Analysis - Jet Airways decision to axe Chennai-Brussels and add Bangalore-Munich is viable

It has been almost a month since India’s largest airline Jet Airways announced that it was cancelling its flights between Chennai (India’s third largest city) and its once robust scissors hub in Brussels, and I still am having trouble fully understanding the impetus behind the decision, though I do believe that there is a scenario where the move(s) made by Jet do make sense. The cancellation left Jet Airways with just 4 daily flights in Brussels; Mumbai and Delhi on the Indian side – Newark and Toronto on the North American side.

Separately, Jet Airways appears to be launching a daily Bangalore – Munich terminator as Jet Airways flights 152/153, though the route has not yet been officially announced by Jet Airways and the winter 2012-2013 flight schedules have not been finalized.

The elimination of Chennai-Brussels flies in the face of the strategy we outlined earlier this year for Jet Airways’ North American operations, which called for an expansion of the scissors hub. From a practical perspective, it reduces the value of Jet Airways to Star Alliance (by eliminating a hub-hub route), while also reducing the attractiveness of Jet Airways to the rapidly burgeoning merchant and manufacturing travel base in Chennai by eliminating the direct flights.

Adding Bangalore-Munich makes more sense, especially if the expanded partnership between Jet Airways and Lufthansa comes to fruition. Even with a Lufthansa partnership, 9W 153 is not timed optimally to connect into Lufthansa’s North American bank in mid-afternoon; the 8:35 am arrival would require a 6-7 hour connection for most US destinations. The United, US Airways, and Air Canada flights are timed a little bit closer to the Jet Airways arrival but the business case seems to be primarily built on European connections.

As of right now, Jet appears to have no immediate plans to terminate the Mumbai-Newark and Delhi-Toronto services through Brussels. What this implies is that Jet Airways plans to continue with both a European operation to Munich, and a North American operation through Brussels. This sort of split operation is typically a bad idea, because instead of a strong European operation in one place, you can end up with a weaker operation in each of two places. That being said, there is a scenario under which the switch would make sense.

Since Jet Airways currently under-utilizes its fleet of Airbus A330-200 aircraft, two A330s could be dedicated to Munich flights from Bangalore and Chennai. The purpose of these flights would be to feed into Lufthansa’s Munich hub and secure the two major Indian cities currently outside of Lufthansa’s destination portfolio in Munich. The flights would be timed to depart India in the early morning (between 6 and 8 am), and arrive in Munich around noon. 

The critical piece is securing membership in the Trans-Atlantic joint venture (JV) partnership between Lufthansa, United, Swiss, Austrian Airlines, and Air Canada. The JV offers its members anti-trust immunity (ATI) for all trans-Atlantic flights. In practice, this means that the airlines can act like one business across the Atlantic; sharing the costs and profits of their respective trans-Atlantic network proportionally to their size, jointly marketing and selling trans-Atlantic tickets, and most importantly being allowed to coordinate and discuss strategy. It doesn’t matter to United if a passenger flies Lufthansa’s Frankfurt-Newark leg or United’s; because United will still get a share of the profits.

Without membership in this JV, the Munich flights by Jet will have to be treated as Indian competition for Lufthansa’s lucrative business here (especially in Bangalore). Once under the umbrella of ATI, these flights can instead be treated as strengthening additions to the Star Alliance hub in Munich – giving Jet a shot at financial viability. I am still not fond of Jet’s decision to abandon Chennai-Brussels and add Bangalore-Munich, but I can understand the strategy behind it.

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Jet Airways to commence Bangalore Munich flights. On the path to Star?

According the Munich airport website (screen shot at the end of this article), Jet Airways will be commencing daily flights between Bangalore and Munich from March 14, 2013.

The schedule announced is

9W154 departs Bangalore 04:05 arrives Munich 08:35
9W153 departs Munich 12:00 arrives Bangalore 02:40 the next morning

While aircraft type is not yet known, it is almost certain that Jet will use its Airbus A330-200.

At Munich airport this flight will operate from Terminal 2 which is 40% owned by German carrier Deutsche Lufthansa, and used exclusively by Lufthansa, Lufthansa partner airlines, and Star Alliance members.

Jet would be relying on traffic from many German companies which based in southern Germany and have a strong presence in Bangalore. Notably Siemens and Robert Bosch which are head-quartered in Munich and Gerlingen, near Stuttgart, about 250km west of Munich.

If Jet's reported partnership with Lufthansa fructifies, Jet will be able to offer connections to many destinations in Europe, but not the United States, as the Lufthansa Munich US flights operate much later in the day leaving a long connection time, and would also arrive to late to connect to the return Jet flight to Bangalore.

This would help Lufthansa increase capacity from Bangalore but yet protect the strong, IT driven, North American traffic for itself via Frankfurt.

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Review: Lufthansa's new Business Class onboard its Boeing 747-8i and Airbus A330-300 Mumbai Munich

Following an excellent trip in India, I started off on my return flight to the US. I got to Mumbai Airport around 22:20 (10:20pm) for my flight to Munich at 01:07.

Mumbai airport - A series of bottlenecks

Right now Mumbai Airport is in a bit of a transition phase as they construct the new integrated terminal so I suppose this is forgivable, but the ground-side experience at Mumbai’s Terminal 2 is just plain awful right now. Call it a lack of CISF personnel or a lack of planning, but all passengers are funnelled in to just two doors, and at peak times for international departures, 9pm onwards, the lines can extend up to 30 minutes long, and it’s a humongous bottleneck that the team at Mumbai airport must look in to on top priority.

Once you get into the terminal, it gets a little bit better but not much. In my case, Lufthansa’s local station manager came over and showed me to the first class check in line. Checking in was a breeze, and I headed over to the second bottleneck at Mumbai Airport, the immigration line. Now I’ll hope against hope that this issue will be fixed once the new integrated terminal comes up, but based on experiences of passengers at T3 in New Delhi, there are just not enough immigration counters or personnel to serve the peak demand both inbound and outbound. Wait times for the premium classes are 20~30 minutes and economy class from 45~60 minutes. I understand why most travellers from India are loathe to connect from domestic to international at hubs, especially Mumbai.

From this bottleneck, you are immediately funnelled into the next bottleneck -- the security check. Another 30 minutes, again thanks to a lack of adequate personnel. A lack of adequate English language knowledge and both the CISF end and many foreign non-English speaking passengers adds to the delays. These are issues the Ministry of Civil Aviation must address if they intend to succeed at hubs and improve tourism. The CISF too needs to explain why is it cannot provide adequate personnel and rendering such a poor service when it receives at least Rs. 130 per departing passenger.

I immediately headed to the Lufthansa Business Lounge opposite Gate 6, which was excellent (review to come soon).

Lufthansa LH765 Mumbai - Munich 

Around 1215, I left for the gate so that I would be able to board the plane early and get some unencumbered shots of Lufthansa’s new business class seat. Unfortunately, the boarding was on a remote gate and in-explicably there was no separate boarding for premium class/frequent flyer passengers versus economy class passengers.

Flight #1 LH765 BOM-MUC 0107-0555 Seat: 8K(business, aisle)- new business class product Aircraft: Airbus A330-300 (2-2-2 business configuration), 90% full.

I got onto the plane and managed to snap a few good shots of the business class seat before settling in. Immediately once we got into the air, the Lufthansa flight attendants immediately came around with hot towels, which were very useful given my state after running around Mumbai Airport.

Following this, they came around with a drink service along with some nuts, which while delicious, weren’t served warm as they are in some other business classes. Still, a meal followed in which I had an excellent Asian vegetarian palate, though the highlight was definitely the apple raisin pie for dessert, as well as the excellent bread basket. A hot dessert might have been in order, though this is just nitpicking.

Following this meal, I decided to check out the selection available in Lufthansa’s AVOD (Audio Video On Demand) in-flight entertainment system (IFE).

The content offering is sparse (especially in comparison to Singapore Airlines, Cathay Pacific, and even United). After some deliberation, I decided on the pilot for 2 Broke Girls on CBS (rapidly becoming one of my more favoured shows – for those that don’t know, I’m a TV savant – I regularly follow some 20-25 shows year round), followed by Battleship, an incredibly contrived big budget action film with gaping plot holes. Still, the impressive visuals from Battleship were pretty awesome on Lufthansa’s massive AVOD screen in the new business class.

I decided to test out the full extent of Lufthansa’s new lie-flat product. And I have to say that the seat passed with flying colours. Lufthansa has this fantastic seat control system which allows you to adjust every single aspect of your seat, including the firmness, and it was pretty awesome for someone like me, who is a bit of a quirky sleeper. I slept like a baby and it was pretty much the best business class seat I’ve ever been in (out of 15 airlines) from a sleep perspective. I managed to squeeze in around 5 hours of sleep before waking up to an excellent breakfast service that finished around 30 minutes before our touchdown on-time in Munich.

Conclusion - Great seat, fantastic bed, excellent cabin crew

As a whole I would judge the new Lufthansa business class product as excellent. This is not to say that there are no flaws. The AVOD IFE content offering is a bit sparse, though this would be mitigated once Flynet (inflight WiFi) is available. Of course the use of your own devices over WiFi becomes less relevant if they run out of battery 3 hours in, so I think it’s critical for Lufthansa to add proper in-seat power outlets and really take Flynet to its full potential, perhaps using the hybrid outlets that accept both US and European plugs.

Edit: A Lufthansa spokesperson informed me that Lufthansa does in fact offer vegetarian meals, so it must have been a communication error on my part that precluded me from getting a standard vegetarian meal.

However, these short-comings are more than overcome by the incredible seat and something that I’ve grown to consider a huge Lufthansa asset; their cabin crew. On my last five to six Lufthansa long-haul flights, I’ve had great flight attendants in both economy and business class. I later found out from Devesh, that Lufthansa has been training its cabin crew with its partner, Singapore Airlines, which is famous for its "Singapore Girl" cabin crew.

I observed the Lufthansa cabin crew always extremely professional and courteous, but they have this critical extra touch of care and attention. Throughout this trip, from Newark to Frankfurt to Bangalore and from Mumbai to Munich, what struck me was the care and attention the LH cabin crew devote to helping out elderly passengers with mundane inflight stuff; like getting up to go to the bathroom, and dealing with wheelchairs and baggage post-flight; something we younger passengers take for granted.

Kudos to Lufthansa’s flight attendants for their excellent service; like their counter-parts in Singapore Airlines, the cabin crew adds those critical extra touches to the overall experience, that makes the difference between good and great.

So overall, I’d rate this a solid 8.5/10, falling behind because of the limited in-flight entertainment content and the limited amenity kit (though the kit bag itself was awesome), and limited food options, but these short-comings may not matter as much to the corporate traveller to whom, rest and service is critical, and there the new business class seat would get a rating of 12 out of 10 if it were possible, and the cabin crew a solid 9.5/10.

It is, by far, the best business class product offered ex-Bangalore today.

All we can say in closing, competitors ........ look out.

Editor's note: Lufthansa commences its Bangalore Frankfurt Boeing 747-8i service later tonight. This is the same Business class found on this new aircraft. Vinay's economy seat was paid for. Thanks to Lufthansa for upgrading him to the Business class on the Mumbai Munich sector operated by an Airbus A330-300. Lufthansa is upgrading its A333 fleet to the same new business class as the B748i progressively.

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Analysis: Indian carriers get new international flying rights

Late yesterday, India's ministry of civil aviation (MoCA) announced the latest allocation of traffic rights to Indian carriers.

Traffic rights granted effective Summer 12

Spicejet – 7 services/week for Delhi-Kabul, Delhi-Guangzhou, Madurai-Colombo, Hyderabad-Bangkok, Trivandrum-Male, Cochin-Male, Delhi-Dubai, Mumbai-Dubai, Delhi-Hong Kong, Delhi-Riyadh.

Jet Airways – 4 services/week on Guwahati-Dhaka, 7 services/week each on Mumbai-Chittagong, Kochi-Kuwait, Mumbai-Kuwait, Trivandrum-Dubai, Chennai-Colombo-Male, Mumbai-Singapore, Delhi-Singapore, Mumbai-Dar es Salaam, Kolkata-Bangkok.

IndiGo – 7 services/week each on Kolkata-Kathmandu, Chennai-Singapore, Hyderabad-Singapore, Delhi-Bangkok, Chennai-Dubai, Delhi-Dubai, Hyderabad-Dubai, Cochin-Dubai, Mumbai-Jeddah.

 Traffic rights granted effective Winter 12

Jet Airways – 7 services/week on Bangalore – Brussels – Chicago /SanFrancisco/ Washington D.C., Mumbai-Paris, Delhi-Munich, Chennai-Munich, Bangalore-Munich, Mumbai-Frankfurt, Mumbai-Munich.

In Bangalore Aviation's opinion, the majority of SpiceJet's granted routes appear feasible (though they did not get rights to Delhi-Dhaka-Yangon).

Jet Airways' summer services are a bit more tenuous, we see Guwhati-Dhaka as very unlikely, same for Mumbai-Chitagong. Chennai-Colombo-Male is now more crowded thanks to Maldivian, Mumbai-Dar Es Salaam is a rather small market with admittedly growing business connections, and a second daily Delhi-Singapore is unlikely given the elevated competition on this route.

Jet's winter services granted vary. We've been very vocal in our support for Jet adding Bangalore-Brussels-San Francisco (they'd instantly become the fastest option, perhaps they can JV with Lufthansa on the route). Similarly, Brussels-Chicago makes sense after American Airlines cut the route; it can be placed into the vacated Brussels-JFK slot. Mumbai-Paris makes sense as an addition to Jet's strong Mumbai operation, as do Mumbai-Frankfurt/Munich if those two routes can be timed to connect in Lufthansa's long haul banks. Chennai-Munich could also work under a JV with Lufthansa scenario; bringing the third Indian destination into the fold. Bangalore-Munich and Delhi-Munich likely wouldn't work given the expanded capacity from Lufthansa's 747-8is to Frankfurt (they wouldn't want Jet to cannibalize some of the traffic).

Most of IndiGo's given rights have already been announced, and the remainder are very safe and conservative.

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Lufthansa faces cabin crew strikes and flight disruptions after talks fail

[Note: Most of the links are to web pages in German. Use a translation tool or a web browser with built in translation like Google Chrome.]

German national carrier Deutsche Lufthansa AG faces multiple flight disruptions after talks with the union representing over 18,000 cabin crew failed. The failure of the 13 month old talks has been acknowledged by both the airline and the UFO union.

The UFO union said it will resort to strikes with only a few hours' notice, which will have significant disruptions to the airline's over 1,850 daily flights. The strike actions can commence as early as Wednesday.

With a worsening of the economies in Europe, sky-rocketing prices of fuel, and intense competition from the Gulf carriers, Lufthansa is pressing ahead with a broad-based cost-saving program, which includes eliminating about 3,500 administrative positions (about 3% of the airline's 117,000 workforce), hiring of temporary staff, leasing of staff, and outsourcing some positions.

The union is pressing for a 5% pay increase after a three year wage freeze, against which Lufthansa has reportedly offered 3.5%. The union is has also demanded that there will be no leasing of personnel, ever, while the airline has reportedly offered a moratorium for now.

As per German media, both the main hub airports of Frankfurt and Munich have geared up for potential disruptions which could cost the carrier millions of euros each day. The airline is also reportedly examining its legal options while still trying to negotiate a deal.

For more information on potential flight disruptions visit this page on Lufthansa's web-site.

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Jet Airways should strengthen its Brussels hub, not shift to Munich

Editor's note: This is Part 1 in a series of analyses answering the question: “What should Jet Airways do with its international operations?” Parts 2 and 3 will cover the idea of a Mumbai hub and the fate of Jet’s 777-300ER fleet.

Photo courtesy Jet Airways

Late last week, a report emerged from the Economic Times of India that India's largest private airline, Jet Airways, was considering a shift of its scissors-hub operation for flights to North America from Brussels to Munich. While questions have arisen about the factuality of the report, the combination of such rumours and the fact that Jet Airways recently applied for 35 weekly frequencies between India and Germany lends credence to the idea that Jet might actually consider such a move.

While Munich would appear to have a larger origin and destination (OD) market with North America and India, Brussels has the edge to North America. Munich, lying close to the automotive heartland of Germany, and virtually all German automotive majors having a presence in India, has the traffic to and from India, it is also a full-fledged hub for Star Alliance member and global behemoth Lufthansa, who operates more than 250 flights per day in Munich. Supposedly, the shift in scissors operation would be in conjunction with Jet Airways' entry into the Star Alliance global partnership of airlines.

However, it is doubtful that Jet Airways will be allowed entry into Star Alliance unimpeded. In August 2011, Air India’s long touted entrance into Star Alliance was delayed indefinitely, due to a variety of operational, financial, and service issues. However, reports that have emerged since that time give indication that one of the sticking points on Air India’s entry was that the Star Alliance insisted on the condition that Jet Airways be allowed to join the alliance simultaneously (listen to podcast here). Whether or not these reports are true, India’s government has taken a provocative stance, and is unlikely to allow the induction of Jet Airways without significant concessions from the alliance.

Regardless, there is a scenario under which a scissors hub in Munich just might be viable. The most important step for Jet Airways would be to secure antitrust immunity (ATI) and/or a joint venture with Lufthansa. This would allow the two airlines to coordinate on schedules, pricing, and service, as well as (most importantly) sharing costs and profits. Once this profit sharing plan is in place, it incentivises Lufthansa to slot Jet Airways’ flights into its current hub.

With that in mind, the potential exists for Jet Airways to integrate its scissors hub operations into the current Lufthansa hub structure at Munich. The current departure timings to North America from Munich are as follows (including Lufthansa’s partner airlines):

Newark: 0920 (United), Charlotte: 1125 (Lufthansa), Washington DC Dulles: 1140 (United), New York JFK: 1145 (Lufthansa), Toronto: 1150 (Air Canada), Philadelphia: 1215 (US Air), Chicago: 1235 (United), Newark: 1530 (Lufthansa), Chicago: 1535 (Lufthansa), Montreal: 1540 (Lufthansa), Los Angeles: 1545 (Lufthansa), Boston: 1555 (Lufthansa), Washington DC Dulles: 1555 (Lufthansa), San Francisco: 1605 (Lufthansa)

Current India operations are timed to arrive in the morning (from Mumbai) and around noon (from Delhi)

Currently, Jet Airways operates three sectors in each direction of Brussels; three to and from India - Mumbai, Delhi and Chennai and three to and from North America - Newark, New York JFK, and Toronto.

Under this hypothetical scenario, there is one potential path for Jet to follow. Their long haul flights should be integrated into Lufthansa’s afternoon departure bank and timed between 3:45 and 4:15 pm. Under this scenario, there would be overlap between Jet’s EWR service and Lufthansa’s, so the carrier would instead pair Mumbai service with Miami on a daily A330-200 service Mumbai-Munich-Miami. The Mumbai-Miami leg has more than 40,000 OD passengers per annum, the Munich-Miami leg has close to 50,000 OD passengers per annum, and the Mumbai-Munich leg has around 25,000 OD passengers per annum, for a sum OD of close to 115,000 passengers per annum. A daily A330-200 represents roughly 160,000 seats per annum, so when combined with new connections enabled by Lufthansa’s hub, the flight could be adequately filled.

Delhi-New York JFK and Chennai-Toronto services could be continued by simply substituting a Munich stop for the Brussels one once again retaining the usage of an A330-200. Finally, a Bangalore-Munich-Houston routing with A330-200 could be used to connect two Star Alliance hubs and feed Bangalore into the scissors hub. This routing would be more heavily dependent on connecting traffic from Lufthansa, and on connections with Latin America in Houston. All of these flights would be timed to arrive between 12 and 1 (with late morning departures from the Indian airports allowing for connections from other Indian cities).

Return flights for the 8 segments would work similarly, with early afternoon departures from the US (2pm~4 pm). Return flights would arrive in Europe in the early morning (6am~7 am), as do most trans-Atlantic flights, and then a departure bank back to India would leave around 9am~10 am.

This series of flights would maximise loads and utilisation of Jet’s flights thanks to the improved connections, especially on the long haul connections to the US which will improve the overall flight potential.

However, despite this potential viability, we feel instead that Jet Airways should maintain its scissors hub operation in Brussels, for a couple of important reasons.

The first is that OD between India and Brussels is more plentiful than to Munich, (roughly 140,000 annual passengers versus around 85,000 annual passengers) though Munich traffic is higher yielding. But even more importantly, OD traffic between Brussels and the US is more plentiful than from Munich (700,000 annual OD versus 600,000 – both estimated figures), and higher yielding. High-yield OD is critical to the profitability of long haul flights.

Secondly, Jet Airways has already built up significant loyalty in the Brussels-North America market, which is equally critical for the viability of these flights. Moving to Munich will mean that they would have to once again start from scratch in building customer loyalty, which is likely to be retained by Lufthansa anyway.

If Jet Airways can get a joint venture with Lufthansa in spite of the Air India-Star Alliance fiasco, then they can just as easily get a JV with Brussels based Brussels Airlines (with whom they already have a code-share agreement), who did not have as direct of a role in Air India’s deferral as Lufthansa, who sponsored the Indian national carrier’s entry into the alliance.

Once this JV is in hand, Jet Airways could proceed as follows. Brussels Airlines is already starting a daily Brussels-New York JFK flight to connect into their own African network, so with a JV, Jet could drop the Brussels-JFK segment of their flight from Delhi, and instead replace it with Chicago O’Hare (while Brussels-New York is a larger market, it also has much more competition). This route would continue to be served with an Airbus A330-200, while Mumbai-Brussels-Newark and Chennai-Brussels-Toronto will continue with their current equipment. Additionally, Bangalore-Brussels-San Francisco would be added daily using A330-200s.

While Bangalore-Brussels OD demand is very small, at just over 7,000 passengers per annum, there is a huge and well documented high-yielding OD demand between Bangalore and San Francisco (73,000 passengers per year) thanks to IT industry links, while Brussels-San Francisco is also a large market (57,000 passengers per year). This cumulative passenger base of 130,000 passengers should be more than enough (along with connections from both Jet Airways and Brussels Airlines short haul networks) to fill daily A330-200 flights on the 258 seat variant, or even 777-300ER of current configuration (it would provide for optimal utilisation of the 777-300ER fleet as one of few routes with huge high yielding OD traffic base).

Longer term, a second daily flight Mumbai-Brussels-Miami (50,000 passengers per annum Mumbai-Miami – 53,000 passengers per annum Brussels Miami) with low density A330-200, as well as a four times per week flight Delhi-Brussels-Vancouver (120,000 passengers per annum Delhi-Vancouver, 15-40 thousand passengers annually between Brussels and Western Canada) using a high density A330-300 (more on this in another part). Finally, a three times per week Chennai-Brussels-Los Angeles could be run with the same high density A330-300 to tap into the large OD market Chennai-Los Angeles (more than 15,000 passengers per annum) as well as Brussels-Los Angeles (69,000 OD passengers per year).

The aforementioned changes will allow Jet Airways to continue to grow critical mass at Brussels, and win an ever increasing share

So to summarise, here is our proposed structure of Jet Airways’ scissors hub in Brussels.

Near-term (within 1 year of writing):

Delhi-Brussels-Chicago O’hare: daily: A332
Mumbai-Brussels-Newark: daily: B77W
Chennai-Brussels-Toronto: daily: A332
Bangalore-Brussels-San Francisco: daily: A332 or B77W

Long-term (within 3-5 years of writing)

Delhi-Brussels-Vancouver: 4/week: A332
Chennai-Brussels-Los Angeles: 3/week: A332
Mumbai-Brussels-Miami: daily: A332

Map generated courtesy GCMap

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Lufthansa analysis, Part 1 - Cutting capacity to boost profitability

When OneWorld members British Airways and Iberia together announced a 555 million Euro net profit under the umbrella of International Airlines Group (IAG), it provided almost a calming influence to the volatile European airline industry.

After financial failures of Hungarian carrier Malev and Spanish carrier Spanair, earlier this year, many in the global analyst community predicted further pain amongst Europe’s airlines. However, the EU’s largest carriers, IAG, Air France-KLM, and Lufthansa Group are not showing any signs of collapse. In fact, Lufthansa has been taking steps in the past four months or so, that will hopefully ensure their profitability for months to come.

Lufthansa is actually cutting capacity

One of the things that should have become abundantly clear after close to six months for me at Bangalore Aviation is that I’m a big believer in the power of capacity discipline and capacity cuts.

Europe’s airlines certainly need to show some capacity discipline in this time of crisis. While the US economy has finally shown signs of life over the past few months, and the economies of Asia, Latin America, Australia, and Africa have for the most part rip-roared back, Europe seems to be lurching from crisis to crisis.

A recent report from the European Central Bank (ECB) indicated that the consensus view of economists is that the Euro Zone will contract about 0.1% in 2012, with sluggish 1.1% growth resuming in 2013.

These economic conditions will naturally depress air travel, consistent growth in Asia and Latin America notwithstanding. Adding to these woes is the sky-rocketing price of fuel, which shows no sign of abating as tensions build, even fruther, around Iran, in the Middle East, as well as potential supply disruptions in Russia.

Lufthansa in particular is disproportionately affected by an increase in fuel prices because much of its long-range fleet consists of four-engined aircraft (Airbus A340, Boeing 747, and Airbus A380). So it was clear that Lufthansa would have to take action in order to shore up their profitability.

The speed of Lufthansa’s response to these factors was impressive to say the least. In the fall of 2011, Lufthansa first began to notice the warning signs that the European debt crisis was going to be a threat to the region’s economy, and their fortunes.

The first telltale move came in early November, when the carrier cancelled its five weekly Frankfurt-Calgary flights. This, was quickly followed by the cancellation of thrice weekly Frankfurt-Guangzhou services later in November, and the placement of Lufthansa’s thrice weekly Frankfurt-Kolkata into a permanent state of “bandh” (the Hindi term for a strike, which is so common in the city).

Lufthansa's new ultra-slim ultra-light Recaro seats reduce weight and increase fleet capacity. Read story here.

New planned services from Munich to Mexico City and from Dusseldorf to Tokyo-Narita were shelved, along with service increases like Frankfurt to Nanjing, Newark, and Munich-Seoul-Busan.

The common thread for all of these changes, were that they were marginal routes; ones with very little Origin and Destination (O&D) traffic on the specific city pair.

Obviously, there is no specific formula for long haul success, but with one notable exception (Emirates/Qatar), the most successful long haul routes typically fall into one of two categories, more heavily the first of these two.

Long haul routes typically rely on a strong cadre of high-yielding origin and destination traffic, or on connecting unique traffic flows that have some sort of restriction on direct services ( i.e. distance for the Kangaroo route, or lack of capacity for Iraq).

It’s a little known fact, but the 10-15% of O&D passengers that ply a route can oftentimes represent up to 40% of revenues for that particular route. Similarly, even routes full of connecting traffic can be unprofitable for carriers like Lufthansa if the connecting traffic isn’t high yield enough or the O&D component is too small or too low-yield.

Each of the cancelled routes fits that mold. Kolkata is almost entirely low-yield connections through Frankfurt, as is Munich-Mexico City. All five routes lack significant O&D traffic, especially of the high yield type; though in the case of Dusseldorf-Narita, it likely had more to do with insufficient connectivity.

Either way, Mexico City is probably better served by flowing traffic through Frankfurt, and ditto for Narita via Munich and Frankfurt. Guangzhou and Nanjing are both secondary Chinese cities (from an international travel perspective), and Munich-Seoul does not have a ton of O&D traffic. All in all, these are marginal routes where there is little necessity for new service, continued, service, or added frequency.

Ultimately, these kinds of moves will likely boost Lufthansa’s profitability ahead and above that of its two main continental competitors, IAG and Air France-KLM. Air France-KLM has taken the opposite tack, and they’re liable to feel pain for it in the near future. Sure they’re dropping a few marginal destinations like Orlando, but at the same time, they’ve been adding capacity to the Far East at an alarming rate.

While the Far East is certainly a growing market to and from Europe, the sudden up-tick in capacity and fuel prices mean that many of these routes will be unprofitable at the start (potentially ramping up to profitability down the line).

Lufthansa, in contrast, has been far more active in cutting such services, and that will pay its own dividends. The airline industry is unique in that investors and managers alike sometimes have a tendency to think too much of expansion, and not enough of profitability. Lufthansa’s actions are designed to boost profits, as capacity cuts are wont to; and that makes Lufthansa a brilliant player relative to many of its peers. As the Euro zone (figuratively) burns, they are taking the right steps to ensure that they are not left fiddling.

This is just Part 1 of Bangalore Aviation's analysis of Lufthansa. Part 2 will cover the carrier's India strategy and further installments will come out leading up to the carrier's financial results on March 15th, which will be analyzed as well.

Stay tuned. In the mean time, as usual, comments are solicited and welcomed.

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I Had My First Pat-Down Search and I'm Fine With It.

Over the past few years here in the US, there has been a severe backlash surrounding the usage of full body scanners and the resultant pat-down searches; for passengers who opt out of the body scan. Supporters of the body scans claim that they are necessary to weed out terrorists who might have dangerous materials such as plastic explosives that can't be detected by the traditional metal detectors strapped to their body. Opponents counter that both the body scans, and the pat-down searches are both violations of privacy and of civil liberties (citing the preclusion of search & seizure without due process in the US Constitution).

Lending credence to the latter viewpoint are the spate of incidents in which the TSA patted down "8-year old girls" and "old grandmothers in diapers," robbed passengers of thousands of dollars worth of equipment, and used the body scan images (which show the "private parts of passengers") inappropriately. So it was under this backdrop that I received my first pat-down search at Munich Airport while on my way back to the States from Switzerland earlier this year.

In the United States, passengers are typically given the option of either passing through the invasive body scanners mentioned above, or receiving a pat down search. However, in Munich, passengers connecting to US flights must pass through a special second security checkpoint at the entrance to the US section of Hall H on the top level of Lufthansa's Terminal 2. It was at this second security checkpoint that I received my very first pat-down search, ostensibly because Munich still lacks body scanners.

The security agent, in an admittedly stark contrast to the typical TSA agent, was courteous and professional, asking me the purpose of my visit (visiting family) and a few other questions such as citizenship and the like, before beginning to pat me down. He explained what he was doing at the beginning of the search, which put my (very slight) unease to rest, and then he actually patted me down. Beyond a little discomfort when he was searching my groin area, the actual search itself wasn't too bad; I had experienced worse before when entering a federal building.

After me came my younger brother, and the agent was once again very kind, explaining in even more detail what he was doing (my brother is 12 for comparison's sake). He went through almost the same routine for the actual search, but didn't touch my little brother's groin area, as he was a young(er) child.

And that was it; we collected our bags and went on our way. To be honest, I can't really see what was so bad. Of course the trademark European "customer service" and professionalism, as well as the civilized manner with which they treated my brother had something to do with my apathy. I'm sure if a surly TSA agent did a truly full body pat-down on my little brother, or even on my 76 year old grandmother, I'd be a good sight angrier.

I see the validity of the arguments about violations of privacy, but ultimately this is something that needs to be done for safety reasons. The TSA is really stuck between a rock and a hard place on this one; they are criticized for the invasive pat-downs and body scanners, but what happens if they withdraw these tools and some terrorist uses the opportunity to sneak plastic explosives onto a flight and blow a plane out of the sky? My guess is that the TSA would be criticized even more than they are right now.

My experience is particularly relevant because Australia appears to be adding full body scanners to its airport experience without the pat-down opt out. Would the pat-down search as I described it serve as a more humane alternative?

Readers, what are your thoughts on body-scanners and pat-down searches? Have you experienced the body scanners yet? Please do let us know via a comment.

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Air China increases Bangalore operations, Lufthansa increases Mumbai Munich

From the Summer 2011 time-table which commences this Sunday, Air China is increasing its frequency on the Shanghai-Chengdu-Bangalore flight from two to three times a week. The Wednesday, Saturday arrivals with Thursday, Sunday departures will be complemented by an additional frequency arriving in to Bangalore on Mondays and departing early morning Tuesdays. Aircraft type continues to be an Airbus A319-100.


Lufthansa continues is expansion in India with two more frequencies on the Mumbai Munich route, making it a daily service, and taking the total of the Lufthansa group to 77 frequencies per week.


Lufthansa :

Delhi-Frankfurt: daily : Boeing 747-400
Delhi-Munich : daily : Airbus A340-600
Mumbai-Frankfurt : daily : Boeing 747-400
Mumbai-Munich : daily : 1,3,4,6 : Airbus A330-300 : 2,5,7 : A340-300
Bangalore-Frankfurt : daily : Boeing 747-400
Chennai-Frankfurt : daily : Airbus A340-300
Kolkata-Frankfurt : 3 per week (2,4,7) : Airbus A330-300
Hyderbad-Frankfurt : 3 per week (2,4,7) : Airbus A340-300
Pune-Frankfurt : 4 per week (2,5,6,7) : Boeing 737-800 Lufthansa Business Jet
(operated by PrivatAir)

Swiss :
Delhi-Zurich : daily : Airbus A330-300
Mumbai-Zurich : daily : Airbus A330-300

Austrian Airlines :
Delhi-Vienna : 6 per week (X2) : Boeing 767-300ER (B767)
Mumbai-Vienna : 5 per week (X4,6) : 2,3 : Boeing 767-300ER (B767) and 1,5,7 : Boeing 767-300ER (B763)

Related articles

• HK's Cathay adds 27 Boeing, Airbus jets to fleet (sfgate.com)
• Virgin creates 450 jobs as new routes launched (dailyexpress.co.uk)
• Swiss cuts fuel consumption (abtn.co.uk)

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Singapore Airlines increases frequency to Mumbai and Delhi

With the global economy increasing in select geographies, Singapore Airlines (SIA) is making changes to its route network in the coming months.

Frequency to Mumbai and Delhi will meanwhile be increased from March and June 2010, respectively. Flights will be operated twice-daily to both Indian cities, up from the existing 11-times-weekly.

Effective 18 December, the Singapore-Moscow-Houston flight frequency will increase to five per week from the current four.

From 19 January 2010, the non-stop Singapore-Newark flights will return to daily operations from the current five times a week.

Munich will be a new destination in the SIA network from end March 2010. Flights will operate five times per week on a Singapore-Munich-Manchester routing.

Also from end March 2010, Colombo and Dhaka will each be served daily, up from five flights a week.

Services to Seoul will increase from June 2010; to 18 weekly from the current 14 weekly, one of which carries on to San Francisco.

From end October 2010, the carrier will commence twice daily operations to Tokyo Haneda airport, complementing the existing twice daily flights to Tokyo Narita, one of which continues on to Los Angeles.

The airline is suspending operations to Karachi and Lahore, Pakistan and Nanjing, China. The last Singapore-Karachi-Lahore service will be operated on 17 February 2010 while the last Singapore-Nanjing service will be operated on 26 March 2010.

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Lufthansa opens new lounge at Munich; offers end to end Mumbai Munich premium service

Even during the current economic slowdown and it's resultant impact on premium air travel, Lufthansa is continuing it's ongoing investment in lounges.

It recently opened the Lufthansa Senator Lounge at Munich. With the Munich lounge, Lufthansa now offers a complete end to end premium experience for passengers on its recently launched all business class Mumbai Munich service.

The new lounge in Munich also marks the debut of a new Lufthansa lounge design with warm earthy tones dominating a puristic space. The lounge features a bar at the centre where travellers find a wide choice of freshly brewed coffee, tea, wines, spirits and non-alcoholic drinks. Patrons can choose from a variety of hot and cold meals, freshen up in showers or use computer workstation.

Earlier this year, Lufthansa opened its first Senator and Business Class Lounge, at Mumbai’s Chhatrapati Shivaji International Airport, in India meant for Lufthansa's and Star Alliance carrier's premium passengers. Built on 500 sq. meters (5,500 sq. feet), the lounge features two separate first and business class sections with over 175 seats. On average 300 guests per day use the lounge.

Just as other Lufthansa lounges, the Mumbai lounge offers hot and cold gourmet dishes, a full bar service, and business services like computers, printers, faxes and Wi-Fi internet access. The lounge also offers resting rooms and shower facilities which is new to lounges in India.

The lounge is for exclusive use by Lufthansa premium class ticket holders and status cardholders of Star Alliance carriers. Senator cardholders from the Miles & More programme have access to the First Class area, Frequent Travellers to the Business Class Lounge.

In the recent past Lufthansa has opened new lounges at New York JFK, an uber luxurious First Class lounge at Frankfurt, and the Tower Lounge at Frankfurt with it's magnificent views for airplane buffs.

Clearly the German carrier is building for the future; spending 150 million Euro ($222 million) on lounge upgrades and extensions and new aircraft worth 16 billion Euro ($23.68 billion) on order until 2016.

Images courtesy Lufthansa

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