Lufthansa Sees Stability in Egypt; Plans Double-Daily Service Next Summer

Deutsche Lufthansa AG said there’s still scope to add services to the Middle East, with Egypt and Iran among potential growth markets, even as Gulf carriers led by Emirates flood routes with vast fleets of wide-body planes.

Egypt is stabilizing following years of unrest, with Lufthansa planning to switch to a double-daily service between Frankfurt and Cairo next summer and to restore flights from Munich, Tamur Goudarzi Pour, the airline’s vice president for the Middle East, Africa and Southeast Europe, said in Dubai.

Iran and Saudi Arabia are also candidates for expansion as Lufthansa seeks out viable routes, Pour said in an interview, while warning that capacity growth of 15 percent or more across the Mideast could undermine the profitability of some markets. The German airline has already decided to halt services between Frankfurt and Abu Dhabi from next summer, it said in October.

“If it continues at this rate by several players at the same time, we’d probably see the need for further adjustments at some point,” Pour said. Still, Cairo is “coming back” and larger economies in his management region including Nigeria and South Africa, as well as Iran and Saudi Arabia, hold promise, with growth in the higher single-digit range targeted, he said.

Lufthansa aims to retain some passengers bound for Abu Dhabi by increasing capacity on flights to nearby Dubai through a switch this month to two-class Boeing Co. (BA) 747-400s from the current three-class layout, Pour said.

Hub Advantage

For Lufthansa, Gulf flights are essentially point-to-point operations, where profitability is determined by demand between two locations. By contrast, Abu Dhabi-based Etihad Airways PJSC and Dubai-based Emirates fill frights from their home bases to Europe predominantly with passengers changing planes from destinations across Asia, the Middle East and Africa.

Lufthansa will face a further squeeze later this month when Qatar Airways Ltd., the second-biggest Gulf carrier, deploys the first Airbus Group NV (AIR) A350 to enter service on the Doha-Frankfurt route — boosting capacity and luring travelers with an all-new model while reducing net fuel expenses.

Emirates is meanwhile continuing to seek access rights for flights to Berlin, while Etihad is awaiting the outcome of an application for code-sharing — or joint ticket sales — with Lufthansa rival Air Berlin Plc, in which it has a minority stake.

Source: Bloomberg