Lufthansa to Merge Germanwings and Most Intra-EU Flights

Lufthansa has announced plans to merge low-cost carrier Germanwings and the short-haul Lufthansa Direct Services in an overall reorganization that will allow the carrier to save 1.5 billion euros and try to remain competitive against foreign carriers.

The merger will take effect on January 1, 2013 and will impact intra-EU flights not originating from Lufthansa’s Frankfurt or Munich hubs. Lufthansa CEO Christoph Franz said in a statement that the changes would improve efficiency and allow profit in the growing short-haul European market.

The announcement follows labor disputes between Lufthansa and flight attendant union Unabhängige Flugbegleiter Organisation where three days of striking left hundreds of thousands of passengers stranded across Germany. Lufthansa’s use of contract flight crews was a primary sticking point with the UFO, and was the concession that put a six-week damper on striking and brought both parties back to the negotiation table, although talks are still ongoing.

Several European carriers are feeling a similar pinch with rising fuel and labor costs, as well as competition from low-cost carriers such as Ryanair and Easyjet. Lufthansa bought Germanwings in 2009 as a no-frills short-haul carrier and plans to use the brand for these flights moving forward.