High flyers

Why Lufthansa chose to pander to premium passengers.

It's a nice life if you can afford it. Just 24 hours before your flight leaves home, your office calls a dedicated call centre and makes a booking.

When you reach Frankfurt or Munich, you are whisked away in a limousine to a nearby airfield where a small six to 10-seater aircraft is waiting. It's all yours. No more queuing up in crowded airline terminals, dragging your luggage behind you, waiting for that connecting flight to Cologne, Nice or wherever: Lufthansa Private Jets can fly you to over 1,000 airports around Europe.

If that sounds too much like Lifestyles of the Rich and Famous, think again: almost all major Indian business houses have made use of this service since it was launched last year.

"They're used to travelling in company planes within India, and expect the same level of service in Europe," points out Werner Heesen, Lufthansa's general manager, passenger sales India, and director, South Asia.

The Private Jet is one instance of how Lufthansa is aiming for the high-end traveller, whether in India or elsewhere. Over the past few years, the German aviation company has rolled out a number of initiatives to draw more first- and business-class passengers (essentially, the high-yielding type of customer).

Going by the numbers, the idea has worked: traffic revenue in 2005 was ¤13.9 billion, an 8 per cent climb over the previous year, operating profit increased 50 per cent in the same period, to ¤577 million, and seat load factor is up by one percentage point, to 75 per cent (Source: company).

There are compelling reasons behind Lufthana's climb up the value chain. The legacy carrier, once controlled by the German government, was badly hit by the entry of low-cost European carriers like RyanAir and EasyJet in the late 1990s. With price differentials of upto 40 per cent, even Lufthansa loyalists began migrating to the low-cost carriers.

"We had to either move up to premium, high revenue businesses, or become cost competitive. Legacy carriers can never compete successfully as low cost," points out Holger Haetty, member of the board, passenger airlines.

The road ahead, then, was clear: customers would tolerate a 20 per cent higher airfare, as long as there was an at least 20 per cent difference in the service they received.

Accordingly, Lufthansa dropped prices to some extent, but now branded itself as a premium airline that offered a quality flying experience. (Incidentally, it didn't give up on the low-cost business. Germanwings was set up in 2002 as a separate business to offer low-cost airline services.)

Of course, there had to be more to it than a mere rebranding exercise. In the next six or seven years, Lufthansa worked at improving the quality of its food and service (the two factors most remembered by customers) and shortening connection times at its terminals in Frankfurt and Munich (critical for business travellers).

The private jets service was started last year as a special feature for its first- and business-class passengers. To sweeten the deal (and encourage its Star Alliance members to try the service), these bookings also qualify for lots of points on Lufthansa's frequent flier programme.

Before that, though, Lufth-ansa was already working on its on-ground service. Here, the differences between first-class and business-class passengers were significant. First class passengers are people who have already arrived. They don't need constant reminders of their status.

"They know they're important," points out Christina Foerster, general manager, product management intercontinental.

The emphasis, then, is on discreet luxury. Bone china services in the air, seven-course menus specially created by international star chefs and caviar for starters are all very well, but they don't count for much if you are breathing the same air as economy passengers. That's where the First Class Terminal came in.

Completed in end-2004, this is a separate building a stone's throw from the main terminal at Frankfurt airport. "Guests" drive up to the foyer and relax in the luxurious brown-toned terminal (Lufthansa's bright yellow and blue are conspicuous by their absence) as their cars are valet parked and personal assistants take care of their pre-take-off formalities.

Over 40 per cent of the "guests" at the lounge are transit passengers, so they can have a bath, sleep in private rooms, eat a gourmet or work in private offices before being driven directly to the aircraft in a Mercedes S-class or Porsche Cayenne.

Subtlety doesn't work with business class passengers, though. "Recognition is important to them," says Foerster. But so are speed, comfort and technology. A prominent business lounge in the main airport building aside, these passengers need a flying experience that helps them arrive at their destination refreshed and ready for business. That meant a complete overhaul of the seats.

Lufthansa's new business class seats promise better sleep (flat beds), relaxation (audio/video on demand and massage functions) and work (bigger tables for the laptop, PC power in every seat). There's also a privacy screen, since only 10 per cent of business class passengers travel with a companion.

Does any of this matter to Indian passengers? Lufthansa certainly thinks so. India accounts for over 22 per cent of its Asia Pacific revenues and local ticket sales here are the highest after Japan for the third year in a row. Seat load factor in Asia Pacific is 84 per cent "" the highest across regions for the company "" and the figure for India is similar. Over 20 per cent of all passengers from India travel business and first class.

Since 2000, the airline's weekly frequency to India has grown at 17 per cent a year and in December, it will restart its thrice-weekly flights to Kolkata (withdrawn in 1971). Kolkata will prove a vital hub for traffic from Bangladesh, Bhutan and Nepal, as well as from entire East India, explains Heesen.

Lufthansa is considering a business jet service within India in association with a private aviation company (similar to Lufthansa Private Jets). Heesen confirms that "talks are on", but declines to share details. There's also talk of increasing flights from Munich and new destinations within India. "I can't tell you what will be first," laughs Haetty.

The writer was recently in Frankfurt on a Lufthansa-sponsored media trip