Lufthansa sees Condor as a good fit for its existing business. The question is would Thomas Cook split up its airline, and would competition regulators allow it?
Lufthansa has talked up its interest in buying Condor from Thomas Cook but is staying away from Alitalia, at least for the moment.
The German airline group used to own half of Condor with Thomas Cook before the latter took full control in 2009. There remains, however, a considerable degree of crossover between the two parties in the German market.
Earlier this year, Thomas Cook said it was running a strategic review of its airline and on an earnings call with analysts on Thursday, Lufthansa Group CEO Carsten Sphor explained the rationale in re-acquiring the brand.
Lufthansa is looking to grow its Eurowings low-cost brand out of Munich and Frankfurt with the aim of getting to around 15 percent of leisure traffic out of these airports, which buying Condor would help achieve.
“So assuming we’ll one way or another…get hold of Condor be it through an acquisition, be it through with bankruptcy, that could be the number of airplanes we could end up in Frankfurt and Munich,” he said.
While Sphor is interested in Condor, he’s not sure how the sale process would play out and whether Thomas Cook would split up its airline.
“Is there really somebody who buys it all as they [Thomas Cook] were hoping for, I find that hard to imagine. Could we buy all of Condor, at least…this will very much depend on antitrust concerns. Would the airline be broken up? I have no idea,” he said,
“If somebody would want to do it against us, I think it’s very unlikely because there is more than 30 percent feed on Condor airplanes by Lufthansa short-haul. So I don’t think that anybody could operate that against us out of Frankfurt or Munich, so we are quite relaxed.”
Lufthansa seems less keen on pursuing a takeover of another European airline, Alitalia. It had looked like a combination of Delta Air Lines and EasyJet were going to buy the Italian flag carrier but that deal looks like it is in jeopardy.
“So we believe we can only do something with the new Alitalia in a restructured fashion, and we don’t want to be next to the government being owners,” Sphor said.
“I never understood what easyJet and Delta would do jointly. I mean, EasyJet wants slots in [Milan] Linarte and Delta wants to protect their joint venture on the North Atlantic. So I don’t understand how that would be a joint offer creating value but it’s absolutely for the Italian government to decide.
“Our personally view is with that current government, it’s difficult to find a resolution.”
Lufthansa was the first mover in the new war between airlines and technology intermediaries such as Sabre and Amadeus. In 2015 it added a $18 (€16 surcharge) to tickets sold through these global distribution systems (commonly called GDSs.)
What’s remarkable is how quickly Lufthansa has been able to change booking methods.
In December, bookings made through one of its direct channels — including the International Air Transport Association’s New Distribution Capability paradigm — overtook those made through intermediaries fro the the first time.
Lufthansa plans to use the shift to introduce what it calls “continuous pricing,” which gives it much more flexibility over what it can charge. Lufthansa said that in the past using intermediaries had meant a limit to the prices it could offer.
“More precise price increments will make the airlines more competitive in price comparisons and increase the passenger load factor,” the company said in its annual report.
Revenue across the group rose 1 percent to $40.5 billion (€35.8 billion) but net profit fell 8 percent to $2.4 billion (€2.2 billion) in the year to the end of December.
The company put the decline down to increased fuel prices and delays and cancellations.
Lufthansa’s low-cost unit swung to an adjusted loss of $261 million (€231 million) from a profit of $67.8 million (€60 million) in 2017, thanks to costs associated with integrating parts of the bankrupt Air Berlin.
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Photo credit: Lufthansa planes. The airline group is interested in taking over Thomas Cook's Condor. Lufthansa