Over the last several years, Lufthansa Group has felt like a creation by Dr Frankenstein — pronounced FRONK-en-steen, of course. It has cobbled together seemingly unrelated pieces to try to create a profit monster. The company is never done tinkering, and now it is at it again with yet another new airline it wants to staple on to its creation.
This time the company is looking toward the regional space to create a new airline. Forget that it already owns two of them, because this will serve a new market. What market is that? Well in typical German bluntness, the company says it needs a new one to get around the restrictions it agreed to at the other airlines. I think they said out loud the part you’re supposed to keep to yourself.
So what is the story with the Lufthansa Group regionals? The two players are Lufthansa CityLine and Air Dolomiti. Neither one has been very good at sticking to their original missions, but that’s just because of what Lufthansa does with its subsidiaries.
Air Dolomiti’s primary purpose was to be an Italian airline that fed originally Munich and eventually Frankfurt from a variety of Italian cities. Today it flies 15 Embraer 195s for Lufthansa around Europe, but it operates under its own name as well. You can book direct with Air Dolomiti or via Lufthansa even though that makes no sense at all since Lufthansa has owned the company fully since 2003, and it is an integral part of the Italian network.
Air Dolomiti started out primarily as a turboprop operator, but it has morphed into the jet carrier it is today. Lufthansa was bullish on growing the airline and had planned to add another dozen Embraers from CityLine. But that plan was scrapped. It has only added 1 airplane since 2019 with I think one more on the way.
Lufthansa CityLine is a whole different story. That airline has flown for Lufthansa with regional aircraft since the 1970s. It was known as DLT until 1992 when Lufthansa bought it and named it CityLine. In 2014, Lufthansa decided to weaponize CityLine by initiating a project called “Jump,” giving it a handful of old A340s that it said it could no longer fly profitably on its own. Instead, it would have CityLine do the flying under the Lufthansa brand with cheaper CityLine pilots but Lufthansa flight attendants.
This was simply a ploy to get the pilots to agree to concessions, and a new agreement with the pilots just a couple years later eliminated the CityLine widebody flying. But CityLine kept growing like kudzu in all different directions.
Today, CityLine has 30 CRJ-900s in its fleet along with 11 Embraer 190/195s that were supposed to be transferred to Air Dolomiti. It has now gotten into the A319 business as well with 11 in the fleet, one or two being operated as cargo and the rest in a passenger configuration. The CityLine network is pretty massive. Here’s the July 2022 map courtesy of Cirium. It stretches from Helsinki to Sevilla and Cork to Varna.
The A319s, in case you’re wondering, are all Munich-based and fly all over Europe from there.
With that background, why on earth does Lufthansa need another subsidiary? You could probably understand if Lufthansa wanted to work with a third party for some capacity, but a new subsidiary seems nuts… except in the mind of a Lufthansa exec.
You can read through the transcript of the most recent earnings call to get a better sense of what’s going on. In short, this is just an end run around labor.
There appear to be two reasons for the creation of this new airline. First, there is a scope clause with labor that restricts the size of CityLine. Part of that is an agreement limiting CityLine to nothing over 75 seats from 2026. Somehow, this does not preclude Lufthansa from just starting a new airline to get around the scope clause. And that’s why on the call you hear it being called CityLine 2.
The other piece is on the pilot side. You may remember Germanwings which used to be a low cost carrier that was eventually relegated to flying under the Eurowings brand. Then Lufthansa said it had too many airlines flying under the Eurowings brand, so it decided to shut down Germanwings. Now it has 250 pilots there that are going to lose their jobs, because the union didn’t want them coming into the other airlines and jumping ahead of the existing crews there. So, instead of just keeping Germanwings, Lufthansa will now transfer these people to the new regional airline, because it can probably do whatever it wants there.
And that is the theme of this. As CEO Carsten Spohr proudly explained, there are scope clauses in place on CityLine that were negotiated with labor. But Lufthansa has the right to start up a new airline that’s completely free of scope clauses. How this is legal or makes any sense is completely beyond me. What’s the point of a scope clause if it’s so easy to get around?
In the end, Lufthansa is just playing the same game it always plays. It is trying to engineer the most perfect airline group it can through overly complex machinations that will probably just be unwound at some point in the future, but not before angering its employees.