Porter’s Five Forces Analysis of Lufthansa
|Name||Deutsche Lufthansa AG ,Part of Lufthansa Group|
|Industry||Aviation ,Airline Transport|
|Revenues||16.81Billion Euros (Approx. 19.1 Billion USD,FY Ending Dec 2021)|
|Profit/Loss||(2.19) Billion Euros, (FY Ending Dec 2021)|
|Competitors||Air France-KLM, Ryan Air, Easy Jet,(European Competition) Turkish Airline (Global Competition), AIG|
Lufthansa is a flagship airline of Germany having headquarters inCologne,Germany. Lufthansa is the second largest airline in Europe founded in January 6, 1953.Lufthansagave a record recovery revenue after COVID -19 impact of 16.81 Billion Euros, with a Net Loss of 2.19 billion Euros, with net assets of 42.53 Billion Euros in Financial Year ending December 31, 2021.Lufthansa Global Ranking on 285 by Global Fortune 500, also ranked 14th by Aviationpros in the category of global safety ranking.
Lufthansa is operating — with 105,300 people employed globally.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis, defined by Professor Micheal E. Porter in 1979,at Harvard Business School is one of the most widely used tool for taking better strategic decisions.The analysis guides to take decisions in the directions which will be less exposed to competition and will provide better profits.
Lufthansa Rivalry among Existing Competitor
- Lufthansa Operations: Lufthansa is providing air-travel services for destinations in more than 80 countries with a codeshare partner with different airlines which further provide the use the flight capacities of different airlines to reach more destinations.Lufthansa record a recovery revenue of 16.81 billion euros in 2021, compared to 13.58 billion in 2020, which is a 26% growth rate. While Lufthansa gave a record revenue of 35.57 billion in 2019 in pre-pandemic environment.
Lufthansa fleet consist mainly of Airbus, Boeing and Bombardier.
In Year 2021 Lufthansa passenger traffic reached to 46.9 million from 36.4 million compared to 2020 which is a 29% growth, while the company was used by 145.2 million passengers in 2019, declared by Statista.
operating for reaching destinations in more than 80 countries with
- Lufthansa Business Revenue Segmentation:Lufthansa’s Business Revenue Segmentation is divided into following segmentation mainly Network Airlines, Eurowings, Logistics, MRO and Catering .Other than these there are Additional Business and Group Functions.
- Network Airlinesis generating revenue through Lufthansa German Airlines, SWISS, Austrian Airlines and Brussels Airlines with high quality service and great travel flexibilitywith an 8.3 Billion Euro segment revenue which is positive 26% change from previous year, in Year 2021.
- Eurowings serves the European business and personal air travel with low cost offers and innovative business ideas with a 0.82 Billion Euro segment revenue which is 37% positive change from previous year, in Year 2021.
- Logistics:Lufthansa Cargo is providing urgent consignment transportation and other e-commerce solutions with an investment in AeroLogic (an airfreight company) is also part of this business segment with a 3.8 Billion Euro segment revenue which is a 38% positive change from previous year,in Year 2021.
- MRO: Lufthansa Technik AG, provided above 800 customers repair and maintenance services of commercial aircrafts with a 4.0 Billion Euros segment revenue which is 7% positive change from previous year,in Year 2021.
- Catering:LSG Group provides various in-flight services with a wide range of food products and concepts with a 1.1 Billion Euros segment revenue which is a 15% negative change from previous year, in Year 2021.
- Air France-KLM(Competitive Rivalry):Air France (merger of KLM and Royal Dutch) gave a post pandemic recovery revenue of 14.3 Billion Euros in 2021 compared to 11.08 Billion Euros in 2020, which is recovery growth of 29%, while the company generated 27.18 Billion Euros in 2019.Lufthansa recently acquired 40% share in ITA Airways to give competition to Air-France and KLM.
- Competitive Rivalry with Other Players (Ryan Air, Easy Jet & Turkish Airline): Lufthansa is facing competition with Turkish Airlines for international travel in terms of low cost offers, larger fleet and with Ryan Air, Easy Jet for European Operations.
Lufthansa Threat of New Entrants
- Global Airline Transportation Industry Due to COVID-19 impact the global airline industry experienced a drop in travel activity to 56% in 2020 with a market size value of 359.3 Billion USD expected to reach 471.8 billion in 2021 as post-pandemic recovery. In such crises environment any new entrant seems not possible, even existing competition may increase.
- High Capital Investment&Regulatory CompliancesAs due to high capital requirements and highly regulated industry with licensing requirements including safety protocols launching an Air-Line Company is a complex task. Even specially the travel industry is highly volatile due to it’s nature of operations and highly dependable on geo-political and economic situations which are in turbulence in current times so threat of new entrant is minimal.
- Product Differentiation & Low Cost Services Product differentiation or high technological advancement can be the core reason behind the success of new product which seems not present in travel transportation industry. Secondly the company offers mainly low cost solutions so new entrant can never economies of scale or easily compete.
Lufthansa Bargaining Power of Suppliers
- Fleet Providers (Aircraft Companies Boeing & Airbus): In terms of fleet and air-craft providers there are only two major companies in the world.
- Extensive Supplies Portfolio:If see Lufthansa Group is offering an extensive portfolio of services so having a diversified portfolio of supplies and suppliers minimizes the risk and threat from supplies. Even Lufthansa is educating and influencing the supplier Industry, having more 300 associated suppliers as of 2017.
Lufthansa Bargaining Power of Buyers
- Competition in European Market:Lufthansa is facing tough competition in Europe as Ryan and Easy Jet keep offering deals and discounts offers which customers are keep comparing, eventually providing a substantial power to customers and influencing their purchasing decisions.
- Customer Satisfaction Rate (Germany):The success of an air-line company highly depends on the service provided, Lufthansa has 105,290 employed globally with highest services standards .Overall in Germany 44% travellers use Lufthansa, with an 89% of customer loyalty, declared by Statista in a survey conducted.
Lufthansa Threat of Substitute Products or Services
- COVID-19 Impact – Ukraine War (Life Style Patterns Including Digital Meetings): After COVID-19 which badly affected the travelling industry, especially due to tight lockdowns in Europe, Ukraine-war created a more tense travelling and economic situation which surely decrease the travel patterns.
- Shift to Low Cost Transportation Modes: There will be surely a shift to low cost alternate modes of transportation in the future.
- Forbes, Profile, Deutsche Lufthansa, Available at Forbes
- Lufthansa, Company History, Available at Lufthansa
- Fortune, World’s Most Admired Companies, Available at Fortune
- Statista (April 12,2022) Revenue of Lufthansa AG from FY 2004 to FY 2021 (in millions euros) | Statista. Statista.AvailableatStatista
- Statista (April 12,2022) Key figures for Lufthansa from 2017 to 2021 (in millions euros) | Statista. Statista.AvailableatStatista
- Aviation Pros (January 3,2023) Etihad ,Emirates Top Global Airline Ranking for 2022.Available at Aviation Pros
- Statista (September 22,2022)Market size of the airline industry worldwide from 2018 to 2021 (in billion U.S. dollar)Statista.AvailableatStatista
- Statista (April 12,2022)Number of Passengers transported by Lufthansa from 2008 to 2021(in millions) Statista. Statista.Availableat Statista
- Statista (April 12,2022) Annual revenue of Air France-KML between 2010 and 2021 (in million euros) Statista. Statista.AvailableatStatista
- Statista (April 12,2022) Key figures of Lufthansa from 2017 to 2021 (in million euros) Statista. Statista.AvailableatStatista
- Simple Flying, (March 10,2022) Lufthansa Competition? Delta ,Air France,& KLM Are Interested In ITA .Available at Simple Flying
- Statista (December 13,2022) Lufthansa brand profile in Germany 2022 Statista. Statista.AvailableatStatista
- Lufthansa, Company Portrait ,Available at Lufthansa