ESCUELA SUPERIOR POLITÉCNICA DEL LITORAL
APPLIED MANAGEMENT CASE ANALYSIS
“LUFTHANSA 2003: ENERGIZING A DECADE OF CHANGE”
Lufthansa had become one of the most robust airlines and top aviation groups in the world. Lufthansa is the largest airline located in Europe in terms of passengers carried. In the 1980s, Lufthansa pursued a policy of rapid fleet expansion based on the belief that only the largest airlines would survive in a global area.
From the brink of bankruptcy, Lufthansa turned a record loss of €350 million in 1992 into a pre-tax profit of €952 million in 2002. This financial result reflected Lufthansa’s major competitive advantage – its ability to respond rapidly, act flexibly, and withstand crises.
By 2002, Lufthansa had become one of the strongest airlines and top aviation groups in the world. Lufthansa went from a record loss of €350 million to a profit of €718 between 1992 and 2002. The number of passengers increased from 33.7 million in 1992 to 43.9 million in 2002.
* Which was the main strategy that explains Lufthansa’s Succeed? * Which was the Lesson Learned about Expansion without screening the market? * How can a Bankruptcy Company Succeed in a Competitive Environment? FLIPPING AND SKIMMING:
* The Case is resumed in 22 pages.
* The Turnaround (1992-1993), basically explains the crisis process. * Financial Data Analysis and Ratios
* Lufthansa’s Organizational Structure and Business Segments * Lufthansa’s Competitive Position and Alliances
* Project’s Explanations and Programs Applied
* Re-Energizing the Ongoing Change
* Challenges in 2003
BEGINNING OF THE CASE:
* Lufthansa was transformed from a state-owned, monolithic, unprofitable national airline into one of the most profitable, privately owned groups in the industry.
* From the brink of bankruptcy, Lufthansa turned a record loss of €350 million in 1992 into a pre-tax profit of €952 million in 2002.
* Lufthansa draw on its ability to cope with crises.
* In fact, overcoming change-tiredness and continuous re-energizing were seen as the key management challenges in 2003.
* Lufthansa was a privately owned, profitable aviation group aspiring to become the leading provider of air transportation services in the world
ENDING OF THE CASE:
* At his last annual press conference, Jürgen Weber presented outstanding annual results for 2002 that exceeded those of all other airlines worldwide.
* From autumn 2003 Lufthansa therefore planned to offer its passengers a new business class with greater comfort and a radically revamped seat that converted into a bed.
* These redesigned seats were to be installed in the modern fleet of Airbus 340-600
* Lufthansa intended to invest around €30 million in a comprehensive customer program that would be implemented by summer 2004.
* Mayrhuber said that Lufthansa would be able to retain its top ranking in the industry and creative force if only costs were also reduced at the same time
* It would be necessary to pinpoint one focus in order to fully exploit Lufthansa’s economies of scale and cost efficiencies over the other cheap airline carriers.
* Lufthansa realized that it could not effectively respond to emerging competitive challenges with its existing structure. * Lufthansa worked constantly on its external relationships. The company decide to choose an alternative strategy; “ Growth through partnerships” * Lufthansa’s goal was to evolve from an airline company into an aviation group and specifically to become the leading provider of air transport services in the world. * By 2003 the number of members of the Star Alliance had grown to 14 members operating from 894...
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