Lufthansa, one of Europe’s leading air carriers and Germany’s flagship airline, is set to launch a new subsidiary, City Airlines, dedicated to short-haul operations across the continent. The move is part of the airline group’s strategy to enhance competitiveness and reduce costs in the increasingly competitive European aviation market.
The new regional carrier is scheduled to commence operations in July 2024. It has received approval for its establishment, marking a significant development in Lufthansa’s efforts to streamline its short-haul operations. City Airlines will operate from two key airports, Munich and Frankfurt, both hubs where many of Lufthansa’s long-haul flights originate.
Lufthansa’s decision to introduce City Airlines aims to strengthen its position in the short-haul segment, a market currently overseen predominantly by another subsidiary, Lufthansa CityLine. The latter’s cost structure has been a longstanding concern for the management, prompting the creation of City Airlines as a strategic move to address these challenges.
In a press release on Wednesday, Lufthansa stated that both City Airlines and Lufthansa CityLine would operate simultaneously, allowing the airline group to optimize its operations and cater to different aspects of the market. This dual-subsidiary approach reflects Lufthansa’s commitment to adapt to the evolving dynamics of the aviation industry.
Recruitment for City Airlines is set to begin in November, with a focus on hiring experienced cockpit and cabin staff. The company is encouraging applications from existing Lufthansa CityLine teams and, according to reports, may consider former employees of the low-cost subsidiary of the Germanwings group, which ceased operations in 2020.
However, this staffing strategy has drawn criticism from unions, labeling it as a legal maneuver aimed at reducing labor costs. Unions argue that hiring employees already within the Lufthansa group under new, potentially less favorable contracts is a tactic to circumvent existing employment conditions. In August, the pilot union VC expressed concern about airlines creating new subsidiaries to manipulate or reduce labor conditions.
In response to these concerns, Lufthansa has affirmed its commitment to negotiating competitive contract conditions for future City Airlines employees. The airline intends to engage in discussions to ensure that the new subsidiary contributes to sustainable job creation in Germany. Jens Fehlinger, the Managing Director of City Airlines, emphasized the company’s vision for the future and its dedication to securing long-term prospects.
This move comes against the backdrop of recent negotiations between Lufthansa and its pilot union, VC, which resulted in pay increases of over 17% for Lufthansa pilots. The negotiations followed a period of labor disputes and strikes, highlighting the complexities of managing employment conditions within the aviation industry.
As Lufthansa gears up for the launch of City Airlines in 2024, the airline group faces the dual challenge of addressing labor concerns and strengthening its competitive position in the short-haul market. The success of this strategic initiative will likely shape the trajectory of Lufthansa’s operations in the European aviation landscape in the years to come.