Topics: Lufthansa, Airline, Airline alliance Pages: 14 (4200 words) Published: May 5, 2013
Lufthansa 2000: Maintaining the Change Momentum

Prepared for:
Business 497a
Professor Don Fujitani
Section # 15663

Prepared by:
Amiel Traynum
Elin Ghadimian
Josh Sherriff
Ross Zalavsky
Ryan Neal
External Environment:
Worldwide events such as the Gulf War, followed by a recession, put a burden on the airline industry and on Lufthansa as a company. These events caused a major decrease in the amount of seats filled in the airline industry. In 1991 the Seat Factor decreased to about 57 percent in Europe, compared to 65 percent worldwide. Socio-Cultural/ Demographic:

You can infer from the case that the growing alliances in the airline industry have been increasing due to globalization. In 1991, Lufthansa had an increase of passenger numbers by 11% due to German re-unification. Legal/Political:

The airline industry was strongly regulated by the government in the US and most of the airline industry was owned by the government in Europe. This changed in the US when deregulation of the industry began in 1978 as airlines gained more lenience in operating their business. Before becoming privately owned and profitable in 1997, Lufthansa was a state-owned, national airline carrier of Federal Republic of Germany and the government had strict control over both routes and landing slots. Regulations for the rest of Europe were not as strict. Economic:

In the past, an economic recession contributed to the major problem of a reduced seat load factor. Another economic recession in any of the countries in which Lufthansa Group does business could have the same affect. The price of oil is a major economic factor that affects Lufthansa and the rest of the Airline Industry. In particular, passenger and freight transport. Flight and trade networks opening or closing between nations would also affect the company since they would be able to either provide or stop providing services to or from those countries. Technological:

In general, technology available in the industry includes planes, navigation equipment, aircraft engines, and onboard computers. Lufthansa developed IT systems which integrated numerous business activities. These systems presented IT based products and services for airlines and companies in transport, travel, and tourism industries. In 1999 this IT system was called “Lufthansa IT Services” and it became the core for all Lufthansa related companies. LH Technik, a subsidiary company, was a global market leader in aircraft maintenance and VIP cabin outfitting. This subsidiary provided services to Lufthansa and also 47 percent of its revenues were earned from external companies. Industry:

Threats and Barriers:
For most of the industries in which Lufthansa Group operates the threat of a new competitor entering is low and the barriers are high. Huge amounts of capital and marketing investment is required. The only exceptions are with C&N’s tourism and Sky Chefs catering which would require less capital investment and therefore be easier to enter. Power of buyers:

Travelers are the major buyers. According to the case the number of passengers increased from 33.7 million in 1992 to 40.5 million in 1998. Buyers have many choices when it comes to an airline carrier. Because of the Internet, pricing information is not secret and people can easily compare. Since there is no product differentiation and everyone arrives to their destination, the threat of switching to low cost carrier is always present. Power of Suppliers:

Two most important inputs for airline industry are airplanes and fuel. There is not any substitute for either one of them. Suppliers such as aircraft manufacturers and fuel companies are crucial for Lufthansa and other airlines to operate. Since there are not many aircraft manufacturers and most fuels are the same, airlines do not have too many options. However, even with high supplier power, the risk of suppliers forward integrating to offer...
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