Lufthansa Airlines: The Microeconomic and Macroeconomic Environment of the Company and the Industry in 2020 and Its Readiness Against Crisis (Case Study)

Spyros Zervas
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Spyros Zervas: Warwick Business School

Chapter Chapter 24 in Advances in Empirical Economic Research, 2023, pp 385-404 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 airline industry represents an oligopoly market with high barriers to entry and consists of large commercial aviation companies, the top 10 of them accounting for approximately half of the global business. For the assessment of the oligopoly market of the airline industry, respective economic theories, and models are used (Besanko et al., Economics of strategy, 7th edn. Wiley, Hoboken, 2015; Hall and Hitch, Price theory and business behavior. Oxf Econ Pap 2:12–45, 1939). To explore the company’s macroeconomic exposure, market exposures, and its cost vulnerabilities, a dedicated analysis of the top 10 airlines in the world, is taking place and analysed by the application of various economic models (Eiteman and Guthrie, The shape of the average cost curve. Am Econ Rev 42(5):832–838, 1952; Samuelson and Nordhaus, Microeconomics, 17th edn. McGraw-Hill, p 110, 2001; Begg and Ward Economics for business, 6th edn. 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 optimising 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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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-22749-3_24

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DOI: 10.1007/978-3-031-22749-3_24

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