Flight test

Flight test

Lufthansa chief draws on all his skills to pilot the legacy carrier into a business space where he's confident it can continue to thrive

Carsten Spohr was named Manager of the Year in 2017 by Manager Magazin in Germany when Lufthansa's profit hit a record high and its share price jumped 150%. Two years later, he finds his skills being tested to the limit after issuing a second profit warning in six months. While the airline is on track for an operating profit of 2 billion euros this year, it is 25% below analysts' forecasts.

But if anyone is to fly Lufthansa through the current turbulence and into clear skies, the ex-pilot is determined to do that before his contract with the company ends in 2023.

With a management engineering degree from the University of Karlsruhe, Mr Spohr was appointed the CEO of Lufthansa in 2014. Like many Germans, he grew up dreaming of working in large corporation; he chose to do an internship with Lufthansa as pat of his studies because flying was his childhood dream.

"Since I was a boy, I was fascinated by aviation," he tells Asia Focus during a recent visit to Bangkok. "I loved to go to the airport to pick up my dad from business trips.

"After a few weeks of working at Lufthansa, I realised that working at Lufthansa without being a pilot is like working at Porsche and not having a driver's licence," he recalls with amusement.

After he graduated from university, he went straight to Lufthansa's flight school, where a novice can train to become a commercial pilot within two years, a programme the carrier has offered for decades.

"I am still captivated by the high-tech of our modern airplanes," says Mr Spohr. "At the same time, there is an emotional element to aviation, both in the cockpit when looking outside to see different lights and scenery, and all the emotions in the back where up to 500 people are about to visit their loved ones, or going together on a honeymoon or having to go on a business trip to strike a deal."

Many pilots like to fly smaller planes because of the extra manoeuvrability. But that is not the case for Mr Spohr who "never liked the small planes too much" because he is a self-proclaimed "safety maniac". That's something you like to hear from any commercial pilot.

"I like our large Lufthansa planes with two engines, lots of redundancy, well-maintained -- that's the aviation I like," he remarks.

In an age when unmanned aerial vehicles are becoming more versatile, and with sophisticated technology enabling planes to pretty much fly themselves, some foresee a future without pilots. But Mr Spohr, 52, does not see that happening on a commercial flight anytime soon.

"We all know that this is happening in the military already, but for commercial aviation, that will not happen even in your lifetime," he comments.

LOW-COST VS PREMIUM

In 2015, Germanwings Flight 9525, operated by a low-cost carrier owned by Lufthansa, crashed in the French Alps. All 144 passengers and six crew members were killed. It was the first fatal crash in the 18-year history of the company and it occurred only one year after Mr Spohr became the CEO. Worse, it emerged that the crash was caused deliberately by a co-pilot who had psychological problems that he had concealed from his employer.

That would have been a disastrous start for anyone but Mr Spohr's response to the tragedy was delicate and assured, to the point that he gained a reputation as one of Germany's most accomplished corporate leaders. Even a series of strikes by Lufthansa pilots the following year did not bring the company to its knees, as it continued to grow in 2017 when profit hit a record high.

But Lufthansa's gross capital expenditure has jumped 8% since then to 3.8 billion euros (US$4.3 billion) last year and now some shareholders are starting to question that budget. Still, Mr Spohr believes that his two-pronged strategy of sticking with quality and the premium market in the front, with the low-cost market in a supporting role, will eventually put the company back on its feet again.

That said, he is disdainful of low-cost carriers that stretch credibility with their pricing. Tickets costing less than 10 euros are "economically, ecologically and politically irresponsible", he told the Swiss newspaper NZZ am Sonntag on July 14. "Flights for less than 10 euros shouldn't exist."

Ryanair is now selling tickets from Berlin costing less than 10 euros to cities including Budapest, Barcelona and Rome. That's for a one-way trip with no checked bags or reserved seating.

Nevertheless, one of the reasons Lufthansa has given for lowering its 2019 profit forecast last month is a decline in airfares caused by competition from low-cost rivals in Europe, particularly Germany and Austria. However, Mr Spohr does not see the low-cost market in Europe, or Asia, growing the way it has for much longer.

"The low-cost carriers in Asia and also back in Europe probably have reached their plateau of market share," he says. "I think we are now seeing very strong growth again of legacy carriers that have done their homework. In all modesty, we are one of them.

"There is not only a market for low-cost aviation as there is also a market in premium. That is why Lufthansa has entered a double strategy by positioning our Lufthansa brand next to Swiss Airlines and Austrian Airlines as premium brands via our four hubs in Europe.

"For those markets that don't require premium brands but still want to show a presence, we have established Eurowings as a secondary product line and that has worked quite well for us, with 800 aircraft in total where 200 are Eurowings and 600 are in the premium brands," he adds. "With that, we not only are number one in Europe but we are also number one between Thailand and Europe."

Lufthansa now owns a total of 12 airlines along with the largest maintenance, repair and overhaul company (Lufthansa Technik), the largest catering company in the world (LSG Sky Chefs), and one of the largest cargo airlines in the world (Lufthansa Cargo).

TECH TO THE RESCUE

Mr Spohr believes the aviation industry "will continue to grow" but it "will not see the growth rate from the past" given "various limitations". For example, infrastructure, both on the ground and in the air, can no longer cope with the growth that the industry has seen in the past few years, especially in Europe.

"Delays and long queues, both for aircraft and for passengers, unfortunately have been the fact over of the last summer," he says. "Secondly, we have seen increasing awareness of the environmental impact of aviation. Around the world, with a strong focus in Europe and Australia, I am sure it is going to spread further, even if we have done so much in aviation to reduce our emissions to become more efficient."

With the expectation and the push for airlines to become even more efficient in reducing the industry's emissions levels, he believes more airlines have to buy more modern aircraft that can reduce emissions by 25% compared to the old models being replaced. But, air traffic control needs to play a bigger role, in his view.

"When I flew in from Seoul, I was nowhere near flying in a straight line as the pilot flew a huge detour to arrive here safely in Bangkok. Unfortunately that is not only true for Asian airspace, but also for European airspace," he observes. "Probably the biggest leverage to reduce emissions, for making flying more efficient, is air-traffic management around the world."

Biometrics, artificial intelligence (AI) and the Internet of Things (IoT) will help further reduce emission problems and improve the travelling experience as well. Mr Spohr says the ways in which airlines deal with passengers from buying a ticket all the way to entering the aircraft can be improved by biometrics and data management which can help "enormously".

"Airports have to become more efficient," he explains. "Security controls can be even stricter and at the same time faster via technology, where there is no more need to take liquids and computers out of your bags if the right modern equipment is available at the airport.

"While we probably won't see huge steps forward on aircraft in the next few years, I see the next technology advancement coming back to passenger handling on the ground and aircraft handling in the air."

Mr Spohr expects Asia Pacific to be "the number one growth engine" in global aviation, with the focus in China, India and Southeast Asia. Lufthansa alone is growing 13% in the region this year and the CEO is looking to see more of the same in the future.

"We are the only European carrier that is operating an Airbus A380 to Bangkok because we couldn't cope with the growth on any other aircraft," he reveals. "That not only shows the attractiveness of the Thai market and the success of Lufthansa in this market but also show the overall dynamic in this part of the world."

The A380 is a modern icon that has made over 500,000 revenue flights carrying over 190 million passengers since its first flight in April 2005, with an average of 575 passenger seats‎ in four classes.

TRAGEDY PREVENTION

After two recent fatal crashes involving Boeing 737 Max 8 jets, Lufthansa was the first to order any Boeing aircraft and it ordered more 787s because Mr Spohr and the company still believe in the industry's ability to learn from its mistakes in the past.

"With all the tragedy behind those two accidents, where my feelings are with the ones who lost somebody they love, the industry has achieved its tremendous safety record by always learning from accidents," he says. "There is no safer way to travel than flying.

"I just returned from the global conference of all airlines, the IATA (International Air Transport Association) meetings in Seoul, and we are now at a safety record as an industry with one fatal loss per 5 million flights, and at Lufthansa, we are much better than that with the size of operation we have."

Achieving a safer flying record as an industry can be done via optimisation of technology, hardware, software, training and procedures in the cockpit, and in maintenance where all five elements are scrutinised for lessons from accidents the past, he believes.

With China soon to become the world's largest aviation market, Mr Spohr can see the Chinese plane maker Commercial Aircraft Corporation of China (Comac), becoming another player in the global market but that prospect is still "many years" from now.

"I think that in the long term, we will see three serious OEMs (original equipment manufacturers) in the world: one in Europe, one in the US and one in China," he says. "The Chinese have understood the importance of aviation, not only around the globe, but especially for the development of China and they have made great progress there with the ambition and self-confidence not to buy European and American airplanes for the next 100 years."

Although he is an engineer with a love of airplanes, Mr Spohr is "really convinced" that the success of a company like Lufthansa is not based on hardware but more on software. Therefore, finding the best people, training and leading them the best ways are the things that differentiate it from its competitors.

"When we have management meetings, we spend most of the time on our people, not on hardware," he says. "Secondly, I do believe there is room for premium in aviation. Despite all the success of low-cost carriers -- even though we own one of our own -- we will continue to focus on premium because, for me, it is still air travel, not air transport.

"Last but not least, quality and safety are the backbone of the Lufthansa brand and they are the backbone of Germany as a brand and the backbone of the Swiss as a brand, so we are proud of our heritage and we will continue to focus on that."

In his free time, Mr Spohr loves to spend family time with his wife and two daughters. Despite a lot of flying for work, he still enjoys travelling and meeting new people.

"My job allows me to meet various interesting people from other CEOs to young flight attendants who have chosen this as part of their lives to experience pilots who love to play a role in safety and aviation who are committed and are inspiring to me," he says.

"This is part of my inspiration for this job in a company with 135,000 people -- unfortunately I cannot meet all of them but I would love to."


CARSTEN SPOHR

Chairman of the management board and CEO, Deutsche Lufthansa AG

Born

  • Dec 16, 1966, Wanne-Eickel, Germany

Education

  • Engineering management, University of Karlsruhe, Germany
  • Lufthansa flight training, Bremen, Germany
  • Airline Training Center, Arizona, USA

Career

  • 1994-95: Head of central personnel marketing, Deutsche Lufthansa AG
  • 1995-98: Personal assistant to the CEO, Deutsche Lufthansa AG
  • 1998-2004: Head of regional partnership management, Deutsche Lufthansa AG
  • 2004-11: Member of the management board, Lufthansa German Airlines
  • 2004-11: Member of the management board, Lufthansa Passenger Airlines
  • 2007-11: Chairman of the management board and CEO, Lufthansa Cargo AG
  • 2011-14: CEO, Lufthansa German Airlines
  • 2011-14: Member of the management board, Deutsche Lufthansa AG
  • 2011-14: CEO, Lufthansa Passenger Airlines
  • 2014-present: Chairman of the management board and CEO, Deutsche Lufthansa AG; Chairman of the supervisory board, SN Airholding; chairman of the supervisory board, Lufthansa Technik AG

Family

  • Married with two daughters

Do you like the content of this article?
COMMENT

Trump says Greta Thunberg should 'chill,' go to movies

WASHINGTON: US President Donald Trump on Thursday slammed Time magazine's naming of Greta Thunberg as 2019 Person of the Year, saying the Swedish teen climate activist should "chill" and go see a movie.

12 Dec 2019

Bangkok Bank takes over StanChart’s Permata for $2.7bn

Bangkok Bank Plc agreed to buy 89.1% of Indonesia’s PT Bank Permata for about US$2.7 billion in the first major purchase of an overseas lender by a Thai bank.

12 Dec 2019

Govt asked to lower cold-weather emergency threshold

The Finance Ministry has been asked to ease aid distribution rules as the country grapples with a cold snap that saw temperatures plunge to around 8-15 degrees Celsius in the countryside.

12 Dec 2019