boost on revenues and cost reduction, the two challenges of Lufthansa for the relaunch of Corriere.it

When it enters the orbit of Lufthansa Ita Airways it will debut with the worst numbers of the group. Starting from operating loss which in 2022 was 486.2 million of Euro. The Germans – with the managing director Carsten Spohr in the front row – are convinced of reversing the fortunes of the company in a couple of years which in October 2021 took the place of Alitalia and is still to be considered a startup. The analysis of Courier on the operational performance of the carriers of the European giant – Lufthansa, Swiss, Austrian Airlines, Brussels, Airlines, Eurowings — and of the tricolor one shows the gap that characterized the past year. And it gives an idea of ​​the possible benefits following Lufthansa’s entry into Italy when the EU Antitrust has given the go-ahead for the operation.

The three points

Less revenue from passengers, more costs, higher fuel costs. The difference between Ita and the Lufthansa group companies – on a like-for-like basis, thus excluding cargo and maintenance – is contained in these three elements. And the official data confirms it. For analysis the Courier has parameterized the values ​​on the “Available seat kilometers” (Ask), an indicator that is obtained by multiplying the seats offered for sale by the total distance in kilometers traveled by the flights performed. On the Ask are calculated the «Rask» (the profitability indicator) and the «Cask» (the cost indicator) always for every kilometer flown by each seat.

Revenues

In 2022 for every seat flown Ita earned 6.8 euro cents per kilometre, less than 9 cents of the airlines of the Lufthansa group. An optimized network of connections, a more advanced revenue management system, better customer profiling, international agreements (starting with the transatlantic joint venture with United Airlines and Air Canada) and greater contractual weight with travel agencies allow carriers of the European agglomeration to obtain a third more than Ita.

Costs

But Lufthansa also does better on the cost side. To fly each of those seats last year Ita spent 10.5 euro cents, the European group 9.25. In 2022 the Italian carrier lost 48.2 euros per passenger transported. Within the European group, Swiss earned 31.4 euros as a customer, Austrian lost a few cents, Lufthansa 8.3 euros, Brussels 11 euros and Eurowings 11.8 euros. The airline that fared worst of the group still did four times better than Ita.

Expense items

Going deeper into the cost side of Ita we notice that of the 10.5 cents paid per seat (again per kilometre) 3.43 were due to the consumption of kerosene and the payment of European quotas for carbon dioxide emissions. The companies of the Lufthansa group instead paid 2.95 cents for fuel: the Italian carrier paid 16% more. Also in this case due to the absence of synergies in the purchasing phase – which only a large group can guarantee – and due to the difficulties in purchasing a quota of kerosene in advance and at a given price. But also net of the energy bill, Ita’s operating costs (7.1 cents) were almost 13% higher than those of Lufthansa (6.3).

In Southern Europe

Ita also did less well than other more similar carriers, those of Southern Europe, such as Tap Air Portugal and Aegean Airlines which have identified their own market niches: the former in connections with South America and Africa, the latter between islands Greece and the rest of the continent. The Portuguese Company — which will soon be subject to privatization — closed 2022 with a Rask of 7.58 cents (against 6.8 for Ita) and a Cask of 7.04 (against 10.53 for Ita), paying less even for kerosene. The same for the Greek Aegean – which does not operate intercontinental flights – which recorded a Rask of 8.3 cents and a Cask of 7.4 last year. On the operating cost side Tap and Aegean spent 30-33% less than Ita.

The budget (hypothetical)

What could Ita’s balance sheet have been like in 2022 if it had been inside Lufthansa? This is about doing a pure simulation because in reality things are a little more complicated. If the Italian company had gone like Swiss – for example – would have closed the past year with almost 202 million euros of profits. If it had recorded the same performance as Austrian it would have had a substantially balanced budget, to close at -56 million with Lufthansa’s numbers, at -157 million with those of Eurowings and at -168.8 million with those of Brussels. Even in the worst-case scenario, he could have aimed for a budget with a red line a third of the real one.

Subscribe to the newsletter of The Economy

Whatever it Takes by Federico Fubini

The challenges for the economy and markets in an unstable world

Europe Matters by Francesca Basso and Viviana Mazza

Europe, the United States and Italy that count, with innovations and important decisions, but also small important stories

One More Thing by Massimo Sideri

From the world of science and technological innovation the news that changes our lives (more than we think)

And don’t forget the newsletters
The Economy Opinions and the Economy 6 pm