A long haul low cost subsidiary is radical for Lufthansa, but even deeper breaths will be necessary
Mr Spohr has had a busy first 70 days, presiding over a profit warning, the announcement of the planned Air China JV, and now this strategic update. As would be expected from a career Lufthansa executive, he demonstrates a deep and thorough knowledge and understanding of the Group's businesses, its strengths and weaknesses.
One of Lufthansa's greatest challenges is that its location in some of the world's highest cost labour markets pushes it to seek a premium positioning in order to drive up unit revenues ("We have the highest RASK in the industry, but also the highest CASK", said Mr Spohr). In addition, the relatively small O&D market around its biggest hub at Frankfurt and the decentralised nature of Germany compared with other large European countries, has given it a high dependence on transfer traffic.
The planned new long-haul business appears to be aimed at creating a lower cost base and reducing the dependency on the hub, while avoiding risk to the premium branding of the core product. The concept is a radical one for Lufthansa and it may help to fight off some of the competition coming from the Middle East by offering non-stop services between secondary cities in opposition to one-stop flights through the Gulf.