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Business

A New Player in the Low-Cost Wars?

Reports that Preussag AG wants to get into Germany's lucrative low-cost airline market could mean more trouble for German airline giant Lufthansa.

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Closing in on Lufthansa's business

Germany’s Lufthansa - already struggling in the cheap flight market - faces more possible competition if one of the world’s largest tourist agencies gets into the low-cost airline business.

The weekly newsmagazine Der Spiegel wrote over the weekend that TUI, a subsidiary of Preussag AG, had plans to partner up with Berlin-based Germania airlines. The new company would offer flights which would overtake Germania's current Berlin-Frankfurt and Berlin-Cologne routes and eventually offer flights outside Germany as well, according to the report.

A spokesman for Preussag denied the report, but confirmed his company was interested in a low-cost airline. "There are many conversations taking place," he told wire services.

The new company would futher crowd an already fiercely competitive, and lucrative, market in Germany. The cheap airline market is the only area not to suffer in the post-Sept. 11 travel crisis, according to studies.

Keeping Lufthansa at arm's length

Low-cost, no-frills carriers such as Ryanair have taken a huge chunk out of Lufthansa's European business by offering flights between Germany and the UK at rock-bottom prices. Germany's anti-trust office has kept Lufthansa from offering prices lower than the low-cost carriers, giving adequate protection for the cheap airline business to flourish.

England-based easyJet recently announced plans to take over British Airways struggling daughter company Deutsche BA. Ryanair continues to expand and, should Preussag and TUI step into the mix, Lufthansa is sure to take futher hits.

Lufthansa's recent appeal to Germany's anti-trust office met with failure. The court sided with Germania and ruled the airline giant would have to offer prices on their Frankfurt-Berlin route that were at least 30.50 euro ($29.77) higher. Germania currently offers 99 euro ($96.63) flights between Frankfurt and Berlin and 77 euro ($75.16) flights from Cologne to Berlin.

Lufthansa has offered cut-rates on off-peak flights. Under a plan announced last week, fares could drop by as much as 63 percent.

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