New Name, Familiar Face Enters Cheap Airline Market

Eurowings Luftverkehrs AG on Wednesday said its supervisory board approved plans to enter the fast-growing low-fares market segment.

The Dortmund-based airline said its low-fares operations, which will be conducted under the name German Wings, will start on October 27, serving between ten and twelve European destinations from its base at Cologne/Bonn airport.

The tariff system will be presented in September, but Handelsblatt has learned that German Wings will copy the aggressive pricing policy of market leader Ryanair, offering fares in the 10–20 euros range.

Germany's national carrier, Deutsche Lufthansa AG, currently holds a stake of 24.9% in Eurowings, but it has an option to increase its stake to 49% by 2004 with the approval of the German Cartel Office.

Lufthansa might increase stake in the coming years

Industry observers are expecting it to exercise this option in the near future. Lufthansa itself has always rejected the idea of entering the low-fares market, even though cheaper rivals such as Ryanair, Deutsche BA and Germania have been making inroads into its market.

Now, via Eurowings and its German Wings unit, Lufthansa will at least be indirectly involved in this new and booming market.

In fact, with its decision to start operations in late October, Eurowings looks to have given itself a head start on two rivals about to enter the low-fares segment.

Ahead of some competition

Belgium-based Virgin Express, owned by British entrepreneur Sir Richard Branson, and German travel giant TUI AG, formerly Preussag. Like Eurowings, both have chosen Cologne/Bonn as their hub.

Handelsblatt has learned from insiders at TUI that the German giant plans to serve destinations such as Madrid, Barcelona, Rome, Milan and Paris. This will bring it into direct competition with Eurowings' new unit.