Lufthansa to Enter Low-Fare Market

German national carrier Deutsche Lufthansa AG on Friday approved plans for subsidiary Eurowings to enter the low-fare market in a bid to fend off growing cut-price competition, according to information obtained by Handelsblatt.

Dortmund-based Eurowings, in which Lufthansa currently holds a 24.9 percent stake, is Germany’s largest regional airline. Lufthansa recently won approval from the Federal Cartel Office for an option to increase its stake in the carrier to 49 percent.

Lufthansa chief Jürgen Weber has so far resisted pressure to go down the low-fare route, stressing repeatedly that the national carrier would not enter this segment directly. Under the new plans, Eurowings, with its five Airbus 319 aircraft, is to form the core of Lufthansa’s new budget airline.

The subsidiary will in future fly from its Cologne/Bonn hub to destinations in the Mediterranean and European cities. There are currently no plans for the budget airline to fly on German domestic routes. Eurowings regional services, which are integrated into Lufthansa’s network, will remain unaffected by the latest move.

To avoid confusion, the new budget airline will be operating under a new name. Over the past few months, Irish low-cost airline Ryanair, Deutsche BA, a subsidiary of British Airways soon to be acquired by no-frills carrier Easyjet, and German regional carrier Germania have stepped up competition against Lufthansa on its home market. TUI, Europe’s largest travel group, and U.K. carrier Virgin have said they also plan to take a slice of the German market.