Lufthansa confirmed (11-Oct-2012) it is merging its point-to-point services outside its Frankfurt and Munich hubs under the Germanwings brand. Up to now, both Lufthansa and Germanwings have offered point-to-point flights on domestic German and European routes. From 2013, however, these services will be "repositioned as a quality product - reasonably priced but not cheap - in the low-cost segment in an upgraded ‘new’ Germanwings". Lufthansa German Airlines will then focus on its hub and long-haul carrier business model. In addition to its long-haul services from Frankfurt, Munich and Düsseldorf, Lufthansa German Airlines will continue to operate all its German domestic and European routes to and from Frankfurt and Munich. Lufthansa Group chairman and CEO Christoph Franz commented: “With this strategic move we are establishing an important precondition for restoring our European flight operations to profitability. With an enhanced brand identity and a corresponding product, Germanwings will combine all our point-to-point operations outside our hubs in a separate company. However, in order to achieve sustained success, it is important that we together with the unions and employee representatives can maintain the cost-effectiveness of Germanwings operations.” Germanwings’ extended flight schedule and its new brand identity will be fine-tuned over the coming weeks and will be presented in Dec-2012. Carsten Spohr, member of the Lufthansa executive board and chief officer Lufthansa German Airlines, added: “As an attractive quality provider in the low-cost segment, our ‘new’ Germanwings will convince not only leisure travellers but also business travellers thanks to its innovative, high-quality product and brand concept plus its extensive flight schedule, which will complement Lufthansa’s global route network.” The management of Germanwings GmbH will remain unchanged. The three board members Thomas Winkelmann (spokesman), Dr. Axel Schmidt and Oliver Wagner will jointly oversee the important merger and realignment phase at Germanwings. As many as 30 aircraft that currently serve Lufthansa’s point-to-point routes will be transferred to Germanwings from Jan-2013. Lufthansa’s regional subsidiary Eurowings, which provides point-to-point services exclusively for Lufthansa, will continue to operate as an independent subsidiary on regional routes. However, in future it will operate on behalf of Germanwings. [more - original PR] [more - original PR - German]
Lufthansa merging point-to-point services outside Frankfurt and Munich hubs under Germanwings brand
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The Lufthansa Group's juggling act continues to impress with the sheer number of balls that it has sought to keep in the air over the past year.
Striving for labour productivity improvements in its mainline operations, while also attempting to minimise industrial unrest; expanding its Eurowings low cost brand through organic growth, while also integrating the acquisition of Brussels Airlines and the wet lease of aircraft from airberlin; facing the growing threat of Ryanair's entry into its biggest hub at Frankfurt, while seeking to maintain a good relationship with the airport's owner Fraport; keeping positive momentum in its financial performance after earning more than its cost of capital in 2014-2016, while the global cycle may have reached a peak.
In the same week as reporting solid, if unspectacular, financial results for 2016, Lufthansa has achieved a break through agreement with its pilots over pay and conditions. As a strategic tool, Eurowings helped it to reach this agreement, but the LCC subsidiary now needs to become financially successful.
Later in Mar-2017, Ryanair will start its first four Frankfurt routes, to which it will add 20 more next winter. Eurowings will need to be part of Lufthansa's response to this growing competitive threat.
Eurowings: new Munich routes outsourced to airberlin. Frankfurt hub may be next for Lufthansa's LCC
When Lufthansa began to transfer point-to-point short haul routes to its LCC Germanwings in 2013 it specifically excluded routes to/from its two main hubs at Munich and Frankfurt. Although its two main hubs have been less penetrated by LCCs than many other major European airports, this is changing. Moreover, competitor LCCs are growing rapidly across Germany and in other Lufthansa Group home markets. Even Air France-KLM established a Munich base for its LCC Transavia in summer 2016 (but this is under review). More ominously, Ryanair is to enter Frankfurt in summer 2017.
Lufthansa first revealed in summer 2016 that it was considering opening a Munich base for its LCC operations, now grouped under the Eurowings brand. On 21-Dec-2016 it announced plans to base four A320 family aircraft at Munich for 32 Eurowings routes from summer 2017.
Perhaps it was always inevitable that Eurowings would eventually extend to selected routes from Frankfurt and Munich, but agreements with pilots were understood to have limited the group's flexibility. Confirmation that the operation of Eurowings routes at Munich will be outsourced to airberlin under wet lease appears to have loosened this restriction. Eurowings routes from Frankfurt are also being considered.