For a while transatlantic ultra low cost airlines were all the rage. The sole focus of most of these airlines seemed to be to gain market share, with little regard for actually being profitable.
WOW Air A321 post-liquidation
It’s interesting to see the strategies the big European “network” airlines are taking. For example, Air France launched low cost carrier Joon, though they’re discontinuing the airline this year.
Meanwhile the Lufthansa Group had Eurowings, and it looks like they’re now shifting strategy on that as well. This comes as Lufthansa Group warned of “price deterioration in Europe caused by market-wide over capacities and aggressively growing low cost competitors.”
The Lufthansa Group & Eurowings
The Lufthansa Group consists of Lufthansa, Swiss, Austrian, Brussels Airlines, and Eurowings. Early last year Lufthansa Group had a surprising strategy for Brussels Airlines — they wanted to fully integrate Brussels Airlines into Eurowings.
In other words, they wanted to turn Brussels Airlines into a full-fledged low cost carrier, not to mention they were destroying any brand recognition associated with the airline.
You’d think some people feel national pride in Brussels Airlines, so to take away the national identity of the airline and instead integrate it into the same airline that operates ultra low cost leisure routes out of Germany seemed odd.
Brussels Airlines A330
Lufthansa group backtracks on Brussels Airlines plans
Lufthansa has just made a 180 when it comes to their Eurowings strategy. Once again, up until now:
- Eurowings operated short haul and long haul flights
- Brussels Airlines was to be integrated into Eurowings, both for short haul and long haul flights
Lufthansa Group has changed their mind, and now plans to keep around the Brussels Airlines brand. Not only that, but they plan to completely eliminate Eurowings on long haul flights, and instead exclusively operate Eurowings as a short haul brand.
With this new strategy:
- Eurowings will exclusively operate A320s on short haul point-to-point flights
- All long haul flights will be transferred to the network airlines (Austrian, Brussels, Lufthansa, and Swiss)
- Eurowings will achieve a 15% reduction in unit costs by 2022; this will happen through a combination of using more efficient planes and also reducing staffing costs (which can’t be good news)
- Brussels Airlines will be more closely aligned to Lufthansa Group’s other network airlines, meaning we could see them become more premium
One interesting adding wrinkle here is that there was recently talk of Lufthansa possibly acquiring Condor, so I wonder how that fits into all of this.
We are seeing a very real shift in the industry away from long haul low cost carriers in Europe. That’s simply because there’s too much capacity, and it has had huge downward pressure on prices. Network airlines have the benefit of also getting high yield traffic from business travelers, so it’s very tough for ultra low cost carriers to compete.
I’ve thought all along that Lufthansa’s attempt to integrate Brussels Airlines into Eurowings was poorly thought out, so I’m happy to see they reversed their decision.
But it’s interesting to see Lufthansa take it a step further and completely eliminate their long haul low cost carrier. Air France has done the same, so at this point it’s just IAG that has a low cost long haul carrier (LEVEL).
What do you make of Lufthansa’s Eurowings decision?