Soaring high

German airline Lufthansa has unveiled an ambitious new Berlin strategy to coincide with the opening of the capital's new international airport in June 2012.

The plans include expanding its fleet and passenger facilities, flying new routes and knocking down ticket prices amid fierce competition from no-frills airlines. The new airport, Berlin Brandenburg International, will be Germany's third-largest once it opens its doors next year.

"We're going to expand our presence in a manner that we've never done before," Carsten Spohr, head of Lufthansa's passenger services, said at a press conference in Berlin on Wednesday.

"We're banking on Berlin and are committed to grow at an above average rate here."

New destinations, new planes

Those growth plans include boosting the carrier's Berlin fleet. The number of planes based in the city will rise to 15 from 9, increasing passenger capacity by over 40 percent. Lufthansa says it will introduce a more flexible flight plan and operate more sophisticated Airbus jets for Berlin.

There are plans to create 4,000 new jobs in Berlin and the neighboring state of Brandenburg. The airline is hiring 130 new pilots and 200 flight crew members. The company's overall investment in Berlin is estimated at 60 million euros.

Lufthansa also plans to fly to 38 destinations from Berlin in the future, instead of the current eight. The new non-stop services – which will fly to cities such as Valencia, Bologna, Birmingham, Istanbul and Barcelona – are seen as an attempt to capitalize on the soaring numbers of tourists flocking to the German capital.

The move is likely to increase pressure on Lufthansa's budget rivals. In addition to domestic player Air Berlin, the German capital is serviced by a number of no-frills carriers including Easyjet, Norwegian and Ryanair.

"There's certainly room for another big carrier in booming Berlin," German aviation analyst Heinrich Großbongardt told Deutsche Welle. "The city's catchment area is also increasingly attractive for international business so it's the right move for Lufthansa."

Tickets starting at 49 euros

The expansion measures in Berlin, Lufthansa says, will help make its short-and medium-haul traffic profitable. Some analysts estimate that Lufthansa has been losing around 100 million euros each year on those routes even though the carrier has been turning a profit on its international flights.

Lufthansa also announced it plans to offer one-way tickets from Berlin to destinations in Europe starting at 49 euros – a first for the airline and a direct challenge to budget airlines that have been offering discount prices for years.

"This is a major step for Lufthansa, which has lost passengers to low-cost carriers because of its inflexible ticketing so far," independent airline industry analyst Cord Schellenberger told Deutsche Welle.

"It may be a late move but Lufthansa has finally learned the right lessons from low-carriers who know how to make money on short-haul flights."

Targeting Air Berlin?

But some analysts are skeptical that the new strategy will really help turn around Lufthansa's European continental traffic.

Großbongardt said Lufthansa's aim of keeping unit costs at the new Berlin airport one third below average costs across its domestic and European network was unrealistic unless it tackled high labor costs, he said.

Instead, Großbongardt said, Lufthansa's expansion plans in Berlin looked more like a direct attack on its main domestic rival, Air Berlin which has traditionally been the dominant airline in Germany's capital.

Air Berlin has been floundering in the red in recent years and has been forced into a cost-cutting program and fleet reductions.

"The plans are a clear attempt to push Air Berlin over the brink," Großbongardt said. "Air Berlin may be struggling but it's still a tough competitor to Lufthansa on German and European routes. Lufthansa would certainly benefit from Air Berlin disappearing from the market."

Berlin to LA

But for all its firepower, Lufthansa has, for now at least, been trumped by Air Berlin when it comes to operating long-haul international flights from the German capital.

Air Berlin plans to fly to 70 destinations from Berlin non-stop starting next summer. The airline already operates flights to New York, Miami, Dubai and Bangkok. Next May, it's set to add another destination to its list – Los Angeles.

Lufthansa has said it has no plans to offer long-haul services before 2013, preferring to concentrate on bolstering its European business.

Author: Sonia Phalnikar
Editor: Sam Edmonds