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Emirates and the Persian Gulf’s two other major airlines are likely to get pride of place at Frankfurt airport’s new terminal, allowing them to offer bigger premium-class lounges to compete more aggressively with local rival Deutsche Lufthansa AG.
Frankfurt’s Terminal 3 will probably house Qatar Airways and Etihad Airways PJSC of Abu Dhabi, as well as Dubai-based Emirates, the world’s biggest carrier on international routes, Matthias Zieschang, chief financial officer of airport owner Fraport AG, said in an interview.
An extra floor will be added to satisfy demands of the Middle Eastern operators for more space, about doubling the room reserved for luxury lounges, Zieschang said. The design change is contributing to a one-year delay in the terminal’s completion to 2023 and may push construction costs beyond the budgeted 3 billion euros ($3.3 billion).
Fraport is under pressure to find alternative sources of growth. Lufthansa, Frankfurt airport’s largest customer, is limiting fleet expansion there to develop its low-cost Eurowings unit, which doesn’t currently fly to the hub. Meanwhile, Air Berlin Plc, Germany’s second-biggest carrier, is halving its fleet to stabilize operations. Frankfurt airport’s passenger numbers slipped 0.3 percent in October and are on track to fall this year for the first time since 2009.
Frankfurt airport’s push to woo new tenants adds to challenges facing Lufthansa. The Gulf carriers are targeting premium long-haul passengers, while in the discount segment, Ryanair Holdings Plc will start service from the hub in March, joining budget rivals including IAG SA’s Vueling division and Wow Air of Iceland.
First- and business-class seats are the most profitable offerings for airlines, putting pressure on Lufthansa to match the Gulf carrier’s services. Qatar Airways and Etihad are among only nine carriers awarded five stars from airline-industry rating service Skytrax. Lufthansa by comparison holds four.
Luxury travel is “booming” and more buoyant than the overall market, Fraport’s Zieschang said.
Emirates and Etihad are able to offer more frequent flights from Frankfurt under a traffic-rights agreement between Germany and the United Arab Emirates. Qatar Airways can’t go beyond its twice-daily service to Doha without shifting flights from other German destinations.
Lufthansa and its Star Alliance partners occupy Frankfurt’s Terminal 1, where they offer their own first-class lounge, The Gulf carriers currently fly from neighboring Terminal 2, alongside members of the British Airways-American Airlines Oneworld group and the Sky Team alliance of Delta Air Lines Inc. and Air France-KLM Group. Those buildings sit along the north side of the airport’s two main runways, while the new terminal is being set up to the south.
Fraport is also building a second, larger common-use luxury lounge in Terminal 1 to complement its existing offering in the same building. Entry to the facility costs 300 euros a person. In January, a hotel within the terminal’s security zone will open, with rooms available by the hour, Zieschang said.
Final decisions on which airlines will occupy Terminal 3 will be made closer to opening and reflect customers’ wishes, Fraport spokesman Christian Engel said.
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©2016 Bloomberg L.P.
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