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MBA Lufthansa Strategy analysis study case

MBA Lufthansa Strategy analysis study case

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    Lufthansa  strategy analysis Lufthansa strategy analysis Presentation Transcript

    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE STRATEGIC ANALYSIS Determining Industry Attractiveness and Identifying Strategic Opportunities Bruno Nelzy Mountaha Ndiaye Noufe Sie ESG Executive MBA, 15 September 2013
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Determining Industry Attractiveness and Identifying Strategic Opportunities for Lufthansa Our Framework Step 1: Analyze shocks and trends in the macro- environment • Dealing with uncertainty, Prioritisation, PEST in nat. and Internat. Contexts, Globalisation drivers,Scenarios (what to know ? Impact ?) Step 2: Analyze the nature of market demand and consumer behavior (Segments, diff among customers: price sensitivity, patterns, demand curve, nature of goods and svc Step 3: Analyze business landscape (industry) • Five competitive forces Framework, Coopetition and Value Net Framework, What is depressing profitability? How is the industry changing?) Step 4: Identify critical success factors (Industry’s KSF ?) Step 5: Analyze the intra- industry(strategic group) structure of the industry and identify critical differences between groups Step 6: Evaluate the competitive sustainability/ vulnerability of strategic positions of rivals Shifting the Focus of Strategy Analysis: From the External to the Internal Environment Situational summary Strategy formulation and selection
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Deutsche Lufthansa AG is an aviation group with global operations and a total of more than 400 subsidiaries and associated companies. •  It is divided into five business segments, which cover the areas of passenger transportation, airfreight and airline services: Passenger Airline Group, Logistics, MRO, IT Services and Catering. These segments play leading roles in their sectors and are in some cases even the global market leader. •  In 2011 the Lufthansa Group had an average of 119,084 employees (without bmi: 115,335) and generated revenue of some EUR 28.7bn. > CORPORATE PROFILE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Deutsche Lufthansa AG is an aviation group with global operations and a total of more than 400 subsidiaries and associated companies. •  It is divided into five business segments, which cover the areas of passenger transportation, airfreight and airline services: Passenger Airline Group, Logistics, MRO, IT Services and Catering. These segments play leading roles in their sectors and are in some cases even the global market leader. •  In 2011 the Lufthansa Group had an average of 119,084 employees (without bmi: 115,335) and generated revenue of some EUR 28.7bn. > CORPORATE PROFILE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Mission Lufthansa competes in the international airline industry . Its business segments include passenger business, logistics, repair and overhaul, catering, leisure travel and IT services. Core values: Ø Provide reliable services for passengers and air-cargo. Seamless cooperation with our partners strengthens us in a volatile environment. Ø Grow profitably and maintain a healthy financial structure, to enable investment in the development of our business, fleet, products and people. Ø Committed to sustainable development and assume our ecological, civic and social responsibilities. > MISSION STATEMENT Dr.Christoph Franz Chairman of the Executive Board and CEO Born 1960, industrial engineer (Dr. rer. pol.) Board Member since 1 June 2009 Appointed until 31 May 2014 With Lufthansa from 1990 until 1994 With SWISS from 2004 until 2009 LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Ø Lufthansa wants to exploit growth potential to create value. Ø Activities were adopted in 2011 that will develop the Group into Europe’s Airline Powerhouse. Ø Competitiveness will receive a lasting boost. Ø The financial strategy combines sound foundations with financial flexibility. > 2013 VISION AND OBJECTIVES Dr.Christoph Franz Chairman of the Executive Board and CEO Born 1960, industrial engineer (Dr. rer. pol.) Board Member since 1 June 2009 Appointed until 31 May 2014 With Lufthansa from 1990 until 1994 With SWISS from 2004 until 2009 LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE BUSINESS LANDSCAPE: A PESTEL ANALYSIS OF ENVIRONMENTAL INFLUENCES (MACRO-ANALYSIS)
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Deregulation in transport industries •  Fuel subsidies provided by governments •  Government participates in regulating fares range and assigning « useable routes » for carriers in order to control the competition •  Government requirement to the immigrants or tourists (Risk control) •  Constrains in terms of adhering to government policies for instance the pledge by the UK government to reduce carbon emissions by 60% reflected in the UK Climate Change Bill •  EU Emission Trading Scheme (ETS), (in stand by 2012 ), 1 kg of jet fuel = 3.15 kg of CO2 > MACRO-ANALYSIS > POLITICAL FACTORS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Gross Domestic Production (GDP): Bad economic leads to less business travel. Most companies cut costs on non-essential travel. They may change the meeting to conference calls. •  Inflation rate risk in EMEA/US : The tendency of people travelling will be low when there are high inflation rate in the country •  Bilateral trade agreements (US, EMEA): Bilateral trade increases the frequency of travelling by businessmen around the world •  Oil price increase •  Source of economic growth have changed (Asia), Power of currency (EURO vs USD ..) > MACRO-ANALYSIS > ECONOMIC FACTORS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > MACRO-ANALYSIS > ECONOMIC FACTORS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Demographic changes (development of the ‘grey’ market who are spending more on leisure and travelling). o  Lifestyles, tastes and fashions are all changing; customers require opportunities to visit new and interesting, often long-haul, destinations. •  Increased popularity of holidays abroad o  has led to a boom in demand for travelling •  Changing in perception of air travel o  Low cost revolution has made air travel accros Europe available to the larger public o  Increase of air travel as people who would not consider travelling by air, now have opportunity to travel •  Population growth o  An ageing population (lots of people in that life stage have more disposable income to spend) •  higher numbers of commuters and the demand of lower cost carriers o  Show an attitude change regarding tour operators/travel-agencies, potentially causing image problems for companies giving higher-cost service > MACRO-ANALYSIS > SOCIOCULTURAL FACTORS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Social network o  direct customer wishes access (worlwide) o  Goal : gain back the control of the customer: While it is true that no one can “own” a customer in today’s environment, given that customers are now empowered by technology, airlines can still leverage the same technology to gain access to their needs and wants, deliver the services desired, and charge according to their willingness and ability to pay o  Integration with Customer Relationship Management systems o  Customer to Business interfacing •  Computers reservation systems (GDS) o  Online travel agencies War o  Improved site usability and functionality o  More flexible booking process o  Alert/ Confirmation-SMS o  Convenient check-in on cell phone > MACRO-ANALYSIS > TECHNOLOGICAL FACTORS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  C02 emission rate, reduce fuel burn and noise level •  Move to have for example airlines charged for their share of green house gas contribution on flights that are to and fro Europe •  Social responsibility •  environmentally friendly measures •  Natural Disaster •  Location: The airports normally located near metropolitan city, which the strategic location could bring convenience to the customers. > MACRO-ANALYSIS > ENVIRONMENTAL FACTORS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Changing in employment laws, company laws, tax law and their regulation •  Regulation about carbon emission level •  Privatization of transport industry / Traffic rights. •  Security requirements - Product safety •  Competition laws. •  EU regulatory changes; for instance the increased call for better care of the customer •  US regulatory changes; for instance the ban on liquids and gels past the screening checkpoints affects the customers of air transport mode who may be in possession of such goods (liquids and gels). > MACRO-ANALYSIS > LEGAL FACTORS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > BUSINESS LANDSCAPE > SUMMARY – RISK MATRIX OF MACRO ENVIRONMENT HIGH •  Fuel price increase •  Deregulations •  Economic crisis •  Social media •  Terrorism MEDIUM •  Changing in employment laws, company laws, tax law •  Security requirements •  Regulation about carbon emission level •  Changing in perception of air travel LOW •  Social responsibility •  environmentally friendly measures •  Natural Disaster IMPACT PROBABILITY HIGH MEDIUM LOW LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  THREATS o  Economic crisis o  Competition between modes of transport o  environmentally friendly measures o  No control on Fuel prices > BUSINESS LANDSCAPE > SUMMARY •  OPPORTUNITIES o  Liberalized environment o  Emerging countries, new « routes », to-from Asean, Midle-east : ASIA is outperforming o  Technology in transport is fast mooving, it will bring the changes in the future LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE INDUSTRY ANALYSIS PORTER FIVE FORCES & KEY SUCCESS FACTORS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Numerous competitor > INDUSTRY ANALYSIS > COMPETITIVE RIVALERY Ø The Big Three are still the biggest by revenue Ø Vueling, Norwegian and Turkish are growing fastest Ø Ryanair is most profitable LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > INDUSTRY ANALYSIS > COMPETITIVE RIVALERY Ø Finnair and Turkish Airlines recorded the highest percentage point improvements in their margins in 2012, Ø Alitalia, SAS and IAG, 2012 saw both an operating loss and a decline in the operating margin. Ø Air France-KLM and airberlin, loss-makers at the operating level at least saw a narrowing of their margin of loss. LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  New business models o  Low Cost Carrier penetration o  Price wars •  New strategic alliances o  Targeted partnerships and equity investments by regions (Emirates) o  Star Alliance groups Air China and Lufthansa take the first two positions on routes between Europe and China o  Qantas cuts Dreamliner order, prepares for Emirates alliance for its Jetstar subsidiary as the low-cost carrier prepares for slower growth on its long-haul routes. •  Low product differentiation > INDUSTRY ANALYSIS > COMPETITIVE RIVALERY LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Different Labor cost > INDUSTRY ANALYSIS > COMPETITIVE RIVALERY LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Regional dominance by Hub > INDUSTRY ANALYSIS > COMPETITIVE RIVALERY • Removal of restrictions on market entry and exit, + policies permitting airline mergers • consolidation in hub-and-spoke networks • strategically located hubs. • Prior to deregulation (end of 1970s), many airline services were taking place on a point-to- point basis. (direct connections at the expense of the frequency of services and high costs ) Airline Deregulation and Hub-and- Spoke Networks With deregulation, • each airline assumes dominance over a hub and services are modified so the hubs are connected to spokes • As an airline assumes dominance of a hub, it reaches oligopolistic (if not monopolistic) control -> increase airfares for specific segments • The advantage for airlines : Regional market dominance ; higher plane loads, LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > INDUSTRY ANALYSIS > THREAT OF NEW ENTRANTS •  Capital requirement o  High start up Cost •  Distribution channels o  limited capacity of distribution channels (Companies are fighting to secure a space for their product) •  Hub and spoke o  Difficult to obtain gates and landing slots at the major hubs o  Rights of incumbent airline to take-off and landing slots (difficult y for new entrants to establish flight schedules at attractive times of the day •  Government policies o  Deregulated environment in USA (1978) o  Liberalized environment in Europe (1987 to 1997) •  Risk o  High-risk nature of the airline industry is a major barrier for new entrants. o  Revenue affected by loads factor o  highly vulnerable to an economic slowdown LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > INDUSTRY ANALYSIS > SUBSTITUTES •  Competition with over mode of transport o  Rail (high speed train) o  Road o  Boats •  No substitute for long flights •  Low Switching Cost o  Could encourage consumer to substitute •  Buyer propensity to substitute •  Technology o  Videoconferencing o  Telecommunications LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Pricing transparency / customers are highly price sensitive o  Buyers have historically had low bargaining power in the airline industry, o  Recent technological developments have changed this picture though. The rise of the Internet has increased the bargaining power of the consumer as it has made it easy for a potential buyer of a flight ticket to search for the cheapest available fare between dozens of airlines o  These developments has made prices of air travel more transparent, and along with the liberalisations within this market over the last decade combined with the low switching costs for buyers in this market, has helped push down prices of air travel •  Corp purchasing / high price elasticity of demand o  Price elasticity is influenced by the income of consumers, seasonal variations, consumer tastes, quality of service, the availability of substitutes and other factors o  Business travelers will still maintain their demand levels even when air travel prices increase o  Short-haul flights see a dramatic decline in demand when prices increase due to the availability of substitutes •  Travel agencies > INDUSTRY ANALYSIS > BARGAINING POWER OF BUYERS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Oil & fuel suppliers •  Aviation Turbine Fuel prices constitute around 80% of the total operating costs of Airline Industry. •  Monopoly of Oil companies: Because of limited number of suppliers, there is hardly any alternate choice for the airlines; •  industry, with these state owned oil companies fixing the ATF price on a mutually agreed common formula among them •  Labor union •  Labour such as pilots, cabin crew, ground personnel, gate agents etc have a bargaining powerwhich is due to the labour agreements at the time of industry regulation that left them withlittle flexibility. •  This force remains a significant factor in successful performance in the industry •  Government – FAA, ATC, TSA and Airports service o  The supplier role of the airports is affiliated with the aeronautical services for which they provide for the airlines. o  To lower the aeronautical costs low fare carriers have followed a strategy of developing routes to secondary and regional airports which also provides faster turnaround times •  Aircraft Manufactures, No substitute (Boeing, Airbus) o  There are only two major manufacturers for large commercial aircraft. Airbus and Boeing . o  demand for fuel efficient and luxurious aircrafts that can accommodate more number of people. o  Also, airlines make relationship specific investment in the form of trained mechanics, existing stock of aircraft etc, which gives aircraft manufacturers some supplier power o  One opposing factor for this supplier power is the slow nature of aircraft sales, because the high value order placed by the industry can take several years to be delivered > INDUSTRY ANALYSIS > BARGAINING POWER OF SUPPLIERS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE q  Global Economic crisis q  Regulation vs. Liberalization vs. Deregulation q  Rising costs (fuel, labor, maintenance, security) q  Low cost (new entrants) q  Restructuring and alliances / number of Competition q  Changing Customer (target, loyalty) q  Staff relations and new types of employees (Generation Y) q  Sustainability of air carriers and safeguards / Consumer protection and passenger rights q  Impact of technology (aircraft, e-commerce, CRSs and GDSs, Internet) q  Air transport and the global trade mechanism / Future approaches to regulatory reform / Hub and spoke > INDUSTRY ANALYSIS > HOW IS THE AIRLINE INDUSTRY CHANGING ? LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > INDUSTRY ANALYSIS > SUMMARY – THREATS MATRIX Threat of new entrants - Moderate Large capital requirement 2 Acces to distribution channels 1 Government policies 3 Threat of substitutes - Low High speed Rail 2 Road /Boats 1 Technology 1 Bargaining power of suppliers – High Oil & fuel suppliers 4 Labor union 3 Government – FAA, ATC, TSA and Airports service 3 Aircraft Manufactures, No substitute (Boeing, Airbus) 4 Bargaining power of buyers – High Pricing transparency / customers are highly price sensitive 4 Corp purchasing 3 high price elasticity of demand 2 Travel agencies 2 Threat of competitive rivalry – High Numerous competitor 5 New business models / price War 3 Strategic alliances 3 Regional dominance by Hub 3 AIRLINE INDUSTRY OVERALL NOT ATTRACTIVE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > INDUSTRY ANALYSIS > SUMMARY – IS THIS INDUSTRY ATTRACTIVE ? 0 2 4 6 8 10 12 14 New entrants Substitute suppliersbuyers Rivalry Forces Forces AIRLINE INDUSTRY OVERALL NOT ATTRACTIVE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE q  Flexibility, steady and moderate growth strategies q  Effective cost cutting strategies / Reasonable capital requirements / Improve balance sheets and credit ratings (prudent capital planning) q  Fleet commonality q  Long-term vision / Ensure that available tonne-km remain congruent with demand (route / network realignment / optimization) q  Shift capacity to take advantage of routes and markets where depressed currency will significantly increase value-for-money opportunities for leisure travel q  Optimization of labour cost q  Strategic Hub control q  Strategic alliances q  Fuel efficient fleet q  Clear value for customers > INDUSTRY ANALYSIS > AIRLINE INDUSTRY KEY SUCCESS FACTORS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE INTRA INDUSTRY ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  The previous structural analysis of industries, while insightful, offers an insufficient explanation for observed differences in performance, and needs to be extended to a strategic group analysis. •  Strategic group analysis (intra-industry structure) could explain more complex patterns of performance observed in industries. Companies within industries that pursue similar competitive strategies are commonly referred to as a strategic group •  Strategic groups theory assumes similar strategies to result from similar resource or scope commitments of strategic group members. These commitments are called mobility barriers and can function as both entry and exit barriers •  Characteristics that distinguish between strategic groups form two major categories: •  Scope of organizations activity: product range, business segmentation, geographical coverage, range of distribution channels used etc. •  Resource commitment: vertical integration, product or service quality, technological leadership, size of organization > INTRA INDUSTRY ANALYSIS > INTRODUCTION LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > INTRA INDUSTRY ANALYSIS > SEGMENTATION > CUSTOMERS Travel purpose Business travelers (with time sensitive and insensitive to Price) Classic Leisure or vacation travelers Costumer origin Local (customer primarly from home market) Foreign (customer primarly from international market) Price sensitivity Stimulative (Pricing drives incremental customer demand) Prenium (Pricing targets yield premiums, not market share) LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Product quality Seat only (‘No-frills’ product focused on seat sales; other offerings generate ancillary revenue) Luxury (Premium product focused on holistic customer experience) Products offering Single product (one size fits all offering for all customer segments) Multi products (Multiple product lines for different customer segments) Market breath Regional (Network services primarily a single geographic sub-region) Domestic (Network covers most of a large domestic market) International (Network covers a meaningful number of intl. routes) Global (Truly global network without significant regional concentration) Network type Point to point (Network focuses on point-to point service) Mixed Haul Hub & Spoke (Connect long-haul / international traffic to short and mid- haul domestic points) Long-Haul Hub & Spoke (Connect long-haul / international traffic to other long-haul points) Cabin class Economy class First class Business class INTRA INDUSTRY ANALYSIS > SEGMENTATION > PRODUCTS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Long-haul International business International flights and medium and large distances Hub and non- hub airports Full service, confortable and prestige Long-haul International leisure International flights and medium and large distances Hub and non- hub airports Long-haul domestic business Domestic flights Hub and non- hub airports Full service, confortable Long-haul domestic leisure Domestic flights Hub and non- hub aiports Short-haul business Domestic and international travel (short distance) Hub and non- hub airports Full service, confortable and prestige Short-haul leisure Domestic flights (between cities in the same country) Hub and non- hub airports > INTRA INDUSTRY ANALYSIS > SEGMENTATION > MARKETS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Traditional companies o  Domestic flights (between cities in the same country) o  International flights o  several types of customers: first class, business and economy class •  High-end companies o  International flights and medium and large distances o  Full service, comfortable and prestige o  Provide quality service to the traveler o  No policy of class specialization (niche market) •  Low-cost companies o  Domestic flights o  International flights (short distance) o  No policy of class o  No service on board (or optional) > INTRA INDUSTRY ANALYSIS > SEGMENTATION > COMPANIES LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  The overall purpose of conducting an external analysis of an industry is to gain an overview for an enterprise showing strategic opportunities and threats within the environment it is operating in. •  A major trend in airline industry is network alliances •  Strategic blocks as a means for companies to transcend the resource and scope restrictions of their respective strategic groups by accessing those resources or markets from which they were precluded prior to forming or joining a strategic block. •  European airlines a looking for alliances in other markets •  For the analysis, three different maps could be compiled each looking at a different linkage of variables. The data supporting each variable were gathered through researching each individual company website profile as well as the websites of the main alliances. > INTRA INDUSTRY ANALYSIS > STRATEGIC GROUPS ANALYSIS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Where are we in the red ocean? > INTRA INDUSTRY ANALYSIS > STRATEGIC GROUPS ANALYSIS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Primary, vertical integration can be defined as backward or forward integration into adjacent actions in the value chain or network •  Airlines therefore have developed part wise interesting structures from integrating aeroplane maintenance, training facilities for future pilots, cargo to tour operations and even IT services. •  In interrelation with the geographical scope in which the chosen companies operate it can be assumed that all global operating airlines have at least a narrow level of ve1tical integration. •  The geographical scope axis derives from the distances (domestic, medium-haul & long-haul) each airlines serves. •  Therefore, the mapping of airlines groups along the axis of vertical integration and geographical scope allows drawing three further conclusions. > INTRA INDUSTRY ANALYSIS > STRATEGIC GROUPS ANALYSIS > VERTICAL INTEGRATION <> GEOGRAPHICAL SCOPE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > INTRA INDUSTRY ANALYSIS > STRATEGIC GROUPS ANALYSIS > VERTICALINTEGRATION GEOGRAPHICAL SCOPE Multinational focused airlines with broad integration Luxair International focused airlines with broad integration Lufthansa, Airfrance, Bristish airways, Finnair, Iberia International focused airlines with medium integration Austrian airlines, Virgin airlines International focused airlines with narrow integration International focused airlines with no integration EasyJet, Ryannair, Air berlin National focused airlines with no integration Lufthansa city lines, Austrian arrows, Alitair express Broad None National Global VERTICAL INTEGRATION <> GEOGRAPHICAL SCOPE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  The product range of the European airline industry serves usually not more than two segments upon all distances, on the one handbusiness class and on the other hand economic class. •  In addition, many airlines carry as well cargo, but this research we ll more focused on the passenger segment. •  In this regard the second chart which can be seen in the Appendix concerning the interrelation of product range and geographical scope gives an informative overview about all options the European industry undertakes. •  It can be noted that most companies can be mapped within three main groups: •  Dominating group serving business and economic class on all distances •  The group serving business and economic class on medium&long-haul distances plus one equal class on domestic flights as well as, •  Airlines serving exclusive economic class on domestic and medium-haul flights. •  However, it could be argued that if this attempt to map companies along the stated axis bears all in all four one player e.g. Virgin Atlantic which just serves long-haul flights, it could be assumed that the chosen variables are not appropriate to identify groups. > INTRA INDUSTRY ANALYSIS > STRATEGIC GROUPS ANALYSIS > VERTICAL INTEGRATION PRODUCT RANGE <> GOEGRAPHICAL SCOPE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > INTRA INDUSTRY ANALYSIS > STRATEGIC GROUPS ANALYSIS > VERTICAL INTEGRATION PRODUCTRANGE GEOGRAPHICAL SCOPE Business class on all distance Olympic, Alitalia, Air france, Lufthansa, KLM, turkish, aeroflot, Iberia, tap portugal Medium haul business flight Business and economic long haul Virgin airlines Economic class all distance Air lingus Economic class domestic and mediul haul Business and economic Business Economic Domestic Long Haul PRODUCT RANGE <> GOEGRAPHICAL SCOPE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  The valuations for every airline regarding their service quality have been gathered from the Website www.airlinetest.com, •  However, if the strategic group model is supposed to be implied to distinguish business strategies and competitive positioning than some groups stated in the map would not refer to that. •  Comparing for example Austrian Airlines and Ryanair, which both have to be mapped in the group of great service quality with a medium-sized fleet, it also has to be acknowledge that they both use different options regarding product and geographical scope, which was explained before. •  In addition, although price matters have not been investigated within this paper, it can be assumed that both companies, Ryanair as LCC and Austrian Airlines as national flag carrier, implement totally different pricing strategies. In summary the overall strategy of both companies cannot be assumed to be equal. Similar variations can be found within different groupings showing the interrelation between size and quality. > INTRA INDUSTRY ANALYSIS > STRATEGIC GROUPS ANALYSIS PRODUCT RANGE <> GOEGRAPHICAL SCOPE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > INTRA INDUSTRY ANALYSIS > STRATEGIC GROUPS ANALYSIS > VERTICAL INTEGRATION SERVICEQUALITY FLEET SIZE Service excellence, small fleet Luxair Moderate service quality, large fleet Great excellence, medium fleet Swiss, air berlin, finnair, Aeroflot Broad None <50 200 Great excellence, small fleet Air lingus, virgin atlantic, Olympic airlines, Austirna arrows Great service quality, medium large size fleet Austrian airlines, Ryannair, turkish Moderate service quality, medium large size fleet Great service quality, large size fleet Lufthansa, british airways Low service quality, large fleet 50<100 100 < 200 PRODUCT RANGE <> GOEGRAPHICAL SCOPE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE What our direct competitors are doing? > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Air France-KLM operating profit by business segment (EUR million) 2005-2012 Ø New Mini offer = without luggage Ø Long-haul passenger network drives 2012 revenue Ø Cargo activities lost Dec-2011* Dec-2012 Change % of 2012 revenue Passenger 18,834 20,186 7.2% 79% Cargo 3,143 3,057 -2.7% 12% Maintenance 1,040 1,096 5.4% 4% Other 1,346 1,294 -3.9% 5% Total 24,363 25,633 5.2% 100% > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Air France-KLM operating profit by business segment Cargo activities: Air France-KLM Cargo confirms its leadership position market share of 29.6% in 2012 growth based in the Middle East (+14.8%) and Africa (+6%). > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE BRITISH AIRWAYS Ø “ a global premium airline” Global • across the globe Premium • service is worth paying a little bit more for Airline • Moving people and cargo > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Ø British Airways seeks new strategic partner after Qantas signs Emirates deal "Asia has become a key market focus for IAG and we're talking to a number of airlines about alternative options for us." BRITISH AIRWAYS > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Ø Concierge Quintessentially Lifestyle Partnership for first class offer BA is the most international of the big flag carriers, which means its network is the least domestic- focused. Focused on Long haul from her Heathrow base It remains much more dependent on a single hub (Heathrow) and on a single intercontinental market (North America) BRITISH AIRWAYS > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Weakness Ø ageing, high fuel-burn aircrafts. In 10 years from 2002 to 2011, BA’s average fleet age grew from just over seven years to between 12 and 13 years BRITISH AIRWAYS > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE IAG lags Lufthansa and Air France in Asia market > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Ø Cost-cutting measures included reducing flight frequencies on some routes to Europe and the US Ø Expanding its profitable Asian network through sister firm • Cathay for the full year 2012 benefitted from improved results at Air China, of which it owns 19.57% as part of a cross-equity arrangement An other Legacy sample, @ the Far East > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE LLC Strategy warning Morris believes that previous responses from legacy carriers to the low-cost threat "have been very similar so far. They've looked to reduce frequencies, they've looked to reduce aircraft size, they've looked to stop serving destinations". Yet he says that "in a business which since time immemorial has grown economies of scale and volume growth, it's quite a cul-de-sac strategy to say this is all about downsizing." > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Turkish Airlines' operating profit almost tripled in 2012 The net profit figure of TRY1,113 million Ø Revenues up 26% • passenger capacity growth of 18% Ø Europe’s most efficient cost structures Ø Productive work force Ø Expansion strategy based on increasing transfer traffic / strong growth on routes to Latin American and Africa > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Turkish Airlines : Specific IT tools to support Network and Revenue Growth Ø IT that can evaluate the entire network for the best available seat/price combinations. Ø Demand forecast Ø Leg/Segment Optimization • PROS Origin & Destination Solutions™ • PROS Real-Time Dynamic Pricing™ • PROS Group System™ • PROS Group Agent™ > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE India : Indigo Model Vs KingFisher Domestic carrier > INTRA INDUSTRY ANALYSIS > COMPETITOR ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE So, Which products, markets, customers…are the most attractive? Our actuals segments and revenues > INTRA INDUSTRY ANALYSIS > LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Market by 2016 Forecast Highlights: International Passenger Development : +331 million passengers the top five countries for international travel • United States (+42.1 million), • the United Kingdom (+32.8 million new passengers), • Germany (+28.2 million), Spain (+21.6 million), and France (23.4 million). Domestic Passenger Development Domestic passenger numbers : +494 million increase reflecting a CAGR of 5.2% Kazakhstan :22.5% CAGR +3.9 million passengers India : 13.1% CAGR, +49.3 million new passengers. China :10.1% CAGR +158.9 million new domestic passengers. By 2016 the five largest markets : United States (710.2 million), China (415 million), Brazil (118.9 million), India (107.2 million), and Japan (93.2 million). > INTRA INDUSTRY ANALYSIS > MARKET ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE China is the world’s number two aviation market with huge growth potential Top 10 airline passenger markets by seats > INTRA INDUSTRY ANALYSIS > MARKET ANALYSIS> Market by 2016 Forecast Highlights: LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > INTRA INDUSTRY ANALYSIS > MARKET ANALYSIS> RETURN ON INVESTMENT BY REGION Clear LCC succes in european market, latin america keep better balance regarding ROIC between legacy and LC Carrier Return On Investment by region LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Cargo segment Asian-Pacific airlines are expected to deliver the largest absolute contribution to industry performance Ø Asian carriers comprise about 40% of the air cargo market and will be the biggest beneficiaries of the expected upturn in cargo demand. Ø Carriers in the region are expected to see average demand growth of 4.9%, slightly outpaced by a 5.0% capacity expansion. > INTRA INDUSTRY ANALYSIS > MARKET ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Product Forecast : What to offer ? Airlines refine their customer segmentation processes, albeit slowly Ø US-based carriers Spirit Airlines and Allegiant Air target extremely price sensitive travellers in domestic and regional markets. These passengers are willing to trade off lower fares for less frequent service Ø We (also Cathay Pacific) are targeting higher fare paying passengers travelling in intercontinental markets. Ø max seat = 467 in a typical 748-8configuration, Lufthansa =only 362 seats, Ø 92 fully lie-flat business class seats Ø 8 seats in the spacious first class. > INTRA INDUSTRY ANALYSIS > PRODUCT ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Product Forecast : What to offer ? Cathay Ø improving its premium class products (both business and premium economy), Ø higher frequency and more destinations in intercontinental markets Singapore Airlines :different segments ; distinct subsidiaries: • Singapore mainline for long-haul premium service; • Silk Air for medium-haul premium service; • Scoot for long-haul budget service; and • Tiger (part owned) for budget service in medium-haul markets. > INTRA INDUSTRY ANALYSIS >PRODUCT ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Product Forecast : Premium The Middle East is at the centre of the fastest-growing premium traffic flows Ø Premium trafic from 9% in 2007 to 7,5% in 2013 = -4% in revenue Ø Highest growing premium growth : • Middle East to Far East • Europe to Middle East > INTRA INDUSTRY ANALYSIS > PRODUCT ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Product Forecast : Premium economy Airlines see growth in premium economy service from India • Air France : +40% • Virgin Atlantic : +60% growth in this class from India routes! > INTRA INDUSTRY ANALYSIS > PRODUCT ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Business, Premium economy , Economy The new 3 class trend Goodbye first class ? or… let us dream ? > INTRA INDUSTRY ANALYSIS > PRODUCT ANALYSIS> LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Product Forecast : Ancillary revenues, meaningful cash flow. a)  A la carte b)  Commission-based products o  Price-service options on flight experience c)  Frequent flier activities d)  Miscellaneous sources such as advertising > INTRA INDUSTRY ANALYSIS > PRODUCT ANALYSIS> forecasts an 11.3% increase, surpassing $3.6 billion in new receipts. LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > INTRA INDUSTRY ANALYSIS > CRITICAL SUCCESS FACTORS Critical success factors refined People High-caliber staff is critical in this service-oriented business. Training programs focusing on front-line communicative skills with customers and internal employee-management problem solving with customer- focused continuous-improvement objectives are essential ingredients. Service Product/Promotions The actual product--aircraft seating space, aircraft type, class of service offerings and booking ease must be at least industry-competitive for success. Promotions, particularly those targeted to frequent high-revenue travelers, create loyalty and repeat business. Route System An airline's route system is perhaps the most consistent success factor. Where to fly and how often are factors that must be matched to customer demand, and at the same time, scheduled to maximize aircraft utilization. Revenue/Cost Control Maximizing revenue through competitive and innovative pricing schemes to attract and maintain a customer base is critical for success. Just as important is cost management, notably fuel procurement and price hedging during volatile periods. Financial Management Net-unit revenue is the measure of profitability, representing all revenues minus all costs divided by the total seats flown. Successful management of this key indicator enables airlines to tap investment for growth. LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Showing the current position of a company within a strategic group regarding two criteria can give an overview of opportunities and threats as well as contribute to strategy formulation. •  However, it can not be assumed that companies within a strategic group have to be seen as direct competitors, because their overall strategic orientation might be different and just regarding two chosen variables comparable. •  Nowadays, are the strategies groups so separated regarding quickly emerging profitable models, is there any convergence to look for ? •  Do we, while keeping “our soul”, bring ours business segment elsewhere, from our core ressources to new revenues ? > INTRA INDUSTRY ANALYSIS > STRATEGIC GROUPS ANALYSIS > SUMMARY LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE INTERNAL ANALYSIS RESSOURCE BASED VIEW ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Our Ressources and cababilities, 90 year old legacy carrier… Still there > RESSOURCE BASED VIEW ANALYSIS > • Financial • Physical • Technological • Organizational • Intangible • Human • Innovation • Reputational …inside the value chain LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Business Model > RESSOURCE BASED VIEW ANALYSIS > BUSINESS MODEL Value Proposal ●  customer ●  Product / service ●  Price Value Architecture ●  Value chain ●  Network value profit equation ●  Sales ●  Cost structure ●  Capital 3 windows , Value for customer, How it’s created, and the global formula of our profit outcome LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Business Model > RESSOURCE BASED VIEW ANALYSIS > BUSINESS MODEL Value Architecture ●  Value chain ●  Network value chain INBOUND LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES SERVICE PROCUREMENT TECHNOLOGY DEVELOPMENT HUMAN RESOURCE MANAGEMENT FIRM INFRASTRUCTURE-Financial Policy - Accounting-Regulatory Compliance- Legal - Community Affairs Pilot Training Safety Training Agent Training In-flight Training Baggage Tracking System • Promotion • Advertising • Advantage Program • Travel Agent Programs • Group Sales • Ticket Counter Operations • Gate Operations • Aircraft Operations • On-board Service • Baggage Handling • Ticket Offices • Route Selection • Passenger Service System • Yield Management System (Pricing) • Fuel • Flight Scheduling • Crew Scheduling • Facilities Planning • Aircraft Acquisition Information Technology Communications Product Development Market Research • Lost Baggage Service • Complaint Follow-up • Baggage System • Flight Connections • Rental Car and Hotel Reservation System Computer Reservation System, In-flight System Flight Scheduling System, Yield Management System Baggage Handling Training Flight, route and yield analyst training LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Lufthansa's balance sheet is strong > RESSOURCE BASED VIEW ANALYSIS > FINANCIAL It has high levels of liquidity and low net debt. The group has consistently covered its capital expenditure needs out of operating cash flow. Its gross liquidity at the end of 2012 was almost EUR5 billion, equivalent to two months of group revenues (much higher than its minimum target of EUR2.3 billion). Lufthansa has a prudent approach. Profit equation ●  Sales ●  Cost structure ●  Capital LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Financial : Revenues by regions > RESSOURCE BASED VIEW ANALYSIS > FINANCIAL • Europe accounted for 46.3% of passenger traffic revenues in 2012, considerably more than Air France- KLM and IAG. • The North Atlantic took the biggest share of revenues among intercontinental destination regions with almost 21%, • closely followed by Asia/Pacific on 19%. Profit equation ●  Sales ●  Cost structure ●  Capital LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Financial Highlights > RESSOURCE BASED VIEW ANALYSIS > FINANCIAL In light of the decreasing operating result again as well as the ongoing extensive restructuring process, the Executive Board proposes to the Supervisory Board to suspend the dividend payment. “Our aim is to allow our shareholders to participate sustainably in the Group’s future success Profit equation ●  Sales ●  Cost structure ●  Capital LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Financial Highlights > RESSOURCE BASED VIEW ANALYSIS > FINANCIAL MRO and Cathering : ROIC champions Profit equation ●  Sales ●  Cost structure ●  Capital LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Financial Highlights > RESSOURCE BASED VIEW ANALYSIS > FINANCIAL Profit equation ●  Sales ●  Cost structure ●  Capital the MRO division has been very steady in its profitability LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Financial Highlights Profit equation ●  Sales ●  Cost structure ●  Capital LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Physical assets - fleet > RESSOURCE BASED VIEW ANALYSIS > FINANCIAL • With over 870 aircraft (including subsidiaries):One of the largest passenger airline fleet in the world • New segmentation whith Germanwings for Lufthansa's short-haul network An airline, a fleet Value Architecture ●  Value chain ●  Network Chain LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Physical assets – Lufthansa Technik > RESSOURCE BASED VIEW ANALYSIS > FINANCIAL IN 2012 Annual report :”The expansion of Lufthansa Technik Shenzhen, China, and the construction of a material warehouse in Singapore additionally ensure that Lufthansa Technik can play a key role in the growth of the Asian MRO market “ MRO (maintenance) locations LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Physical assets – Lufthansa Technik > RESSOURCE BASED VIEW ANALYSIS > PHYSICAL Complete A380 support (Plus airbus and boeing lines) LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Physical assets – LSG Skychef plants… Awarded First classLounges > RESSOURCE BASED VIEW ANALYSIS > PHYSICAL LSG Skychef locations •  Cathering Airports lounges LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Physical assets – Logistics (Cargo) > RESSOURCE BASED VIEW ANALYSIS > PHYSICAL Lufthansa Cargo reported the second-best operating result in its history. Thanks to strong exports, Lufthansa Cargo profited from much better load factors on flights from Europe to China. At the same time, the company decided to shift capacity from Asia towards America, as market developments in this traffic region were much more stable. LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Physical assets – Distribution channels > RESSOURCE BASED VIEW ANALYSIS > PHYSICAL Lufthansa expands its leisure travel booking channels Goal : reduce cost of distribution by translating booking fees outside from LH In home markets the tactics have been to get customers to book directly on the airline website and to a find a way of getting travel agents and ultimately customers to pay the GDS booking fee instead of the airline. Now Cooperation with TUIfly - Travel agencies can book Lufthansa flights via TOMA More, Lufthansa will sell around 16 million of his Amadeus shares, equivalent to 3.61 percent of the company LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Technology > RESSOURCE BASED VIEW ANALYSIS > TECHNOLOGY *Dynamic packaging *Bordconnect *future-oriented distribution channel LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Technology for logistics > RESSOURCE BASED VIEW ANALYSIS > TECHNOLOGY TIBCO EAI (Entreprise Application Integration) Current Status of the EAI Project Lufthansa Cargo has already completed two EAI projects: TrackIT and Chase. TrackIT is used to proactively supply customer information about the current status of freight transport, and drive the introduction of a status reporting system. Chase is an extension of the existing customer relationship management (CRM) system and is used to efficiently manage customer requirements and complaints. The Siebel CRM application has already been connected to the system, and at least ten additional systems will be connected over the next two to three years, including SAP and MOSAIK. LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Organizational > RESSOURCE BASED VIEW ANALYSIS > ORGANIZATIONAL Ability to redraw « what is » and execute « What should» : The SCORE (Synergies, Costs, Organization, Revenue, Execution) programme is a restructuring program launched in January 2012 to improve the Group's operating margin in the long term, with cost savings of at least EUR 1.5 billion targeted by end of 2014. LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Organizational > RESSOURCE BASED VIEW ANALYSIS > ORGANIZATIONAL Synergies, Costs, Organization, Revenue, Execution LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Organizational > RESSOURCE BASED VIEW ANALYSIS > ORGANIZATIONAL SCORE • Around 800 measures in 2012 to improve earnings and cut costs. • As a result, the Company was able to achieve a structural earnings improvement of EUR 618m in the first year of the programme, around EUR 300m more than originally planned. 'Making better use of synergies in purchasing, coordinating flight plans being between airlines, adjusting capacities and lowering staff costs through more efficient processes in administrative areas all played a role here, LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Organizational > RESSOURCE BASED VIEW ANALYSIS > ORGANIZATIONAL SCORE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > RESSOURCE BASED VIEW ANALYSIS > HUMAN RESSOURCES •  The volatile market environment made human resources activities particularly challenging. •  Major projects were launched to increase flexibility and diversity. •  The Management Landscape 2020 project addresses the demands of the future. •  Wide-ranging wage agreements create perspectives. •  International employer attractiveness further improved LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > RESSOURCE BASED VIEW ANALYSIS > INTANGIBLE Intangible assets carried at EUR 1m (previous year: EUR 5m) were acquired by means of finance leases. Non-capitalised research and development expenses for intangible assets of EUR 13m (previous year: EUR 8m) were incurred in the period. Firm orders have been placed for intangible assets worth EUR 11m (previous year: EUR 8m), but they are not yet at the Group’s economic disposal. LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Group initiative “Impulse”. Committed staff members again made vital contributions to optimising products and processes in 2011 as part of the suggestion management scheme. •  employees’ imaginations produced 3,142 suggestions for improvements with the potential for saving around EUR 8m (2012) •  A large number of research projects and partnerships generate new findings and advance the progress of innovative ideas in the spirit of sustainable development. •  Lufthansa is actively involved in research into alternative fuels •  Lufthansa and the Jülich research centre started a programme of long-term observation of the Earth’s atmosphere using scheduled aircraft •  For nearly two decades Lufthansa has been the only airline in the world involved in climate research and air quality. •  Starting in autumn 2011 and after extensive testing, the container fleet at Lufthansa and Lufthansa Cargo is being replaced successively by new containers made of light compound materials •  The successful installation of hush kits on the complete Boeing B737 fleet in late 2011 also made an important contribution to the sustainable reduction of aircraft noise > RESSOURCE BASED VIEW ANALYSIS > INNOVATION LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  Lufthansa claims to operate one of the safest passenger services compared with other airlines. •  Germany’s reputation for precise and high-quality engineering contributes to this image. By means of cautious engine maintenance and precise security control, Lufthansa was rarely involved •  in serious air crashes. Through providing safe flights, it builds up an outstanding corporation image and reputation, assuring customers a sense of status and reputation if they choose to flight.. > RESSOURCE BASED VIEW ANALYSIS > REPUTATIONAL LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > RESSOURCE BASED VIEW ANALYSIS > CAPABILITIES •  6 business segments Organizational structure & Control •  Continuously work in innovation and stream- lined cost structures (to remain the first choice among competitors) Economic sustainability •  Maintain employee’s motivation as well as their mental and physical health and strenghen a culture of life long learning within the company Social responsibility LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > RESSOURCE BASED VIEW ANALYSIS > CAPABILITIES > CORE COMPETENCIES •  Technik AG is the word’s leading provider of technical aircraft servicesMaintenance, Repair and Overhaul (MRO) •  Cargo AG ranks among the market leaders in the international air freight business and offers worldwide network Logistics •  Systems AG has a world-wide ledership role in the aviation industry IT Services •  LSG Sky Chefs is the largest provider worldwide of airline catering and the management of all processes related to in-flight serviceCatering LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE VRIST Filter > RESSOURCE BASED VIEW ANALYSIS > VRIST FILTER Whitch ressources and capabilities builds competitive advantage Ressource or capabilities Strategic Ressource or capabilities Valorisable Rare Inimitable Non Substituable Non Transferable LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE VRIST LH /other airline > RESSOURCE BASED VIEW ANALYSIS > VRIST FILTER Value Architecture ●  Value chain > Primary activity LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE LH service competitive advantage > RESSOURCE BASED VIEW ANALYSIS > VRIST FILTER Whitch ressources and capabilities builds competitive advantage LH competitive advantage Lufthasa Technik (MRO) Logistics LGS SkyChef Lufthansa gained a top rankings at the recently concluded “World Airline Awards 2013” event in the categories “Best First Class Airline Lounge”, “Best Western European Airline” and “Best Transatlantic Airline”. Value Proposal ●  customer ●  Product / service ●  Prrice LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE LH competitive drawback LH has highest CASK on both short-haul and long-haul / competitor > RESSOURCE BASED VIEW ANALYSIS > BUSINESS MODEL >VALUE CHAIN > CASK RESULT Value Architecture ●  Value chain > Operation LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > SITUATIONAL SUMMARY > SWOT Strenghts: * Global operations * Structural divisions *Abiliity to react from future trends * MRO and Cathering champions * Global Logistics core competence *Premium, robust and safety image Weekness * Too german centric * Numerous proprietary aircraft models in the fleet to manage * No International bases and business unit with cultural endorsment on new growing market and culture (Brazil, India, ASEAN) *Structural superior CASK regarding competitors Opportunities * Ownership stakes in different markets * Optimize fleet capacity and routing *Use a mooving world to dispacth LH core values, seeking profitability * Expand presence in growing market Threats: * LCC on European Market * Other alliances, and new kind of jointures (ethiad-jetairway) * Gulf Carriers in European Market without the same structure cost and taxes LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > SITUATIONAL SUMMARY •  The opportunities and risks for the Lufthansa Group will be defined very largely by macroeconomic factors and their subsequent effects on global air traffic markets and competition. •  Past experience shows that developments in external parameters are subject to great uncertainty. •  Lufthansa currently anticipate that the global economy will continue to perform well, albeit at lower growth rates. As a result of the financial and economic crisis a tangible forecast risk can be observed for assessments of future economic developments. In the future greater volatility is expected than has been previously observed. •  The assumed growth in global passenger and cargo demand is therefore subject to considerable opportunities and risks for Lufthansa. •  Fuel prices remained high and were not much affected by the lower growth prospects. Kerosene costs are reduced by strong hedging results. LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE > SITUATIONAL SUMMARY •  Additional expenses will come from the inclusion of European air traffic in emissions trading •  No decision has yet been taken on the possibility of offsetting the costs of purchasing the necessary certificates against the air traffic tax •  These risks are mirrored by the corresponding opportunities if the parameters of demand, average yields and fuel price develop better than expected. •  In this environment Lufthansa is relying on its ability to adjust its capacities and resources flexibly to changing market conditions and to cut costs. •  In early 2012 the Executive Board presented SCORE, the new Group programme to safeguard earnings, which is intended to make lasting, structural improvements to profitability. •  Despite the tense situation on financial markets and the deteriorating economic outlook, the Group expects to be able to maintain its investment grade rating. Counterparty risks are rising again, however. LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE INTERNAL FACTORS (IFAS) EXTERNAL FACTORS EFAS * Global operations * Structural divisions *Abiliity to react from future trends * MRO and Cathering champions * Global Logistics core competence *Premium, robust and safety image * Too german centric * Numerous proprietary aircraft models in the fleet to manage * No International bases and business unit with cultural endorsment on new growing market and culture (Brazil, India, ASEAN) *Structural superior CASK regarding competitors * Ownership stakes in different markets * Optimize fleet capacity and routing *Use a mooving world to dispacth LH core values, seeking profitability * Expand presence in growing market * LCC on European Market * Other alliances, and new kind of jointures (ethiad-jetairway) * Gulf Carriers in European Market without the same structure cost and taxes STRENGTHS (S) WEAKNESSES (W) OPPORTUNITIES (O) SO STRATEGIES WO STRATEGIES THREATS (T) ST STRATEGIES WT STRATEGIES > SITUATIONAL SUMMARY > SWOT LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS •  Invest in emerging markets •  Invest in new travel technologies, high quality customers travel experience •  Expand high quality service •  Business operations cost control •  Optimize labor cost •  New LCC acquisitions •  Develop new alliances •  Operating cost •  Reduce operating cost •  Reduce Structure cost
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE BUILDING A STRATREGY Bruno Nelzy Mountaha Ndiaye Noufe Sie
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Nothing is possible without cultural change Cultural change in Lufthansa is also a key theme and priority for Dr Franz. He identifies the need for “a culture which embraces change, […] where we, with our de-centralised business units, strengthen and foster entrepreneurship; […] a culture which is open to create and make use of synergies between similar businesses, […] and a culture which is open for taking up ideas invented maybe outside the Lufthansa Group”. LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS > STRATEGIC OPPORTUNITIES > CORPORATE STRATEGY
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE CORPORATE STRATEGY > STRATEGIC OPPORTUNITIES > CORPORATE STRATEGY Our focus : Searching to grow, Handshaking the world, by Spreading our cababilities LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Middle east Gulf carrier Ø The Market have to be shared, Ø Emirate’s & Gulf carrier cant’be (at this time ) beaten on midle-east Hub Control Ø Opportunity to optimise slot allocation in the for our long hull A380 > STRATEGIC OPPORTUNITIES > CORPORATE STRATEGY > NEW MARKETS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE India Ø Enforce Strategic MRO Alliances for the India growing fleet., (Indigo, Jet Airways) Ø Propose the lease and maintenance model from the Turkish base created to India carrier Ø Premium economy product should be the lowerest cabin of a LH fleet there, focused on long- haul superior planes thanks to our fleet optimization and Opex reduction. Profit equation ●  Sales ●  Cost structure ●  Capital > STRATEGIC OPPORTUNITIES > CORPORATE STRATEGY > NEW MARKETS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Turkish Airline Strategic Aliance Ø New revenues , economy of scale and bigger native customer base Ø New MRO base Ø the two compagny in a « join management » give and Immediate bigger base , adding code-share and more total income. Ø Staff costs are lower in Turkey and air travel is becoming more affordable. Revenues at TK have grown at an average 24% a year for five years. Ø Create a Turkish LH Technik MRO/lease base Value proposal ●  customer ●  product/ service ●  Price Profit equation ●  Sales ●  Cost structure ●  Capital > STRATEGIC OPPORTUNITIES > CORPORATE STRATEGY > NEW ALLIANCES LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE TAM MRO – LH Tecknik joint venture Ø Make a coordinated dispatched structure Brazil MRO sector poised for major expansion Ø Each International major substanable step, should be considered with a localy cultural approach, Ø Making a Lufthasa tecknik there , should be made whith a local partener who wants to grow. Value proposal ●  customer ●  product/ service ●  Price Profit equation ●  Sales ●  Cost structure ●  Capital > STRATEGIC OPPORTUNITIES > CORPORATE STRATEGY > NEW ALLIANCES LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE BUSINESS STRATEGY Our focus : How to enforce premium Lufthansa Experience, meanwhile lowering Operating Cost ? > STRATEGIC OPPORTUNITIES > CORPORATE STRATEGY LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE BUSINESS STRATEGY From our ‘fil rouge’ « Do customer buy a seat or an experience ? », let’s take a look at our SCORE 3D STRATEGY Ø 1 Product value business strategy enhancement on Passager Segment Ø 1 Global Operating Cost business strategy enhancement Value proposal ●  clustomer ●  product/ service ●  Price Value Architecture ●  Operationnal value chain ●  Value network > STRATEGIC OPPORTUNITIES > BUSINESS STRATEGY > CUSTOMER EXPERIENCE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Dimention 2 on Experience Lufthasa • Build an Business traveller ecosystem, Every where we are not but business is. Ø Quasi-Integration of business Travel agent, co-development of facilities o Including from emerged country ! (Brazil, India) Ø Develop First Class Lounges and business facilites in Sao Paolo, Delhi .. o  even if actual fligths are on code-shared companies, present LH business services localy Value proposal ●  customer ●  product / service ●  Price > STRATEGIC OPPORTUNITIES > BUSINESS STRATEGY > CUSTOMER EXPERIENCE LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Dimention 3 Optimizing Operating COST by new Fleet business model Limit aircraft fleet models Ø Less models whith premium cabins to keep comfort differentiation Ø Key succes factor of o Southwest Airline (only B737) o Indigo (A320) Value Architecture ●  Operationnal value chain ●  Value network > STRATEGIC OPPORTUNITIES > BUSINESS STRATEGY > OPERATING COSTS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Dimention 3 Optimizing Operating COST by new Fleet business model Reduce direct ownership of fleet Ø New Quasi integration of Lufthasa lease and MRO Technik to manage a shared fleet for lease Ø Air Lease sample : Operating Cash Flow x 10 by 3 years Value Architecture ●  Operationnal value chain ●  Value network > STRATEGIC OPPORTUNITIES > BUSINESS STRATEGY > OPERATING COSTS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Dimention 3 Optimizing Operating COST by new Fleet business model Reduce direct ownership of fleet Ø Gradually swith to lease model selecting the most profitable aircraft for each route from models avaliable between owned fleet or the « shared »’s subsidiary fleet. Ø The goal is to moving OPEX to the LH subsidiary Ø New revenues by leasing planes to others carrier who can t support total maintenance Value Architecture ●  Operationnal value chain ●  Value network Profit equation ●  Sales ●  Cost structure ●  Capital > STRATEGIC OPPORTUNITIES > BUSINESS STRATEGY > OPERATING COSTS LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE Reduce fleet models Quasi intégration Lease-Lechnik MRO Switch to a shared fleet Moving OPEX of fleet maintenance to the new subsidiary Capture new Revenues from others airlines whith it Enhance Premium Lufthasa Experience •  Co-develop business facilities whith agencies from IBAS and ASEAN countries •  Seek new Meedle class from IBAS countries > STRATEGIC OPPORTUNITIES > SUMMARY LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE •  The Executive Board of Deutsche Lufthansa AG believes that the outlook for the Group remains positive overall. The combination of operating flexibility and solid financial profiles allows the Company to develop its business actively and independently of the prevailing market environment. •  At the same time, the business segments are addressing the structural shifts in the industry, which result from high fuel prices or state subsidised competitors on long-haul routes. •  Against the background of these changed conditions, Lufthansa must create competitive structures in order to be able to retain its market position and defend itself against competition, in particular low-cost carriers and airlines from the Middle East, India for the long term. > STRATEGIC OPPORTUNITIES > SUMMARY LUFTHANSA AT GLANCE BUSINESS LANDSCAPE INDUSTRY ANALYSIS COMPETITVE SUSTAINABILITY SITUATIONAL SUMMARY STRATEGIC OPPORTUNITIES INTERNAL ANALYSIS
    • *ESG EXECUTIVE MBA B. NELZY M. NDIAYE N. SIE STRATEGIC ANALYSIS Determining Industry Attractiveness and Identifying Strategic Opportunities Bruno Nelzy Mountaha Ndiaye Noufe Sie ESG Executive MBA, September 2013 THANKS YOU Q&A