Germany's largest airline announced a major fare reform that involves a shift to the pricing model used by low-cost carriers
Amid growing competition from budget airlines, Lufthansa has decided to abandon its traditional pricing model for selling economy-class tickets. Instead, it will orient itself toward the fare grid used by low-cost carriers. This means the airline will offer tickets in different price categories depending on the range of services selected by the passenger at the time of booking.
The sale of tickets under this system began on Tuesday, July 28, and flights under these rules will be possible from October 1. The new rules will apply only to intra-European flights and flights within Germany, the company said. Lufthansa offers a choice of three economy-class fares. In the cheapest, Economy Light, the price of a round-trip ticket starts at 89 euros. However, this price includes only carry-on luggage. For additional baggage, you will have to pay at least 15 euros, and for seat selection, another 10 euros.
"Today, about a third of our passengers travel within Europe with only carry-on luggage," said the company's commercial director, Jens Bischof. Cancellation or changes to the booking are not provided for in this fare. In the medium-priced Economy Classic fare, a round-trip ticket costs at least 129 euros. This includes baggage up to 23 kilograms and the ability to reserve a seat for free at the time of purchase. A fee is charged for ticket changes.
The same set of services is provided in the Economy Flex fare, with the only difference being that it allows free rebooking. The surcharge compared to the previous fare ranges from 60 to 160 euros depending on the route, Lufthansa said. The business class retains its previous fares, the company noted. The only change will be in the process of cancellation and changes to bookings: passengers will now be able to do this free of charge.
For Lufthansa, the transition to a new fare system is "a step that brings it closer to budget airlines," said Dennis Dalenburg, editor-in-chief of the German industry website aero.de, in an interview with DW. He recalled that Lufthansa's budget subsidiary, Germanwings, has long aligned its fares with those of low-cost carriers. According to Dalenburg, the fare reform will allow Lufthansa to attract new passengers who want to buy the cheapest ticket and do not need additional services on board. "This is undoubtedly a step toward greater competitiveness," the expert summarized.
The transition to the new fare system is apparently a response by the German airline to growing competition in the European market from budget carriers, primarily Irish Ryanair, Dalenburg believes. In the past financial year, which ended in March, the low-cost carrier carried about 91 million passengers — more than Lufthansa and Germanwings combined, the dpa news agency notes.
Ryanair expects that in the current financial year, which ends in March 2016, this figure will soar to 103 million, Ryanair CEO Michael O'Leary said on July 27. In recent months, he has repeatedly noted that his company is ready for tough price competition. Whether Lufthansa will emerge victorious from this is a debatable question, writes Die Welt. One reason for doubt, the publication says, is that budget airlines have newer aircraft and consequently lower fuel consumption. Low-cost carriers also have much lower distribution costs: many passengers book flights themselves on airline websites, notes Die Welt.
In the context of price competition, Lufthansa has decided to focus on the needs of passengers who do not want to pay for services they do not use, the company emphasizes. "Many passengers want to pay only for those services that are useful to them," Jens Bischof stressed. "That is exactly what our new fare concept is aimed at."
The transition to the new fare system is a correct, albeit somewhat belated, step, says Dennis Dalenburg. After all, unlike its competitors, Lufthansa is actually the last to switch to a pricing model that allows booking just a flight without additional services, the expert added.
However, he stressed, even with a similar pricing model, Lufthansa will differ from low-cost carriers. The airline will, for example, offer free snacks on board to all passengers regardless of the cost of their ticket. "So even passengers who bought the cheapest ticket will get a little more comfort than in the low-cost segment," Dalenburg concluded.