Understanding the network strategy in Lufthansa’s India expansion

Last evening, Lufthansa announced its India expansion plans which included flights to Bengaluru from Munich and to Hyderabad from Frankfurt starting this winter. The two additions aren’t surprising for students of airline network planning. 

The flight to Bengaluru from Munich starts from October 29, 2023 and is now open for sale. The thrice a week service will operate on Wednesdays, Fridays and Sundays from Munich at below timings. Lufthansa is deploying the Airbus A350 on this route.

LH764 MUC1210 – 0110(+1) BLR

LH765 BLR0300 – 0815MUC

The airline has two configurations of the A350 in its fleet. The airline will deploy the aircraft with 48 Business / 21 Premium Economy / 224 Economy seats, which is premium heavy; while the other configuration which the airline operates is 30 Business / 24 Premium Economy / 241 Economy seats. 

On its Bengaluru – Frankfurt route, the airline is currently deploying the B747-400; which is configured with 67 Business / 32 Premium Economy / 272 Economy class seats. The same type would continue into winter. 

In August 2019, the airline had announced the launch of this service. The flights were to begin in March 2020, but for the pandemic which closed the world a week before that. This will be the third Indian destination from Munich, with Delhi and Mumbai being the first two. This flight further cements Bengaluru as a southern gateway for long haul flights, even when it stands fifth in International traffic with Chennai and Kochi handling more international traffic than Bengaluru.

Network Thoughts

Lufthansa has been operating to Bengaluru from 2001. The carrier started operations when Bengaluru had limited long haul options and the airport was still at HAL. The airline, once, commanded immense premium in the Bengaluru market. As the greenfield airport became operational, the city grew and more airlines came in; Lufthansa lost the absolute edge it once had. The airline has experimented the route with varied aircraft types to find the right capacity mix for cabin types. 

What options could an airline have?

  1. To deploy a higher capacity aircraft like the 748i, which is a lesser risky strategy, has lower incremental cost but also limits potential of revenue
  2. To add another flight to Frankfurt – which does not bode well since it does not provide good connections beyond Frankfurt and dilutes the yield at double the capacity
  3. To add flight to Munich – which works the best, since it gives a new destination for both Bengaluru and Munich market, allows strengthening of Munich hub for the airline albeit coming in at a higher cost of operations, which it expects to absorb, profitably, over a period of time

Lufthansa has been building its Munich hub efficiently with most flight launches happening from Frankfurt and when the market builds up, a flight is added from Munich – unless for short haul European destinations. This is a classic two-hub strategy which bodes well for the airline to expand both in the eastern markets and its western markets.

Munich Airport is the second busiest airport in Germany and a second hub for Lufthansa. While the airline started expanding at Munich to tide over the capacity crisis at Frankfurt, the airport has grown in its own might thanks to the flourishing businesses in the Bavaria region – of which Munich is the main city.

From here on, this will be a classic case of revenue strategy in play with flights which are not doing so well from Munich will see connections being offered on them, instead of via Frankfurt. The seats thus freed up on the Bengaluru – Frankfurt flight will be used to sell new points in the network and compete with the middle eastern carriers who have made massive inroads in secondary cities in Europe.

This will help Lufthansa compete with Air France – KLM which increased its presence to Bengaluru post the fall of Jet Airways and also Emirates – which has recently added capacity to Bengaluru.

The new flight will connect well, both ways to New York, Newark, Boston, Denver and Montreal and offer multiple European connections with a total travel time which is better than a connection at Frankfurt, making it competitive.

Hyderabad back on the map

The airline will return to Hyderabad after over a decade. The airline is expected to deploy the dreamliners to Hyderabad from Frankfurt. The airline will provide more details on this service mid-May.

Hyderabad will be the fifth destination for the airline in India, as it already operates to Delhi, Mumbai, Bengaluru and Chennai. This flight will compete with British Airways’ daily to London, currently the longest flight from Hyderabad. With the middle eastern carriers present, the Hyderabad to Europe and North America traffic is divided amongst Middle Eastern carriers, British Airways and Air India which offers good two way connectivity via its Delhi hub.

Hyderabad is in the middle of an expansion where it has opted to expand the terminal and apron. The airport recorded over 21 million passengers in FY 22-23, 17.6 million of whom were domestic with over 3.4 million international. The airport has seen 97% of its pre-covid traffic return, with 70 domestic and 15 international destinations being serviced currently.

The airline has opened reservations of flights to Hyderabad as of May 25, 2023 with thrice a week service as announced earlier.

LH752 FRA1000 – 2300HYD 257

LH753 HYD0100 – 0610FRA 136

Flights begin January 16, 2024 operated by the B787-9 Dreamliner, configured in three class – Economy, Premium Economy and Business.

Tail Note

For Q4-CY22, Lufthansa carried 1.69% of all outbound traffic from India and took 3.02% of traffic amongst foreign carriers. Roughly 44% outbound passengers flew Indian carriers, while the rest flew foreign carriers.

It is interesting to see Hyderabad see a return of services. The southern triangle of Bengaluru – Chennai – Hyderabad, have their own specialities with Bengaluru focused on IT, Chennai on manufacturing and Hyderabad on pharma. While Bengaluru moves ahead with long haul expansion, Chennai continues to dominate the narrow body market with connections to South East Asia and Middle East, leaving Hyderabad in a rather challenging position to attract traffic. Hyderabad remains at the cusp of breaking into a higher league and time will tell how many of these can the airline support?

From Lufthansa’s perspective, the next steps could see increasing capacity at Chennai by moving from 5x weekly to Daily when aircraft availability and market demand permits and looking at ways to adjust the aircraft type at Delhi, Mumbai and Bengaluru to match the mix of premium and economy passenger demand.

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Updated on May 25, 2023 with details of Hyderabad flight


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