Flying high amid turbulent conditions

Air China and Lufthansa signed a memorandum of understanding in 2014 to build up a joint venture on China-Europe routes. It will provide "even better flight connections and services in the future", Lufthansa said in a statement.

Although no further details were released, the two Star-alliance companies' joint venture is expected to account for about 35 percent of the China-Europe flights and 84 percent of the China-Germany flights.

"The key objective of this alliance is to enable customers to have access to an unparalleled network of destinations at competitive prices with increased frequencies and connections, and even more possibilities to earn miles," Garnadt said.

But the real benefits of the joint venture, apart from the broader benefits of code-sharing, lie in the ability to cut costs and improve sales for both companies, industry experts said. On a different plane, the closer cooperation could also open the door for Chinese and European carriers to cope with competition from the fast-expanding Gulf carriers, they said.

Sadiq Gillani, senior manager of Lufthansa, said: "Carriers flying across the Gulf will be heavily impacted by this (the Gulf carriers') capacity growth." He said most of the carriers in the Middle East region will double their capacities by 2020.

"Gulf carriers have been developing very fast in recent years. But this growth is often based on unbalanced market conditions," said Garnadt.

Aviation is not governed by World Trade Organization rules, he said, hence, competition must be fair and reciprocal with equal advantages for both sides. Some analysts have suggested that Lufthansa cooperate with the Gulf carriers, especially those which it has criticized the most.

Jonathan Wober, chief financial analyst of independent aviation market analysis group CAPA, said: "If you can't beat them, then join them. Probably at some point they will need to find a way to team up with other Gulf-based carriers or Turkish Airlines, although that is easier said than done."

Some European carriers have already started to work with the Gulf-based carriers. Qatar Airways acquired a 9.99 percent stake in International Airlines Group, the parent company of British Airways, in January.

But Lufthansa does not have any such plan, Garnadt said. "For the passenger business, we do not see such solutions at the moment." However, its unit Lufthansa Technik already has business partnerships with some Gulf-based carriers.

Garnadt, a member of the Board of Lufthansa German Airlines with responsibility for the hub management and passenger services division from 2007 to 2010, understands the need to upgrade services and enhance passengers' travel experiences. As a carrier with a long history, Lufthansa is perhaps running its biggest fleet renewal investment program in history, he said.

Since 2011, the carrier has invested about 1.5 billion euros ($1.61 billion) to refit its cabins.

Previous Page 1 2 Next Page

Previous Page 1 2 Next Page