Transport Airlines

Lufthansa considers starting low cost airline for gaining foothold in Asia

Mar 26, 2013 1:31 am

Skift Take

Airlines without a strong presence or unique value prop in Asia might as well get out because winners will eventually emerge out of the crowded and growing competition.

— Samantha Shankman

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Kai Pfaffenbach  / Reuters

File photo of air planes flying over the Fraport airport, next to a Lufthansa aircraft tail fin, in Frankfurt, September 4, 2012. Kai Pfaffenbach / Reuters


Deutsche Lufthansa AG is weighing whether to form a partnership with another carrier or start its own new long-haul, low-cost venture to help it expand in Asia, Chief Financial Officer Simone Menne said.

Europe’s second-largest airline won’t be able to keep pace with Persian Gulf-based rivals such as Emirates airline and Etihad Airways PJSC without a change in strategy, Menne said at a briefing with reporters in New York.

The deliberations are part of Cologne, Germany-based Lufthansa’s efforts to better compete in a region where passenger traffic will grow 50 percent faster than Europe over the next five years, according to the International Air Transport Association. The company ended service to Hyderabad and Calcutta last year because the routes were uneconomical, Menne said.

“The threat from Gulf carriers, for us, is Southeast Asia and it’s India,” Menne said. “That is a concern for investors, and the answer is we look at all strategic options we have there. That can be partnerships, it can be joint ventures, it can be our own platform or it can be a retreat from this market.”

Asia Pacific passenger traffic will grow at a 6.7 percent annual rate through 2016, compared with 4.4 percent for Europe, IATA forecast in December. Lufthansa won’t be able to grow that fast in the region unless it changes course, Menne said.

Lufthansa may form a new unit similar to its low-cost Germanwings subsidiary to expand its reach in Asia, Menne said. It would also consider forming an alliance with a Middle Eastern or Asian airline, she said, without naming potential partners.

Lufthansa has been discussing closer ties with Turkish Airlines since at least November. Both airlines are members of the Star Alliance and are partners in the Antalya-based Turkish low-cost carrier SunExpress.

“We are cooperating already because we have a joint venture together,” Menne said. “We are in regular talks and we are regularly considering what cooperation could bring us in other areas, but that’s it for the moment.”

Editors: James Langford and John Lear.

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net. To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.

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