Lufthansa and competing LCCs erode yields in Germany and Austria

Lufthansa Group has cautioned that home markets in Germany and Austria are suffering downward yield pressure due to "carriers willing to accept significant losses to expand their market share".

Competition has certainly intensified since the 2017 demise of the Air Berlin Group. Lufthansa Group took on some of airberlin's capacity, but so did easyJet. Ryanair accelerated its expansion in Germany and bought Lauda in Vienna, where LEVEL and Wizz Air also entered.

In the German domestic market the gap left by airberlin has mainly been filled by Lufthansa's Eurowings subsidiary and easyJet. In the German international market this gap has mainly been filled by Eurowings, Ryanair and easyJet.

The Austrian domestic market is now dominated by Lufthansa Group's Austrian Airlines. In the Austrian international market, LCC new entrants are growing faster than Lufthansa Group.

Not only is low yield competition against Lufthansa Group increasing, but also a growing share of its own capacity is now operated by its lower yield subsidiary.

Eurowings has grown the group's market share in Germany, although not in Austria, but has also contributed to yield erosion in both markets. Not a truly low cost airline in CASK terms, Eurowings has not done enough to lower the group's high unit cost.