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Germany

Germanwings: Dark day for promising business

Lufthansa's budget airline Germanwings has been a promising business since it was founded in 2002. The airliner crash in France has cast a shadow on that success story, however.

Germanwings was actually founded in 1997 as a subsidiary of Eurowings Luftverkehrs AG, and initially named Eurowings Flug GmbH. From the start, the airline's headquarters were in Cologne. Lufthansa owned about a quarter of all Eurowing shares.

Five years later, Eurowings Flug GmbH changed its name to Germanwings. With five A319-100 planes, the new airline headed to tourist destinations from Cologne airport. Initially, the carrier followed a no-frills philosophy, offering low fares instead of free service on board. Later, the airline added rates that offered more premium service and more airport hubs emerged.

Boost for Germanwings

Germanwings has been wholly owned by Lufthansa since 2009. Despite the tough competition on the budget airline market, the subsidiary has grown in importance for the parent company. Christoph Franz, former Lufthansa chairman of the board, made strengthening the budget airline a top priority.

In 2011, he announced that in the course of 2012, Germanwings would take over all of Lufthansa's European destinations out of Stuttgart airport. Critics said Germanwings was detrimental to Lufthansa, a premium brand. But Franz defended his strategy. "It doesn't make sense to be on the market with a very high quality product customers no longer want to pay for," he argued.

Where restructuring is concerned, his successor Carsten Spohr is even more radical: Germanwings has now taken over all of Lufthansa's domestic and European routes outside of the Frankfurt and Munich airports. In 2015, Spohr says, Germanwings will be in the black for the first time.

Germanwings about to vanish

But soon, the name Germanwings will be history. Last year, Spohr announced that the airline's budget sector would be switching back to the brand Eurowings. "Germanwings was successful, but for cost reasons, we must change over to Eurowings," the Lufthansa chief executive said, adding it will also be easier to establish the brand on other European markets.

The new Lufthansa subsidiary plans to include destinations to the US, the Indian Ocean region and Africa in its flight schedule, with fares up to 40 percent lower than Lufthansa's. Eurowings will be cutting costs on staff, as the new carrier's personnel is not subject to Lufthansa labor contracts.

The plan has already angered unions and is among the reasons for the ongoing strikes at Lufthansa and Germanwings.

Currently, the budget carrier soon to be absorbed by Eurowings is Germany's third-largest airline after its parent company and Air Berlin.

It's come a long way from its initial fleet of five planes: today, Germanwings operates a fleet of 85 airplanes, and has more than 2,000 employees.