Lufthansa Orders Five Additional Airbus A350-900, Installing First Class On Ten Aircraft Stationed In Munich

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Lufthansa has made headlines this week, betting more on the Airbus A350 and it’s Munich hub by ordering five additional aircraft of these type and equipping ten of their upcoming deliveries with First Class.

Last week the Lufthansa Group has ordered five Boeing 787-9s and five Airbus A350-900s which was a remarkable step to compliment it’s current fleet but the addition of First Class for the A350 came as a surprise.

Mind you as of now the information about Lufthansa intending to equip the next A350-900 with one row of First Class comes from sources of AeroTelegraph without any official announcement from Lufthansa as of now.

Lufthansa is indeed at a breaking in terms of their premium service and had to make a decision. The carrier has decided to retire the A380 and lost 8 First Class seats with each aircraft, likewise with the old 747-400 as well as the Airbus A340-600. Currently the only aircraft that is able to provide First Class revenue is the Boeing 747-800 of which Lufthansa operates 19 in total.

Even assuming that these would be in the air every day which is impossible due to maintenance and aircraft rotation that’s slicing the salami extremely thin for a carrier of Lufthansa’s size.

Lufthansa will receive Boeing 777-900 but as per the last known plans these aircraft will only feature a new Business Class but no First Class. Will Lufthansa have to rethink that strategy?

The phasing out so much cabin space has now pressured Lufthansa to make at least one decision and according to the Aero Telegraph article ten Airbus A350-900 will feature one row of First Class (4 seats) with all of them being stationed in Munich.

The question remains if the 747-800 is enough to satisfy customer demand and justify extensive First Class ground operations at Germany’s largest airport and Lufthansa’s hub. Especially the First Class terminal (currently closed) is a rather expensive piece of real estate to upkeep.

Unless Lufthansa increases the revenue space of actual First Class again I can’t see a basis for this facility which was opened in 2004 to exist. It’s quite possible that the popular FCT won’t see it’s 20th birthday under current conditions. A lot of intercontinental traffic including First Class is connecting in Frankfurt which means the function as a curbside arrival and departure terminal of the FCT is moot.

Simply to entertain and satisfy HON Circle members and connecting First Class flyers via Munich and Zurich doesn’t justify keeping the door open. The less passengers are able to use the First Class Terminal the more expensive the per passenger expense becomes and this number could skyrocket.

And Lufthansa is counting much on Munich and it’s high revenue clientele to balance out the numbers. German SMEs are expected to make a comeback in international travel according to the Financial Times, citing Lufthansa CEO Carsten Spohr.

German national carrier Lufthansa is “optimistic” about the return of corporate travel, betting that executives from the country’s small-and-medium sized companies will take to the skies again in an effort win business overseas.

“Many of our corporate customers are not just the global, blue-chip companies . . . but SMEs which are the backbone of the German economy,” said Carsten Spohr, the carrier’s chief executive. Spohr’s confidence, which relied on data gathered by Lufthansa’s sales team, was supported by representatives of Mittelstand companies.

In a survey conducted in February by the VCI — which represents 1,700 German chemical and pharmaceutical companies — nearly 60 per cent said limits on travel were the biggest challenge facing their businesses.

The study, which polled more than 120 small or medium-sized enterprises, found that the inability to take business trips was preventing companies from acquiring new customers and hindering development projects. “They don’t have a global infrastructure to live without corporate travel,” Spohr said of such businesses. “They don’t even sometimes have people on the ground in markets in Asia or the US, so people need to go there themselves.” …

The question of whether business travel will ever return to its pre-pandemic levels is one that has hung over the airline industry. The Financial Times reported last month that Europe’s largest banks are planning to slash business travel permanently by as much as half from pre-Covid levels. …

“We don’t share the pessimism of some regarding the future prospects of business travel,” he added. “Basically the smaller the company, the more they will be requiring corporate travel also in the future.” It is a view echoed by the VCI survey of Mittelstand companies.

Despite the rapid adoption of remote working during the Covid-19 crisis, “medium-sized businesses want to visit their foreign sites as soon as it is safe to do so,” the VCI told the FT. The German Business Travel Association, VDR, said 70 per cent of members surveyed were “ready to resume business travel at a moment’s notice”. …

Time will tell if this projection becomes reality. I do expect business travel to rebound but the numbers will be significantly reduced and I believe the market for premium class tickets is destroyed for years to come. The golden times where companies pay 7000 Euro for a Business Class return are over for the foreseeable future and this results from both, a price war between the carriers but also the ability and plain willingness of companies to pay such prices.

Coming back to the original topic of Lufthansa adding additional First Class seats to the Munich hub through A350-900 deployment it begs the question who the target audience is. Wealthy leisure customers or corporate?

Would an overall increase of First Class even resonate and result in additional revenue or is all this just opportunity for people to use their swelling upgrades and mileage balances?

Conclusion

Lufthansa continues to invest in it’s Munich hub, ordering and deploying additional Airbus A350-900 and equipping at least some (10) of them with a four seat First Class cabin.

Executive management sees demand for flying activity and premium products returning soon, especially from the German SME business community. The Lufthansa group has decided to focus on serving customers with the new generation of aircraft such as Airbus A350, Boeing 777-900 and even some B787 Dreamliners. The remaining 747-8 will remain in the fleet for some time to come while the A380s are likely gone for good.

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