The strategy of operating a low cost carrier SPECIFICALLY NOT out of a major hub has apparently been scuttled.
According to Eurowings boss, Karl Ulrich Garnadt, Eurowings (Lufthansa’s low cost carrier division) will begin operating flights out of Lufthansa’s #2 hub in, Munich. No date has been announced, but it was indicated that Munich operations for EW would begin sometime in 2017.
The rationale behind the change in the Eurowings business model is to stave off LCC competition that is beginning to build in Munich thanks to other LCC operators such as Easyjet and Norwegian among others. However, there are inherent risks with the idea, one being labor and the other being the impact on Lufthansa’s mainline operations.
As the Eurowings concept was built out, Lufthansa had worked with Unions to ensure that there would be no conflict of interest when it came to Eurowings and Lufthansa crews. Bringing the 2 carriers in direct competition in Munich may not sit well with Unions who typically have an itchy trigger finger when it comes to calling strikes for trivial reasons.
Another almost certain unintended consequence with this move is the risk that Lufthansa mainline operations will lose passengers to Eurowings. EW and LH would be in direct competition for the same passengers. Fares wars within the same airline group?
Not only will this impact short haul Munich operations for Lufthansa, it will almost certainly impact long haul operations as well. Booking a combination of EW and LH flights on one ticket is not an easy task, nor is the ability to connect from an EW flight to one operated by Lufthansa, and vice versa. A lot of systems work will be needed to marry the 2, and thats on top of Eurowings’ existing systems challenges that they are working through.
I see this as a reactionary move and an attempt to reduce the impact of non-LH LCC airlines in Munich, but in reality I don’t see how this will be possible since Eurowings is suggesting that only 4 or 5 aircraft would be assigned to Munich, hardly enough to make a significant impact on the competition, but enough to hurt itself and the parent company. EW already has its set of challenges and I think that they are stretching themselves a bit too thin in opening this new ‘front’ on the war against other LCCs. This defines dabbling and experimenting, not a commitment. Bandaids do not heal wounds.
It would be wiser for EW to be proactive and perfect their product that currently has it challenges and not enter a new arena with a business model designed for anything but operating out of major hubs, especially Lufthansa’s. Perfect the EW model so that it allows Lufthansa to consolidate other European LCCs into Eurowings when the opportunities arise. Don’t dilute what at best is a marginally successful unit (most would even argue that it is not yet successful).
In my humble opinion it’s a case of ‘Ready, Fire, Aim’.
I’d like to be proven wrong, but I wouldn’t bet against me.
