Lufthansa is searching for a second Asian partner but the airline's new president and chief operating officer, Frederick Reid, says he remains committed to the relationship with struggling Thai Airways International.

Further development of 'a highly developed alliance system' is one of the three issues Reid identified as 'pressing' in an exclusive interview with Airline Business. The other two areas he will concentrate on when he takes over his new role from 1 April are costs and the opportunities created by full deregulation in Europe.

The adoption of US-style deregulation is transforming the face of European airline management. Reid was the second US citizen appointed to head a major European airline following a management shakeup at Swissair in the same week (see story opposite). But unlike his Swissair counterpart, Reid is a five year 'veteran' of Lufthansa and was previously former chief operating officer of the passenger division. Jürgen Weber remains chairman.

Reid denies any concerns about keeping Thai Airways as an alliance partner, despite the postponement of plans to build a new Bangkok airport and the prospects of a new home-grown competitor (see story p20). 'I would like to dispel any notion that we feel Thai is a shaky partner,' says Reid. However, he says the search for a second Asian partner is necessary because of the fragmented nature of the market. 'Asia is not as homogeneous as North America and this is an issue we discuss with Thai openly,' he says, adding that Lufthansa 'may look for new partners in northeast or southwest Asia.'

As a German company, Lufthansa suffers a cost disadvantage over many of its European and US rivals, and Reid says he has set an optimistic target of cutting costs by 4 per cent from the current level of 9.9 cents/ASK and is looking for a further 4 per cent reduction in 1998. He says labour costs are not the main target and points out that the current dispute with the pilots is less financial and more focused on concerns about length of contract and the encroachment of regional jets.

In Europe, Reid is assessing potential cabotage opportunities created by deregulation and is looking at the Spanish, Italian and French markets. Lufthansa is coming under more pressure in the domestic market, where private operator Eurowings is set to enter Frankfurt-Berlin - Lufthansa's last remaining monopoly trunk route - with a four-times daily ATR72 service.

The Dortmund-based carrier will operate the route as a codeshare with Air France. Eurowings believes it has found a market niche operating into Berlin/Tempelhof. It would be hard pushed to compete with Lufthansa's shuttle service into Tegel with A310s and A321s, but Eurowings chairman Reinhardt Santner says he plans to put a BAe146 onto the route from the winter schedule. The entry of Euro-wings coincided with a non-binding ruling by the German cartel office that Lufthansa should lower its highest fare on the route by DM200 (US$116). Lufthansa will appeal the ruling but says the entry of Eurowings with its highest one-way fare only DM21 lower than Lufthansa's will help its case.

Elsewhere, Reid denies the sale of 19.7 per cent of its total 39.7 per cent stake in Lauda Air to Austrian Airlines will end the cooperation with Lauda. But another source at the carrier says the conflicting alliance groupings will make cooperation difficult.


Source: Airline Business