CAPA Centre for Aviation stresses it must avoid legacy issues
Lufthansa is implementing a number of initiatives to make its long-haul operations more competitive. It is adding premium economy to all widebody aircraft, for example. But the most radical development is the plan to establish a new lower cost airline with a new brand aimed at the long-haul point-to-point leisure market, the CAPA Centre for Aviation reports.
The small scale is deceptive. Operating with a fleet of only seven planes, compared more than 100 Lufthansa-branded widebody aircraft, the success or failure of the project could have far-reaching consequences for the group.
CAPA suggests that the new airline should avoid “all legacy issues”, especially since “Lufthansa’s short-haul LCC, Germanwings, has too many legacy issues” yet “the more flexible and lower cost pilot contract at its Eurowings subsidiary gives it options for growth”.
While pointing out that Norwegian, the only current LCC widebody operator in Europe, has seen its profits suffer since entering long-haul markets, CAPA stresses that Lufthansa’s long-haul “Wings” carriers “will need much lower unit cost to offset downward price pressures”.
SunExpress, which already operates in point-to-point leisure – but not genuinely long-haul – markets under a separate brand, could be used as a vehicle for the new long-haul airline.
Lufthansa runs this airline on a 50/50 basis with Star Alliance partner Turkish Airlines and says it has been talking to Turkish about this possibility. A venture through SunExpress could also help improve relations with Turkish Airlines. But SunExpress has no experience with widebodies.
LH says that an important part of the Wings concept is to “disconnect the brand from the labour agreement”. In addition to cutting costs, a new brand would introduce a low-frills product without damaging the Lufthansa brand.
“It could also be an opportunity in markets where Lufthansa has not historically been strong, but where a fresh new brand could be more appropriate,” CAPA says. And if the project succeeds, it may push Lufthansa to try similar things in the rest of the group.
[pictured: Lufthansa Boeing 747-8; courtesy Lufthansa]