Monday, July 21, 2014

Lufthansa may launch low-cost long-haul flights under a new brand as part of plans to attract more price conscious travellers and battle competition from Middle East carriers and low-cost airlines, its new chief executive has said.
Carsten Spohr, who took the reins of Europe's largest airline by revenue in May, needs to win back investors after a profit warning last month wiped $2bn (£1.2bn) off the airline's market value in a single day.
Short-term measures to make up for the lower-than-expected profit in 2014 and 2015 include increasing the number of seats Lufthansa offers by only 2% in the winter, rather than 4% as originally planned, he told journalists on Wednesday as he unveiled his plans for the German airline.
The challenges facing Lufthansa are numerous – Middle East carriers are expanding aggressively on long-haul routes, while low-cost carriers are gaining customers on short-haul routes.
In addition, cargo markets have not recovered as quickly as expected and Lufthansa has had to cut prices on its normally lucrative North Atlantic routes after it, and rivals, flooded the market with seats. It's not just Lufthansa that's suffering. Air France-KLM also cited overcapacity and cargo woes as reasons behind its own profit warning this week.
Shares in Lufthansa extended gains, rising 3% to €15.47 by midday.
The stock had already been trading higher before Spohr's comments, recovering ground lost after Air France's profit warning dragged the sector down.
Spohr, who took the top job in May after heading the airline's passenger business, said Lufthansa would focus more on attracting leisure travellers with lower cost tickets and a no-frills service.
He said: "Point to point has higher dynamic than hub travel." Spohr added that 75% of all intercontinental air travel and 79% of European air travel was for private reasons, rather than business trips. Lufthansa will therefore expand its low-cost offerings under a "Wings" holding group. The airline is already expanding its Germanwings brand to take on short-haul traffic within Europe and now plans to expand its Eurowings regional airline.
On long-haul, Lufthansa is considering a concept that would see it offer flights from Munich or Cologne and Duesseldorf in Germany's industrial heartland. Lufthansa could go it alone or with a partner and is in advanced talks with Turkish Airlines to this effect, Spohr said.

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