Lufthansa CEO Wolfgang Mayrhuber 'Protectionism only Produces New Problems'

Lufthansa CEO Wolfgang Mayrhuber, 61, talks to SPIEGEL about how airlines can survive the downturn, his recent shopping spree in the European airline industry and why cash-strapped consumers won't go without their foreign vacations.


How will Lufthansa cope with the global downturn?
DPA

How will Lufthansa cope with the global downturn?

SPIEGEL: Mr. Mayrhuber, there are two main reasons why people fly: business trips and vacations. The global economy currently looks paralyzed and consumers are very carefully considering whether, and how, they should fly to holiday destinations. What consequences does all this have for your company?

Wolfgang Mayrhuber: For aviation in general, this means a drop in demand, no doubt about it. This will vary from region to region and from route to route, but currently we're talking about roughly a 10-percent decline across the board, which we all have to react to …

SPIEGEL: ... for example, with reduced working hours, as will soon be introduced at your air freight subsidiary?

Mayrhuber: Yes, for instance. Sales have declined at many companies. This means that investments have to be put off. The initial result has been a reduction in the amount of air freight. We've therefore decided together with the employees to reduce hours at Lufthansa Cargo. This ensures that jobs are retained.

SPIEGEL: Are you also going to propose reduced working hours for the remaining workforce?

Mayrhuber: From our current perspective, that's not planned, but it depends of course on how the economic situation continues to develop. Until now we've been able to mitigate the effects of the downturn by introducing various measures.

SPIEGEL: For example?

Mayrhuber: The first thing that you can adjust is your capacity. You don't necessarily have to fly to Shanghai with a jumbo jet when a slightly smaller aircraft will do. The second thing is your frequency. We will no longer fly to certain long-haul destinations three times a day, but rather only twice. We also now no longer offer 15 flights a day between Hamburg and Frankfurt, but only 12.

SPIEGEL: In places where the impact of the economic crisis is most severe, you must notice it right away in terms of your booking numbers.

Mayrhuber: The Japanese market reacts immediately. Developing regions like South America and Africa are the last to feel the crisis. But the current situation cannot be compared with 9/11, a regional armed conflict or even the SARS crisis, where certain routes had to be canceled virtually overnight. It's more like we are sitting in a large pond and the water level is dropping. The question is: When will the frogs start croaking?

SPIEGEL: You could also cancel orders for new aircraft.

Mayrhuber: This year alone we've ordered aircraft worth a total of over €1.5 billion ($1.95 billion). We will accept these deliveries and pay for them. We had originally intended to use them, not only to replace older jets, but also to fuel growth, which of course takes a backseat in periods like this. But we currently don't intend to cancel aircraft orders. And of course aircraft that are removed from service aren't worthless. They are either sold or temporarily retained as a reserve fleet. We can do this because we rapidly amortize the cost of our aircraft and 80 percent of them belong to us instead of to large leasing companies.

SPIEGEL: According to estimates by the International Air Transport Association, the industry is weathering one of the worst storms of the past 50 years. Considering the situation, it sounds like you're taking this in stride.

Mayrhuber: Because I think we're in good shape -- and because this economic downturn will also someday come to an end. People's basic needs on this planet won't simply disappear. Businesspeople and holidaymakers will continue to fly. And we have a good product. I assume people would rather keep their current car for another year than say: Okay, this summer we won't go anywhere nice on holiday. It all boils down to which airline has the best deals.

Graphic: Key Lufthansa figures
DER SPIEGEL

Graphic: Key Lufthansa figures

SPIEGEL: Absolutely. So now we can expect consumers to flock to the discount airlines.

Mayrhuber: If by that you mean being able to get value for money when you fly, then Lufthansa is already the largest discount airline in Germany.

SPIEGEL: What makes you say that? Is it because Ryanair and the other discount carriers add so many hidden expenses to airfares that are as low as €19.90?

Mayrhuber: Among other things. When you fly with us, it's also easy to rebook your flight. Initially, discount airlines posed an almost philosophical question that we asked ourselves as well: Is it possible that they will replace us someday? We have risen to the challenge -- and are better than ever, with attractive prices, not only at our subsidiary Germanwings, but also in our core business.

SPIEGEL: Could you imagine that you or your industry would also call for government aid?

Mayrhuber: I and my European colleagues clearly say: We don't need any help, but we can't bear any additional regulations, restrictions or burdens such as bans on night flying, and emissions trading, security costs or excessive conditions for planned mergers. And I have the impression that we are sticking to our joint position, namely: We can make it without subsidies.

SPIEGEL: Even though France and Germany have already announced loan guarantees for Airbus customers?

Mayrhuber: This aims to help the manufacturers, and both countries have a direct interest in Airbus. I have nothing against sales financing, unless it only applies to certain countries and doesn't take into account the creditworthiness of each individual operator. But of course we've noticed that the governments of other countries have no qualms about aiding their airlines. We've already seen the first government bailouts in China. There are also indications that the US would like to bail out its ailing airlines. I see this as a mistake because protectionism and subsidies only produce new problems.

SPIEGEL: Could Lufthansa really do without aid if large competitors received it, for example, in America?

Mayrhuber: We've already endured a number of phases like this. It no longer had anything to do with fair competition, but we couldn't do anything about it.

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