Germanwings: can a premium strategy sustain an LCC? Lufthansa would like to think so

On 4-Oct-2013, Lufthansa gave a presentation to analysts and investors in London on developments in its Passenger Airlines business, with a focus on giving more details of the progress of the 'new Germanwings'. The session was led by Carsten Spohr, CEO of Lufthansa German Airlines, and supported by the CEO and CFO of LCC subsidiary Germanwings.

The speakers gave an update on the transfer of non-hub European point-to-point traffic from Lufthansa to Germanwings and its expected impact on the group's short/medium-haul losses.

Lufthansa's plans for Germanwings are more far-reaching than those of Air France with its LCC subsidiary Transavia France. However, IAG already has a fully fledged stand-alone pan-European LCC in the form of Vueling. Moreover, both Transavia and Vueling (and other European LCCs) have lower unit costs than Germanwings. Can it generate enough of a price premium to offset this cost disadvantage?