IAG, Lufthansa and Air France-KLM confront short-haul cost options; Air France will be sorely tested

International Airlines Group (IAG) CEO Willie Walsh has indicated that he is fully prepared to meet any opposition head-on in restoring the Group's short-haul cost disadvantage against Europe's major LCCs like easyJet and Ryanair, a reference to Iberia's pilots who have been striking on a weekly basis in protest against recently-established subsidiary Iberia Express operating off a lower cost (and pilot salary) base.

Rather more timidly, Lufthansa recently appeared to confirm it was exploring a "business case" to merge operations of the Group's lower cost Germanwings subsidiary with the full brand Lufthansa fleet. Germany's Bild Zeitung reported that a new low-cost subsidiary, project named Direct 4 You, was also being considered.

These reports follow Air France-KLM chairman and CEO Jean-Cyril Spinetta's recent comments that the company was considering using Air France-KLM Group's French version of its Dutch subsidiary Transavia as an umbrella for an apparently similar low-cost model to its two major European rivals.