Andrzej Jeziorski/MUNICH
Lufthansa is considering establishing a new, low-cost airline to combat continuing losses on its domestic network. The new service could eventually have a fleet of some 50 aircraft and would offer ticket prices 20% below current Lufthansa levels.
The German airline says that it is losing "hundreds of millions" of deutschmarks on domestic routes. Most of these losses are attributed to services which do not link into the airline's primary hubs at Frankfurt and Munich, and feed no passengers into long-haul flights.
According to Carl Sigel, operations chief for Lufthansa's passenger services, the airline is "especially threatened" on these routes by low-cost start-up carriers, which try to siphon passengers off from Lufthansa's network. Sigel says that if the company does not react immediately, losses will continue to increase.
Starting a new airline is one possible solution being considered.
Sigel says that dropping the loss-making routes and losing market share as a result would be unacceptable, while Lufthansa would prefer to avoid contracting other airlines to fly the affected routes on its behalf. He believes that the best solution is a new product within the company, which Lufthansa says could take the form of a new airline, or a service such as the now-defunct Lufthansa Express.
The new product, informally dubbed "Lufthansa light", would keep down costs by cutting cabin services and introducing higher-density seating. Lower salaries are also likely, although the airline hastens to deny that the project will lead to "wage dumping".
Lufthansa says that the project is at a very early stage, and the company is now looking for a project manager to examine all options and hold talks with representatives of the Lufthansa workforce. The airline says that it is too early to discuss timetables for the proposal, and the concept is "not in any decision-making process at this time".
Meanwhile, Lufthansa has revealed a strong turnaround in its financial fortunes over the first half of the year, raising pre-tax profits threefold to DM397 million ($213 million). The recovery was led by a strong recovery in sales, which rose by nearly 10%.
Lufthansa admits that the weakness of the deutschmark against the US dollar helped the result by around DM125 million, but argues that the majority of the gains came from solid traffic growth and tight control of expenses. Labour costs were virtually unchanged, while staff numbers are down by 1%. Lufthansa Cargo also made a profit of DM33 million, turning around its losses from a year ago.
Source: Flight International
