Lufthansa Airlines. The Microeconomic and Macroeconomic Environment of the Company and the Industry in 2020 and Its Readiness Against Crisis

Spyros Zervas ()
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Spyros Zervas: The University of Warwick

A chapter in Operational Research Methods in Business, Finance and Economics, 2023, pp 147-166 from Springer

Abstract: Abstract The objective of this work is to provide an analysis of the impact of the microeconomic and macroeconomic environment of Lufthansa Airlines and sets out the performance of the organization in relation to its main competitors from 2006 until 2019. The airlines industry represents an oligopoly market with high barriers to enter and consists of large commercial aviation companies, top ten of them accounting for approximately half of the global business. For the assessment of the oligopoly market of the airlines industry, respective economic theory, and models are used (Besanko in Economics of strategy. Wiley, Hoboken, 2015; Hall in Price theory and business behavior, pp. 12–45, 1939). To explore the company’s market exposures and its cost vulnerabilities, a dedicated analysis of the top ten airlines in the world, is taking place and is analyzed by the application of various economic models (Eiteman in Am Econ Rev 42(5): 832–838, 1952; Samuelson in Microeconomics. McGraw-Hill, p. 110, 2001; Begg in Economics for Business. Macgrew Hill, Maidenhead, 2020). The demand of airlines is exposed to various elasticities depending on the region and the type of the airline while the evolution of oil prices contains one of the most important factors of industry and company’s profitability. Therefore, a detailed analysis of the macroeconomic impact of oil prices is performed. Lufthansa has a small sales margin due to the high costs and is a company relatively more vulnerable and exposed to external economic shocks due to its structural business design. Because of that it is not well equipped to withstand global economic shocks. Lufthansa needs to transform its business model in order to survive future crises by optimizing its operating costs and further growing its scale.

Keywords: Macroeconomics; Lufthansa; Airlines; Economics; Airlines oligopoly; Airlines competition; Economic shocks; Cost vulnerability (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/978-3-031-31241-0_8

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