German Body Says Lufthansa ‘Abusing Position’ For Long-Haul Passengers

German Lufthansa - aircraft - Aviatorsbuzz
A representational picture of a Lufthansa aircraft. Source: Instagram

Lufthansa is abusing its dominant market position in the competition for long-haul flight passengers, Germany’s Federal Cartel Office has found.

German Body Does Preliminary Probe

President Andreas Mundt told German news agency dpa on Tuesday that a preliminary investigation has shown that the airline’s decision to cancel its flat-rate contract with smaller airline Condor made it harder for passengers to book long-haul flights.

Aviationpros.com reported that the move makes it more difficult to book Condor flights in conjunction with a connecting Lufthansa flight and therefore discourages passengers from using Condor at all.

“After preliminary examination, we are of the opinion that the termination represents an abuse of market power,” it quoted Mr. Mundt as saying. The authority is now in talks with Lufthansa about the next steps.

“It would of course be welcomed if Lufthansa would let the contract with Condor continue to run,” Mr. Mundt said.

According to media reports, the European Commission has also addressed the negative effects of the termination of the contract.

The Lufthansa Group wants to get more involved in the business of long-haul flights and has founded the new “Eurowings Discover” operation, with which tourist flights are to be bundled.

Eurowings is Lufthansa’s low-cost subsidiary. Condor used to be a Lufthansa subsidiary itself and has stood on its own two feet with the help of a large government loan since the Thomas Cook Group filed for bankruptcy.

Recently,  Lufthansa revealed plans to reduce its fleet to 650 aircraft in the next two years. The move is part of the company’s plans to reduce cost through restructuring following the impact of the coronavirus pandemic.

Until the end of 2019, the Lufthansa Group fleet comprised 763 aircraft.

In addition to the fleet reduction, the company plans to cut additional 10,000 jobs or compensate equivalent wage costs in Germany. Lufthansa Group CEO Carsten Spohr was quoted by aerospace-technology.com as saying: “With a smaller, more agile and more sustainable Lufthansa Group, we want to maintain our leading position worldwide and secure the jobs of around 100,000 employees in the long term.”

Lufthansa To Restrict Cash Drain

During the first quarter of this year, Lufthansa plans to restrict the average monthly operating cash drain, excluding working capital changes, capital expenditure and one-off and restructuring expenses, to approximately €300m.

Last year, Lufthansa’s revenue fell to €13.6bn as passenger traffic dropped due to the pandemic and the associated travel restrictions.

The company plans to increase its capacity to 40% to 50% of 2019 levels this year.

Deutsche Lufthansa chief financial officer Remco Steenbergen said: “Thanks to our recent financing measures, we have sufficient liquidity to withstand a market environment that remains difficult. The next step is to strengthen our balance sheet and reduce debt.

“In doing so, we will reduce our costs through a successful restructuring. Our crisis and cost management has taken effect much faster than originally planned. At the same time, our business has recovered more slowly than we had initially hoped. In addition to repaying the government stabilisation funds, the goal of our financial strategy is for the financial markets to re-evaluate our creditworthiness to investment grade in the medium terms.”

 

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