Following widening Q1 losses, Lufthansa should prioritise its premium offering over cost cutting

By moving away from the low-cost segment of the business and concentrating more on premium and business customers the company should be able to recoup profits.

As the low-cost segment of the airline industry struggles, Lufthansa should concentrate on its less price-sensitive segments.

Lufthansa Q1 2019

Lufthansa has posted a net loss of €342 million for Q1 2019, a big decline compared to a loss of €39 million the same time last year. The company blames rising fuel costs and overcapacity for its meagre results but as long as it focuses on its premium customers, Lufthansa will remain a leading player.

Premium customers are willing to pay for a better flight experience

Q1 is often the weakest quarter for airlines, so although the drop may seem initially significant the company should be able to recover over the course of the year. By moving away from the low-cost segment of the business and concentrating more on premium and business customers the company should be able to recoup profits.

Low-cost subsidiary Eurowings made just 13.4% of the group’s traffic revenue in the first quarter of 2019 and struggled last year due to integration costs incurred after parts of Air Berlin were purchased. Low cost, therefore, is not a segment Lufthansa needs to depend on.

Customer appreciation is key to attracting and maintaining custom

Personalisation and the integration of technology are at the forefront of the premium customers’ demands and Lufthansa already offers a virtual chatbot – named Mildred – via the Facebook Messenger App, which can aid with searching for and booking flights.

The company is also dedicated to appreciating their customers through its Brilliant Basics and Magic Moments experiences, these are added touches such as handwritten birthday cards which are intended to make customers feel special and encourage them to book with the company again.

Focusing on a high-quality fleet should be a priority

Overcapacity has been an industry-wide issue and a key factor in the demise of Monarch, Air Berlin and WOW air. Not to make the same mistake, companies such as Lufthansa should concentrate on quality rather than the variety of aircraft on offer.

The company is lucky not to have any 737 MAX aircraft owing to the grounding of the aircraft worldwide following two fatal accidents. News that Lufthansa was the first high-profile airline to place an order with Boeing after the grounding of aircraft was met with discontent by some weary customers.

Customers looking beyond a ‘no-frills’ experience may be attracted by the knowledge that airlines are becoming more environmentally friendly. The addition of the Airbus A350-900 to the Lufthansa fleet, for example, was widely met with approval as it uses 25% less kerosene and produces 25% fewer emissions.

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