How do hub airports of the same airline group compete with each other and strategically position themselves in a highly competitive & geographically close environment?

Abstract

This master's thesis explores the competitive dynamics and strategic positioning of Lufthansa Group (LHG) hub airports, namely Frankfurt (FRA), Munich (MUC), Zurich (ZRH), and Vienna (VIE). Brussels Airport (BRU) was excluded from the analysis due to its divergent structures and business model from those of the other hubs. The study is particularly noteworthy due to the paucity of research on the competitive environment within such a defined environment. A mixed-methods approach was utilized in the research, integrating quantitative analysis of the development of route networks, overlaps, and route transfer over a 15-year time span with qualitative insights from expert interviews. This integrated approach yielded a comprehensive understanding of intra-group competition and cooperation.

Competition among LHG hubs has increased over time in terms of route overlaps, which have increased significantly. However, this increase is more apparent in terms of complementary market profiles than in terms of direct competition for specific destinations. Although there is competition for transfer traffic and to some extent for local passengers between the hubs, direct competition within LHG remains limited. Hubs are regarded as complementary rather than rivals, and most hubs face higher degrees of competition with other airports outside the LHG hub landscape. Although the potential for capacity shifts between hubs has historically been negligible, recent increases in route transfers, particularly from MUC to FRA, suggest that LHG is strategically redistributing traffic to optimize its bargaining power with the hubs. Due to its extensive intercontinental network, high transfer passenger share, and strong resilience during the Covid pandemic, FRA maintains its position as the dominant LHG hub. ZRH emerged as a strong competitor, ranking second in terms of routes and showing robust post-pandemic growth, driven by its high-yield market and profitable hub carriers. MUC faces recovery challenges, lagging behind ZRH due to its comparatively slower pandemic recovery and weaker high-speed rail connections, though it remains LHG's second-largest hub. VIE struggles with a smaller route network, lower transfer share, and weaker intercontinental focus, positioning it as the least competitive hub. The research also indicates that financial incentives are of minor significance in LHG's hub competition. The hubs rely more heavily on bilateral agreements, operational efficiency and collaboration, and long-term agreements to attract LHG traffic.