Lufthansa: The SCORE program - change for success?
MarketLine, October 2012, Pages: 22
Introduction
Lufthansa’s premium position in the European aviation industry is under threat. As well as fuel prices, environmental regulation threaten to disadvantage European carriers compared to international rivals. A surge in popularity for budget airlines and Gulf carriers has prompted Lufthansa to begin the SCORE program, aimed at saving €1.5bn in costs by 2014 via rationalization and efficiency.
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Highlights
Lufthansa is the largest aviation company in terms of revenue. Other proxies, such as passenger numbers, also suggest Lufthansa enjoys a leading position, if not outright first place.
The company’s revenues grew 8.6% in 2011 to reach €28.7bn ($39.9bn).
Staff costs are a significant problem for Lufthansa, accounting for 22% of their expenditure in 2011. In comparison, Ryanair staff costs were 11% and Emirates’ costs were 13.2% of their total costs.
Your key questions answered
- Why has Lufthansa embarked on this program?
- How successful will the program be?
OVERVIEW
Catalyst
Summary
ANALYSIS
Lufthansa operates in an increasingly difficult market
Lufthansa is Europe’s largest airliner
The airline faces mounting difficulties
The SCORE program
2011 showed some promise despite worsening conditions
Brands were restructured
Synergies are crucial for the SCORE program
Costs are to be driven down
Revenue generation is also being targeted
Change for success?
Union hostility
SCORE estimates do not account for restructuring costs
Interim results presented challenges
The aviation industry is not immune from the global slowdown
CONCLUSIONS
A sensible strategy in a harsh environment
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