Future Echoes: Lufthansa Express

It's not just since the 2000s that the big European carriers have been taking a hard look at how to make money on short haul routes. As far back as the early 1990s Lufthansa was struggling and it was one of the first airline's to attempt the now largely discredited airline within an airline operation, which in the US alone has seen the likes of Delta Express, Song, Metrojet and TED appear and vanish. Lufthansa didn't go the whole hog but did create its Lufthansa Express concept as a first step.

By 2017 the short haul international and domestic networks of the major national airlines of Europe are a shadow of themselves, following the onslaught of low cost competitors of which Easyjet, Ryanair, Wizz Air and Norwegian are the main survivors. The only routes left in the colours of the majors are business heavy hub feed services, with most of the rest chopped or transferred to lower cost subsidiaries like Eurowings and Vueling. Lufthansa's own operations have changed beyond recognition within the past decade, with a number of brands and concepts (Condor, Germanwings, Sun Express, Eurowings) being added to or departing from the Lufthansa stable. Now Lufthansa is doing something similar with its long haul operations (passing A340s to CityLine for wet lease back to the parent) but in many ways for the airline this is all a familiar story.

D-ABMB 737-230 at Dusseldorf in 1994. Photo by Konstantin von Wedelstaedt from Wikipedia

In the early 90s Lufthansa was not doing well. Following German reunification the cash strapped German government demanded improved performance from the airline, which was suffering already from the results of the recession brought on by the first Gulf War. Losses in 1991 amounted to 426 million DMs and 391 million in 1992.

Lufthansa got a new CEO, Juergen Weber, and he quickly focused on cost cutting to improve competitiveness. At the time Lufthansa reportedly had the lowest margins of any of the major European airlines (worse than Alitalia, I find that hard to believe?). Weber first targeted staff with plans to cut 7,000 jobs. Lufthansa's two unions had different approaches. OTV (representing flight attendants and ground staff) was aggressively against Weber's plans but the DAG (representing pilots and engineers) was more conciliatory and offered to take an 8% wage cut and increase their hours from 37.5 to 40 per week.

Part of the reason for the willingness to work with Lufthansa was that Weber was also considering a major reshuffle of the company that would see all domestic operations spun off into a subsidiary firm, which would offer lower salaries and less benefits (effectively where Lufthansa has gone today). This was partly in response to the opening of the European market in 1993, which enabled far more competition than previously.

That enablement of competition saw British Airways purchase a 49% stake in the German regional operator Delta Air and suddenly Lufthansa found itself with a major competitor in the form of Deutsche BA. Lufthansa forged ahead with its new airline concept - to be known as Lufthansa Express. The eventual plans fell short of a completely new airline and instead focused on a sub-brand of the main airline.

Express would start on 8 key domestic German routes and promised a better on-time record, faster check in and new bargain fare pricing. This was to be achieved partly by changing the way the aircraft themselves were routed. Rather than flying complicated connect the dots style routes between different start and end points the Express aircraft would operate in a more simple ping-pong style fashion. This would in turn lead to centralisation of maintenance and crew housing. Savings were expected to the tune of 90 million Deutsche marks per year.

It is perhaps not so well known that LH operated 737-400s. here is D-ABKD at FRA in 1994. Photo by Pedro Aragão from Wikipedia

Express would gain its own check-in desks, whilst the new route structure would decrease delays, which at the time meant 10% of domestic flights being delayed over 15 minutes. Another innovation was bargain prices on late-night and short-notice flights. Passengers would get a 55% discount on flights after 7:30 P.M., even without advance reservation. Of course the other feature was staff salaries: 25% less than was  usual. The unions accepted this to stop Lufthansa creating a totally independent Lufthansa Express with even lower personnel costs.

The new airline began operations on Sunday October 25, 1992 with its 28 aircraft wearing the Lufthansa scheme, but with Express titles underneath the windowline. By the next Spring it was intended that Express would grow to operate services to other European countries as well.

D-ABIN a 737-530 as far away as Lisbon. Photo by Pedro Aragão from Wikipedia

Flight crew were based in Frankfurt, Hamburg, Munich and Berlin and were able to work "half-time" or "full-time". Onboard service was very much reduced but the "Gate Buffet" was retained. The aircraft transferred were mainly Boeing 737-200/300/400/500s but a small number of A300-600s and A310s also wore the Express scheme.

It wasn't all 737s. Here A300-600 D-AIAU has Express markings in 1994. Photo by Pedro Aragão from Wikipedia

It is a little unclear whether Express was a success or not but by the end of 1994 the airline was folded back into the main operation, probably because of new contracts and cost savings throughout the entire carrier rendered the separate airline redundant. 1994 marked the end of Lufthansa's financial crisis with a profit of 302 million DM and that year the government reduced its holding in the airline to 35%. That year also marked the beginning of a relationship with United that would lead to the formation of the Star Alliance in 1997. Phase 1 of Lufthansa's reconstruction was based around the following 5 principles:

• Stretching out depreciation
  
• Selling of assets
• Reduction in capacity
• Reduction in workforce
• Increasing productivity

This proved a major success and by 1998 turnover per employee had almost doubled whilst the workforce was about 7,000 lower than in 1992.

737-300 D-ABEN at Dusseldorf in 1993. Photo by Konstantin von Wedelstaedt from Wikipedia

Deutsche BA would prove to be a loss maker for British Airways and from 1997 Air Berlin would become a bigger threat to Lufthansa. By 2015 Air Berlin was itself in a lot of trouble and the primary short haul competitors were Ryanair, Easyjet and Wizz Air. Accordingly Lufthansa has had to go back to the extreme style plans it was looking at in 1992 with Eurowings re-established as a separate much lower cost airline. This has predictably led to a lot of staff acrimony, but given the situation it is hard to see what alternatives Lufthansa has but to continue to cut costs in the face of such aggressive competition, which is now beginning to eat into yields even on long haul routes. In comparison the competition of the early 90s looks positively sedate.

Nevertheless Lufthansa Express appears to have been a worthwhile stepping stone to assisting Lufthansa as a whole towards profitability. Certainly its aircraft could be seen for years after its dissolution still flying throughout Lufthansa's network.

References

1992, Oct. Lufthansa Shifts Into the Express Lane. New York Times
Griffin, R. Van Fleet, D. Management Skills: Assessment and Development
2005. Whatever happened to the "Lufthansa Express" concept? The Aviation Forum
2007, Dec. Pacts for employment and competitiveness: Lufthansa AG