Lufthansa: Going global, but how to manage Complexity?

Lufthansa is the leading, probably pivotal, member of the largest alliance, the Star Alliance. If globalisation means complexity, alliances are even more complex to manage than individual companies because they lack the hierarchical conflict resolution mechanisms that individual companies can employ. Important questions to Lufthansa: * Is the current strategy sufficient to maintain Lufthansa’s position as one of the few profitable airline companies, given the uncertainties and dynamics in the highly competitive but cyclical market? * Has Lufthansa done enough to reduce complexity in the right places and survive the competition, especially against the background of customer satisfaction and high value added? * Are all the employees in the corporation embraced culturally? * Is Lufthansa prepared for the sustainability challenges – in particular global warming – which create new uncertainties?
Surviving the changes in the airline industry
In 1992, due to the first war in Iraq, Lufthansa was close to bankruptcy just like other airlines as international air traffic has been reduced. Therefore Lufthansa has offered point-to-point connections on high traffic density routes. Also they targeted the business class passengers with new offerings such as Virgin Airlines. From the early 1990’s a minimum of 3% reduction in cost was needed every year and likely to continue.
The economic and political events had a negative impact as well on the airline industry. After the Iraq war, the air traffic has been slown down by the Asian financial crisis in 1997 and then financial crisis in Russia and the Latin America and dramatically fall after 2001 terrorist attacks in USA. Afterwards oil prices rise dramatically in 2006-2005 and the traffic jams and queues in major airports, made people to choose alternative