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AseanAffairs Magazine
March - April 2010

The United States is facing daunting prospects in the Asia-Pacific region, a huge market for US goods, while China’s influence is growing as it makes rapid trade inroads in the region. The implications for the US and its need to redefine its ties with Asean are explored in our exclusive interviews with Ernest Z. Bower, Senior Adviser & Director - Southeast Asia Program, Center for Strategic and International Studies, Founding Partner, Brooks Bower Asia LLC and former President of the US-Asean Business Council, and Demetrios Marantis, Deputy United States Trade Representative for Asia.

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Interview with Dr. Andreas Bierwirth,
Chief Commercial Officer, Austrian Airlines Group

Q: What is “Austrian Next Generation strategy”? How would it help expand your market share in Europe, or elsewhere? 

A: First of all we have to create a profit creating business unit. The money we are going to earn cannot be earned in the inter- European market but as a network carrier you always have to make your money out of long haul and mid haul flights. The long haul flights have been in the negative for us.

We now have to search for the reasons and to create the network of profit-creating business units. The reasons, we have found and the answers, we have identified. First we are going to have a network redesign starting from the winter schedule 2010- 2011. Then we will re-enter the market with big aircraft.

Q: How does the relationship between Austrian Airlines and Deutsche Lufthansa work in terms of creating growth?

 A: Maybe you will need to ask Lufthansa about why they have bought Austrian Airlines. I think the major issue is the marketing and the strategic local position of the two countries within the CEE (Center Eastern Europe). Countries like Ukraine, Romania and Bulgaria are perfect.

The Austrian economy has a very strong linkage, a better linkage even than the German economy, to those countries, so there is a high local demand out of Austria into these countries, which enables us to work as a pioneer in taking this opportunity to develop smaller markets.

Secondly, our linkage to the Middle East is very strong. For example Lufthansa doesn’t fly to Syria or Damascus. There are some destinations we are not serving of course, for example if you look at Tel Aviv, Lufthansa is flying a jumbo and we’re flying a 767.

But markets like Syria and Oman are very important for us. In total we have a lot of debts in our company. We are suffering with red numbers, not only now but when the economy was good as well. We have been in the red since 2008. The reason is because our business model got into a little bit of trouble, and secondly we had a lot of external factors that explain more than three quarters of the red numbers. We had a lot of aircraft repairs.

These for example cost hundreds of millions each year. We started our construction in December 2008. In 2009, we increased it and in 2010 there will come a time when a lot of people will leave our company and that will create a lot of layoffs.

The growth of Lufthansa gives us other opportunities. To give you an example, fuel management will be done out of Germany, not only for us but for the other subsidiary airlines like Swiss Airlines as well – this will give us an economy of scale so we can bargain on a bigger scale.

Of course we are taking this opportunity everywhere. Besides this, we are working on our business model in our airline, therefore we prepared a name - the Austrian Next Generation.

Q: What does it mean for the Austrian to have Deutsche Lufthansa as its controlling shareholder?

A: It’s a great opportunity for a small airline like us, otherwise you could say our airlines will never be competitive if we don’t get an economy of scale similar to the big airlines. Secondly, we get access to the customised warehouse of Lufthansa and we become a part of the agency contracts which is done for all the airlines. By joining with Lufthansa we have access, where Lufthansa used to transfer passengers to other airlines now we are also involved.

Therefore, it is much better and much more flexible. For example, people can fly to Bangkok and back to Vienna which was not possible in the past. So we offer more value to our customers.  ....

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