Lufthansa's long-haul low-cost Asian operation. A range of partner options. Part 1

Lufthansa has suggested it may look to a long-haul, low-cost solution to meet its future Southeast Asian growth goals. The German flag carrier's historically strong position on Europe-Asia Pacific is steadily being eroded by competition from Gulf carriers and others with more competitive cost bases. An additional player, LCC Norwegian Air Shuttle, is also about to enter the fray over the pole, with a Bangkok service. Our analysis suggests that the Lufthansa Group may need to cut its unit costs on long-haul by as much as 30% in order to be competitive and to secure its long term future in the region.

Lufthansa's major European Big Three rivals, after years of sulking, are meanwhile now cuddling up to the Gulf carriers; IAG has brought Qatar Airways into oneworld and Air France-KLM is codesharing with Etihad. Unfortunately, the toughest Gulf competitor, Emirates, wants to continue to stand alone. And China, still largely dormant internationally, is starting to stir.

Given Asia Pacific's position as the biggest air passenger market and one of those with the highest forecast growth rates, Lufthansa needs a new direction. It is apparently considering whether to form a partnership with another carrier or start its own new low-cost operation. The latter is a big ask. There is a host of potential partners though; but Lufthansa would have to be careful how many toes it stands on, with such an option.