Lufthansa Case Study

Strategic ManagementCases

Competitiveness and Globalization

8th Edition

Michael A. Hitt

Texas A&M University

R. Duane Ireland

Texas A&M University

Robert E. Hoskisson

Arizona State University

HITTIRE

LAND HO

SKISSON

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In the glamorous, but financially not so glorious, airline industry, Lufthansa is one of the three companies world-wide whose debt is rated as investment-grade. For most of the other companies, if they are not already in bank-ruptcy procedures or being bailed out by the govern-ment, the financial situation is simply a nightmare. Since World War II the industry has never earned its cost of capital over the business cycle. Especially after the de-regulation (beginning in 1978 in the United States), which increasingly replaced the government-organized IATA cartel,1 the situation got worse. By 2005, the cu-mulative losses of airlines since 2001 amounted to about US$40.7 billion.2 As mergers are still legally prevented across many country borders, the airlines response to globalization was to form alliances (refer to Exhibit 1 for

characteristics of globalization and how it relates to com-plexity), alliances are even more complex to manage than

Lufthansa: Going Global, but How to Manage Complexity?

Simon Tywuschik, Ulrich Steger

International Institute for Management Development

Case 18

individual companies because they lack the hierarchical conflict resolution mechanisms that individual companies can employ.

But despite their pride in mastering the turmoil of the past, some nagging questions remain for Lufthansas management as the globalization of the airline industry moves full speed ahead.

Is the current strategy sufficient to maintain Lufthansas position as one of the few profitable air-line companies, given the uncertainties and dynam-ics in the highly competitive but cyclical market?

Has Lufthansa done enough to reduce complexity in the right places and to survive the competition, especially against the background of customer satis-faction and high value added?

Are all employees in the corporation embraced

Is Lufthansa prepared for the sustainability challengesin particular global warmingwhich create new uncertainties?

D

on

Ham

mo

nd

/De

sig

n P

ics/C

orb

is

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Research Associate Simon Tywuschik prepared this case under the supervision of Professor Ulrich Steger as a basis for class discussion rather than to illustrate

either effective or ineffective handling of a business situation. This case has been compiled purely from public sources. Copyright 2006 by IMD, International

Institute for Management Development, Lausanne, Switzerland.

Exhibit 1 Key Facts for the Main Airline Alliances

Key Features Star Alliance One World Sky Team

Year of formation 1997 1999 2000

Members 18 8 10

Passengers (in millions) 425 258 373

Destinations 842 605 728

Fleet Size 2800 2161 2151

Market Share (Rev.) 28.4% 15.8% 23.9%

Headquarters Frankfurt (Ger) Vancouver (Can) None

Organization type Formalized organization Governing Board Committee

Sources: Web sites of the alliances, 2006; PATA, 2006. www.staralliance.com; www.oneworld.com; www.skyteam.com.



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Exhibit 2 The Six Features of Globalization

Feature Explanation

(1) Eroding Borders Never before in history have so many boundaries in the social, political, and economic realm

been weakened or abolished. However, boundaries fulfill two core functions: First, they contain

effects (inside a certain entity); and second, they define the difference between us and others

(identify creation). As a consequence of the erosion of boundaries, complexity increases (see also

Exhibit 3).

(2) Mobility The erosion of boundaries facilitates greater mobility of goods, capital, knowledge/technology, and

people.

(3) Heterarchy Organizations across all industries are not structured hierarchically (top down), but rather

heterarchically (i.e., changing dependencies and interdependent influencing channels are common).

Due to the interdependency between different organizational layers, the process of power exertion

has become more costly.

(4) Erosion of Legitimacy Because it is almost impossible to clearly identify one-way cause-and-effect relationships within

complex systems, responsibilities (institutional as well as personal) are difficult to establish.

This process leads to the erosion of legitimacy within many organizations, in particular of

democratically elected governments. Although they can no longer provide for the welfare

of nation states, they remain the only addressee of the voter, which therefore leads to

disenchantment with politics.

(5) Variety of Options In complex systems no foreseeable and stable structures are evident (from a persons choice of

profession to a global players determination of corporate strategy), but the number of options

can (on a personal and institutional level) also lead to information overload and failure (anxiety).

(6) Asymmetry between

Past and Future

Asymmetry between past and future: The future is not a smooth continuation of the past; rather

abrupt breaks are characteristic of development of the economic, social, and political spheres.

Exhibit 3 Complexity and Consequences for Corporations

Situation Challenge Approach

De

fin

itio

n a

nd

Ke

y C

on

ce

pts In systems theory, complexity is

defined by the number of different

potential states of a system that

depend on certain complexity drivers

(see below for drivers).

Ashbys Law of Variety suggests

that organizations can handle high

external complexity only by a similar

internal complexity. The internal

implementation of such complexity

would create problems particularly

for multi-business line corporations.

Hence, these corporations look for

drivers that decrease complexity (see

below).

The more open and globally spread

out a system is, the greater the

velocity of change. The main

challenge of corporations is to

manage complexity. A global

company must be characterized by

certain features in order to manage

complexity and survive competition

(see below).

Ke

y D

rive

rs a

nd

Fe

atu

res

Difference and diversity of values,

aims, interests, cultures, and types of

behaviors.

Interdependence that provides for

greater interaction.

Ambiguity of situations and of informa-

tion in its meaning.

Fast flux: Through eroding borders, the

number of actors and interdependen-

cies increases. The different interests

and information uncertainty increase

the number and intensity of actions

that influence a system. It means that

adjustment processes occur continu-

ously, which again cause interventions.

A common business culture and val-

ues and one clearly formulated and

focused business strategy should

help to establish one clear direction.

Standardized processes decrease

variations (and hence complexity) in

the course of business and create

more transparency.

Focus on certain activities (such as

core competencies).

Decentralization of decision power

reduces the need for coordination

(and hence of interaction) and early

warning systems allow for more

time to adjust.

Activities in several world regions

provide for a certain homogeneity

of demand on the one hand and

advantages for corporations on the

other hand, among others economies

of scale.

One global strategy for the fulfill-

ment of common aims.

Employees of different ethical and

professional backgrounds.

Standardized norms and processes.



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Surviving the Changes in the Airline Industry

In 1992 Lufthansasimilar to other airlineswas close to bankruptcy, as the first Iraq war reduced international air traffic. It became obvious that the massive European and global expansion strategy that Lufthansa had been pursuing since the early 1980s was not economically vi-able (refer to Exhibits 4 and 5 for an overview of passen-ger sales and growth rate).

The fixed costs were too high for a cyclical business. On the other hand, strong reasons supported the belief

that the network effect and economies of scale were leading to a global airline industry, dominated by a hand-ful of key players (similar to the car industry).

However, the deregulation process had not gone far enough to allow for major mergers (in the United States, foreigners can own only 25 percent of an airline; in the EU non-European ownership is limited to 49 percent; in most of Asia any acquisition of a major airline might not be illegal, but it is practically impossible). But deregula-tion and the erosion of the IATA cartel went far enough to allow for scores of new competitors. No-frills low-cost airlines spread from the United States to Europe and

18.6%

ROW

14.2%

Dtl

22.0%

NA

13.0% AP

32.2%

EU

1980

15.1%

Dtl

30.5%

EU

21.3% AP

22.4%

NA

10.6%

ROW

1990

17.1%

Dtl

31.8%

EU17.8% AP

23.2%

NA

10.1%

ROW

2000

Note: Data for 1980 and 1990 also include cargo and mail services. Data for 2000 excludes CityLine.Note:

Abbreviations: NA North America; AP Asia Pacific; ROW Rest of the World; EU Europe; Dtl Germany

Sources: Lufthansas annual reports; authors calculations.

Exhibit 4 Lufthansas Passenger Transportation Turnover by Region, 1980, 1990, and 2000

1981

5.0%

0.0%

5.0%

10.0%

An

nu

al C

han

ge in

%

15.0%

16.2 16.2

7.28.1

2.2

6.1

8.1

11.3

8.1

11.1

3.9

6.8

2.93.8

10.7

2.4

1.5 1.12.1

9.2

15.5

10.1

7.6

0.3

4.0

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

Year

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Note: From 1995, only passenger revenue is considered (excludes mail and cargo). Figures represent net sales.Note:

Sources: Lufthansas annual reports from 1981 to 2005; authors calculations.

Exhibit 5



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then Asia, nurtured by the abundance of used aircraft and leasing opportunities (e.g., easyJet was started with less than 5 million). Unlike the flag carriers, with their hubs, they offered point-to-point connections on high traffic density routes. Also business class passengers were targeted with new offerings (such as Virgin Airlines). Overcapacity and persisting government subsidies (es-pecially in southern Europe, Asia, and Latin America) combined to create permanent price pressure: From the early 1990s, a minimum of 3 percent reduction in costs was needed every year, which was likely to continue.

Economic and political developments did not have a positive effect on the airline industry either. After recov-ering from the effects of the first Iraq war, air traffic was once again slowed down by the Asian financial crisisstarting in 1997followed by similar events in Russia and Latin America. However, everything the airline industry had experienced so far was dwarfed when terrorists used airplanes as flying bombs on September 11, 2001.

The succeeding War on Terrorespecially the sec-ond Iraq waralong with spreading tensions through the Middle East and the SARS scare delivered a three-year nightmare for the industry, which was in a cyclical business downturn anyway: Worldwide air passenger volumes fell by 3.3 percent and 2.4 percent in 2001 and 2003, respec-tively, and remained flat in 2002.3 Lufthansas traffic turn-over even decreased between 2001 and 2003 by 4.6 percent.4

Then, once passenger demand began to recover, oil prices escalated dramatically in 20052006. Currently, fuel costs are the second-highest cost category per seat kilometer, ac-counting for 26 percent of operating costs in Europe airlines (labor costs account for approximately 30 percent).

Add in the issue above and the traffic jams and queues at major airportswhich makes high-speed trains a more attractive alternative for journeys up to 500 kilometersand a picture emerges. As such, the airline industry ap-pears as a high-growthlow-profit industry. Everybody expects air traffic to growdespite a highly volatile environmentbut nobody expects a similar surge in profits. Because airline companies are now mostly priva-tized (Lufthansa since 1996, with about 40 percent held by diverse foreign owners), they have to fight for survival on their own. The bankruptcies of Swissair and Varig, for example, and the financial difficulties of Japan Airlines (JAL) indicate that the former flag carriers cannot bank on governments coming to their rescue. The fate of Pan Amonce the dominant international carrier and now defunctis a sobering lesson for everyone.

Lufthansa: Continued Challenges

Since Lufthansas turnaround in 19921993, in only one year have no new cost-cutting initiatives been launched, implemented, or (after 2001) even accelerated. In fact, a

certain management routine on how to implement and control such cost-cutting initiatives has even been estab-lished. Compared to 1992, the cost base has been reduced by approximately 40 percent, despite rising wages, secu-rity and airport fees and the roller coaster of fuel prices.

Lufthansa needed to ensure cash flow (especially after 2001), and it needed to reduce costs (e.g., by hiring for-eign crew members). Lufthansa transformed fixed costs into variable costs (by outsourcing), and rationalized every step in the value chain, especially via electronic processes which is very tricky when it comes to interfac-ing with the customer.

The art of the endeavor was to push the cost-cutting through, without losing consensus with the employeeswho, like everywhere in the industry, are highly union-ized6and the strong work-councils, who had several levers to derail the whole process or at least slow it down considerably. With one exception of the strike in early summer 2001 by the pilots who have a separate union and felt disrespected, the magic worked. But employ-ers always face the risk of a burn out syndrome, when everybody asks: Will this ever stop?

However, sometimes Lufthansa executives think that cost-cutting is easier, relatively speaking, than managing the Star Alliance (refer to Exhibit 6 for an overview of its 18 members), now the biggest of the global airline alli-ances, with 28.4 percent market share and 842 destina-tions in 152 countries.7 Many think of Lufthansa as the leader and integrator, because the biggest member, United Airlines, was preoccupied for more than three years with emerging from Chapter 11 bankruptcy procedures in the

From the beginning, Lufthansas strategy was to drive the Star Alliance from the revenue side by keeping more passengers in the network. This idea of seamless travel is implemented through code-sharing, coordinated flight schedules, common lounges, baggage handling, and so forth, leading to a higher utilization of planes and infrastructure (lower cost per unit), and sometimes also to economies of scale in purchasing and sales.

A constant balancing act is necessary between the alliance members independence (including the right to leave) and the need for common processes, especially in IT, and quality insurance. Another constant point of debate centers on the needs and expectations of global customers. Are they the same or do they differ by culture (e.g., in terms of greeting during the boarding process)? A crisis of individual members (especially Varig and United) could endanger the whole alliance, and Lufthansa was pushed to save Air Canada from bankruptcy in 1999, but could not prevent the Australian partner Anselt from going out of service (Varig and United still flew during the bankruptcy process and received only technical aid from Lufthansa). In any case, Lufthansa management



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risks) of the other airline members and creates the per-ception that Lufthansa is seeking a role as a dominant force (e.g., looking for shareholdings in other airlines), a factor that contributed considerably to the downfall of SWISS in 2001. However, when its new incarnation, SWISS, was up for grabs in 2005, Lufthansa violated this principle and acquired the airline to prevent it fall-ing into the hands of arch rival British Airways and the OneWorld Alliance. And more acquisitions may be in the cards: Lufthansa maintains 10 percent of its own shares (the legal maximum) for the purpose of a reserve.

For Lufthansatrained in the art of consensus more than othersit seems to be easier to accept only an 80 percent workable solution, if everybody is behind it and has bought into the compromise. Nevertheless, it was a learning process over several years; many com-promises ran counter to a Lufthansa culture that takes pride in engineering excellence and maintaining stan-dards, not only in back-office processes like IT, but also with customer interfaces (e.g., Lufthansa thought that the electronic check-in should be completed in half the

time than the other alliance members found acceptable for their customers). Sometimes alliance initiatives run counter to the interests of Lufthansa divisions: The idea of creating a common Star Alliance IT infrastructure would rob the IT systems divisions of most of their customers.

Despite the time-consuming negotiation and con-sensus-building processes in the Star Alliance manage-ment superstructure (refer to Exhibit 7) and despite the higher transaction costs, Lufthansa executives remained strong supporters of the alliance. The reason is quite sim-ple: Because no alternatives (mostly M&As) are (legally) available, alliances are the only way to operate in a global network without increasing ones own investments in an economically unsustainable way (a lesson learned the hard way). It is estimated that for Lufthansa the net op-erating profit increase through the Star Alliance is about 500 million per year, which roughly corresponds to the profits for 2005. Hence, in the overall profitability equa-tion for flag carriers, the regional business seems to fulfill a marketing activity for international routes rather than being a profit source of its own.

1. AerLingus

2. American Airlines

3. British Airways

4. Cathy Pacific

5. Finnair

6. Iberia

7. LAN

8. Qantas

1. Aeroflot

2. Aeromexico

3. Air France/ KLM

4. Alitalia

5. Continental

6. Czech Airlines

7. Delta

8. Korean Air

9. Northwest

Market Share: 15.8% Market Share: 23.9%

1. Air Canada

2. Air New Zealand

3. ANA

4. Asiana Airlines

5. Austrian Airlines

6. bmi

7. LOT Polish Airlines

8. Lufthansa

9. SAS Scandinavian Airlines

10. Singapore Airlines

11. South African Airways

12. Spanair

13. SWISS

14. TAP Air Portugal

15. Thai Airways International

16. United

17. US Airways

18. Varig

Market Share: 28.4%

Exhibit 6 Global Airline Alliances and Their Members



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Although the Star Alliance is great for intercontinental and business travel, it does not provide an answer to the onslaught of the low-cost carriers. Alongside some second-tier partnerships outside the Star Alliance, Lufthansa created Lufthansa Regional (refer to Exhibit 8 for the organizational structure), which carries out approximately

50 percent of the companys German and European flights. Within Lufthansa Regional, Eurowings and CityLine (partially) belong to the Lufthansa Group.9 However, the planes from the other partners are operated via wetleas-ing, whereby Lufthansa leases the aircraft complete with crew and maintenance contracts. In this case the planes are

Alliance Board (Airline Members)

CEO

Corporate Office

Legal

HR/Training

Finance and Strategy

CommercialProducts and

Services

Loyalty

Marketing

Information

Technology

Project Management Practice

18 A

irlin

e

Mem

bers

Fo

rmal

Org

an

izati

on

Source: Star Alliance, 2005. http://www.staralliance.com.

Exhibit 7 Organizational Structure of Star Alliance

BU

Catering

(2.22 billion)

BU

Leisure/Travel

(7.66 billion)

Lufthansa

Regional

Lufthansas

Core Fleet

Air Dolomiti

(100%)

CityLine

(100%)

Eurowings

(49%)

bmi

(30%)

(Partial) Ownership

SWISS

AIR

Contact AirAugsburg

Airways

Cooperation (wet-lease)

BU

Logistics

(2.75 billion)

BU

Passage

(12.05 billion)

BU

MRO

(3.12 billion)

BU

IT Services

(0.64 billion)

Note: Revenue figures refer to 2005.Note:

Source: Company information, 2006. http://www.lufthansa.com.

Exhibit 8 Structure of Lufthansa Holding and Lufthansa Regional



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integrated into Lufthansas scheduling and the company carries the risk of the revenue side only.

Operating in a high-price competitive market, Lufthansa Regional needs a lower-cost structure than Lufthansas core fleet. The cost savings at Lufthansa Regional come partly from the slightly lower wages, the smaller planes adjusted to the traffic density, a reduced service level, an operating base in second-tier airports, and point-to-point-service so that the time in the air is greater than for network airplanes. On the revenue side, Lufthansa gains through the feeder function to intercontinental flights (otherwise passengers might go via other big hubs) and the density of the connections: Only a few attractive routes can be developed by low-cost carriers without facing competition from the outset directly with Lufthansa (and its ability to cut prices when needed, a source of continuous controversy with the antitrust authorities).

However, as compelling as the business logic for Lufthansa Regional may appear to financial and indus-try analysts, the two-class society is a cause of friction

and ongoing tension among the employees, as well as sometimes irritating to customers because of the differ-ent service standards, which are not matched in price differences. Another ongoing debate concerns in which category the newly acquired SwissAir belongs. Is it a low-cost provider or an equal partner in the Star Alliance? Often SWISS deliberately competes in its marketing ef-forts with the no-frill sector; on other occasions it refers to its tradition as a premium airline.

Can Organization Provide Stability?

Since 1996 Lufthansa has been organized as a holding with six business lines (refer to Exhibit 9 for a brief de-scription), dissolving the once integrated corporation. Although Passage is dominant, with approximately two-thirds of the turnover, each division is fully responsible for its own financial results and any interactions with other group companies occur on market price terms. However, as in every decentralized organization, the holding com-pany needs to unite its businesses under one strategy

Passage

Monolithic

flag carrier

Logistics

Divisions

Integrated Functions

Result of the Transformation Process: Focused flag carrier

Strategic Business Areas

Active Portfolio Management

MRO*IT-

Services

Globe

GroundCatering Condor

Passage Logistics MRO*IT-

Services

Globe

GroundCatering Condor

Equant DHL Amadeus

Passage Logistics MRO*

1991

1994

1997

2000

2001

IT-

ServicesSale

Sky Chef

Acqu.

T. Cook

Acqu.

IPO IPO

Sale of

Sky Chef

Sale

Sale

SaleConv.

Bond

Sale of

T. Cook

* MRO: Maintenance, repair, and overhaul

Sources: Company information; authors illustration, 2006.

Exhibit 9 Evolution of the Organizational Structure of Lufthansa



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roof, avoiding silos and any duplication of functions. These goals might have been the drivers at Lufthansa for a more focused corporate strategy, the sale of Ground Globe (airport ground service) and several financial di-vestments (e.g., the shareholding in the reservation system Amadeus). Then, just at the very end of 2006, Lufthansa sold its 50 percent stake in Thomas Cook, the tourism company into which Lufthansa integrated its charter air-line Condor, for 800 million to KarstadtQuelle.10 And finally, even more might be for sale with LSG Sky Chefs (catering) when its turnaround is finalized (some parts of LSG Sky Chefs have been sold).

The permanent attempt to remove intermediaries is representative of the focus not only on cost cutting but also on streamlining the business model. In 2005 Lufthansa abolished any discount on its tickets for inde-pendent travel agencies (they now have to charge their customers for issuing tickets) and promotes direct book-ing via the Web or call centers or controlled distribution channels (e.g., LH City Centers, a franchise travel agency chain with 540 offices in 49 countries as of 2006).

Above All: Maintaining Financial Discipline

Every business cycle challenges the precious investment-grade rating that Lufthansa enjoys. In the crisis from 2001 to 2004, the gearing increased from 36 percent in 2000 to 85.4 percent in 2005, despite an increase in share-holder capital.dominant and Lufthansa has learned to focus its cost cut-ting on the cash flow impact. Depreciation of airplanes is higher than British Airways for example (12 vs. 20 years) to ensure a rapid capital recovery and reduce debt service as quickly as possible. Leasing part of the fleet allows for quicker adjustment of capacity (after 2001 approximately 20 percent of plane capacity was taken out of operation; now it is building up again).

Corporate Culture in Transition

Lufthansa was once known for its strong culture, based on pride in being a Lufthanseat, the positive image of the company in Germany and its reputation for en-gineering excellence, underpinned by ongoing training and educational activities. Now approximately one-third of the workforce is non-German, and it has become more fragmented in its interests, perceptions, communication channels, and expectations. The pilots strike in 2001,

which put the pilots in confrontation with the ground personnel (who suffered the brunt of passenger anger), was not only about money. It was also about the pilots feeling that they were no longer sufficiently appreciated, a lack of integration into the normal flow of communi-cation and consensus building.

Management has tried to improve the situation; ongoing town hall meetings with members of the man-agement board and the CEO are held, as well as an ex-tensive written communication flow about the develop-ment of the company. Such initiatives are state-of-the-art in the industry today and Lufthansa has included them in the leadership values for its employees. As a result, every employee has individual targets and managers of all levels are evaluated on an annual basis (in a dialogue with his/her boss).

Continuous education and training is also high on the agenda, not only for employees but also for manage-ment. Among German-based companies, Lufthansa pio-neered a corporate university in 1998. The Lufthansa School of Business is recognized worldwide as one of the best in the industry.

To increase employees identification with the com-pany and to help passengers feel valued (despite the high fuel consumption), Lufthansa is embarking on a wide range of social and environmental activitiesfrom supporting children in need (via the Help Alliance) to protecting endangered animals and recycling or in-troducing fuel efficiency initiatives (see http://konzern.lufthansa.com/en/html/ueber_uns/balance/index

But Lufthansa management knows that past efforts are now being challenged by an issue of a completely new dimensionglobal warming. Although the airline in-dustry claims that only 3 percent of global CO

2 emissions

come from air traffic, the whole impact on global warm-ing is approximately twice that factor (e.g., through NOx emissions at high altitude) and rapidly growing. Given current growth rates, the share of CO

2 emissions from

air traffic might increase to approximately 20 percent by 2020.

Unlike many other energy sources in developed coun-tries, fuel for airlines is not taxeda point constantly raised in public criticism. So far the industry has avoided taxation because it would require some sort of interna-tional agreement, but the pressure is rapidly growing to price the externalities of air transport into travel costs. The industry is considering a kind of emission trading to avoid taxation, but even this approach would increase fuel prices considerably and may end the era of cheap flights.



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Notes

1. As of 2006, IATA (International Air Transport Association) represents

261 airlines comprising 94 percent of international scheduled air traffic.

2. IATA, 2006. The figure represents the sum of the net profits between

2001 and 2005 for all IATA member companies. These are (in US$

billion): 13.0 (2001), 11.3 (2002), 7.6 (2003), 5.6 (2004), 3.2

(2005). The estimated value for 2006 is US$ 1.7 billion.

3. Datamonitor, Airline Report, 2005; IATA Air Transport Statistics, 2001,

2002, and 2003.

4. Lufthansas annual reports between 2000 and 2003. These figures

represent the total passage revenue (including cargo and mail), which

dropped from 12.55 billion for the year 2000 to 11.66 billion for the

year 2003.

5. IATA, 2005, 2006. In the United States and Asia, the share of labor

costs in operating costs is 38 percent and 20 percent, respectively.

6. Furthermore, in Lufthansas case the chairman of the (Civil) Service

and Transportation Union is the deputy chairman of the supervisory

board due to the co-determination law.

7. Star Alliance; PATA, November 2006. PATA data are calculated on the

basis of IACO data.

8. The formal bankruptcy procedure began on December 9, 2002, and

closed on February 1, 2006.

9. The low-cost airline Germanwings is a 100% subsidiary of Eurowings.

10. Before this deal, KarstadtQuelle held the other 50% of Thomas Cook.

Further, the deal that was announced in December 2006 makes

Lufthansa a minority stakeholder in Condor.

11. Gearing is calculated as the ratio of a companys long-term funds

with fixed interest to its total capital. A high gearing is generally

considered speculative.



Lufthansa Case Study

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