Lufthansa Cargo AG Case Study 1. How does air cargo differ from the passenger bu
ID: 2747110 • Letter: L
Question
Lufthansa Cargo AG Case Study
1. How does air cargo differ from the passenger business in terms of revenue management? Which areas are more complex, which can be managed more easily?
2. What is the purpose of selling long-term capacity contracts? Does Lufthansa Cargo effectively reach its business and risk-taking objectives?
3. How could current reservation and pricing practices at Lufthansa Cargo be improved? How does the introduction of dynamic pricing effect capacity buyers, i.e., freight forwarders?
Explanation / Answer
Revenue management helps in allocating the right inventory(stock) to the right customer at the right price. It aims at maximizing profits and revenues. Revenue management is applied in airline industry to increment revenues from passengers sales.
Seeing the success of revenue management in airline industry, other industries start applying it for their business. One of them is air cargo industry. However, air cargo is different from the passenger business. Normally, cargo is not booked round trip, thus making it unbalanced. Passenger business has a fixed capacity, considering seats. Whereas cargo has no fixed capacity. It is difficult to know available cargo space. It depends upon the volume and weight of the goods transported. In this case, problem of loading can occur. Thus, a mixing of cargo with different weights and volumes is done.
It is more complex as compared to passenger industry. Passengers business is easy to manage. There is problem of routing in case of air cargo as cargo does not fly a direct route. There is no historical booking data in air cargo industry. Passenger business is easily managed as they have complete historical booking data. Different prices for different products based on different customer requirements. There are many more difficulties in air cargo: unequal trade lanes, short booking period, amount is uncertain till departure as weight of the cargo may fluctuate and many more.
b) Every organization makes a vision to be the most successful organization in the market sector. Lufthansa Group of industries has the same goal, it wants to be the first choice in the eyes of the customers as well as people working in the firm. It aims in increasing growth in aviation industry. it is working with an intention to take the aviation industry to another level, towards global aviation. It is continuously improving its internal as well as external organizational environment.
With ever changing customer demands, Lufthansa group considers the choice of customer as its core target to be attained. To work effectively and efficiently, Lufthansa group made the right leadership management style. With extending aviation industry, it keeps on improving on a daily basis, making daily targets to be attained within a specified period of time. It keeps on expanding its operations as aviation industry has got intense competition. They analyze the demand in the market as well as the behaviour of the consumer. It aims at making effective strategic plans and procedures. Technology in travel business is fast moving, they keep a track on new technology and its factors in the market. They are always ready for change implementation as in today's scenario, nothing is stable right from demand to supply in the market area. Customer focus and providing best quality are their key functions to grow successfully.
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