The new Eurowings flights from Germany – Breakthrough for ‘long haul low cost’ or just old wine in new bottles?

Kurzfassung

During Berlin’s ITB travel trade fair in March 2015, Lufthansa Group has named the first ‘low cost long haul’ destinations for revitalized Eurowings, which are going to be operated by SunExpress Germany. For the first time since the early 90’s, LH Group is going to fly long haul out of Cologne/Bonn, one of Europe’s pioneer low cost airports, whose management has consistently been predicting the inauguration of ‘low cost long haul’ flights. The objective of this paper is to have a critical look at this new product to assess to what extent it meets the fundamental low cost criteria and if it may be seen as breakthrough for the ‘long haul low cost’ business model in Germany. First, we review the vast literature on low cost carriers to sum up the essential cost- and rev-enue related characteristics of their business model, and to discuss its transferability to long haul operations. Second, we have a closer look at the new ‘low cost long haul’ product as announced by Eurowings and then assess its compatibility with the low cost carrier (LCC) principles. We also discuss the general reasoning behind Lufthansa’s move. We find that major parts of the business model have more in common with traditional long haul leisure operations of holiday carriers such as airberlin and Condor than with the low cost philosophy of Ryanair and the likes. However, some LCC principles like ‘no free catering’ or ‘baggage charges’ apply for passengers travelling at the lowest fares. It is still too early to predict if the Eurowings product can be regarded as breakthrough for ‘low cost long haul’ flights. The actual choice of holiday destinations by Eurowings, though, indicates a quite conservative approach with only limited potential for supply-driven market stimulationon routes to Dubai and Bangkok. In any case, irrespectively of the question if the new product itself is ‘low cost’ or not, Lufthansa seems to have sound internal reasons for inaugurating the Eurowings long haul flights, as it could help significantly reducing staff costs also on longer distances.