Lufthansa and SIA initially forged a JV in late 2015, with the focus now on corporates and agents. Lufthansa says it is beginning to jointly approach key SIA companies in Australia, offering joint contracts aimed at boosting the two airlines’ shares in the Australia-Germany and Australia-Switzerland markets. In some cases, these companies previously had separate deals with SIA and Lufthansa and, in other cases, they only had contracts in place with one of the airlines. The JV does not include joint sales on any online distribution channel.
In Australia, the JV covers the Australia to Austria, Belgium, Germany and Switzerland markets, as well as these four European countries from Singapore. Lufthansa and SIA are still waiting on anti-trust approval on the other proposed markets, involving Indonesia and Malaysia to the same four European countries.
Austria, Belgium, Germany and Switzerland are Lufthansa Group’s home markets. Lufthansa the parent airline and subsidiary Swiss serve the Australia-Germany and Australia-Switzerland markets respectively with connections via Bangkok, Hong Kong and Singapore. Under the new joint venture, Australia-Germany and Australia-Switzerland passengers flying via Singapore have the option of Lufthansa, Swiss or SIA flights from Singapore while only SIA (or for Cairns and Darwin regional subsidiary SilkAir) operates the Australia-Singapore legs.
Lufthansa’s Australia passengers still have the option of going through Bangkok or Hong Kong – using Qantas, Cathay Pacific or Thai Airways on the Australia-Asia legs. Hong Kong ironically has been the largest transit point for Lufthansa’s Australia passengers as historically its codeshare with SIA on Australia-Singapore routes generated less traffic than its interline partnerships with Cathay, Thai and Qantas. Under the new JV, the number of Lufthansa Australia passengers flying through Singapore should increase – and Lufthansa is also confident its total sales in Australia will increase.
Germany is a large market from Australia and while Switzerland is much smaller – approximately one third the size – it is significant for corporate and business traffic. The Austrian and Belgium markets are very small and not as much of a focus under the new JV. There are no flights from Singapore to Austria or Belgium on SIA or Lufthansa Group subsidiaries Austrian Airlines or Brussels Airlines. Therefore, the new JV can only offer a relatively inconvenient two-stop product from Australia to Austria and Belgium.
Lufthansa is still offering a one-stop offline product from Australia to Vienna outside the JV via Bangkok and Hong Kong as Austrian serves both these Asian cities. It does not have any one-stop product from Australia to Brussels. Airlines with one-stop products in the Australia-Brussels market include Air China, All Nippon Airways, Emirates, Etihad, Qatar Airways and Thai Airways.
The Lufthansa Group accounts for less than 1% of bookings in the Australia-Belgium market – hardly surprising given it only able to offer a two-stop product. The group accounts for approximately 4% of Australia-Switzerland bookings. Its share of the Australia-Austria and Australia-Germany markets is stronger, at over 5%.
Australia to Germany market share by airline (% of bookings): FY2016
Note: based on one-way bookings from Australia to Germany for the year ending Jun-2016
Source: CAPA – Centre for Aviation and OAG Traffic Analyser
Prior the implementation of the JV, SIA was already the third largest airline in the Australia-Germany market, behind only Emirates and Etihad. SIA offers two daily flights to Frankfurt, one daily flight to Munich and three weekly flights to Dusseldorf while Lufthansa also operates one daily flight from Singapore to Frankfurt. SIA and Swiss both operate daily flights from Singapore to Zurich.
All the market share figures are from prior to the implementation of the JV. The JV should result in an increase in total Australia point of sale bookings for the Lufthansa Group, from the current level of slightly less than 100,000 per year, as well as a diversion of some of its existing traffic from Hong Kong or Bangkok to Singapore.
As Lufthansa attempts to increase sales in Australia, the focus is clearly on the corporate side. Corporates with significant traffic to Germany and or Switzerland are being targeted and offered a product, with attractive schedules and prices, aimed at making the Lufthansa-SIA combination their biggest or exclusive provider.