Lufthansa bets Germany’s Mittelstand will rescue business travel

Lufthansa bets Germany’s Mittelstand will rescue business travel

The study, which polled more than 120 small or medium-sized enterprises, found that the inability to take business trips was preventing companies from acquiring new customers and hindering development projects. Spohr’s confidence, which relied on data gathered by Lufthansa’s sales team, was supported by representatives of Mittelstand companies. In a survey conducted in February by the VCI — which represents 1,700 German chemical and pharmaceutical companies — nearly 60 per cent said limits on travel were the biggest challenge facing their businesses.

“They don’t have a global infrastructure to live without corporate travel,” Spohr said of such businesses. “They don’t even sometimes have people on the ground in markets in Asia or the US, so people need to go there themselves.” The group has decommissioned more than 100 aircraft, and is significantly revamping its long-haul fleet. Roughly a third of its first or business class seats will be eliminated as a result of removing Airbus A380 and A340-600 models from its line-up.

However, the Frankfurt-based company — which received a €9bn bailout from European governments last year — expects business travel to remain below 2019’s level until at least 2025, and is scaling back premium capacity as a result. The more modern Airbus A350 has a more flexible configuration, Lufthansa said, allowing the airline to shrink the number of business class seats on routes using the plane from 48 to 36.

Lufthansa, which includes Austrian, Swiss, Brussels and Eurowings airlines, has long been heavily reliant on revenues from business customers. Prior to the pandemic, corporate bookings accounted for 45 per cent of the group’s revenue. The question of whether business travel will ever return to its pre-pandemic levels is one that has hung over the airline industry. The Financial Times reported last month that Europe’s largest banks are planning to slash business travel permanently by as much as half from pre-Covid levels.

Customer surveys indicated “significant pent-up demand in the German Mittelstand, which is a key customer group for us,” the 54-year-old former pilot said. At the same time, Lufthansa will expand the number of premium economy seats, Spohr said, because they provide significantly better profit margins per square metre. This less-expensive class is also favoured by companies with tighter budgets, which the airline believes will lead the rebound.

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