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Will Lufthansa revolutionise the low-cost market?

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Research shows Germanwings’ unit costs remain high

Analysis by the CAPA Centre for Aviation suggests that although Germanwings’ unit costs are significantly below those of Lufthansa, the cost gap to other LCCs is even bigger. Its revenues also do not match Lufthansa’s. And it also faces a huge operational challenge in growing from 7-8 million passengers to its target of 20 million in 2015, while boosting Lufthansa’s short-haul and medium-haul earnings by €200 million.
Lufthansa says that the new Germanwings will “revolutionise the European low-cost market”. According to the group’s CEO Christoph Franz, it will offer “Europe’s best price-performance ratio among the low-cost airlines – with a high level of quality and competitive cost structures”. The official operational launch of the newly rebranded carrier with its new livery is scheduled for 1 July 2013.
Among Europe’s LCCs, the “Best” fare product is superior to its competitors, with easyJet’s flexible fare being the closest comparable product. But it is offered on a minority of the seats.
CAPA offers detailed analysis to show that “Germanwings may revolutionise Lufthansa, and this kind of radical move by major legacy groups is to be encouraged. However, even if it succeeds, it will remain at most Europe’s fifth biggest LCC with a cost base that is significantly higher than the other LCCs. Like its new logo, its claim that it will revolutionise the European low-cost market looks little more than a vehicle to generate publicity. But rhetoric will not guarantee sustainability.”
CAPA
[pictured: Germanwings’ new livery; courtesy Lufthansa]

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