Lufthansa could stay in long haul race with Turkish Airlines link

Fri Nov 30, 2012 8:39am EST
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By Marilyn Gerlach

FRANKFURT (Reuters) - Closer ties with Turkish Airlines (THYAO.IS: Quote) could keep Lufthansa (LHAG.DE: Quote) in the race for long haul flights to Asia and stem the flow of business to Gulf carriers.

A combination of the German airline, Europe's biggest by revenues, and the world's fastest growing carrier would create a group with about 600 aircraft, more than the three big Gulf carriers' combined fleet of 500 planes.

Westbound traffic is in decline, making eastward growth crucial. Turkish Airlines' Istanbul hub straddles Europe and Asia and is hours closer to Europe than Gulf airports.

While Lufthansa has not confirmed any plans for strategic negotiations, Turkish Airlines Chairman Hamdi Topcu told broadcaster NTV this month that talks on tie-up expansion with Lufthansa would begin in December.

"Lufthansa is really constrained now in terms of looking for strategic partners. It's running out of options. Turkish Airlines is still the best option at the moment, and probably its last," Cheuvreux analyst Peter Oppitzhauser told Reuters.

Lufthansa, whose passenger business is forecast to post an operating loss this year, is slashing costs and cutting jobs to cope with high fuel prices and stiff competition.

Middle Eastern carriers are building alliances and investing in new routes and new aircraft to divert a thriving traffic flow between Europe and Asia to their hubs and lure passengers with lower prices as well as better food and in-flight service.

Airlines will add 19 percent capacity on routes between Europe and the United Arab Emirates (UAE) in the first quarter of 2013, partly so passengers can switch planes there, according to UBS which forecasts 12 percent growth on direct Europe-China services. Capacity between Europe and the United States is expected to shrink.   Continued...

A yield traffic sign is pictured next to a Lufthansa logo at Frankfurt Airport April 18, 2010. REUTERS/Johannes Eisele