Lufthansa Selects Cologne as Base for Discount Long-Haul Foray

Deutsche Lufthansa AG said it will go ahead with plans to establish a low-cost, long-haul arm as an extension of its SunExpress venture with Turkish Airlines, with a fleet of wide-body jets to be based in Cologne.

Europe’s second-biggest airline will lease as many as seven Airbus Group NV A330-200 aircraft in an all-coach configuration seating 310 people and serving holiday destinations including Florida, southern Africa and islands in the Indian Ocean, Chief Executive Officer Carsten Spohr said today.

“We are convinced this idea, long-haul, low-cost service out of Europe, will be successful,” Spohr said on Bloomberg Television. “It’s about offering customers more choice; a choice of brands, products and business model.” Costs will be 40 percent lower than at Lufthansa’s main long-haul operation.

Spohr is already positioning short-haul discount division Germanwings to take over European services outside Lufthansa’s main Frankfurt and Munich hubs as he seeks to fend off low-cost specialists such as EasyJet Plc. While the company’s share of long-haul flying faces erosion as Middle Eastern carriers led by Dubai-based Emirates divert traffic via hubs in the Gulf, the new Cologne venture’s focus on point-to-point vacation routes suggests that its chief competitors will be tour operators.

The business will be part of SunExpress, a 50-50 venture between Lufthansa and Turkish Air founded 25 years ago, which currently links Mediterranean holiday destinations with German cities using a fleet of 74 Boeing Co. 737 planes.

The long-haul arm will carry the brand of Eurowings, which Lufthansa is developing to offer low-cost short-haul flights from bases outside Germany and which will also ultimately incorporate the Germanwings routes.

Efforts to convince unions to accept the plans have so far failed, Bettina Volkens, the Lufthansa board member responsible for personnel, said today. With regard to strikes this week over early retirement payments for pilots the company will offer to go to arbitration in an effort to reach a deal, she said.

Spohr has already cut profit forecasts twice since taking over in May as a result of earlier pilot walkouts and a decline in fares as competitors add capacity.