Deutsche Lufthansa A.G. (Lufthansa Germán Airlines Incorporated)

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Deutsche Lufthansa A.G. (Lufthansa Germán Airlines Incorporated)

Von-Gablenz-Strasse 2-6
D-5000 Koln 21
Federal Republic of Germany.
(0221) 8261

Public/State-owned Company
Incorporated: 1926 as Deutsche Luft Hansa
Aktiengesellschaft
Employees: 31,575
Sales: DM 9.287 billion (US$ 4.782 billion)
Market value: DM 3.169 billion (US$ 1.632 billion)
Stock Index: Frankfurt

The West German national flag carrier Lufthansa is regarded as one of the five major airlines in the Western world. Its history parallels the development of aviation in Germany, dating back to a time when the first aviators were just beginning to fly. However, it wasn’t established as a commercial airline in Germany until the 1920’s.

After World War I the German government favored the development of a national airline sytem made up of a number of associated regional airlines. One of the largest airline companies, Deutscher Aero Lloyd, was incorporated in 1923 and centered its operations around Berlin’s Temple Field. The following year Junkers Luftverkehr was founded. Junkers built airplanes in addition to operating an airline. Together the two companies dominated German aviation.

The two companies merged with all the other German aeronautic concerns in 1926 to form Deutsche Luft Hansa Aktiengesellschaft (the name “Hansa” was taken from the north-German Hanseatic trading league which had contributed most of the airline’s private capital). Luft Hansa was a government-private monopoly; the chosen instrument for all German air services. The company’s logo was taken from Aero Lloyd and its blue and yellow colors were taken from Junkers. By May of 1926 Luft Hansa served 57 domestic and 15 international airports.

In 1934, under the new name “Lufthansa,” the company opened an airmail service between Stuttgart and Buenos Aires. As an instrument of state commerce and diplomacy Lufthansa flew to numerous destinations around the world including Beijing, New York, Cairo, Bangkok and Tokyo. Regarded as an instrument of the state Lufthansa increasingly came under the control of the ruling Nazi party. Lufthansa began service to destinations in the Soviet Union during 1940. These routes provided the German Luftwaffe (air force) with valuable strategic information used in Hitler’s surprise invasion of the Soviet Union two years later. In 1941 the Luftwaffe assumed control of Lufthansa’s airplanes and converted many of them for military use. As the war continued many Lufthansa employees were drafted into military service in support of the Luftwaffe; by the end of the war in 1945 many had lost their lives.

After the war Germany was occupied by the Soviet Union, the United States, France and Britain. The Soviet occupied zone later became the German Democratic Republic (East Germany), and the American, French and British zones became the Federal Republic of Germany (West Germany). A general state of belligerency between the Soviet Union and the Western allies further divided East and West Germany. Under the conditions of the occupation both East and West Germany were forbidden to establish their own airline companies. British, French and American airlines had a monopoly on air service in West Germany, while the Soviet airline Aeroflot assumed all air services in East Germany.

By 1951 the re-establishment of a national airline for West Germany was proposed. The following year the West German government in Bonn set up a preparatory airline corporation, and then in 1953 Luftag was created. Hans Bongers, who joined Lufthansa in 1926, was reinstated as director of the national airline. Luftag began service with four Convair 340s, later joined by three DC-3s, and four Lockheed Constellations.

Luftag’s airplanes were piloted by foreign airline personnel while former Lufthansa pilots were retrained in the United States. The Germans later flew as co-pilots until 1956 when all-German crews were assigned. In 1954 Luftag instituted its old name, Lufthansa, and in the following years re-established its services to North and South America and the Middle East.

Lufthansa began flying Boeing 707 passenger jets on its international routes in 1961. The introduction of jets marked the beginning of an equipment rotation at Lufthansa. The older propeller-driven airplanes were slowly phased out and replaced by passenger jets. With this new equipment Lufthansa had firmly re-established itself as one of the world’s premier air carriers.

The expansion of Lufthansa continued with the reintroduction of services to Africa. The airline established service to Nigeria in 1962 and later that year began service to Johannesburg, South Africa. Despite the heavy investment required for the airline’s expansion, Lufthansa was able to declare its first profitable year in 1964. Previously the airline had charged its losses to the Federal government.

Lufthansa joined a maintenance pool called ATLAS in 1969. As a member of ATLAS, Lufthansa cooperates with Air France, Alitalia, Sabena, and Iberia in the repair and maintenance of aircraft and other equipment. Lufthansa’s Hamburg facility has been designated to perform repairs for the pool’s B-747s, DC-10s and A-300s.

The updating of equipment at Lufthansa continued over the next few years as the airline introduced Boeing’s 737 for short distance shuttle routes, and a 747 jumbo jet for heavily traveled long distance services. In addition to the 747, Lufthansa purchased several McDonnell Douglas DC-10s. The new aircraft replaced the older propeller-driven airplanes, the last of which was removed from the fleet in 1971. During this period Lufthansa developed its air freight services with a fleet of 747s specially designated to haul cargo. The airline constructed automated freight handling facilities in a number of destinations across the world. Lufthansa recognized the importance of cargo services before most of its competition. The company established one of the most modern freight handling systems in the world. Cargo services have been a major source of revenue for Lufthansa.

Being a European airline Lufthansa was dangerously exposed to terrorist activities during the 1970’s. Security was inadequate at many airports served by the company, which made it easy for terrorists to board and later commandeer an airplane. However, not one Lufthansa passenger has lost his life despite numerous hijackings on the airline. The chairman of the company during the 1970’s was Rolf Bebber and he must be credited for Lufthansa’s success in ending the hijacking peacefully. He established a crisis management procedure which enlisted the diplomatic influence of the West German government. Through this procedure the company could respond quickly to terrorist demands in order to resolve a crisis. In addition, security at all Lufthansa airports was significantly upgraded.

The airline experienced considerable problems with German air traffic controllers who staged a “go-slow” from May to November 1973. Lufthansa estimates that it lost $71 million due to flight cancellations during that period. The controllers, who are civil servants, have been demonstrating their displeasure with working conditions in this manner since 1962. Lufthansa has tried to persuade the Federal government to change the status of the controllers in an effort to avoid future slowdowns but has thus far been unsuccessful.

Lufthansa received its first A-300 jetliner in 1976 from Airbus, the French-German-British-Spanish aircraft consortium. The A-300 was the first commerical aircraft to be built primarily by Germans in over 30 years. The German member of the Airbus group, Messerschmidt-Bólkow-Blohm (MBB), continued to contribute to the development of more advanced Airbus jetliners and Lufthansa continued to add them to its fleet. In 1983 the airline commissioned its first A-310 and has since expressed interest in the consortium’s A-320 and A-340 jumbo jet projects.

MBB has been particularly willing to involve Lufthansa in the Airbus projects. Since both companies are German they are encouraged by the Federal government to coordinate and serve each other’s economic interests. As a result, Airbus is especially sensitive to Lufthansa’s design requirements. And because Lufthansa is a highly respected modern air carrier, the jetliners built to its specifications are, in turn, more marketable to other airline companies.

In 1982, 80% of Lufthansa’s stock was owned by the West German government. The board of directors, however, was appointed by Lufthansa’s private investors. On June 22 of that year the board of directors narrowly elected a new chairman to succeed Herbert Culmann. Culmann was a popular chairman, but he retired two years early to save his company embarrassment over allegations of kickbacks to travel agents.

The new chairman was Heinz Ruhnau, a career bureaucrat with strong affiliations with the West German Social Democratic Party. His appointment generated an unusual amount of concern because many feared the ruling Social Democrats were attempting to politicize the airline. Ruhnau was an Under Secretary in the Transport Ministry and a former chief assistant to the head of West Germany’s largest trade union, IG Metall. He did not, however, have experience in private enterprise, and Lufthansa was being prepared for a further privatization of its stock. In 1985 the Federal government held 74.31% of Lufthansa, 7.85% was held by government agencies, and the remaining 17.84% was held by private interests.

Ruhnau assumed his post on July 1, 1982 in a smooth transition of leadership. Ruhnau’s immediate tasks were to improve Lufthansa’s thin profit margin and win the support of the company’s 30,000 skeptical employees. The company’s performance in 1982 was impressive and resulted in its election as airline of the year by the editors of Air Transport World.

Much of Lufthansa’s future growth depends on its ability to remain competitive in an increasingly difficult world airline market. To this end, it has entered a number of markets which are not immediately recognized as potential commercial successes. For instance, Lufthansa’s service to Lagos, Nigeria is extremely popular. Lufthansa is also one of the first major airline companies to establish regular service to Beijing, where it is investing in a new 400-room hotel and business center. Given the growing economic importance of the Far East, China may also become one of Lufthansa’s more popular destinations.