THREATS
1. LCC competition remains
As noted above, Lufthansa is increasing its presence in the LCC segment of the market with Eurowings. However, Germanwings, its main brand in this segment until now, is not competitive on costs against Europe's leading LCCs and we do not have details of Eurowings unit cost. Growing LCC competition remains a threat to the Lufthansa group, particularly as competitors such as easyJet and Ryanair are now targeting the high yield business travellers that are vital to legacy airline profitability.
See related reports:
Ryanair lags easyJet on business traveller & customer service initiatives; both have great potential
EasyJet SWOT: you must be getting things right if Stelios has gone quiet
Lufthansa's biggest hub, Frankfurt, remains minimally penetrated by LCCs. However, penetration of the European short/medium haul market from Germany excluding Frankfurt and Munich by LCCs other than Germanwings was around 27% in 2014, according to CAPA research published in a previous report.
See related report: Germanwings has preserved Lufthansa's market share, but still has too many legacy issues for a LCC