More industry consolidation is on the way says Lufthansa CEO Carsten Spohr. He wants to ensure Lufthansa is in the so-called champions league.
Speaking at a conference in Berlin, Spohr said:
It is obvious that consolidation will act further and we as Lufthansa want to be part of that.
There will most likely be three major European network carriers or groups of carriers, plus one or two low cost guys.
Our job in Lufthansa … is to make sure the company is fit enough to play in this league of global champions league players in our industry
I laughed when I read the last line…leave it to a German CEO to make a football (soccer) reference when it comes to airlines.
But he actually makes a persuasive point. Spohr argues there are three major airlines in the USA, three in the Middle East, and three in China. Thus, he argues Europe will also gravitate toward three major players. And you could even argue that has already occurred, with the Air France Group (Air France + KLM), IAG Group (British Airways + Aer Lingus + Iberia), and Lufthansa Group (Lufthansa, SWISS, Austrian, Brussels). There are independent non-budget players in Europe like Alitalia, SAS, Turkish Airlines, but the three kingdoms…or championship leagues…have already been declared.
Speaking of Alitalia, Spohr says the answer is consolidation via mergers, not bankruptcy. Lufthansa continues to eye Alitalia, hoping to return to the Italian market in a big way after the failed Lufthansa Italia experiment.
> Read More: Lufthansa Wants Friendship, Not Marriage With Alitalia
But don’t construe Spohr’s argument to signal there will only be three major legacy airlines in Europe. He’s referring to umbrella organizations. Speaking of SWISS, Spohr said people still love the “Swissness” of SWISS and that “here in Europe brands still matter a lot.” Lufthansa bought SWISS 10 years ago, but unlike its plans for Brussels Airlines has no intention of folding SWISS into Lufthansa. Same story with Austrian.
CONCLUSION
Considering how a big three have already formed in Europe, Spohr’s comments were not exactly revealing. Nevertheless, I liked his choice of language and he makes a valid point. Just like in sport, airline champions and airline losers emerge. Lufthansa hopes it will never be one of those losers.
image: Lufthansa
I’d argue Turkish has neatly aligned itself with Star Alliance while still competing with the ME.
They ARE already in the league. People fly BA only because they need to go to London, not because BA is any special at all. A hub-agnostic transfer passenger will find things like MUC and ZRH a far better experience, and for someone who doesn’t speak half a word of German at all, I still find German hospitality far more sincere and authentic than the British ones.
Most Brits would agree with you – and MUC & ZRH are well recognised as being the best transfer hubs in Europe and some of the best in the world.
Before you put BA down any further though just, to keep in the soccer frame of mind, look to your own teams first. They make BA look like premier league players.
Outside of the European big three there are still some incredibly strong smaller players – A3 and AY spring immediately to mind. SK is also there but a bit of an economic basket case though not on AZ lines. It may not suit the big three but those strong independents have in the main better standards of service and they compete strongly as members of star and oneworld.
Somehow I doubt the further consolidation Spohr seeks will come his way from them so I’m not sure where he’s going to find it unless he has his sights on easyJet and they play ball. Equally his hopes for AZ are intrinsically flawed for as long as the Italian government maintains a majority share which is their stated intention and just look what that did to EY’s finances!
As you say, it’s already happening. Unfortunately, as the case of the U.S. shows, consolidation usually leads to negative outcomes for the consumer in the form of higher fares and/or worse service. The Economist’s Gulliver travel blog did a note on this a while back pointing to the more aggressive consolidation in the U.S. being part of the explanation for the higher fares there versus Europe.
Not entirely convinced by the argument that “3 is gravitated towards” when Southwest is the largest domestic carrier… and with their east coast/west coast split JetBlue and Alaska essentially make 2 x 0.5 to get us 5.
China is perhaps more true, but this kinda misses the point when you have to discount Cathay Pacific & Dragon which is right next door (or in the porch..) to stay at 3 carriers. And it discounts the sizeable carriers based rather close by in Taiwan and Seoul.
Then on the Middle East… is it even going to be 3 for that much longer? If Qatar get sunk by the blockade and Etihad wains into Emirates, it would be down to 1! Or is it 2 because of Fly Dubai?
Basically I think he’s wrong.
Lufthansa is not in the stadium, let alone the game. In respect of a “champions league” they would be eliminated in the first round, similar to Germany at the World Cup.
Truly awful airline.
Which US carrier is better than LH?
I’m struggling to think.