Lufthansa and Eurowings have to act fast to win partners for their planned low-cost airline partner programme, says fvw’s Rita Münck.
Lufthansa managers must be looking jealously at Ryanair's profit mountain of €1.2 billion last year from cheap flights in Europe. The German carrier's own budget airline Eurowings made an underlying profit of just €38 million last year. Since 2015 Eurowings has marketed the flights of Germanwings which has struggled to be profitable since its launch in 2002. Since last November, Eurowings has offered long-haul flights from Cologne while in Vienna, a new carrier called Eurowings Europe is being created.
The next step lies just ahead. The Lufthansa Group is working to develop the Wings concept, which CEO Carsten Spohr already outlined in 2014 to combat Ryanair and Easyjet. Eurowings is supposed to rapidly create a platform for a partner model that other airlines can dock on to.
However, the wheels turn slowly in the Lufthansa Group. Although the Wings idea has existed since 2014, only now is a legal structure being created under which airlines can even cooperate with Eurowings. The idea that airlines can slip under the Eurowings roof, give up administrative tasks and benefit from synergies definitely sounds attractive.
But such a process would mean major changes for potential partners. If they handed over sales & marketing and network planning, then they would have to get rid of many employees. This is rarely a quick process and costs time, money and, at worst, motivation. It could take years for the Wings model to pay off.
At the same time, the aviation market is not standing still. Ryanair and Easyjet, already with more than 300 and 200 planes respectively, are each due to take delivery of 200 more planes in the next few years. Moreover, other business models are emerging in other parts of the world that could be implemented in Europe with the right partners. One example is the Value Alliance in Asia, covering eight budget airlines in the region.
In Europe, there are nearly 200 registered airlines. Consolidation would certainly help the healthy players in the market, especially the Lufthansa Group. But in view of these market conditions, Eurowings should not wait for potential partners to come along. The budget airline would do well to approach candidates directly. I can think of two suitable names: Condor and TUIfly.