Lufthansa, Europe’s biggest airline, will soon launch its long haul budget carrier, Eurowings, to destinations in India even as it grapples with increasing competition from Gulf carriers.

For similar reasons, the German airline said it has no immediate plans to pick up a stake in any Indian carriers.

“They (Gulf carriers) are everywhere in India. It will become difficult for us to enter into tie-ups with airlines in India because of the big presence of Gulf carriers there,” Lufthansa Group Senior Vice-President and Chief Strategy Officer Sadiq Gillani told BusinessLine . It will be the first European airline to launch its budget carrier in the Indian sub-continent.

Gilani, who is also the Chairman of the advisory board of Lufthansa Consulting, said Lufthansa Airline will be positioned as a premium offering while Eurowings will offer extremely competitive fares.

The airline will mostly fly A330s with a two-class configuration — the recently launched premium economy and economy.

Rising competition

Armed with heavy subsidies, Gulf carriers are viewed as a big headache for European as well as US airlines amid increasing competition.

At a recent meeting of EU transport ministers, French and German representatives claimed that public subsidies and government guarantees have pulled Gulf carriers ahead of European airlines.

The European Commission has decided to take up the matter following protests from its carriers.

There is also a move to place curbs on the extension of traffic rights given to foreign airlines in Europe accompanied by effective control of the operation of these airlines.

Lufthansa is banking big on some of its new offerings including a new class of seats, which it expects will help it draw more passengers.

Its recent launch of premium economy class, which sits between economy and business, cost Lufthansa about €100 million. It expects revenues of about €1 billion from its new product, which it has introduced in a phased manner, including flights to India.

Lufthansa is trying to market premium economy with several industry defining efforts. One is to allow passengers to bid for the premium economy seats while another one allows on-board passengers to upgrade their economy to premium economy by paying €300.

Annette Mann, Director for launch management of premium economy, told BusinessLine the initial response has been heartening. It now has a load factor of about 75 per cent, with about 35 per cent of economy class passengers going for an upgrade to premium economy.

The premium economy seats are 38 inches wide, compared with the 31-32-inch economy and 64-inch business. “We have tried to price the tickets in a manner where it doesn’t really pinch the passengers to upgrade from economy and at the same time there is a huge price barrier between business and premium economy,” Mann said.

In spite of that, about 5 per cent of business class passengers opt for premium economy, but Mann said it is much lower than what the airline had expected.

(The writer was in Munich on an invitation from Lufthansa).

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