Why saying sorry is so difficult

Thomas Cook have found themselves in a furore over the death of two children at a hotel in Corfu. Their real sin – in the eyes of the parents and the tabloid press – seems to have been that they did not express much contrition at the time and have steadfastly refused to apologise since then. The fact that they received a substantial pay-out from the hotel to cover damage to their reputation and PR expenses has, quite understandably, just added to fuel to the fire.

At the time of the incident in Corfu, Thomas Cook was in the hands of an arrogant and incompetent management who were running the company into near bankruptcy and awarding themselves ever-increasing salaries and bonuses. Their poor behaviour in this case was simply part of an overall malaise in the company. These people departed a long time ago and the person brought in to bring the group back into shape has also left which, if judged by the stockmarket’s reaction, was a very positive move. The company is now, finally, in more sensible hands but the new management will really have their work cut out to rescue this particular situation.

The standard PR advice when a company is involved in an event where people are killed or injured is that the CEO should make a full and frank statement of contrition. CEO’s are human too; they have wives and children and have not set out to hurt their customers. In many cases, they will be genuinely shocked and upset at what has happened.

However, despite the PR advice, they will be firmly told by their company lawyers that they must not say anything that could be seen as accepting even a tiny bit of liability. The company’s insurers will probably back this up with a threat to suspend cover if the CEO says anything remotely prejudicial to a possible legal case.

In many instances, a CEO is tied. He knows what he should say – and probably want to say – but cannot.

I was actually rather shocked at the reaction of the CEO of Lufthansa to the Germanwings crash. Within days of the accident, and well before even a preliminary report had been prepared by official investigators, he appeared to be accepting some of the blame. In one way, his reaction was spot-on – it was quite clearly honest and heart-felt. He was as shocked and upset as anyone. The company’s sensitive behaviour was almost a text book example of how to behave in such an event. But had he cleared his comments with his insurers or did he just feel it was worth the risk?

Thomas Cook will have to pay for the sins of their previous management but properly-managed, honest companies have a huge problem balancing the opposing demands of their PR advisers and their insurers.

Lufthansa must try harder

Some airlines promote a luxurious image, some fun, some sexy and others cheap. Lufthansa is none of those – its one main feature is that it is solid and reliable.

Sadly, and not for the first time, today’s pilots strike suggests the airline does not want to live up to its own image any longer.

The strike by pilots from midday on Monday until midnight on Tuesday was public knowledge on Friday, or earlier for those who keep a watch on such things. Anyone looking at Lufthansa’s website on Sunday afternoon would have been none the wiser though. There was the usual link to Travel Information where some details of the strike were given and passengers told of the option to travel earlier if they wanted. Passengers in Germany probably knew of the strike because of local media coverage but foreign strikes do not get much coverage elsewhere so the likelihood is that most British (and French, Spanish, Italian and others) travellers knew nothing about it. And Lufthansa certainly wasn’t going to volunteer the news.

Like every airline, Lufthansa wants to keep in touch with its customers by social media. They have an active Twitter account  - but not so active it could be bothered to mention the strike until 17.00 on Sunday.

Yes, we all know that strikes can get called off at short notice but why could not Lufthansa do passengers the courtesy of warning them of the (strong) possibility?

Lufthansa has a long record of strikes in recent years and this behaviour is nothing new. 

The least an airline should do when it is aware of the serious possibility of a strike is to add a highlighted section to its homepage. No company wants to boast of its strikes but there is a clear line between providing correct information and deliberately avoiding passing it on.

Lufthansa needs to take lessons from Ryanair, and many others, on how to warn passengers of potential disruption. 

Lufthansa and Turkish Airlines

Lufthansa has admitted to having general talks with Turkish Airlines about co-operation but the Turkish Prime Minister appears to have let the cat out of the bag by suggesting this could lead to the creation of a joint-company.

We could be wrong but this does not sound likely. It looks rather that the Turks are putting pressure on Germany to come up with some sort of deal.

It is one thing for shareholders in British Airways and Iberia to be persuaded to give up their individual holdings and take shares in a holding company instead but to expect shareholders in a tightly-regulated European company to swap their shares for a new company with extensive exposure in a country outside Europe, which does not have the highest reputation for shareholder disclosure, is surely a step too far.

However, there are many things that can be done without a full financial union. Lufthansa already has a joint shareholding with Turkish Airlines in a Turkish charter airline and Turkish Airlines is a big customer of Lufthansa Technik so the two companies are used to working together.

Turkish Airlines would gain much-needed prestige from any fuller co-operation with Lufthansa whereas Lufthansa would gain a  partner that is a match for the Gulf airlines that it sees as such a threat to its longhaul market. Just looking at route maps, a deal could make sense.

The big danger in this is for Lufthansa. They might be a bit stodgy but they have a fine reputation for safety. Turkish Airlines have been spending a lot of money on polishing their image and their safety record has improved from the dismal situation some years ago but there are still too many stories of sloppy behaviour at all levels of the company which would not be tolerated in a true top class airline.

A number of co-operation agreements have been made between airlines recently and Lufthansa might feel itself under pressure to react. Maybe they do need a partner but we must hope Lufthansa does not allow itself to be pressurised into something it could well live to regret.

Lufthansa’s sexy new toy

I am not a regular aircraft anorak. Most new types leave me cold. Airbus has become very good at producing aircraft which are efficient but soulless and even the new A380 does not make me enthusiastic. Boeing seems to be in a competition with itself to produce yet longer versions of its 777 flying-tube and the 787, for all its technical wizzardry, still seems rather like a 767 with go-faster stripes.

But there is one new aircraft I have to admit to finding genuinely exciting. Boeing’s new version of the jumbo, the 747-8, has genuine style and character both inside and outside. Unfortunately, it looks as if Lufthansa will be one of the few passenger airlines to buy it. The airline has decided that the specific characteristics of the aircraft make it ideal for routes with a higher Business Class demand so it will be flying on some of their more lucrative routes.

This video shows the making of nine individual ad campaigns on one day. Whilst it is meant as a behind-the-scenes look at a photo-shoot, it actually gives a better feel of the aircraft than some that have been shot to deliberately showcase it.

The sick of Europe

It can be quite interesting to view the health of a country’s economy through the results of its flag-carrier. An airline is unlikely to make large profits if its home economy is doing badly and, if an airline is losing money due to some bad habits (over-staffing, corruption and simple bad management) then it is highly likely that those same traits extend to other businesses and government itself. The airline business is a pretty perilous one at the best of times so problems will probably surface in an airline well before the country itself is aware its own economic mess.

In Ireland, Aer Lingus hit the financial skids well before the country itself lost its Celtic Tiger label. Interestingly, whilst the airline is still not completely out of the woods (how could it be with the Irish economy in the state that it is?), it has done much of the hard work to give it a decent platform to stay in business.

The bankruptcy of Olympic came well before the fall of Greece and anyone who saw the fantasy accounting, gross over-staffing, political cronyism and outright corruption that went on at that airline can hardly be surprised that the rest of the country’s institutions were in a similar state. Did those who kept lending money to Greece really believe that Olympic was some sort of aberration and the rest of the country was run on sound principals?

Iberia’s problems were spotted before the Spanish banking crash and the airline has started to make the serious adjustments necessary to survive in the 21st Century. Ironically, the management of International Airlines Group will probably find it easier to push through the measures needed because the rest of the country is in such a poor state. Ordinary people will not have much sympathy for pilots or cabin staff who have been earning much more and working less than their colleagues in other countries.

Which brings us to France. Air France has finally acknowledged it has a problem and must seriously cut costs. Unfortunately, I doubt that the cuts are big enough to solve even the situation as the airline sees it at the moment. Air France remains heavily “helped” by the government in all sorts of ways that its competitors in other countries are not. If this financial support were stripped away, the airline is in a much bigger mess than it acknowledges now. 

And what about Lufthansa? On the face of it, Lufthansa is highly successful but there are some worrying signs. Its passenger service on longhaul has been well below the level of its competitors for many years – only now are they introducing longhaul Business Class standards that BA and Virgin had at the turn of the century. The company has lost large sums on ill-conceived acquisitions in Europe. The fiasco over the new Berlin Airport has been heavily downplayed in Germany and compared to the issues faced by Heathrow Terminal Five. Delaying opening by a year, with only a few weeks notice is on a totally different level of cock-up to T5. The Berlin farce will cost well over a billion Euros in extra operating costs alone. Air Berlin was swift to demand compensation but Lufthansa has been rather quieter on the subject – as a tacit acknowledgement of how much support the airline still receives from the state. New management at Lufthansa seems fully aware of its current weaknesses and is working to address them.

So, looking into the crystal ball, what does the current state of the airlines suggest about the economies of Europe? 

Spain – in a serious mess, but at least they acknowledge it and are doing their best to get out of it and will probably succeed.

France – in a much, much worse state than currently accepted.

Germany – sound but not without some issues and not quite as rosy as seen from the outside.

 

Lufthansa – not again, surely?

After the debacle of having to sell British Midland at a huge loss, you might have thought Lufthansa would have learned their lesson, but apparently not. According to the Financial Times, they are seriously interested in bidding for another airline basket-case, TAP.

Lufthansa have had a mixed – to be very polite – record in their recent investments. Aside from British Midland, they have had serious trouble with Austrian Airlines, Lufthansa Italia had to be closed almost as soon as it had started and Brussels Airlines is also looking dicey. Only Swiss has been a success.

Lufthansa is now very much under new management and the new bosses have been openly critical of their predecessor’s strategy. So why do they seem to be falling for the same trap?

Maybe they have learned one lesson from past errors. There is some point in going after a country’s flag carrier but no sense at all in trying to establish a second-string airline. Most European countries struggle to support one full-service airline and none have successfully managed to have two which compete head-to-head across the network. Of course, Portugal is in a very weak state financially, and has been since long before the current round of crises. The real attraction for Lufthansa lies in its routes to Brazil and its strong connections to South America. Oh, and the other big plus is that IAG are also interested in buying TAP and Lufthansa do not want to let them get a monopoly.

They are getting their towels out ready to reserve their space across the South Atlantic. You have a feeling that yet more hard-earned German cash is about to be blown in their determination to be a European leader.

British Midland – the nuclear option

Press reports that Lufthansa are making threats to close down British Midland if European competition authorities do not allow IAG to take it over were dismissed as bravado by most. This is unwise.

Of course, Lufthansa would prefer to sell the company as quickly as possible and the threat is a pretty obvious tactic. The British government would not be too happy about all the unnecessary redundancies and a closure would be messy.

British Midland cost Lufthansa €285 million last year – and losses could be even greater if they have to keep it going throughout this year in a state of limbo.

Lufthansa has new and much more aggressive management than before. They have started talking tough to their staff in Germany and to other overseas subsidiaries. They have told Austrian Airlines staff they have to agree cost-cutting measures or much of the airline will be rolled into the lower-cost Tyrolean brand. The overseas acquisition spree of the previous management has hurt Lufthansa badly.

The new management is anxious to make a mark both on the main brand and ensure that its subsidiaries do not act as a drain on the group. They cannot afford to talk tough and back down.

If European regulators make conditions on a deal that force IAG to walk away or insist on delaying approval for several months, there is every reason to believe that Lufthansa will follow up its threat.

The butchery begins at BMI

So Lufthansa’s recent acquisition goes under the knife. The Times is reporting that 600 jobs will be going as well as well as a number of routes. The airline will cut the number of aircraft in its mainline fleet from 39 to 30 and will end services from Heathrow to Brussels, Tel Aviv, Kiev and Aleppo in January. Its Heathrow-Amsterdam service (its first international route from Heathrow) will shut in March and seasonal services to Palma and Venice will not be restarted next summer. Particularly noteworthy is the closure of Tel Aviv, which had been receiving double daily flights since May this year, and had apparently been profitable since its launch in March 2008.

Cynics amongst you might suggest however that this just par for the course and continues BMI’s own chaotic approach to route development. This has regularly seen supposedly profitable routes (for instance to Chicago and Las Vegas) pulled within a couple of years of starting.


Light at the end of the tunnel for BMI

As we predicted in Inside Traveller, Lufthansa have decided against selling BMI. Whilst they were forced to buy the airline, through an agreement made some years ago, they were able to get a major price reduction. Since February, the airline industry has come back from the brink and the possible value of BMI’s major asset – its large stock of slots at Heathrow – has increased massively since it now seems unlikely that a new runway will be built. We rather suspect that Lufthansa has got a bit of a bargain.

Now it just has the difficult job of sorting out the airline.

That is easier said than done. Sir Michael Bishop did a terrific job in keeping the airline going and maintaining and increasing its bank of slots. It was a brilliant attempt at keeping an awful lot of balls in the air but it was not a long-term strategy. Now Lufthansa have to decide what they are going to do to make BMI a successful operation in its own right.

Their first move has been to start some radical pruning at Bmibaby, reducing the fleet and concentrating on airports where they have a strong position, notably East Midlands.

No doubt the main BMI operation will face some similar surgery in the near future.

It won’t necessarily be very popular but it is important that the airline survives as a genuine second force in British aviation so Lufthansa’s moves to sort out BMI should be welcomed.

All the news that fits

It is rather frightening to read even the most simple airline press release and see how it is used by the press in the most lazy and cynical way.

We all know that airlines are having a tough time at the moment so when Lufthansa issue a Press Release giving details of their winter timetable and begin it by saying “In view of weaker demand…” and go on to say that they are reducing the number of flights by 7.4%, the rest of the story writes itself. This was presented by many newspapers and specialist aviation publications (who should know better) as further proof of the bad state of the airline business.

The story suits everyone. The airline is happy because it shows its shareholders and employees that things are tough and they are taking matters seriously. For the journalist, it is an easy story to write because it fits into their standard themes of “economic hard times” and “a tough winter ahead”.

All very simple – except it is not really the proper story.

Lufthansa are decreasing the number of flights – all airlines do this over the winter, even in good times – but they are actually increasing the number of seats they have for sale!

The real story is that they are withdrawing some smaller aircraft and replacing them with larger ones (especially on short commuter routes). This will reduce the number of flights by 7.4% but the number of seats per kilometer that thay have for sale will increase by 1.1%.

All this is made clear in Lufthansa’s Press Release but it looks as if many journalists could not be bothered to read beyond the first paragraph before writing their story.

www.lufthansa.com