To succeed in China, Carsten Spohr, chairman and CEO of Deutsche Lufthansa AG, and his team have chosen to take a digital approach that seems to be at odds with his philosophy. Not only are news feeds available on Lufthansa Airlines as well as Swiss and Austrian Airlines (all under Deutsche Lufthansa AG), they have also introduced onboard Wi-Fi and e-journals as part of a suite of entertainment services that pamper digital-savvy Chinese passengers.
Indeed, passenger connectivity is just one aspect of Lufthansa's sweeping digital strategy. And thanks to a local partnership with Air China, Lufthansa is flying more Chinese travelers than their European counterparts for the first time since last year.
How big is the Chinese market? How do you position China in your overall strategy?
China for us is not only one of our most dynamic markets, it is also the second-biggest long-haul market in terms of turnover after the United States. And together with our joint venture partner Air China, we are clearly No 1 between China and Europe. About 5% of our global revenue comes from our Chinese routes. Last year, we grew revenue 12%, so in two more years we will break the 1-billion-euro turnover threshold.
What's worth noting is that from last year, we have had more Chinese passengers on our airplanes than European passengers for the first time. We aim to intensify the frequency to the key gateways - Beijing, Shanghai and Hong Kong - and to add new destinations to the portfolio as well. We reopened our Shenyang-Frankfurt operation at the end of March, celebrated 10 years of the Nanjing-Frankfurt route, and are operating in Qingdao, which of course with a German Beer heritage is important to a German company.
In terms of the number of destinations, by 2020 we will have reached seven－the lucky number in Germany. Then, one year later, we will have the lucky number eight, which is China's lucky number.
How has your partnership with Air China benefited your business?
It's important to understand that even though we are the top European carrier to and from China, the only way we can achieve that position is thanks to strong partnership. And that partner is Air China. We started more than 25 years ago on the maintenance side when I was a young Lufthansa manager.
We completed our alignment of contracts for corporate customers at the end of March. That means they now have the choice to combine all Lufthansa Group and Air China offers, to and from China. We will continue to work on additional frequencies, additional destinations, and even more seamless products both on the digital and physical side at the airport between the two partners.
What's the biggest driver for your business here and challenges?
The German economy has taken significant advantage of China's opening-up, and of course the German economy needs a way to transfer goods to and from China. Lufthansa has served in these regards - that has been the driver of our success.
One strategic priority is digitalization. We operate in 105 countries in the world, and China is by far the top market when it comes to the percentage of mobile purchases. We have been learning from the experiences of this country and take them to other parts of the world.
The only challenge I see for now is infrastructure - we would like to come here more often, with more and bigger airplanes, but there are limited airport slots, especially in Shanghai. We have limitations on the ground, on landing slots, and also restrictions on flying over Russia, which is of course the shortest way.
What efforts have you made on digitalization?
Lufthansa is already on WeChat, and this year we launched official accounts for SWISS and Austrian Airlines as well. The next step is to bring the sales elements onto WeChat as a touch point with our customers. And it's our goal to accomplish this in the next few months.
Chinese customers are so involved in the latest digital media that we have begun to offer tailor-made e-journals onboard our Lufthansa aircraft. We are also working closely with local travel platforms such as Fliggy and Ctrip to increase direct sales. Sales generated from the website stand roughly at 10% in China, but that figure is about 30% or even 40% in our home market Germany. After all, 70% of deals here are conducted via mobile purchasing.
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