Budget Gamble Lufthansa Risks Losing Customers With Revamp

Lufthansa will soon be called Germanwings, at least on some routes. The German national carrier is shifting unprofitable short-haul flights that don't serve its Frankfurt or Munich hubs to its budget subsidiary in order to cut costs -- and risks alienating its customers in the process.



Thomas Winkelmann, the head of budget airline Germanwings, is often most pleased about the things he doesn't find on his aircraft, like overly expensive service. But last Thursday, even Winkelmann was surprised to learn that the planes no longer have a third toilet. He thought for a moment before saying: "Too heavy." In other words, in future more than 144 people will have to share two toilets on his Airbuses. Sounds like fun.

Germanwings is a subsidiary of the national carrier. Its business model is to be as frugal as possible. Instead of hiring a designer to create new uniforms for the flight attendants, two employees gained inspiration by walking through department stores and poring over catalogues. Animals wouldn't survive in the cargo hold, because Germanwings doesn't keep it pressurized. And the two-legged creatures traveling in the cabin can only expect to receive cold snacks -- at a charge, for most passengers -- because the planes have no equipment to heat food. Even the new paint job on the planes is about 100 kilograms (220 lbs.) lighter than before, which will save the airline about €300,000 ($395,000) in annual kerosene costs for its entire fleet.

Starting July 1, millions of air travelers will be able to experience the Germanwings version of cheap chic firsthand. In future, one in five Lufthansa passengers will in fact be Germanwings passengers. That's because Lufthansa itself is giving up unprofitable direct flights between non-hub cities, that is, flights that don't pass through the company's hub airports, Frankfurt and Munich.

Düsseldorf will become the low-cost carrier's main hub. Lufthansa will also no longer operate direct flights between the cities of Hamburg, Stuttgart, Cologne and Berlin. The move is intended to cut costs.

From fuel to airport fees to employees, the goal is to make Germanwings more competitive than its parent company in the fiercely contested aviation business. As an example, a Lufthansa plane used on European routes currently spends an average of 8.5 hours a day in the air, while the average Germanwings plane is in the air for 10.9 hours.

Lufthansa management board member Carsten Spohr says that the new concept has "pizzazz." After praising the new Business Class handle-less coffee cup, which will be used for hot beverages on board Lufthansa flights as of May 12, he walks across the apron at Frankfurt airport. An Airbus A319 in the new Germanwings livery is parked far away from the passenger terminal. Passengers will have to embark and disembark at this somewhat more remote location in the future, because that too will save the airline money.

Germanwings CEO Winkelmann doesn't see this as a problem. On the contrary, he says, "we like parking on the apron. Everything happens more quickly there. You can place stairs at both ends of the aircraft."

In addition to the existing Germanwings jets, 30 Lufthansa aircraft will become part of the budget subsidiary's fleet. Cabin conversion will cost the airline €5.5 million. Although the planes will only have an Economy Class cabin, the seats in the first 10 rows have more leg room. In rows 1 to 3, the middle seats will remain empty. To garner a seat in these coveted front rows, passengers will have to book their tickets at the so-called "Best" fare. In Lufthansa jargon, these business passengers are referred to as "comfort seekers."

Frequent Flyers Feel Cheated

The squalor begins in row 11. Snacks and small bottles of water are available for purchase, and seating capacity approaches the proverbial tin-of-sardines level -- for what Lufthansa calls "the price-sensitive passenger." The "Basic" fare can't be booked through travel agencies, only through the Germanwings website. This is to point business travelers in the direction of the more expensive fares.

Despite the efforts to cut costs, Lufthansa's Spohr hopes to improve what has been a tense relationship with his customers. "We weren't paying enough attention to our customers' needs, the way a service provider should," says the executive, who will undoubtedly be paying very close attention in the future, especially after the vehement complaints coming from passengers more recently.

Frequent flyers feel especially cheated. The relatively large group of Lufthansa "Frequent Travellers" became upset when they were expected to pay €25 to gain access to Germanwings lounges. The airline quickly changed its policy, so that Frequent Travellers with tickets purchased at "Smart" fares can now use the lounges for free.

On the other hand, Lufthansa's best customers, the frequent flyers known as Senators and members of the so-called HON Circle (who have to fly at least 600,000 HON miles in two years to qualify), will largely lose their privileges when they fly with Germanwings in future. These privileges include extra baggage allowances and keeping the seats next to them unoccupied.

A legal dispute is also in the offing. Lufthansa has already switched some of its flights to Germanwings, but so far without the new "Best" fare. Because tickets must be booked at this fare to accumulate HON miles, customers are accusing the company of failing to deliver on a product pledge, once again. They are concerned about losing their beloved status. Hans Mahr, the former editor-in-chief at broadcaster RTL and a frequent flyer with HON status, says: "It's a real shame with Lufthansa. Now it doesn't really matter what airline I fly with in Europe."

Translated from the German by Christopher Sultan


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