Lufthansa warning over ‘competitive disadvantage’ to Gulf airlines

Europe’s second-biggest airline has revisited the stiff competition it faces from the Gulf as its airlines continue to expand.

Carsten Schaeffer, a regional vice president of sales and services at Lufthansa, said taht taxes on aviation and fuel are among the competition challenges they face. Adam Berry / Getty Images
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Lufthansa, the German airline, has reignited the debate over competition in Europe’s crowded aviation sector as Arabian Gulf carriers step up their expansion across the continent.

Europe’s second largest carrier, which is embroiled in a pay row with pilots threatening to strike at home, faces increased competition from route expansion by regional carriers.

“We all know that one of the competitive benefits of the Gulf carriers is the environment that was created by the governments here,” said Carsten Schaeffer, a regional vice president of sales and services at Lufthansa, during an event in Dubai on Wednesday. “If you compare that to the European environment, it is much more difficult to operate. We think this gives us a competitive disadvantage.”

Mr Schaeffer cited taxes on aviation and fuel among other challenges they face.

“We have to tell our politicians, and specially in Germany and Austria and around Europe, that we want to have good competition for the customer,” he added.

Said Aage Dünhaupt, Lufthansa’s spokesman: “Aviation is seen in Europe as a golden cage where you can pull out money.”

Gulf carriers including Emirates Airline and Etihad Airways are adding European routes amid rising competition between carriers from the region and beyond. The budget airline Ryanair on Monday blamed intense competition after it reported its biggest third-quarter loss in five years.

At the same time, emerging aviation hubs such as Dubai, Doha and Abu Dhabi are picking up increasing market share at the expense of more established European hubs, including London Heathrow and Paris Charles de Gaulle.

Saj Ahmad, the chief analyst at StrategicAero Research, said that while some European carriers “love to blame” Gulf airlines, they seldom consider their own inefficiencies.

"EU airlines thrived for decades on state aid and languish today because of their inefficient and outmoded structures," said Mr Ahmad. "Airlines like Emirates are industry bellwethers because they have world-class management and operate as a paragon of airline efficiency."

Emirates has long refuted claims that it benefits from unfair subsidies. In a 139-page report published in 2012 it claimed that more than 18,000 jobs in Germany were dependent on the economic activities of the carrier, while the value of money spent by incoming tourists carried by Emirates exceeded €1.6 billion (Dh7.94bn) each year.

Mr Schaeffer said that Emirates was regarded as more of a direct competitor in Europe than Etihad, despite the recent expansion of the Abu Dhabi-based carrier through its equity alliances,

“It’s very interesting to see how Emirates is approaching the business and approaching a continent like Europe and how Etihad does it,” said Mr Schaeffer.

Etihad’s growth has been defined by the acquisition of minority stakes in other carriers. These include Air Seychelles, Air Berlin, Virgin Australia, Air Serbia, Ireland’s Aer Lingus, India’s Jet Airways, and Etihad Regional — formally known as Darwin Airline.

On Sunday, Etihad said it had entered the final phase of due diligence for a possible investment in Alitalia, the loss-making Italian carrier.

Emirates, which flies to 34 destinations in Europe, has said that it would double its flights to Dublin later this year. It is also flying its A380 aircraft to Zurich.

Meanwhile, Etihad, which flies to 32 destinations in Europe, plans to start daily non-stop flights to Zurich. Etihad Regional has also said it would operate four flights per week between Geneva and Stuttgart in Germany

“Gulf network carriers are serious competitors in many markets,” said Will Horton, an analyst at the Centre for Aviation. “They often serve more major markets with a better product and greater efficiency due to fleet, labour and the superior economics of long-haul to long-haul transfers.If they are a threat they are also an opportunity for a partnership, as Air France and many other carriers have shown.”