Earlier this week when The Lufthansa Group announced their quarterly earnings result, their Chief Executive Christoph Franz took the opportunity to answer questions regarding Lufthansa’s plans on a potential “tie-up” or codesharing arrangement with a Mid-East Carrier.
In the Reuters story, Herr Franz insisted that Lufthansa will wait to create such a partnership until it feels that it has accomplished the goal of revamping their current operation. Lufthansa is currently in the middle of their “SCORE” initiative focused on streamlining the group and optimizing their cost structure. It appears that any serious conversations regarding a Mid-East partnership will wait until they have reached their goal under “SCORE”.
Over the last few months we have seen Qantas enter a 10 year alliance with Emirates, Qatar announced that it will join oneworld and Air France entered a code-share agreement with Air Berlin and Etihad. When asked about these partnerships, he stated that “Air France and Air Berlin have entered these partnerships from a position of weakness”, he also added that “We do not want to do this, we are not under pressure, and we can and we will assess any potential partnerships very carefully”.
European carriers have been under a great deal of stress ever since Mid-East airlines entered the European market en-masse and have started to chip away at market share that was normally reserved for the European legacy carriers.
Herr Franz went on to say that Lufthansa will only enter discussions with a potential Mid-East partner when it feels it is on equal footing with the potential partner and is not acting out of desperation. As part of his comments, he added “If the head of Air France traffic says ‘If you can’t beat them, join them,’ that’s not the expression of a business strategy conducive to survival”.
That comment should crystallize exactly how Lufthansa feels when it comes to these partnerships. The feeling is that they can go at it alone for the time being, and will act only when they are confident that they have their own house in order.
It will be interesting to see which strategy will work best over time: Partner now as in the case of Air France, Qantas and Air Berlin? or wait until you are in the drivers seat at the negotiating table.
Personally, I would think being in the “driver’s seat” and in control of your destiny is a far more desirable place to be versus having terms dictated to you.
