Will Lufthansa succeed with low-cost long-haul?

19 Sep 2014 by Alex McWhirter

Lufthansa will launch its "low-cost" long-haul subsidiary in the autumn of 2015.

The new venture will utilise some of the German carrier's redundant A340-300s and operate out of Dusseldorf or Cologne along with Munich.

Sadly those readers who thought Lufthansa's new venture would be offering cut-price flights to the likes of New York or Singapore will be disappointed.

Lufthansa is first and foremost a business airline. So, it would not wish to cannibalise its existing traffic.

The new venture will be aimed at the leisure market and will not be offering departures from the parent's Frankfurt hub.

Seating onboard the A340-300s is expected to be denser than that of today's product at Lufthansa mainline.

First class will be removed and, as with Air AsiaX’s former services between Kuala Lumpur, London and Paris, we might expect tight 3-3-3 seating (the A340 was designed for 2-4-2 seating) in the economy cabin plus a simplified business class or premium economy cabin for wealthier holidaymakers.

But Lufthansa, as thorough as ever, is taking its time getting the venture off the ground. Aviation, and especially the budget sector, is a fast-moving business and the marketplace could well be different by this time next year.

And is this really a low-cost product? With carriers like Norwegian and AirAsiaX, passengers expect to pay ancillaries for a variety of things.

By contrast Lufthansa says its new venture will fly at a lower cost but still maintain the same full service offering that it (Lufthansa) provides. According to the Lufthansa Group, the latter offerings would allow the airline to retain those leisure destinations which were under threat (for losing Lufthansa mainline service) such as Bangkok.

But haven't we seen this all before? Readers with long memories will remember that Lufthansa established Condor for this very purpose. Condor was recently sold to Thomas Cook, a decision which Lufthansa probably now regrets.

The business model in Europe for low-cost long-haul still remains unproven. Subscribers can read more in this feature from out October 2013 issue.

It's unclear what the situation is at Norwegian so far, but Air AsiaX failed in its bid to bring low fares to Europe.

Speaking at the Farnborough Airshow in July, Air Asia founder and head Tony Fernandes warned Lufthansa that its venture was a risky one.

"I know why they (Lufthansa) wants to do it, but it’s dangerous to have a low-cost and a full-service carrier in the same group because invariably you compete with one another,” Fernandes told Reuters. "I think it’s very risky, I would advise against it."

He believes that full-service carriers should chose whether to be low-cost or premium: "History has shown that any full-service carrier that has gone into low-cost has suffered. But I can see why it’s tempting."

Alex McWhirter

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