Lufthansa’s First Class Strategy

There’s an interesting Bloomberg article today about Lufthansa’s first class strategy, and how they no longer want their first class to be “upgrade class.”

There’s no doubt they’ve been taking steps towards that, as they’re eliminating first class on a third of their longhaul routes, including my beloved Seattle to Frankfurt flight. Beyond that they’ve begun only releasing first class award space to partner airlines at most 15 days out, and while that may not materially decrease the number of people booking first class on miles (since many people are still switching to the product close to departure), it certainly helps them maximize revenue in advance, and makes the cabin more “exclusive” and “unattainable.”

The article states that first class demand is up 10%, which they attribute to their new first class product. I’m not convinced attributing it to their new first class is necessarily accurate, as it seems more likely to be as a result of the recovering economy and resulting demand for first class.

The article also states that Lufthansa’s strategy for actually selling first class is to offer discounted, leisure-oriented first class fares that are cheaper than full fare business class in many cases. The idea is that by creating first class fares with change fees they’re not cannibalizing their corporate fares, but also coming up with a way to generate revenue from first class aside from upgrades.

There are some interesting quotes in the article from Lufthansa’s executives. Not surprisingly, they’d like to think their first class is exclusive and innovative:

“We try not to fill first at any price. It’s an exclusive, innovative product.”

It’s also interesting to hear Lufthansa’s CEO say that first class has more or less been “serving as a mile-burning product:”

Chief Executive Officer Christoph Franz said separately that Lufthansa may have stuck with a comprehensive first-class network for too long, and that the product risked becoming “an upgrade class” for people redeeming frequent flyer points.

“For an entire product class to be more or less serving as a mile-burning product, that’s not the right thing,” the CEO said in an interview in New York on Nov. 6. “It’s a top-notch luxury product. We want to have passengers essentially for first class, with a few upgrades.”

Interestingly, despite the apparent increase in demand for first class, premium yields as a whole are down:

While Lufthansa doesn’t break down sales for first class, the share of premium revenue on long-haul flights, including business berths, was 47 percent for the first nine months, the lowest proportion in 4 years. That revenue is generated from just 20 percent of customers, Bischof said.

Anyway, nothing here’s that’s shocking really. I’d expect first class sales to be up with the economy improving (or an improved product — whichever you’d like to attribute it to), though hope that Lufthansa doesn’t go the way of Swiss in not releasing any first class award space to partner airlines, and as of next year, not even releasing award space to non-elite members of their own frequent flyer program.

Lufthansa-First-Class134

Comments

  1. They must be thrilled with those of us who are managing to redeem every First Class seat that they release for points redemption. We managed to redeem 2 seats in F from SFO to FRA next week. Figured the gravy train may be stopping soon so would use what could be our last opportunity to fly Lufthansa F. We will try to conduct ourselves in a manner becoming a paying F customer as it seems from the Lufthansa comments above they don’t really appreciate us points redeemers sitting up front.

  2. @ Vicky — Impressive you found space from SFO-FRA. That’s probably the single toughest route on which to snag first class award space. Congrats and enjoy your flight!

  3. I remember only three years ago SFO-FRA could be had everyday in F. Then all the pimping on the blogs put too many declasse idiots in the seats who would take inane photos every 5 minutes, including of the menu. It became very clear who didn’t belong. I’ve traveled paid C, paid F, and private, and I guarantee you that you paying travelers do not like riff-raff like that.

  4. @acbx Right, because as we all know, having money automatically gives you class. You’ve clearly never seen a rich, obnoxious jackass in F. Taking pictures of the menu is totally harmless and does not interfere with anyone else. Being rude and obnoxious because you have money and think that makes you better than others does.

  5. @ Despina — LOL, I do my best. Admittedly it’s the most ironic song since she has money and has no class, but that’s one of the nice things about many people with money — they’re oblivious to that. 😉

  6. And paying travelers would be equally annoyed by those rich obnoxious jerks. It’s just that these days you see a lot more idiots in F from the blogs pointing and taking photos of everything.

  7. I’m falling for the bait from those who have a fundamental displeasure with people taking pictures of a aluminum cabin, some fast food, and paper menus. So long as someone doesn’t take a picture of someone without their permission, I think it is all fair game. To stick your nose up at those who fly F because they learned how to do so from blogs is utterly classless, you actually believe you are above someone because you parted with cash and they spent their accumulated rebates. What this attitude fails to appreciate is that everyone in there has paid something of value to be in there and has just as much right to be present as the next. Is the road warrior flying between Des Moines and Milwaukee 4 times a week who then cashes in his miles for a nice vacation no more a paying customer than the entrepreneur freshly funded by a VC flying to a conference in F? No, of course not, they all are an important part of the travelling public.

    If it really annoys you and you need to feel better about paying to fly in an exclusive club, there is always flying private. If your company expense accounts are not that generous or your net worth isn’t quite substantial enough to do so then you best get comfortable stuck with the rest of the commercial flyers.

    First, biz, and economy all need each other and they all belong in the same glorified aluminum can. Everyone belongs where they paid, and they deserve to be treated with respect just as they should be considerate of others right to not have their travel unreasonably interfered with.

    People who regularly pay for F and believe there are some people who “don’t belong” must be deluded. I have never heard of any airline announce it will be reducing economy seats to increase F capacity because it is so much more important to the airline’s business. The airlines know who belongs, it is the customers that allow them to keep paying the bills.

  8. The premium cabins remain a cash cow for most airlines. Even when the seats are filled by points flyers, the in-house accounting generates some measure of ‘profit’ for the operating side. Off-line (alliance) premium bookings also generate a worthy profit for the operating side of the metal’s owner, but neither is as good as a cash sale. I question the idea that LH does not really want points flyers up front simply because filling those seats still generates black ink on their P&L for each flight. Some of it may be funny money, but to them it is real. Improving economic conditions certainly do sell more of the high profit cash-paid seats, but they still cannot fill the reduced numbers of premium seats on most flights. Reducing or eliminating FC seats may be unfortunate for the point-flying opportunists, but give the bean counters some credit: They are not fools!

  9. “The airlines know who belongs, it is the customers that allow them to keep paying the bills.”

    Yes, and clearly LH is telling you that you [i.e. mile burners] don’t belong.

  10. I don’t understand how having half empty first class cabins makes it more exclusive and luxurious??? I actually find the older Lufthansa first to be only a mediocre product and not as good as many of its competitors. However, I think the 50 cent rubber ducks and the ride to-from the F terminal to help make it a better product.

  11. Here’s an idea! Only allow miles to be redeemed for the class of service in which they were earned! Also, differentiate the credit card mile earners based on amount of $$ charged per year! Spend $100,000/yr. and then you can redeem your pts. for 1st class, etc.! This will keep everyone in their respective class!

  12. Whilst you probably see less of it flying F out of the US, I can assure you that the most annoying F pax I come across are those who appear to be (blatantly corrupt) Government members from African and Middle Eastern countries.

  13. I guess, LH strategy for F is clearer now. They want to lock-in most F pax into inflexible fares so they wouldn’t change their mind (thus a high fee for changes); then LH releases F award space to partners close to departure to fill in most remaining seats (I guess they like to keep some seats open for last-minute and/or corporate bookings).

    P.S. What’s wrong with taking photos inside an airplane? If you don’t use flash, it’s pretty discreet, especially in F since you are by yourself. For whatever reason, airlines’ sites have limited photos/videos so real-life reports are valuable and server as valuable word-of-mouth promotional tools.

  14. I wonder why there are quite a few flights I see F6 or F7 and LH still wouldn’t release any seats on the day prior to departure.

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