Lufthansa plans to launch a new regional and domestic airline in Germany that should operate alongside its regional subsidiary CityLine. The airline will most likely get a dedicated Airline Operator Certificate (AOC) and should begin services in early 2023. Lufthansa plans to launch new regional subsidiary.
CEO Carsten Spohr confirmed the plans for the new unit during today’s press conference on the 2021 results. He said he was happy to disclose a bit more about the plans after seeing various media reports that were beyond the truth. “Around this theme, there is as much fake news as is coming from Russia.”
Spohr said: “We plan to establish a kind of second Lufthansa CityLine that will be ready to start operations in early 2023. It serves various purposes. First, it will offer an opportunity to employ some 250 captains that were active with Germanwings, which has now been dissolved and which would risk unemployment.” Germanwings ceased passenger operations in April 2020, having traded as a wet-lease airline to Eurowings since 2016. Germanwings was founded in 1997 and operated like a no-frills low-cost airline.
Chief Financial Officer Remco Steenbergen said during the press conference that negotiations with unions continue “to find a solution regarding the remaining pilots that are currently without work after the closure of the Germanwings passenger flight operations. We aim at either employing them at another Group airline or a newly established AOC so we can prevent forced dismissals.” Regional airlines should take over more short-haul routes, with leisure-focused airlines within the Group offering more touristic routes.
Lufthansa has a scope clause too
But there is another reason why Lufthansa wants another regional and short-haul carrier. It’s the German version of scope clause. “Lufthansa and pilot union Cockpit have agreed that CityLine can no longer operate aircraft over 75 seats from 2026”, said Spohr. This actually means that CityLine in its current format will not be able to continue. The subsidiary operates the Mitsubishi CRJ900 with ninety seats, the Embraer E190 with 100 seats, the E195 with 120 seats, and the Airbus A319 with 138 seats.
The third reason for establishing a new carrier is its cost structure and competitiveness at Lufthansa’s hubs in Frankfurt and Munich. “The mix of airlines that serve our hubs in Frankfurt and Munich will shift to those with the best cost structure. We currently operate this system with Lufthansa itself, with Citylink, with Air Dolomiti, with Eurowings Discover, as well as with SWISS, Austrian, and Brussels Airlines. We will look at how we can respond to ever-changing costs to make us more competitive.” This means there will be a shift of capacity to airlines with lower costs and higher productivity that will help drive unit costs down.
No decision has been taken about the exact size of the new carrier. “We have to see how many aircraft the new AOC will get. With 250 captains, Germanwings has almost as many as at CityLine, so it could be of the identical size of CityLine or around forty to fifty aircraft”, said Spohr. “But not only will there be growth with this new carrier, but also with our main carrier. How this mix will look in the long-term will depend on market trends and cost developments. We will use pay schemes that also apply to CityLine. Those colleagues coming from Germanwings will keep their Germanwings contracts.”
Carsten Spohr also said that Lufthansa and Swiss logistics company MSC continue their due diligence procedure of ITA Airways. “With MSC, we have a partner that has different interests but which complement ours very well. That’s why we are checking what ITA has to offer before deciding which options we will pursue. This could be a commercial partnership, an equity investment, a minority share. We can only say something about this when we have checked their data room, but the strategical logic to get a win-win situation for ITA, MSC, and us is obvious.”
A potential agreement with ITA Airways will mean the first serious consolidation within the European airline industry for over a decade. Spohr said that in recent weeks, he has discussed his position with the European Commission: “I have the impression that Brussels acknowledges that we need strong airlines in Europe to be able to compete with the strong carriers in the US, China, the Middle East, and in Turkey. Without consolidation, we will not succeed in this. How a decision on anti-trust pans out is something I don’t want to speculate on. With remedies, a compromise might be sought, but especially after the events (in Russia) in the past few days, I can’t imagine that we in Europe want to sit and look and that we, who are at the top of the aviation league, would be unable to play our role because we blocked consolidation. The competition in Europe is tough thanks to low-cost carriers, but there are clear advantages to maintaining a league of strong carriers.”
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
Richard is contributing to AirInsight since December 2018. He also writes for Airliner World, Aviation News, Piloot & Vliegtuig, and Luchtvaartnieuws Magazine. Twitter: @rschuur_aero.