Lufthansa’s digital future takes flight with ‘Digital Hangar’

The airline’s new digital-focused business unit is adopting a cross-functional, product-centric approach to enhancing the customer experience, with hubs across Europe.

In June, the Lufthansa Group’s Digital Hangar touched down in Barcelona. A new business unit, which also has hubs in Brussels, Frankfurt, Gdansk, Vienna, and Zurich, Digital Hangar was founded in September 2022 with the aim to create the world’s best-connected travel experience, incorporating both in-person and digital services.

Each Hangar houses agile coaches, business analysts, data and analytics specialists, product owners, Scrum masters, software engineers, and user interface designers — all with one mission: to elevate the airlines’ digital customer experience before, during, and after the flight.

Christian Spannbauer, CTO for the Digital Hangar, spoke with CIO.com from Barcelona about the impact of this new initiative for the official flag carrier airline of Germany, which, as a founding member of the Star Alliance network, has become a truly global airline.

“We place the customer in the center of our thinking, and we organize ourselves along the customer journey, which is different to being organized by sales or operations business lines,” says Spannbauer about the impact of this new initiative and its talent. “It’s also about agile ways of working, and the need to be empowered.”

The Hangars are developing the next generation of reservation processes, information services, personalization, and self-service tools for the Cologne-headquartered airline, which also operates Austrian Airlines, Brussels Airlines, Eurowings, and Swiss International Air Lines, among others.

Banking on product-based IT

To develop the next generation of customer services, Lufthansa’s Digital Hangar has adopted new business operating models popular among organization’s pursuing digital transformation, Spannbauer says.

“This means we acknowledge that digital is a cross-functional effort, rather than operating in silos of technology and business,” he says, adding that the Hangar is also moving to a product-centric model, “as we believe that digital services require a product management approach to get really outstanding results, rather than ramping up a project and setting its mission, and then ramping it down again.”

This is the most significant difference of the Hangar hubs, he continues, when compared to the traditional technology team within an airline. “Those product teams need to be self-sufficient, and that means they need to be empowered to entirely develop and run a digital product.”

As with so many major change programs taking place in business at present, the impact of the Coronavirus pandemic was the trigger. “It really became apparent there was something lacking in our landscape,” he says. The volatility of the travel market, the inability to know how long the pandemic would last, and pressure from travellers made Lufthansa Group realize that existing customer experience methods needed to modernize.

“We started our digital journey three years ago, with the harmonization of our booking platform, but during the Corona crisis, it became clear that booking is not the only digital service that we should offer our customers,” Spannbauer says.

As a result, the Digital Hangar has seven value streams: inspiration, search, and booking; ancillary services; personalization, profile, and loyalty; payment; travel experience; customer servicing; and a B2B-focused value stream. Discussing these, Spannbauer says: “I believe the customer will choose us due to their experience along the entire travel journey with us, and we have to do a lot more than we do today. Experience is not only the cherry on the cake.”

And speaking about flying in an era of no-frills budget airlines and finding new digital means to win over customers and remain competitive, he adds that the flight is not a commodity experience. “We believe digital experience is connected to the physical experience travelers have with our colleagues onboard, and this leads to an overall experience for our customers, so we can’t disconnect the physical, the human, and the digital,” he says, elaborating that organizations that get digital right will win customer loyalty because digital has the power to simplify the lives of busy travellers.

“The complexity in all areas of life is increasing, so we’re all looking for convenience,” he says. “If you’re worried about baggage, if there are proactive services, that’s very much about experience.”

And getting digital right, Spannbauer says, requires digital services to be developed by cross-functional teams that own the product, not simply write a spec and send it down to IT.

“We don’t need to convince our business partners to collaborate,” he says. “We manage our teams according to outcomes rather than just shipping features.”

The Digital Hangar also has a different operating model from previous digital teams at Lufthansa Group. “We follow a test, measure, and learn system to see what’s creating value for our customers,” he adds. “Test, measure, and learn comes with responsibility, so it has a lot to do with a healthy failure culture and leadership.”

Barcelona proves a perfect fit

Lufthansa Group is joining a host of major business peers in powering up a digital hub in Barcelona, including fast-moving consumer goods makers Danone and Unilever, tech firm Dynatrace, and Roche in pharmaceuticals. Spannbauer and Lufthansa Group were attracted to Barcelona for many of the same reasons as their peers.

“The environment is very promising as it offers a very diverse open community, with access to tech innovation and startups,” he says, adding that the Barcelona center, which is operated by partner Quantion, will complement the other hubs in the Digital Hangar network. “The operating model of the Digital Hangars is transparent to the location; there is the same operating model in all places, and we do not differentiate.”

Barcelona is garnering a reputation across the technological world for its focus, skills, and government support for businesses looking to increase the pace of digitization.

“From the beginning, the government was helpful in the process and offered us a lot of support and help with offices, meeting the community, integrating us into the networks,” he says. “I hadn’t received such behavior beforehand, and it has flattened the learning curve for us. Many different cultures and communities come together here, and I feel that eases the collaboration, and this is the perfect fit to our target and our culture.”

The Digital Hangar has, of course, begun to work with generative AI, too, with the first iteration being used for the Lufthansa Group staff portal. Spannbauer says they started with a publicly available foundation model before enriching it with their own large language model.

“If you base your ChatGPT usage on publicly available models, then it is only a matter of time before someone offers the same service,” the CTO says. “We believe the differentiator is your own data.”

The Digital Hangar also provides Lufthansa Group and its airlines with its own software company. So what does this mean for major vendors, in particular Amadeus, the global tech giant of the travel sector?

“In the backend, there are still core IT services being provided by our partners, but it’s a different role,” Spannbauer says. “I believe the more we do with digital, the more our partners will benefit and contribute with their systems and infrastructure because as we increase our technology surface, there is a lot of room for our partners to maneuver.”

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