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Why is Lufthansa so interested in Turkish Airlines?

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A whole range of reasons lie behind talks between the carriers

As Lufthansa and Turkish Airlines begin talks about a stronger partnership, which the CEOs of the two airlines confirmed recently, backed by German Chancellor Angela Merkel and Turkish Prime Minister Tayyip Erdogan, the obvious question is: why?
The two carriers already have a close relationship, launching the joint venture SunExpress more than 20 years ago which continues to operate scheduled and charter flights based in Antalya. Lufthansa also sponsored Turkish Airlines’ entry into the Star Alliance. Now, however, LH thinks that closer ties with TK may keep it in the race for long-haul flights to Asia – stemming the tide of business flowing to the big three Gulf carriers. A group with Lufthansa and Turkish Airlines would create a fleet of 600 aircraft, more than the Gulf carriers combined (500).
With westbound traffic in decline and eastward traffic crucial for growth, “Lufthansa is really constrained now in terms of looking for strategic partners,” says Cheuvreux analyst Peter Oppitzhauser. “It’s running out of options. Turkish Airlines is still the best option at the moment, and probably its last.” Lufthansa itself highlighted the immediacy of the issue. “It is a question of time before Europe’s connections to other regions will be conducted only via the Gulf states,” it said on its website.
Reuters says that Lufthansa is “the only major European airline that does not have a Gulf partner”. An alliance with Turkish Airlines would bring more flights, raise investment in newer aircraft and boost pricing power. LH also has one eye on eventual privatisation of Turkish Airlines. More joint ventures could take place, for example in catering, IT and maintenance. Code sharing to more Asian destinations could be expanded.
To CAPA analyst David Bentley, the attraction for Lufthansa is clear. Staff costs are lower in Turkey and air travel is becoming more affordable. Revenues at TK have grown at an average 24% a year for five years.
MainFirstBank analyst Loic Sabatier agrees. “Turkish Airlines has a good presence in regions where Lufthansa has low presence, like the Middle East, South Asia and the Mediterranean. It enables Lufthansa to diversify its offer without investing in new routes and aircraft.”
Reuters
[pictured: Business Class onboard Turkish Airlines]

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