Over the last decade, Europe’s big three airline groups, IAG (owner of British Airways/Iberia), Air France/KLM, and Lufthansa Group, have all been in much better shape than their American counterparts. While US airlines floundered and filed for bankruptcy, they grew and became stronger. But now, the tables are turned as a variety of different things are conspiring to make life very difficult for the European legacies. So far, the response has been the same failed strategies we’ve seen before on this side of the Pond.

One of the biggest problems these airlines face are their own governments. As much as I complain about the state of the US government’s approach to air travel, Europe is much, much worse. Some of this is on the macro level with the European Union’s much criticized carbon trading scheme. Some, however, is country-specific.

The poster-child for terrible government policy is the United Kingdom. Not only has the country levied some of the harshest taxes ever seen in aviation (the UK Air Passenger Duty is now approaching £100 on some tickets), but it fundamentally refuses to add capacity in London where it is needed most. Discussions around a new runway at Heathrow or a new airport way out in the Thames estuary remain just that – all talk and no action. We won’t see any sort of capacity increase there for decades, and the country has already begun to suffer the effects.

Bad government policy isn’t unique to the UK. Germany has begun to stab itself in the heart with airport curfews. The biggest impact is felt in Frankfurt, where night flights have stuck a dagger in the air cargo market. (In the first three months of this year, air cargo at Frankfurt dropped more than 10 percent.) There is also over-taxation there and in most other European countries.

Fighting Low Cost Carriers With Familiar Strategies
This wouldn’t be an issue if there were no competition, but of course, there is plenty. For flights within Europe, low cost carriers have only grown stronger. Though they deal with the same governmental issues, they have operating costs far lower than the legacy airlines and they can profit with much lower fares. Does this sound familiar? It should, because it’s what happened in the US.

You’ll recall that over the last decade or two, US airlines tried all sorts of things to become competitive. They opted for “airline-within-an-airline” low cost carriers that all were complete failures. They’ve looked at b-scale wages over the years. They’ve had aggressive cost cutting campaigns. In the end, it was only Chapter 11 bankruptcy that allowed them to become more competitive. European airlines don’t have such a convenient option.

Instead, they are trying the same tactics that didn’t work in the US. IAG has started a low cost carrier in Spain called Iberia Express. Nothing is different except that the wages are lower so it’s a cheaper operation to run. Iberia employees are angry and striking, but it hasn’t stopped the airline from pushing forward. In Germany, Lufthansa has started to turn over more short haul flying to its low cost subsidiary Germanwings. Most of Stuttgart flights, for example, are now flown by Germanwings instead of Lufthansa. The French are also plotting a strategy to shift short haul flights to a low cost carrier.

The shorter distances within Europe as compared to the US make this an even more pronounced problem since people on shorter flights care less about the difference in amenities. For most legacy airlines, however, they can take solace in the fact that in the long haul world, they are still king.

Trouble in the Gulf
Traditional low cost airlines have tried and failed many times on long haul routes. The most recent was Air Asia X which canceled all of its European services. That has been the saving grace for American carriers, which have made major efforts to shift the balance away from domestic flying toward long haul. This is good for European airlines because they have traditionally had more long haul flying than short haul as compared to the US carriers.

But there’s a big problem in Europe: the Gulf carriers.

A whole host of airlines in the Middle East have sprung up with luxury service combined with lower fares. The pack is led my Emirates, which still is planning on filling about 100 A380s a day in addition to its massive fleet of 777s. Etihad in Abu Dhabi along with Qatar Airways in Doha and even Turkish in Istanbul have flooded Europe with cheap capacity thanks to lower costs.

This has created major headaches for European airline flying to Asia and Africa. While Emirates and the like don’t fly the routes nonstop, they have good, fast connections that draw away a ton of traffic. Lufthansa alone has seen this erode profits to the point where it has pulled flights to Hyderabad, Kolkata, and Guanghzou. Nanjing, Chennai, and Bangkok are now on the chopping block.

While European airlines had been relying on government intervention to keep these big guys out, that won’t work forever. At the Phoenix Aviation Symposium in March, IAG chief Willie Walsh said that he was downright jealous of the Middle Eastern carriers because they have governments that believe in the importance of aviation for economic growth. They help the airlines and provide good taxation environments to help them grow.

And grow they have. Emirates has six daily flights from Heathrow to Dubai (4 on A380s) and two daily 777s out of Gatwick. But even more importantly, Emirates flies to smaller cities like Newcastle, Glasgow, and Birmingham, providing better flight options than even BA can offer to those folks.

That leaves the European airlines in a good position only to the Americas. No low cost carrier has found a way to make that work (though many more will try and fail). But in the US, they have formed joint ventures with their American counterparts. American carriers are much more likely to take on upgrades and lower fare traffic. That puts pressure on the European carriers and their often superior options when the revenues end up being shared.

Problems are Easy, Solutions are Hard
This post has been easy for me to write because I just talk about the problems and don’t have to come up with solutions. That’s the hardest part of all and it’s what the European legacy carriers struggle with every day. If I knew what to do, I’m sure I’d be a rich man.

Does that means there’s no solution? Of course not. But it’s not a simple problem to solve. These airlines see tremendous pressure in nearly all parts of their business. With the governments not interested in budging on their terrible policies and labor not seeing the reality of the cost problem, it’s going to be tough to make much progress.

I didn’t write about Lufthansa’s new business class when it first came out, because I just wasn’t sure what to make of it. But I’ve been talking to a few people, and I think it might be a good time to discuss. I really can’t make up my mind. I think I’m going to have to wait until I can sit in the seat myself to see if it’s good or if it’s bad.

Without question, it has to be better than what Lufthansa has today. This is the Lufthansa business class seat at its best today. I say “at its best” because this is how it is on the A380, which has nicer seat coverings and amenities than the rest of the fleet:

The seat is an angled lie flat bed, and while I found it pretty comfy for reclining during daylight hours, sleeping was impossible. I was in row 1 on my overnight flight last year and somehow found myself on my stomach, all the way down with my legs kicked up on the bulkhead in the middle of the night. It wasn’t a pretty sight. And that’s why everyone is going away from the angled flat beds now: they suck.

Lufthansa told us last year it would do the same, but it wouldn’t make the change until the 747-8 came out. With that airplane going into service very soon, Lufthansa last month decided to unwrap the details on the new business class. Here’s the new offering:

At first glance, it certainly looks nice. I like the colors and the wood paneling. I’m also very happy to know that it’s a fully flat bed, as expected. But there are a couple of things that stand out. First is that it’s not a very private offering. I’m actually ok with that, but it’s very different than what you’ll find on some other airlines out there. Second, you have to climb over someone if you’re in the window. Many airlines have gone out of their way to give direct aisle access while Lufthansa apparently has decided that isn’t necessary.

Third is the angled nature of the seat. No, the bed isn’t angled toward the floor, but you can see that the seats angle in toward the middle. So the aisle seat is pointed toward the window while the window seat is pointed toward the aisle. It doesn’t look like it’s so angled that you’ll have a stare down with your neighbor, but it’s still odd. I get why they did this – it gives you more space around your shoulders where you notice it the most. That’s good, but it has a consequence.

The strangest part about it is where your feet go. Look at this picture:

When the bed is fully extended, you’re just a thin piece of plastic away from playing footsie with your neighbor. That’s pretty close, but is it going to be annoying? I’m just not sure without having been in the seat itself.

I tend to think the most annoying part would be having the person in the window seat trying to get out by doing airplane gymnastics over the aisle seat. But I’m also concerned about the amount of private space.

You can see more new business class photos on the Lufthansa site (where I pulled these from). I just don’t know about this one. But I do hear the 747-8 will be coming to LAX as one of the first three markets, so hopefully I’ll have a chance to sneak onboard while it’s on a layover and check it out.

If you decide to put out bad analysis, as UNITE HERE did last week regarding Lufthansa complaints, and someone calls you on it, what would you do? The smart answer would probably be to just let it go and stop calling attention to the work, especially since it has more holes than Swiss cheese. But fortunately for us, UNITE HERE has decided to go the opposite route.

The union is using one of oldest tricks in the book: going after my credibility to muddy the water. This is just dumb. They really shouldn’t want to bring more attention to a flawed report like this. Now I’ve just dug in deeper and found even more problems with it. While I was waffling before, now I’m not. UNITE HERE has truly earned the Cranky Jackass Award.

You can read the union’s entire response here (pdf) if you’d like, but I’ll pull out the most fun parts. Let’s start with the opening.

One of the things I appreciate about your site is you are very open about your relationship to companies in the airline industry. And just one month after Lufthansa gave you a free round-trip, business class ride on its A380 from San Francisco to Frankfurt, perhaps I should not be surprised at your dismissive response to my report.

Ah yes, the back-handed compliment. A time-honored tradition that’s used to cover bad work. If someone calls out real issues, just call his or her credibility into question but look completely pleasant while doing so. This takes the focus off your bad analysis and tries to shift the issue. (Sounds like the author may have a future in politics.) It’s true, I’m very open about these things, and I did just fly Lufthansa at the airline’s expense. That doesn’t mean I won’t gladly rip Lufthansa a new one if it’s deserved. The problem here for the union is that it’s not.

You can read the rest of the response yourself if you’re interested in more sugar-coated insults, but let’s focus on the weak defense of the report itself and break that down.

The Department of Transportation data in the report is real, and to my knowledge is the only reliable U.S. source of compiled complaint information on international
airlines. If the DOT is willing to use these numbers to “to determine the extent to which carriers are in compliance with federal aviation consumer protection regulations,” then they’re good enough for me. Even if I am just a research analyst at a union.

*sigh* The issue is not whether this is the only place to get complaint data or not but whether or not it’s statistically valid and can be used to explain a trend or not. In this case, the year-over-year change in complaints from 2009 to 2010 moved by roughly less than one-thousandth of one percent over total passengers carried by Lufthansa to and from the US (using my rough passenger estimate). Even the initial number itself is so tiny that it’s not significantly different from zero. So regardless of what the purpose of the complaint reports are in the eyes of the DOT, that doesn’t magically mean that we can consider each number valid for any kind of analysis.

You’re right, I could have used the raw numbers, but I sort of agree with you that the raw numbers themselves aren’t incredibly exciting on their own. They’re small
because, well, how many people actually go through the effort to submit their airline complaints to the U.S. government? (If you care about an answer, you can look at the DOT analysis for the new passenger rights rule, where the DOT uses the ratio that every 1 complaint submitted to the DOT represents about 61 complaints submitted to the foreign airlines.

Excellent. Let’s just forget about using raw numbers because they aren’t “exciting.” I see. So we’re not looking for statistical validity here. We’re looking for excitement. You can apply any ratio you want to these numbers, but that still doesn’t make the small change valid. And this ratio is just an estimate by the DOT anyway, so using it would make a statistically insignificant change even less valid, if that’s possible.

The result of that comparison was clear. Lufthansa complaints went up, Air France and British Airways complaints went down. Is the sample number of complaints
small? Yes. But if the increases were random, would Lufthansa have seen them in 7 out of 8 top categories from 2009 to 2010? If they were random, wouldn’t Air France and British Airways have seen more fluctuation too?

This is my favorite part. I hadn’t even touched the Air France and British Airways numbers in my initial post, so I should thank the union for giving me even more firepower to show how awful the analysis is. The result is far from “clear” as proposed.

When I spoke with the research analyst, he told me that he didn’t bother looking at the monthly complaint reports. He just looked at the year-end summary and called it a day. That makes the analysis even worse because it doesn’t look for outliers. And that’s exactly why BA’s numbers are so different. In 2009, BA saw 347 complaints while dropping to a mere 120 in 2010. That’s great improvement, right? Wrong.

A look at the monthly data shows that in October 2009, BA received an incredible 244 complaints for reservations/ticketing/boarding. Why? According to the Bureau of Transportation Statistics, “The increase in the number of October complaints is attributed primarily to British Airways’ erroneous offer of $40 fares between the United States and India.” That’s an outlier and can’t be used to judge overall performance for an entire year. Guess what happens if we just substitute a more typical monthly result that month? We see an increase in complaints year-over-year approaching 20 percent. Fun with numbers, right? (Not that this is a significant change either.)

I highly recommend reading the entire response. In particular, I like the union’s effort to call into question the safety of the engines on the A380. Enjoy.

One thing that’s certain is that you can make statistics say pretty much whatever you want to get your point across. That’s exactly what the UNITE HERE union is doing with what appears to be a smear campaign against Lufthansa. After talking with the research analyst behind the report, I still can’t figure out why the union is bothering with this.

Earlier this week, I received an email from news@lufthansaalert.org with a report produced by the Lufthansa Traveler Alert site. That site is apparently the new campaign by the UNITE HERE union to make Lufthansa look bad. The report, titled “Customer Complaints Spike at Lufthansa, Decrease at British Airways and Air France,” was six pages of hilarity. See, the union has opted to use percentages despite the incredibly small numbers involved.

As highlighted in the email, there were four key points of the report. As I mentioned, you’ll notice that only percentages are used in all of these. That’s because the numbers are so incredibly small that it’s impossible to actually take them seriously. But when you use percentages, it looks a lot worse. Here are the four points.

Point #1 – Last year, Lufthansa’s total passenger complaints went up 70%. Meanwhile British Airways and Air France both saw decreases in total complaints.
Sounds awful, right? Well let’s use real numbers. In 2010, Lufthansa received a whopping 118 complaints via the DOT versus 68 in 2010. I did a little back of the envelope math and with around 30 flights each way per day between the US and Germany and a 75 percent load factor, Lufthansa serves around 5 million customers in the US in a year.

You think that change in the number of complaints is in any way an indication of a serious issue? I highly doubt it.

Point #2 – Lufthansa customer complaints increased in 2010 in seven of the top eight complaint categories: flight problems, baggage, rescheduling/ticketing, refunds, fares, oversales and disability access.
As you can imagine, since we’re already looking at a tiny sample size, breaking it down into categories makes it even worse. Baggage complaints were highest with 32 for the entire year. That’s up from 22. Next is a tie between Flight Problems and Reservations (not rescheduling as they suggest)/Ticketing/Boarding at 23. Everything else is single digits. Were they up? Sure. But it’s hard to consider this a trend with such a tiny sample size.

Point #3 – When 2006 data is compared with 2010 data, Lufthansa saw a 23% increase in total complaints while British Airways and Air France saw complaints drop by over 30%.
Point #4 – In each of the top four customer complaint categories – flights problems, baggage, ticketing/rescheduling/boarding, and refunds – Lufthansa trended worse than did British Airways and Air France when 2006 and 2010 data are compared.
This is rehashing the exact same thing. In 2006, Lufthansa received 87 complaints. It went down to 84 in 2007, then up to 61 and up to 68 before finally getting to 118 in 2010. What’s to say it’s not just an anomaly? The parting shot in the report tries to address that.

So far in 2011, with just January and February numbers tallied, Lufthansa has had over twice the number of total complaints filed compared to its total in Jan-Feb 2010.

Very convenient that the data was cut off in February. The March numbers have been out for well over a month and this report just came out, so March could have been included. Why wasn’t it? Well, because Lufthansa had only 8 complaints versus 21 the year before. Oops, might as well just leave out any periods that don’t help the cause, right? This is just nuts, but that brings up the biggest question.

Why the heck is the union doing this?

Normally, you would think that the union was looking to sign a better contract or get more people hired to help fix the problem, but that’s really not applicable here. UNITE HERE only represents the North American-based employees at LSG Skychefs, the catering business. So, the union has nothing to gain if Lufthansa made the strange decision to try to rectify these “problems.” None of them seem to have been about catering, so it’s not like the union can claim the airline needs to hire more of its workers to fix the problem. And even though it continues to be in ongoing negotiations with Lufthansa about a new contract, this certainly won’t impact those negotiations at all, at least not positively.

I spoke with the research analyst about the report and he really kept repeating the same two points.

1. “No comment about negotiations except that they’re ongoing.”
2. “We believe the data in the report speaks for itself.”

Unfortunately for the union, it’s the lack of data that really speaks volumes. This is just a misleading piece of propaganda that falls flat on its face.

It may be a very small piece of the travel experience that few of us will have the chance to try, but it’s still fun to explore what airlines are doing for their international First Class passengers. Lufthansa is certainly no slouch in this area. In particular, the airline’s First Class Terminal in Frankfurt has always captured my imagine. Combined with the new First Class that rolled out on the A380, it’s a fantastic experience. Let’s walk through a trip from the perspective of someone starting in Frankfurt.

When you get to the airport, you immediately bypass Lufthansa’s main terminal area in favor of the First Class Terminal located just to the west. This free-standing building is only for those travelers flying in international First Class on Lufthansa or connecting to international First Class on Austrian and Swiss. If you’re in First on United? Too bad. HON Circle members also have access to the terminal when they fly. These people fly 300,000 600,000 miles over a two year period, so it’s a very exclusive group.

If you’re driving, someone will take your car and valet park it (apparently not very common in Germany, at least not when compared to the US). If you have a rental car, you can leave it and they will return it for you. You walk in to find a welcome area with desks to check yourself in. After processing there, you walk through the security area into the lounge itself.

The main part of the lounge has plenty of loungers, massage chairs, and workstations. There is a large bar in the main area which has the largest selection of whiskey in Europe – 86 different options.

On the side, there is a sit-down dining area where you can order food.

Going toward the west part of the lounge, you’ll find the cigar lounge, which smelled so friggin’ good. This is an old boys club, for sure.

Past there you find the restrooms along with a couple of day rooms for those who need some rest.

Unlike in the day rooms that British Airways has in the Concorde Lounge at Heathrow, these do not have bathrooms built in. There are a few shower rooms that you can use independently. Some have tubs.

When it comes to boarding, First Class passengers do not pre-board with the rest. They board at the last possible minute by going downstairs to the passport control area. Your passport was sent ahead when you checked in, so you just pick it up and then pick the car you want to take you to the airplane. It’s a mix of Mercedes and Porsches models, and while they can’t guarantee you’ll get the car you want, you will get one of these.

You could technically arrive at the First Class Terminal at 20 minutes before your flight and still likely make it onboard (assuming your gate isn’t too far away). They do ask for at least 30 minutes just to be safe, however.

Once you get to the airplane, you come up from the ramp and go right onboard. About 200 to 300 people per day take advantage of this set-up. There are also First Class lounges in the terminal for those who may be connecting from other airlines or simply do not want to go over to the First Class Terminal itself. Munich also has a First Class lounge as do a couple of places around the world, but none as extravagant as this.

Once onboard, then it’s time to take your seat. You might remember when I wrote about Lufthansa’s plan for the 747 First Class with a seat and a bed. That’s really just a temporary solution. The new First Class standard is what has been delivered on the A380. This has fully flat beds in a sound-cocoon. We weren’t able to experience it in flight, but it’s supposed to be an incredibly quiet experience. For this, I took a video to show it better.

If you’re rich, then step right up and buy these fares. A roundtrip from New York to Frankfurt is only a mere $16,000 or so while a roundtrip originating in Frankfurt starts at just over $11,000. Bargain! You can always try to save up enough points as well in order to get this excellent experience.