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Lufthansa to fight discounters head on

Deutsche Lufthansa plans to launch a head-on battle against low-cost carriers in its crowded domestic market this summer as it fights for customers in its core European network, company sources said.
/ Source: Reuters

Deutsche Lufthansa plans to launch a head-on battle against low-cost carriers in its crowded domestic market this summer as it fights for customers in its core European network, company sources said.

Lufthansa plans to station five Boeing 737-800 aircraft at Hamburg airport from June, offering fares under 100 euros ($128.5) to European cities and may add three more planes from August if the strategy pays off, the sources told Reuters on Thursday, referring to an internal company announcement.

A spokesman for Lufthansa said the memo reflected unfinished discussions and that no decisions had yet been made on which planes will operate on which routes.

“Lufthansa is not changing its business model,” the spokesman said. “We have already offered low fares in the past.”

Lufthansa is considering fares of 65 euros and 85 euros, one source familiar with the matter told Reuters. Hamburg is seen as a test, which may lead to a roll-out of the strategy to other airports, sources said.

At Hamburg, Lufthansa would be competing further with DBA, which operates eight routes from the airport, as well as Air Berlin and TUI’s HLX.

Europe’s biggest low-cost carrier, Ryanair, operates six routes from Hamburg-Luebeck airport, while Germanwings, in whose owner Eurowings Lufthansa already owns 49 percent, flies between Hamburg and Stuttgart.

Lufthansa Chief Financial Officer Karl-Ludwig Kley said on Wednesday that the airline was planning an aggressive price strategy in Europe as budget carriers prepare to add 90 aircraft into the market this summer.

He said yields, or average revenue per passenger carried and kilometre flown, would continue to drop under pressure from competition and an excess of available seats.

Lufthansa’s European yields dropped 4.8 percent year-on-year in July to September 2004 and were 8.7 percent lower in the last quarter of 2004. They were down 0.6 percent in the first quarter of this year.