Lufthansa Planning Lcc in Africa

Topics: Africa, Airline, East Africa Pages: 6 (2084 words) Published: June 23, 2013
By: Bassam Tariq

ufthansa planning for investing into a Low Cost Carrier: “Budget Airline much needed for Africa”: By setting a Low cost carrier in Africa, this would enable Lufthansa to cut on free services provided to passengers and increase revenue by adding passenger load factor. Innovativeness and punctuality have boosted sales for South African LCCs like Mango and Jet4you respectively. People want two things from an airline, firstly they require punctuality and secondly they want a good fare. Maintaining flight punctuality and technically efficient aircrafts owing to lack of expertise and resources have been a huge problem for Africa, Air travel within Africa is considerably more expensive per mile flown than intercontinental travel. Air Arabia has launched LCC model and managed to attract traffic of full service carriers as well. Since it has become a huge problem in Africa to maintain flight punctuality and technically efficient aircrafts due to the lack of expertise and resources, it will serve as a great opportunity to avail in the region. A good example of LCC in the surrounding market is Air Arabia who has successfully launched the LCC model and has attracted good bulk of traffic including the customers of the full service carriers of the region. Lufthansa can enter the African region with an innovative, cost effective LCC model for intra Africa traffic and capture the huge potential not being explored fully by existing competition. The intra traffic accounts for 20 percent of total traffic and it is set to grow even further. Speed to market and a wide network spanning across all regions of Africa is extremely important as other players are setting their foothold in the region. It will also establish safe and cheap travel for African region. Additionally, the LCC can feed traffic for international operations of Lufthansa’s Group of airlines such as Lufthansa, Brussels and Austrian for international routes and creating best network in Africa for international travel thus making Lufthansa’s position very strong in the continent. On the same note to facilitate this model efficiently Lufthansa should make its bases at secondary airports in Africa in order to reduce costs. The additional innovative options for its LCC would be to establish Lufthansa Café (on-board café) and Lufthansa Boutique for onboard shopping as a source of ancillary revenues. A good example of this can be seen in Nigeria where an LCC named Nigeria Aero makes 10% of its revenue from on board sales alone. Additionally, Lufthansa can establish routes between African and Middle Eastern destinations (Dubai, Jeddah, etc) using its new Low Cost Carrier, can be named as Afro-Lufthansa or Lufthansa Africa. Middle Eastern LCCs are already penetrating in the region to take advantage of expatriate travel in addition to the peak season of Hajj and Umra (major religious gathering from all over the world) in Saudi Arabia. Airlines like Fly Dubai, Air Arabia and Bahrain air are competing with full service African and Gulf carriers. Bahrain Air, LCC of Bahrain is establishing its second hub in Dammam, Saudi Arabia, to start flights between Dammam and Sudan. Lufthansa can also use the opportunity of attracting the bulk traffic between Africa and Middle East while benefiting from the popular markets like Jeddah and Dubai etc. Another example, EasyJet, second largest LLC of Europe, has acquired Nigerian LCC Fly540 to enter African market as a low cost carrier through FastJet. The competitive landscape is expected to change as FastJet remodels Fly540.iiIt shows the great potential in the market for LCC. The need of an LCC in Africa is attracting foreign players, such as Germania a German carrier is in process of establishing an LLC model in a smaller format to address the traffic in Gambia which again shows great potential in the market for this particular airline model since airlines have started considering Africa to deploy their extra capacity. The...
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