Caso Lufthansa

In 1991 Lufthansa was almost bankrupt. Eight years later, at the general business meeting on the 16th of June 1999 Jürgen Weber (CEO) announced record results in Lufthansa’s more than 70-year history. In eight years, the company had gone from the brink of bankruptcy to becoming one of the world’s leading airline companies, a founding member of the STAR ALLIANCE – the airline industry’s mostcomprehensive network- aspiring to become the leading aviation group in the world.
Lufthansa had undergone some radical changes that reversed a record loss of DM 730 million in 1992 to a record pre-tax profit of DM 2.5 billion in 1998 (an increase of 42% compared to 1997 when the pre-tax profit was DM 1.75 billion). Revenues increased by 4.8% from DM 21.6 billion in 1997, to DM 22.7 billion in 1998.The Seat Load Factor (SLF-proportion of seats filled) reached 73%, a record performance in Lufthansa’s history (1.5 percentage points increase compared to 1997 and 9 percentage points increase compared to 1991.
After the first step of the turnaround it was apparent that transformation had just begun and that a much more fundamental change had to follow to assure the company’s future. The LufthansaExecutive Board (Vorstand) and the Supervisor Board (Aufsichtsrat) decided to follow a concept of sustaining renewal (redevelopment) at 3 levels, operational, structural, and strategic. In 1999, none of these processes were fully completed. In fact, sustaining the change process was seen as the key management challenge.
In 1991, Lufthansa was almost bankrupt. It was the national airline carrierof the Federal Republic of Germany, state owned, monolithic, and unprofitable.
Eight years later, in 1999 it was a privately owned, profitable company, a core element of the strongest world-wide alliance in the airline industry, aspiring to become the leading aviation group in the world. During the years of 1992-1999, Lufthansa went from a record loss of DM 2.5 billion (Appendix 1).
The numberof passenger increased from 33.7 million in 1992 to 40.5 million in 1998, while the number of employees decreased from about 64000 in 1992 to about 5500 in 1998
Recent history
Era before weber
Founded in 1926, liquidated in 1945 and reborn in 1953, Lufthansa historically represented the characteristic strengths of German industry: a strong focus on reliability, order and technical excellence.Majority owned by the German state, its strategy, organization and culture represent an amalgam of a strong technical orientation, dominated by engineers, together with the bureaucratic values of public administration. Its role as an organ of the state was reflected in its values and beliefs: formal, rule-driven and inflexible, the yellow badges of Lufthansa symbolized independence, permanenceand sovereign dignity.
In the second half of the 1980s, under the leadership of Heinz Ruhnau, Lufthansa pursued a policy of “growth through own strength.” Based on the belief that only the largest airlines will survive in an era of global competition, Ruhnau had committed the airline to a rapid fleet expansion in order to capture market share. When Jürgen Weber was appointed as CEO in 1991,Lufthansa had enlarged its fleet by some 120 aircrafts to 275.
Gulf war and the breakdown of the aviation market
In the late 80s, deregulation triggered intensive price competition. This process, coupled with the steep fall in air traffic during the Gulf War and the subsequent recession, led to a serious over-capacity for the airline industry on a global basis, and severe market slump in Europe. In1991, the Seat Load Factor (SLF-proportion of available seats filled) went down to about 57% in Europe, compared to a worldwide average of about 65%.
The problem was aggravated because of a remarkable inflexibility concerning capacities and services offered. Deregulation of the airline industry started in 1978 in the US. In Europe, in contrast, while there was some relaxation in regulations, over...