Skift Forum Europe Preview: Lufthansa Group’s Innovation Hub Is Its Hedge Against Disruptors

The world’s airlines are not know for innovation. They run complex 24-7 operations, often across many countries, and they don’t have the time, or enthusiasm, to rethink how they operate. And since they’re relatively insulated from new competition – barriers to entry are high — they often can get away with it.

But that may not last forever. While it’s not likely a bunch of new global airlines will spring up, some airline executives are concerned others might disrupt their businesses. Forward-thinkers sometimes fear airlines might become mere transportation providers, with a more nimble company — perhaps Amazon, Google, or a company that doesn’t exist yet — handling all the retailing.

No one knows what might happen. But at Lufthansa Group, a small team based in Berlin — away from the mammoth headquarters in Frankfurt — has been working for more than three years to help the company monitor tech trends. Lufthansa wants this division, called the Lufthansa Innovation Hub, to take chances the parent company would not, while working faster to implement its ideas. Executives in Frankfurt hope this will make the company more nimble, and better able to withstand new competition.

At Skift Forum Europe in Berlin on April 26, Lufthansa Chief Digital Officer Christian Langer will speak about this hub, which he oversees. We spoke with him recently to preview the discussion.

Skift: In 2014, Lufthansa Group established its innovation hub. You put it away from the main headquarters in Frankfurt. Why is it so important this group stays independent?

Christian Langer:  The people there are fresh-minded. They have an outside-in view. They are founders. They are VCs. They have worked for incubators. They have a huge network into the start-up system. This is the first thing they bring to the table.

The second is, they are not used to how we do things at a huge company like ours. They don’t know the processes and the standards. They are invited to do things differently, and Lufthansa allows them to do things differently. They are our spearheads to be quick, try things, stop things if they fail, try the next, learn from it, and pivot in another direction.

Over the years, teams in the Lufthansa Group have adopted the behavior the innovation hub teaches them. That’s progress. The innovation hub is the place where we go and meet and learn and to try things. Although it’s a small team, it’s a big role they have and a big influence they have.

Skift: Has the innovation hub had any big successes?

Langer: One of the biggest — you might know it, you might love it — is airlinecheckins.com, where we tried a different way of letting passengers check in for any airline in the world, not just Lufthansa Group airlines. We did it without spending one single euro or dollar on marketing, so the customer acquisition cost was zero. We have more than 20,000 customers and have checked in people for more than 190 airlines. It’s a huge success by just re-thinking the checking-in process. How can we automate it? How can we make it more convenient for the customer?

Skift: What else is the hub working on?

Langer: Last year, in 2017, we started new ways of pricing tickets. For Eurowings, our low-cost carrier, we started to offer a deal where you buy 10 tickets and you can fly whenever you want and use one of your tickets. It’s like when I was young, and there was the local swimming pool in our little city, and I bought 10 tickets, and then I went there 10 times during the summer. They call it Flightpass.

It was a success. We learned how customers behave when they buy 10 tickets at one time and fly whenever they want. Then we tried it with one of our legacy carriers, with Swiss. Same thing. We didn’t sell out of them, because we didn’t want to. But we sold a few hundred just to see how people were reacting.

Then we started the next experiment with pricing and said, ‘OK let’s go to Lufthansa, to our core airline, and try what we call Timepass. You don’t buy flights anymore, but you buy block hours on board. If you do a one-hour flight, you spend one hour of your Timepass and if you did a three-hour flight, you spend three hours. We just count block time. This was another experiment. Once again, we learn from the customers how they use it. This gives insight into how new pricing models might work out.

Skift: Is it easier for a team of outsiders in Berlin to implement these ideas than for a team in Frankfurt to come up with them?

Langer: I guess so, because they are not experts in pricing. They are not experts in checking-in processes, and all the things attached to it. They don’t know about all the things that might make it not work. They worked together with the experts, but they drove these projects.

For Airline Checkins, they started a prototype after three weeks time. When it started, it was just the front end. All the work was done manually behind the scenes. The customers thought it was all automatic, but it wasn’t. This is a way to do things which is not common in the core departments of Lufthansa. This would be a two-year project at Lufthansa. I think this is the true value of the innovation hub.

Skift: Did anyone at headquarters say these projects weren’t feasible? 

Langer: There are always people who doubt. And of course there are discussions with lawyers, and with revenue managers. People ask, ‘What is the effect of this?’ But the innovation hub convinced those guys to try it. We’ve only sold 500 of those time passes. By limiting it, by not advertising it too much, by keeping it small and for only a limited time, this is the way to do an experiment.

If we had said, ‘We are introducing it from now and it will be available forever,’ this would have been the standard way. Then we would have done all the checks and discussions. But stating it clearly as an experiment to learn from, it was easier. But of course you have people who reject the idea and say, ‘No no no.’

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