Abstract

"Turbulent Growth. The Aviation Industry since the 1990s in the Light of Lufthansa's Recent History"

Hartmut Berghoff, University of Goettingen (Berghoff@uni-goettingen.de)

Aviation is closely linked to globalization. As mobility increased in general, the demand for air transport soared. Between 1990 and 2019 the number of passengers more than quadrupled (1 to 4.5 billion worldwide). As a result, airlines experienced a massive growth of their turnover, which, however, did not translate into a parallel increase in profits. On the contrary, the industry’s margins remained small in most years and sometimes were even negative. The number of bankruptcies was very high and so was the number of take-overs and mergers, chapter 11 insolvencies and bail outs by governments. Big names in the industry disappeared from PanAm to Continental and US Airways, from Swiss Air to Alitalia or Sabena.
This paper deals with the aviation industry’s rapid growth since the 1990s which coincided with a kind of precarious growth. Among the major problems were unpredictable variations in costs (esp. fuel) and demand, sudden disruptions by political, medical or environmental crises as well as fierce competition by low-cost airlines, which shook up the industry by introducing completely new business models.
This paper focuses on the responses of the airlines to these challenges. They sought to improve their profitability through rationalization and cooperation, esp. airline alliances. The response was partly technical in nature such as the move to more fuel-efficient engines and automated processes, and partly organizational (staff reduction, shorter ground times, faster turnover, reduction of service levels, etc.).
One main quandary of the large legacy carriers was the need to cut costs, while preserving their status as quality airlines. To be able to live up to this claim they needed to distinguish their services from those of low-cost competitors, while at the same time they had to imitate them in several ways. At the same the airlines’ customer base expanded and changed. New consumers with different expectations and preferences boarded the planes. As the numbers of passengers grew and flying lost its former social exclusivity, the price sensitivity of customers increased and new patterns of consumption and travel experiences were established.