The boss of Deutsche Lufthansa AG Carsten Spohr is in war of words with the CEO of Ryanair Holdings named Michael O’Leary. Mr. Spohr has vowed to defend the domestic market of the German carrier from the budget airlines and their further encroachment. This has happened despite assurances by Mr. O’Leary that their shate of the business will only be shrinking.
Mr. Spohr’s Thoughts
Mr. Spohr had stated that the current revamping of Lufthansa’s short haul operations will most likely protect the market share of the company, despite the fact that they lost a considerable amount of market share within Europe to UK budget carriers easyJet PLC and Ryan air.
He had also stated in an interview with The Wall Street Journal that Lufthansa Group will most certainly remain in the home market and will not be squeezed out. He was also quoted as saying that competitors are now realizing this fact. However, Mr. O’Leary has different thoughts on the matter. In another interview with The Wall Street Journal, Mr. O’Leary stated that it is definitely over for the legacy carrier model within Europe.
The Verbal War
The verbal war is being carried out as the flag carriers in Europe continue to struggle to bring down their costs quickly enough to effectively compete with the budget airlines. The budget airline passenger routes across Europe seem to be growing by leaps and bounds and this has left the legacy carriers extremely worried.
Lufthansa has reshuffled its management board responsibilities and will be announcing annual savings of as much as $560 million by 2019. The Ryanair passenger numbers have increased by 6% from 2014.
Mr. O’Leary has stated that within 5 to 10 years, the budget airlines market share and will squeeze out the legacy network carriers as they will continue operating most of the flights in Europe.
Such discount airlines will most likely restrict the monopolistic presence of airlines such as Air France, KLM, and Lufthansa. Additionally, the budget airlines plan to continue expanding their operations into additional airports and destinations.
Ryanair has carefully focused itself on the German market as a part of its growth strategy and plans on serving more of the primary airports as well as lure in the business travelers. The Irish carrier has started to operate more flights within Germany from Cologne where the Germanwings budget unit of Lufthansa is situated.
However, in response to this, Lufthansa is also bringing in a new low cost airline to compete and Mr. Spohr is confident that it will become the third largest in Europe as well as dominate the home markets within Switzerland, Austria, and Germany.
Lufthansa is also still considering partnering for Eurowings, its new budget unit. This is supposed to be lower in cost than Germanwings. However, further details still need to be made available regarding this development.