August 25, 2008. Shanghai campus -- One of Germany's best respected and most acclaimed top executives, Lufthansa Supervisory Board Chairman Dr Juergen Weber, today addressed the CEIBS incoming 2008 MBA class. Dr Weber is credited with spearheading the transformation of Lufthansa from an indebted state-run enterprise in 1991 to the world's most profitable airline today. He was named Germany's best manager by Wirtschaftswoche magazine (September 2002) and has been elected into the "Hall of Fame" of the Manager Magazin (May 2006).
CEIBS Dean and Vice President Rolf D. Cremer (right) gives a brief overview of the CEIBS Shanghai campus to Lufthansa Supervisory Board Chairman Dr Juergen Weber (second left) before Dr Weber's speech. Looking on at left and centre are Lufthansa executives while CEIBS Vice President and Co-Dean Zhang Weijiong is at second right.
In his address on the theme of networking, delivered to a packed CEIBS auditorium of 180-plus students and professors, Dr Weber began with predictions for a booming airline business in China. Based on his forecast that "the Chinese economy will be in a leading position worldwide by 2015," Dr Weber believes air travel will grow so aggressively in China in the near term that domestic airlines will triple their fleets and the nation will become the largest market worldwide for new planes.
Recounting Lufthansa's long history in China, Weber explained that the airline's first flight into China took place in 1926 while regular flights to Hong Kong began in 1961. When the airline began flying into mainland China in 1980, the airline's only route required passengers from Europe to spend 24 hours flying Frankfurt-Rome-Athens-Karachi-Beijing. Today, Lufthansa and its 'daughter' airline Swiss Air make 72 direct flights between Europe and Chinese cities each week, giving the airline a large lead over any other European airline flying into China. Including its air transport, catering and airplane maintenance businesses, Lufthansa now employs 18,000 in China.
While Lufthansa turned a profit of 1.6 billion euro last year, making it the industry's top earner worldwide, this was far from the case when Dr Weber took the company's top position in 1991. That year, the airline was 10 billion deutschmarks in debt and, in Dr Weber's own words, was not keeping up with global travel trends. In his first year in the new role, Dr Weber faced the prospect of lacking funds to pay employee salaries for the month of December -- just before Christmas -- unless he successfully found a bank willing to extend a loan. From this low point (Lufthansa eventually did find a loaner), Dr Weber began transforming the airline. Within 18 months, the airline had paid back that emergency loan through trimming 10,000 jobs and increasing productivity by 50%. "That started our turnaround," Dr Weber told CEIBS. "Employees realized that if we don't change we will be dead."
Another key factor in the company's rebound was the formation of the Star Alliance, a project Dr Weber supported from the start. While journalists and professors argued that the concept of airlines forming partnerships and sharing air travel routes with each other would "never work," Dr Weber says the network eventually served as a saving grace for the airline, providing customers with efficient access to sought-after destinations. Member airlines were able to streamline operations, share facilities, and consolidate services such as billing.
Still, the early days of the alliance were not easy since the partners included such diverse companies from diverse business cultures. Dr Weber shared with CEIBS students four necessary components to a successful business alliance:
1. offer a win-win for all sides, treat all partners equally
2. choose healthy partners -- a weak partner plus a weak partner does not make a strong alliance
3. allow the partners to maintain a different corporate culture, but not too different
4. form the alliance based on mutual trust -- a handshake between trusting partners is often more valuable than pages and pages of legal agreements.
Another lesson Dr Weber shared is that a complicated, multi-member business alliance cannot run by committee. Instead, the Star Alliance formed a separate management company to oversee such aspects as developing a common IT system and drafting common HR policies.
After a spirited Q& A session, Dr Weber offered one more kernel of wisdom for incoming CEIBS students. "Network as students, network internationally. If I were your age, I would come to China and I would learn more languages. This is the future of the globalized world."
For a full account of Dr Weber's speech, see the Fall 2008 edition of The LINK magazine.
