Lufthansa and Singapore Airlines limited JV

Travel News 01 Nov 2015

Lufthansa and Singapore Airlines groups have been forced to compromise their previous independence. One new strategy is to form a revenue sharing joint venture. This method of cooperation is becoming more common between Europe and Asia, having already been established in the trans-Atlantic and trans-Pacific markets. Most JVs were established to enhance a position of strength built on pre-existing solid footing. In comparison, Lufthansa and SIA are setting aside differences in this time of duress to respond to the Gulf carriers that have changed their business profoundly. The JV was signed on 11 November to operate routes between Singapore and Europe on a JV basis, expand codeshare ties and deepen commercial cooperation. The agreement also includes Austrian Airlines, SilkAir and SWISS. Elements of the agreement, including new codeshare services, will be introduced in the coming months. Other features require additional regulatory approval and will be implemented during 2016. The agreement includes the following:

• The carriers will operate Singapore-Düsseldorf, Singapore-Frankfurt, Singapore-Munich and Singapore-Zurich services under revenue-sharing arrangements;

• The airlines will cooperate in key markets in Australia, Europe and Southeast Asia, including coordinating schedules, offering joint fare promotions, aligning corporate programmes and exploring enhancements to frequent flyer programme ties;

• More than 20 new codeshare routes will provide Singapore Airlines passengers with access to and from points in Austria,Belgium, Germany and Switzerland via Frankfurt, Munich and Zurich. Lufthansa and SWISS will codeshare on Singapore Airlines and SilkAir services to destinations in Southeast Asia and the Southwest Pacific. The carriers' codeshare cooperation is expected to be expanded to additional destinations.

Although Lufthansa and SIA account for about 27% of non-stop Western Europe-Southeast Asia capacity, their share of flown passengers is around 13%. Emirates alone has 12%; adding Etihad and Qatar now has 27% of the market transiting via the Gulf. But SIA and Lufthansa are the only airlines operating non-stop service between their respective countries.

A Singapore-London passenger, for example, could go non-stop on SIA outside the JV or via a German/Swiss hub under a JV. Both airline groups will compete for the Kuala Lumpur-Amsterdam passenger.