgently needed: „Satellite“ and third runway

� Intermodality improvement (High speed trains to downtown Munich)

Perspectives

� Improvement of network quality, growth by size of airplanes� Rollover regional fleet (decrease of unit costs)� Further stabilisation of continental network� Independent base for cabin and cockpit crew

Strenghts

� Short minimum connecting time (30 min)� Consistent three class operation� Solid system partnership with airport� Positive results Terminal 2

Lufthansa Group12

Direct services are supporting lufthansa‘s presencein non-hub-catchments and completing our 360°-offer

Requirements

� Fair competition, e.g. no distortion by subsidy payment tonon profitable airports

� Focus on competitive cost base (productivity, aircraftsize, airport cost)

� Innovative marketing concepts

Perspectives

� Further development of successful programs, e.g. „betterFly“� Further expansion in important catchments, especially

HAM and DUS, including intercont operation DUS� Local system partnership, cooperation e.g. regarding

infrastructure BBI

Strenghts

� Local presence and competence in non-hub-catchments� Innovative steering, pricing and marketing� Strong focus on competitors

Lufthansa Group13

With Zurich and Milan Lufthansa seizes attractivemarket opportunities

Zurich

� Economic success: Trust in SWISS integration pays off� Access to important customer groups in the Swiss market� Local identity, value of two brands� Zurich enables additional transfer options within the

Lufthansa Hub system

Milan

� Economically important region with high volume of traffic� Perspectives

- Development of European network with focus on business traffic

- Close cooperation with partners and airport- First step: Positioning of 6 shorthaul aircraftoperated by Air Dolomiti in spring 2009

Lufthansa Group14

Agenda




Lufthansa Group15

Aircraft fleets( Regional aircraft included )

AF/KL LH/LX BA Iberia Ryanair EasyjetAir Berlin

Longhaul

Shorthaul and regional

on order

115

133

58

379

177

82

343

123

153

146

4922

164

135

116

159

14146

114

Source: ACAS, without LCC: Germanwings, Clickair, Flybe, Transavia

The European airline market – key Players

Lufthansa Group16

The „Big Three“ in the legacy league

BA AF / KL LH Group

� Focus on mega-catchmentLON and longhaul

� Low focus on traffic outsideLON

� Limited Europeanfeed

� One brand� Oneworld

� Successful in the past� Future with Open Sky?

� Moderate growth

� Moderate feeder trafficin PAR

� Extensive feed AMS

� Two brands� SkyTeam

� Strong growth basis andsuccessful integration

� Growth strategy

� Two hubs PAR/ AMS� Mega-catchment PAR

� European feed isessential

� Strong presence inEuropean feed markets

� Multiple brands� Star Alliance

� Growth strategy

� No mega-catchment� Multi hub

� Success depends on position in Europeanmarkets

Lufthansa Group17

ZRH

* exemplarySource: LH Catchment Data

Different market structures drive different strateg ies

LON

MAD

15,5

2,8

5.9

19.4

PAR

MXP

ROM4.6

13.7

13.5

9.3

6.2

7.3

12.5

Catchments* (population in millions within 90 min)

STO1.3

BUD3.3

ATH3.1

VIE4.3

IST8.8

DUS22.6

AMS13.5

CPH2.4

FRA12.5

MUC7.3

Lufthansa Group18

7 7

11

95

3

AF/KL LH/LX BA

Transfer

Local

Source: MIDT O&D Passengers 2007 vv

Longhaul passengers in 2007, in Mio.

Efficient feeder services are the lifeline forLufthansa‘s longhaul system

(37%)

(63%)

(26%)

(74%)(41%)

(59%)

BAAF / KL LH Group

Lufthansa Group19

On time performance (Departure)AEA-Hubs April 2008 in %

78,3 78,0

83,0

73,6

52,8

88,284,2

79,3400

333

265

302

372

165

200

395

0

10

20

30

40

50

60

70

80

90

100

OSVIE

LXZRH

LHMUC

KLAMS

LHFRA

IBMAD

AFCDG

BALHR

0

50

100

150

200

250

300

350

400

450

Lufthansa hub performance in comparison to majorEuropean hubs

*Average number of departures per day

*

Lufthansa Group20

On time performance: Zurich and Munich take toppositions, but room for improvement

AEA Comparison

Ranking Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08

1 VIE VIE VIE VIE VIE AMS AMS ZRH VIE MUC VIE VIE VIE 88,2%

2 MUC AMS AMS MUC AMS VIE VIE MAD MUC ZRH MUC MUC ZRH 84,2%

3 ZRH ZRH MAD ZRH MUC FRA FRA AMS ZRH MAD MAD MAD MUC 83,0%

4 AMS MUC MUC FRA FRA ZRH MAD VIE MAD VIE ZRH ZRH AMS 79,3%

5 FRA MAD ZRH MAD ZRH MUC MUC MUC AMS AMS AMS FRA FRA 78,3%

6 MAD FRA FRA AMS MAD MAD ZRH FRA FRA FRA FRA CDG MAD 78,0%

7 CDG CDG CDG CDG CDG CDG CDG CDG CDG CDG CDG AMS CDG 73,6%

8 LHR LHR LHR LHR LHR LHR LHR LHR LHR LHR LHR LHR LHR 52,8%

Lufthansa Group22

FRA

MUCZRH

Fragmented market and demand patterns in CentralEurope require a broad strategic approach, notlimitited to „Multi Hub“

Multi-PRODUCT

Multi-HUB

Multi-BRAND

Global

Network

Lufthansa Group23

Ground product evolution: customer convenienceand process efficiency

Mobile BordkarteMobile Bordkarte

LH0024, S10A, 08DEC, M

Daten

Lufthansa wünscht Ihnen einen

guten Flug.

Mobile BordkarteMobile Bordkarte

LH0024, S10A, 08DEC, M

Daten

Lufthansa wünscht Ihnen einen

guten Flug.

Mobile boarding pass

� Pilot routes: FRA-HAM and vice versaMUC-HAM and vice versa

� Check-in channels: Mobile internetSMS push check-in

� From end of June 2008 mobile boarding pass will also beoffered at online check-in on all domestic routes as an alternative to home print boarding pass

� High customer satisfaction

Online check-in with home print boarding pass

� More than 10,500 online check-in users per day in May 2008

� Online boarding pass available on:

- all flights ex-Germany (except USA)

- 560 routes worldwide, 50 of these intercont

� Extension on further routes planned in 2008 (especially USA)

Lufthansa Group24

To further improve the lounge product LH will inves t more than 150 million Euro in the next few years

Lufthansa Group25

Besides premium traffic market: Our “Multi Product” strategy supports our seat load factor and the productivity of aircraft

Competitive pricing concepts Extension of seasonal services

Lufthansa Group26

Investments in modern technology reduce costbase and help the environment

Average specific fuel consumption(litres per 100 passenger kilometres)

30,3%Reduction since 1991

Lufthansa-fleet 2007:4,32 l/100pkm

4,31

4,36

4,39

4,38

6,2

5,64

5,315,19

5,145,14

4,984,97

4,68

4,574,65

4,51

4

4,5

5

5,5

6

6,5

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

4,32

15 Airbus A 380-800

18 Airbus A 330/340

15 Bombardier CRJ 900

20 Boeing 747-8

30 Embraer 190

64 Airbus A 320-Family

Fleet investment, LH Group

Lufthansa Group27

Agenda




Lufthansa Group28

LH/LXAF/KLBAOAL

Market shares in premium traffic: LH Group in leading position in most European markets

30%

5% 2%

64%

46%

10% 6%

38%

7% 8% 4%

81%

18%11%

3%

68%

10% 5% 2%

83%

8% 2% 2%

87%

45%

7%2%

47%

19%12% 6%

63%

27%

11% 5%

57%

12% 4% 3%

81%

5%

46%

3%

46%

2% 4%

36%

59%

Premium traffic market sharesLonghaul traffic to/from Europe

Source: MIDT 2007

Spain/Portugal

UK, Ireland

Scandinavia

Germany

SwitzerlandAustria

Italy

France,Benelux

Eastern Europe

GreeceTurkey

Russia

CIS

Lufthansa Group29

40

50

60

70

80

90

100

1992 1994 1996 1998 2000 2002 2004 2006 2008

AEA average

Lufthansa‘s seat load factor exceeds the AEA average

* 2008: Jan-April only. SLF cum. 2008 expected to remain stable.Source: AEA (Association of European Airlines) and Lufthansa Annual Reports

[%]

*

Lufthansa Group30

40

50

60

70

80

90

100

2000

2001

2002

2003

2004

2005

2006

2007

2008

40

50

60

70

80

90

100

2000

2001

2002

2003

2004

2005

2006

2007

2008

AEA average

1) domestic and cross border Europe* 2008: Jan-April only. SLF cum. 2008 expected to remain stable.Source: AEA (Association of European Airlines)

*

Our capacity is highly utilized, on longhaul flightsbut also in European traffic

AEA average

*

SLF longhaul flights SLF shorthaul flights 1

[%][%]

Lufthansa Group31

The productivity of our fleet is increasing

Entwicklung der Flottenproduktivität (Kont Regional)

7,5 7,5

7,9

7,0

7,7

7,9 7,9

7,4

7,1

6,46,66,87,07,27,47,67,88,0

Total FRA MUC DIRECT

2006 2007 2008 (expected)

Entwicklung der Flottenproduktivität (Kont Classic)

8,6 8,8 8,8

7,0

8,7 8,9 9,0

7,48,3

0,0

2,0

4,0

6,0

8,0

10,0


2006 2007 2008 (expected)

Shorthaul (Classic)

Shorthaul (Regional)Entwicklung der Flottenproduktivität (Interkont)

14,414,3

14,714,8 14,8 14,7

15,0

14,5

13,8

14,0

14,2

14,4

14,6

14,8

15,0

15,2


2006 2007 2008 (expected)

Longhaul

Aircraft productivity, in block hours per day

Lufthansa Group32

Thank you for your attention!

Lufthansa Group33

Disclaimer

This presentation is for informational purposes only, contains preliminary financial and other information about Lufthansa and is subject to updating, revision, amendment and completion. This presentation does not and is not intended to constitute or contain any offer of securities for sale or a solicitation of an offer to purchase any securities of Deutsche Lufthansa AG or any other company and neither this presentation nor anything contained herein shall form the basis of any contract or commitment.

Certain statements contained in this presentation may be statements of future expectations and other forward-looking statements or trend information that are based on management's current views and assumptions and involve known and unknown risks and uncertainties. In addition to statements which are forward-looking by reason of context, including without limitation, statements referring to risk limitations, operational profitability, financial strength, performance targets, profitable growth opportunities, and risk adequate pricing, as well as the words "may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, or continue", "potential, future, or further", and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements. Lufthansa assumes no obligation to update any such statements or any other information contained herein.

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