Small Airlines Challenge Lufthansa's Hold On Germany

<I>Frankfurt</I> - Travel managers in Germany are looking forward to lower prices on domestic routes as competition heats up among Lufthansa, Deutsche BA and Eurowings.

Eurowings has announced it will take on Lufthansa on one of the national carrier's last major monopoly routes--Frankfurt-Berlin, a market estimated at 1.4 million passengers a year.

Deutsche BA is increasing capacity 72 percent and has upped frequencies on its Munich-Duesseldorf service as it concentrates on undercutting Lufthansa prices on trunk routes. And low-cost carrier Debonair last month doubled its number of daily flights between Munich and Duesseldorf Express airport in Moenchengladbach to four. It plans to fly to Berlin, Hamburg and Hanover this fall.

"As a business travel manager, it is positive that other airlines are coming," said Siemens travel manager Karl-Heinz Joerk shortly before his recent retirement. "We had no competition for too long."

"We welcome the competition; wherever there is a monopoly, there is a bad situation," agreed Michael Kirnberger, travel manager of pharmaceutical firm Merck. "Nothing against Lufthansa, but now we have the chance of an alternative from Frankfurt."

Both Joerk and Kirnberger said they expected a price decrease on the Berlin-Frankfurt route. "Eurowings will reduce prices, and Lufthansa will follow," Kirnberger predicted.

The German cartel office in February ordered Lufthansa--which currently flies 16 times a day as the only airline between Berlin and Frankfurt--to cut its "excessive" fares of about $470 (at current exchange rates) on the route following a probe into domestic price levels.

Stefan Pichler, Germany sales director for Lufthansa, has said the airline will challenge this in court since the route had a "double-figure million loss" between the two cities as part of overall losses of close to $60 million on domestic routes.

As of last month, Eurowings flies in an Air France code share four times a day to the Berlin city-center airport, Tempelhof, using a turboprop ATR-72, which could be upgraded to a jet later in the year.

"There is a need for a second carrier," said Eurowings chairman Reinhard Santner said. "We think we will be successful."

The airline will charge a one-way super-saver fare of $70 and one-way business fares as low as $139, undercutting Lufthansa's full round-trip prices by more than $175.

Eurowings marketing director Ulrich Sigman said the carrier would have less than 10 percent of capacity but aimed to seize at least a 10 percent market share of the business travel segment. The airline managed to get four slots at crowded Frankfurt Airport and swapped them with several airlines, including Air France and Delta Air Lines, to get the right departure times, sources said.

Lufthansa has reacted cautiously to the increased competition in its backyard. Sales and marketing chief executive Hemjoe Klein said only that the airline "welcomed competition" but declined to comment on how it would react on prices.