Lufthansa should consider Gulf partnership, German official says

[FRANKFURT] Deutsche Lufthansa AG should consider teaming up with one of the Persian Gulf airlines rather than bashing them with regulators, following the example of British Airways' parent company and Qatar Airways Ltd, a German government official said.

"Walling off the market won't help, and the Gulf carriers have a geo-strategic advantage due to their location," Brigitte Zypries, the Economy Ministry state secretary who coordinates Germany's aviation and aerospace policy, said in a phone interview late Tuesday. "One should think about other possibilities."

Ms Zypries became the first senior German lawmaker to publicly suggest that Lufthansa may be better off becoming a partner with a Gulf airline than fighting expansion by competitors from the region.

Lufthansa chief executive officer Carsten Spohr has said there's no level playing field among carriers from Gulf countries and Europe, while US airlines last year claimed the Gulf trio of Emirates, Etihad Airways PJSC and Qatar Airways benefits from more than US$40 billion in subsidies from government owners.

Lufthansa's stance runs counter to those of London-based International Consolidated Airlines Group SA, the owner of British Airways and Spanish carriers Iberia and Vueling, and Air Berlin Plc. IAG has brought in Qatar Airways as its biggest investor as well as a partner in the Oneworld global airline alliance. Abu Dhabi-based Etihad has become Air Berlin's largest shareholder amid efforts to bail out the unprofitable German company.

State-supported Turkish Airlines is Lufthansa's main Middle Eastern partner. They're both members of the Star Alliance airline grouping, and together own the leisure carrier SunExpress. Harry Hohmeister, the head of Lufthansa's mainline brands, said last month that he'd prefer to develop that relationship further rather than link up with Dubai-based Emirates, which doesn't have a European partner.

"There are other nice big carriers which might contribute more to us than Emirates could," Mr Hohmeister said in a May 18 interview in Dubai. While the German company reduced so-called code-sharing sales cooperation two years ago in a dispute over Turkish Airlines' "overambitious" plans, "maybe we could return to that."

Qatar Airways raised its holding in IAG to 15 per cent from about 12 per cent in May, and said it may consider buying as much as 49 per cent. Qatar's Investment Authority also owns a stake in London's Heathrow Airport, British Airways' main hub. Part of Etihad's strategy for Air Berlin is to develop ties to the Middle East carrier's other European affiliates, particularly Italian carrier Alitalia.

"I understand Lufthansa's arguments, but it's a difficult debate," Mr Zypries said. "The English have demonstrated how such cooperation could shape up, and it makes sense to consider that."

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