Dealing with low-cost competition in the airline industry (B):

The foundation of Germanwings

Introduction

Three years later, it seemed that Lufthansa’s decision to create

a low-cost subsidiary called “Germanwings” was a success. The Lufthansa’s board

of management had considered various options to confront the disruptive

business model of Ryanair, easyJet, and others. After looking carefully at the

key building blocks of this model, they decided that Lufthansa could certainly

apply the model to a largely independent low-cost subsidiary and thus tame the

pressure of these voracious competitors.

The decision

A decision was made in the summer of 2002 to convert an indirect

subsidiary of Lufhansa, “Eurowings Flug GmbH,” into a low-cost airline under

the brand name of Germanwings. That brand name used to belong to a German high-quality airline that went bankrupt in

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