Marek Kuhta, "Lufthansa" – tickets for flights from Belgrade's airport to be in high demand

(Marek Kuhta)

Exceptionally liberal agreement on air transportation, which has been signed between Serbia and Germany, ensured the leading position for "Lufthansa" among the foreign airliners that operate in our country. Since the beginning of the year, "Lufthansa" has transported over 182,000 passengers in Serbian market where its share amounts to 22%. According to the words of Mareka Kuhta, the CEO of "Lufthansa" for Serbia, Macedonia and Montenegro, this company is going to stick to the 3S strategy (sale, sale and sale) in the following period in Serbia. Marek Kuhta points out in the interview for eKapija that the demand for air transportation services is going to grow in Serbia, which additionally stimulates "Lufthansa" to include the investments in the bussiness in our country in the general investment plan of the company.

eKapija: Current crisis in air transportation industry is a great opportunity for large companies to buy smaller ones at low prices. How ambitious are the plans of "Lufthansa"?

- Very ambitious. The largest "Lufthansa's" acquisition was company "Swiss International Airlines", which kept doing its business, following the takeover in 2007, as an independent brand, but with the management's cooperation in making of plans for further investments and expansion. We invested in "Jet Blue", the US company, at the beginning of the year by purchasing about 35% of stocks. Also, "Lufthansa" has entered the race for Austrian "Austrian Airlines", while the negotiations about purchase of Italian "Alitalia" and investments in Scandinavian company SAS are underway. We also own 45% of "Brussels Airlines", which we recently bought for 65m EUR, and our share in the ownership of "British Midland" amounts to 20%. "Lufthansa" also owns 39% of company "Eurowings", of which part is low-cost company "Germanwings". It is now good to buy companies, not because of the brand or their fleet, but because of the market they operate in, and "Lufthansa" uses current situation to strengthen its position.

Strong companies, of which number is small, will definitely survive the crisis and then we will have a much clearer picture in the air transportation industry. Only those companies that can allow themselves to operate with losses for a year will survive the crisis. On the other hand, this is a very bad period for the companies that want to find the new owner.

eKapija: What is your comment on the lack of interest in "Jat"?

- We did not take part in the tender and we are not familiar with the terms, so that I am not in the position to make any comment on the attempt of privatization of Serbian airliner.

eKapija: Having in mind the current crisis, did the lack of interest in "Jat" "save" the Serbian company for some better times?

- It could be said so. The sale of an air transportation company at this moment can not be unconditionally good solution due to the crisis that lowers the price. Of course, some smaller airliners have suffered huge losses, so that the sale was the only way out for them. My opinion is that Serbia definitely requires national airliner and that its restructuring and modernization is also necessary, and it is good that the Government is trying to save it. I don't want to takl about the best possible way for realization, but I would like to point out that the entrance of strategic partner proved to be one of the good solutions when it comes to small companies like "Jat Airways". "Jat" has been our partner for decades, we are satisfied with the operations in Serbia and I hope that the crisis will be surmounted.

eKapija: Is this the right moment for privatization of "Jat tehnika"?

- Yes. I think that the sale of 70% of capital of that company is a smart move because the servicer that can provide quality service at favorable price is necessary in this period of crisis and constant financial pressurs. My opinion is that these demands can easily be satisfied in Serbia. I would also like to encourage every potential investor who is thinking about investing in "Jat tehnika". Future modernized company for overhaul and maintenance of airplanes will, most certainly, attract significantly larger number of foreign air transportation companies than "Jat tehnika" currently does.

eKapija: There were some talks about cooperation between "Jat tehnika" and "Lufthansa Technik". Do you know something about that?

- I know that "Jat tehnika" and "Lufthansa Technical Training", the daughter-company of "Lufthansa Technik", talked about opening the school for mechanics and technicians. However, I have no fresh information, so that I don't know what happened with the realization of those ideas because "Lufthansa Passenger Airlines" operates independently from "Lufthansa Technik", but, of course, within the same group, concern.

eKapija: You said that you were very satisfied with the operations in Serbia. How does that sound in digits?

- We are registering constant growth of number of transported passengers - we transported 203,000 people in 2007 and increased that number by about 20% since the beginning of the year. Lufthansa is the largest foreign air transportation company in this market with the share of over 22%.

"Lufthansa" currently has 42 flights a week from Belgrade to Germany, that is, 14 flights to Frankfurt, 7 to Dueseldorf and 21 to Munich. "Swiss" has introduced 2 flights a week to Basel, and they already have 7 flights to Zurich. This company registers excellent results and covers 3% of market in Serbia. Our company's offer includes flights to 194 destinations in 79 countries all around the world and, thanks to the membership in "Star Alliance" and cooperation with other airliners, we offer flights to more than 960 destinations in 160 countries.

eKapija: What is the favorite destination of the people in Serbia?

- You will be surprised - it is Shangai. We have sold the largest number of flying tickets for this city. Other top destinations are European countries - Germany, Austria, Switzerland... Also, the tickets for New York are also in high demand, although I though that the people would prefer Chicago. Spain and Portugal are also very popular.

eKapija: How attractive is our market for low-cost companies?

- Extremely. Local market is very suitable for operations of low cost companies because Serbia is multicultural and multinational community, which means that its citizens often visit their cousins and friends in the neighboring countries. Services of these airliners would be used by all passengers who now travel by bus, automobile or some other transportation means. Also, Serbia has large diaspora and it is one of the exceptional advantages when it comes to low-cost transportation. When these companies enter some market, they get the people used to flying, which automatically increases demand for air transportation services and the passengers easily move from low cost to expensive airliners. People in Serbia would like to travel and they can hardly wait to travel again. They are also willing to spend money for holidays. Unfortunately, the only low-cost companies in Serbian market are "Germanwings", which flies to Koeln and Stuttgart, and "Norwegian Air Shuttle", which flies to Oslo.

eKapija: What is the main reason for their poor business results in Serbia ?

- The main reason is, first of all, strict regulation of the market. Serbia has signed the Open Sky Agreement, but it has not been put in effect yet and, therefore, bilateral contracts with certain countries whose air transportation companies operate in Serbian market are still valid. Also, there are significant limitations regarding capacity and number of airports where the airplanes can land. That practically means that the number of foreign low-cost companies are not allowed to fly to Serbia, which would be profitable for sure. However, the contract that Serbia signed with Germany is more liberal than the others because aforementioned limitations do not exist. Following the putting of the Open Sky Agreement in effect, Serbia will become much more attractive for other airliners as well. Also, that Agreement will make it easier for Serbian air transportation companies to introduce new flights to the countries that signed that Agreement.

eKapija: What benefits will "Lufthansa" have from the Open Sky Agreement that was signed between USA and Europe in March?

- That Agreement has both positive and negative consequences. It gives great freedom to airliners because they are allowed to take off from any airport in Europe, and the only limitation concerns the capacities of the airplanes and the airports they want to land on. "Lufthansa" used to be able to fly only on the lines from Germany to Chicago, and now it can fly to Chicago from London's "Heathrow" if it likes. Therefore, the airliners get the opportunity for operations in much bigger market, but that chance is also offered to all other airliners, which makes the competition significantly tougher. The market is deregulated, but are there real chances for "Lufthansa" to fly from France to New York or from London to Chicago. Also, large investments are needed because you must pay the parking for the airplane and many other fees. In addition, you are not a national airliner so that it is pretty difficult for you to attract the clients. The one thing is for sure - the Open Sky Agreement is a great thing for passengers because it will broaden the offer for them. The effects of the application of this agrement will be seen after the crisis.

eKapija: "Lufthansa" is known as company that invests much in modern technologies. What are the latest solutions?

- We have plenty of innovations, such as possibility of flight checking while at home, which is very popular among our customers. The next step is checking via mobile phone, which will, actually, represent your boarding ticket. It is only necessary for the phone to have access to Internet in order for you to be able to take over the ticket that you are to show when boarding the plane. The passenger shows his mobile phone to the staff at the airport and they have scanners that recognize the bar code on the ticket, that is, his mobile phone. We are currently working on introduction of automatic system for control of boarding tickets. That system is already in operation at numerous airports in Germany and the talks with the police at Belgrade-based airport about introduction of this technique of registration for flight are underway. We hope that we will soon agree on the procedures.

What is the number of passengers that Lufthansa expects to transport in 2008?

- Since the beginning of the year, "Lufthansa" has transported over 182,000 passengers in Serbian market, which represents 20% growth against the last year. "Lufthansa" also notices effects of current economic situation at the global level. Recently announced business report for September 2008 is poor because of the strikes and generally reduced business activities. However, "Lufthansa" registered 1.7 billion EUR worth of profit in 2007, which is over 100% more than in 2006, while the incomes were increased by 13%, to 22.4 billion EUR.

T.S.

Note: Lufthansa in Serbia is active, long-time member of German Business Association (DWB)