Tom Gill / London

German regional carrier Germania and German tour operator group Preussag are considering the launch of a low-cost carrier to challenge low-fare competitors in the German market.

A senior source close to the talks between the two companies confirms a recent report in German magazine Der Spiegel that they will form a low-fares carrier in which Germania chairman and managing director Hinrich Bischoff will hold an 80% stake and Preussag will take 20%.Preussag's existing airline group includes German charter airline Hapag-Lloyd and Britannia Airways of the UK.

Germania launched a low-fares service in November from Frankfurt to Berlin and Cologne to Berlin. According to the report, the joint company would take on these services and five of Germania's eight-strong Boeing 737 fleet, expanding its routes and increasing the fleet to 50 aircraft in the next three years. "The news is true," says the source.

Preussag, shortly to be rebranded TUI, says "no decision has been made yet" on the final shape of the venture, or whether or not it would enter the budget market at all, and says a decision will be announced in the "next couple of weeks".

At Preussag's annual general meeting last week, executive board chairman Michael Frenzel confined his comments on the low-cost market to generalities. "In Europe in the next 10 years, an annual growth of over 10% is forecast for the low-cost carriers. We want a share in this and are evaluating our potential entry in this market," he said.

Besides the budget fares service, Germania operates charter flights for Preussag's German tour operator TUI as well as charter flights for other German and Turkish tour companies.

German airlines are gearing themselves up to face the threat of foreign no-frills carriers. Ryanair is opening up domestic services in Germany, while in May, EasyJet secured an option to buy Deutsche BA, the British Airways' German subsidiary that has rebranded itself as a low-fares domestic German airline.

Source: Flight International