Less Luxury at Lux air?

I have been to Luxembourg once. This tiny Grand Duchy has a population of half a million in an area of just under 1000 square miles (2 586sq km) in an area bounded by Belgium, Germany and  France. It is the 170th smallest country in the world and the second wealthiest.

The Grand Duchy has a railway company: Chemins de Fer Luxembourgeois with six lines. The last visit I had to Luxembourg was by train so I have not had the pleasure of flying the Duchy’s airline:  Luxair. The carrier is rated a 3 star by Skytrax -but has very high customer reviews.

The country must be one of the smallest countries in the world to have their own flag carrier. The Luxembourg Airlines Company was founded in 1948 and Luxair emerged from this operation in 1961. The airline flies to 59 destinations (of which 39 are seasonal) using 15 planes

  • Embraer ERJ-145 (Six Planes)
  • Bombardier Q400 (Five planes)
  • Boeing 737-700 (Three planes)
  • Boeing 737-800 (One plane- with more on order)
90 per cent of Luxembourg air traffic originates or travels to Western Europe (obviously the country itself is way too small for domestic flights!). Its frequent flyer program is Miles and More (Lufthansa’s program).
I have been concerned for some time as to how many of Europe’s airlines will exist in five years and Luxair has clearly some question marks. Some recent developments have had an impact:
Ownership
This week, Swiss forwarding and logistics company Panalpina  sold its 12 per cent stake in Luxair to the State.  The Duchy now own 60 per cent of Luxair.  The Duchy have not announced how many shares it will hold and how many shares will be held by Banque et Caisse d’Epargne de l’Etat, the State owned bank.
On July 2nd, the largest Union associated with Luxair learnt that there had been takeover discussions with Lufthansa.
In turn, Luxair has a one third stake in freight carrier CargoLux, one of the largest scheduled all-cargo airlines in the world.  Luxembourg Airport is the eighth largest air freight platform in Europe!  In 2011, Qatar Airlines, increased its share of that carrier to 25 percent and announced an interest in owning up to half of that airline. The other shareholders are the  Banque et Caisse d’Epargne de l’Etat (the state owned bank mentioned earlier) and Société Nationale de Crédit et d’Investissement .
Competition
In April, 2012 easyJet announced that they will start flying to Luxembourg from London Gatwick in October, 2012. Currently British airways fly to Lux from London Heathrow, Air France from London City and Luxair from London city. If successful, one assumes that easyJet would add flights to Lux from their other hubs such as:
  • Amsterdam (currently a KLM monopoly)
  • Geneva (Luxair and Darwin currently fly this route)
  • Milan (currently a Luxair monopoly albiet code-shared with Alitalia
A move such as this would start to chip away at Luxair’s near -monopoly position.
Codesharing
In June, Luxair added a code sharing arrangement with Star Alliance member Turkish airlines. They already have an extensive codesharing arrangement with Lufthansa, also a Star Alliance member.

 Strategy

The new Chair of Luxair (Former Luxembourg City Mayor Paul Helminger) announced last week, that the carrier will focus on becoming a budget carrier dropping some routes and adding others. A strategy fraught with risk. The other issue is that the airlines’ unions have not been consulted on this direction.

So the future looks like it contains one of these four possibilities: 

  1. a Qatar/Luxembourg state owned company (merged with or more closely associated with Cargolux) with bases in Europe feeding the long-haul traffic into Qatar Airways from several European cities. The name “Luxair” is multilingual, and the association with Luxembourg must be seen as positive brand-wise,  OR
  2. a Lufthansa owned subsidiary (although this sounds like it has fallen through) OR
  3. a stand alone Budget carrier which would probaby be much smaller than the current operation- maybe with siex to ten hubs OR
  4. gone within seven to ten years
It seems to me that a stand alone flag carrier for such a small country will become increasingly difficult to sustain. One hopes their great customer service attitudes will continue to pervade this carier no matter what its future.

 

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Comments

  1. A little OT, I flew LUX-LGW-LUX a couple years ago. Nice enough airport, very nice elite lounge. I was living in Kaiserslautern, Germany at the time and the fare made it worth the drive, wasn’t that much further than FRA. Plus I refuse to fly Ryanair…

  2. Sorry but some information is wrong!The new chair of Luxair said that Luxair will not become a low -cost carrier! Luxair has 2 airline activities. Luxair Tours is very succesful in providing package holidays an this activity is very profitable, so we might see Luxair flying to more exotic holiday destination…why not add 2 787 to the fleet?

  3. Thank you for alerting me. Your information is more recent. My post was written in July based on the information at that date. The CEO Adrien Ney on 21st August, 2012 said things need to change after the airline’s massive 2011 loss. On that date, he categorically said Low Cost Carrier was not an option. He has also promised no down sizing or outsourcing which does not give many options! Growth in Package tours and cargo would be the two options pursued.

  4. Have you ever thought about including a little bit more than just your articles? I mean, what you say is valuable and all. Nevertheless think about if you added some great pictures or videos to give your posts more, “pop”! Your content is excellent but with images and clips, this website could certainly be one of the very best in its field. Good blog!

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