Strikes shave 20% off Lufthansa’s brand value

Repeated strikes by its crew have shaved off German airline Lufthansa’s brand value by at least 15-20 per cent.

Alexander Schlaubitz, Vice-President Marketing and Digital Innovation Lead of Lufthansa, estimated that the airline’s brand value has depleted nearly €750 million. “And we are not at the finishing line yet where strikes are concerned,” he admitted.

How was the figure arrived at? “It’s not the cleanest of calculations. The measure was arrived at by weekly tracking of brand perceptions and looking back at order books,” he said.

The past 18 months have been a tough time for the airline, with a series of strikes by its employees over its decision to cut costs in order to take on competition from low cost airlines and West Asian carriers more effectively. The worst was a week-long one in November 2015, when nearly 4,700 flights were cancelled and an estimated 550,000 passengers affected. According to reports, it cost the airline losses of €10 million a day.

Diwali dampener And ironically, the strike came just a month after Lufthansa had scripted a special global Diwali campaign for Indians with the tagline “Diwali begins when you join your loved ones”. Unfortunately, when Diwali did come, the airline was in the midst of a crippling strike and could not meet its promise.

Schlaubitz, here to deliver a keynote on “Creating customer value through empathy” at digital marketing and advertising event ad:tech India, said it is a challenging time for airlines as competition within the category is dense.

“We get margins of barely €5 per passenger,” he said. For Lufthansa, which is positioned as a premium airline and cannot start charging for every service as low-cost rivals do, as it would affect brand perceptions, it is a tight balancing act. “We need to build up brand value and at the same time find new revenue resources. Finding the right equation is key,” he said.

However, he added, Lufthansa is facing up to the challenges through a host of small initiatives and incremental improvements. “We are anticipating the concrete travel needs of passengers,” he said. For instance, to address the top traveller anxiety, the Lufthansa app can notify a passenger that his or her luggage has been loaded on the same flight.

Recently, it introduced an advanced seat reservation feature at an additional cost. “We may not be doing one big bang new thing but we are doing lots of little things,” he said. Lufthansa has also set up an innovation hub in Berlin where it is creating strong new travel products. It is now sewing up a joint venture with a Silicon Valley company for tech innovations.

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