AsianAviationGossip: Lufthansa ends Codeshare partner with Turkish Airlines.. Why?

Lufthansa of Germany has decided to terminate its code-share partner with its fellow member of Turkish Airlines. The decision was made because of decrease in demand of codeshare between Lufthansa and Turkish Airlines and structural costs. According to various media [5] reported that Lufthansa losing its customers as customers (especially Germans) are preferably to fly on Turkish Airlines to Turkey. However, according to both official stated that, although the codeshare agreement is suspended, both airlines are working together, such as the airlines are co-founder of Turkish-low cost airlines, SunExpress. There are many factors, why German/Lufthansa’s choose to fly with Turkish Airlines over Lufthansa

Number of Destinations. Based on Star Alliance’s electronic timetable[1] shows that, Turkish Airlines serves more frequencies and destinations (from Istanbul Antarturk/ Sabiha – Gocken Airport) than Lufthansa. Besides serving to Frankfurt and Munich, Turkish Airlines also operates to cities in Germany such as Berlin (Tegel), Bremen, Dusseldorf, Friederichshafen, Cologne/Bonn, Hamburg, Hannover, Leipzig, Nuremberg and Stuttgart. In addition, Turkish Airlines is also operates flights from other hubs in Sabiha Gocken and Ankara Esboanga International Airport to German cities. Lufthansa is mainly operating flights to Turkey from its main hubs in Frankfurt Am Main and Munich. Figures 1a and 1b show the routes served by Turkish Airlines and Lufthansa between Germany-Turkey.

Figure 1a: Turkish Airlines route networks between Germany-Turkey

Figure 1a: Lufthansa route networks between Germany-Turkey

From Figure 2 shows that, Turkish Airlines dominates of Germany- Turkey air traffic by 78% of total seats capacity as compared to Lufthansa. Thus, it reflected to the previous point, which is Turkish Airlines serves more destinations in Germany. Moreover, the airline is also offers more frequency than Lufthansa. Besides that, in some routes from Istanbul – Germany, Turkish Airlines utilize wide-body jets. For example, Istanbul(IST)-Frankfurt (TXL)/Dusseldorf(DUS), Turkish Airlines use Boeing 777-300 ER and operate twice weekly on each route. (See table 1 for airlines' frequencies between Germany - Turkey on appendix BELOW)

Figure 2: Percentage of Turkish Airlines' and Lufthansa's seat capacity on Germany-Turkey air traffic pie chart

Turks people in Germany[2]. According to Wikipedia.com, there are more than 4 million Turks (with/without German citizenship) living in Germany which forming 4-5% of total German population. Moreover, the website also mentioned that large – scale migration of Turks to West Germany during economic miracle in 1960 and 1970s. During this era, the West Germany government was facing labour shortage problems. Thus, the government negotiated with Turkish republic to supply Turkish workers to fill void especially work in the factories. In addition, currently the German Turks living in Germany are already three or fourth generations. Thus, most of German Turks choose its native airlines rather than Lufthansa.
Fares. By comparing from both airlines fare on Economy (From Istanbul – Frankfurt on 31 January 2014), the fares on Turkish Airlines offer 21.5% less than Lufthansa. In other words, the fare on Turkish Airlines is much cheaper than Lufthansa. (Turkish Airlines- €128 and Lufthansa €168). Thus, this is the main reason most passengers choose to fly on Turkish airlines[3].
Inflight Services. Turkish Airline inflight services are reportedly better than Lufthansa. One element of inflight services are catering services. Turkish Airlines has also improved its catering service in all cabin classed as the airlines established with DO & CO. Moreover, the airline has also launched new Chef – On board service on First and Business class passengers. Giving additional values, attract customers to fly on Turkish Airlines[2].
Connections. Istanbul-Kamal Antarturk airport is strategically positioned between Europe and Asia or Africa. Turkish Airlines’ hub in Istanbul is naturally and strategically located between Asia and Europe. Moreover, Istanbul is also nearer to the Africa continents. Since 2010, Turkish Airlines has launched more destinations in five continents from its hub in Kamal-Antarturk Airport. Moreover, the airline expands its operation in Sabiha-Gocken Airport which is positioned in Asia-side of Istanbul. Turkish Airlines has added several main European cities from Sabiha-Goken Airport. Anyhow, since Istanbul-Kamal Antarturk nearly congested, Turkish government has decided to build new airport located nearer in Arnavutköy district of Istanbul (in European side of Istanbul and located nearer to Balkan sea). However, the completion of the new airport was reported to complete in 2017[2,3].

Reduction of FFP

Officials at Lufthansa, have been studied their partnership with Turkish Airlines for many months and trying to decide either Lufthansa gain benefits or not. In addition, Lufthansa officials also worried that Turkish Airlines is too close geographically to Germany and so competes for many of the same passengers without offering Lufthansa access to markets that it can’t reach on its own..

Besides that, Lufthansa plans to reduce its Miles & More frequent flyer status credits on Turkish Airlines. According to ausbt.com, Lufthansa’s frequent flyer holders will receive 100% rate on members on Star Alliance. However, starting from 1 January 2014, the scheme will reduce to 75% on all – Turkish Airline’s flights only. Moreover, Lufthansa’s other unit in Austria and Switzerland – Austrian Airlines and SWISS are planning to pull out from their code-share partnership with Turkish Airlines. The termination will begin from March 2014 [4, 5].

Terminate code-share will solve the problem?

Personally, I would say that the suspension of codeshare operation between Lufthansa and Turkish gives impact especially for Star Alliance FFP and customers. Slashing percentage of gaining points is really bad idea! If this continuously happened, both airlines will lose their customers. Each of these airlines has its own potential and advantages to grow and they need to each other. Lufthansa is the largest airlines in Europe after Air France-KLM group, has focusing its operation in Western Europe. Meanwhile, Turkish Airlines although has large network to European destinations, the airline however is less presence in secondary cities in western region region as compared to Lufthansa. Thus, both airlines are actually needed to each other to fill void and form large route networks in European continents.

How to solve the problems?

1. Cancel the termination of codeshare agreement

2. Lufthansa needs to add more destinations in Turkey from its hubs. In addition, Lufthansa needs to improve cabin services and reduce cost.

3. Both airlines need to sell each other seats on their website with same and agreeable price, in order to avoid competition and gain win-win situation (this would apply on overlapping routes from Munich/Frankfurt to Istanbul).

4. Lufthansa may resume code share on Turkish Airlines’ flights from Istanbul – Leipzig, Cologne/Bonn, Stuttgart, Hamburg/ Hannover/Berlin/Friederischafen.

Conclusion

In conclusion, based on points that mentioned in factors such as numbers of destinations, fares and so on, show that Lufthansa needs to have partnership with Turkish Airlines. The termination of codeshare and reduce points by flying on Turkish Airlines would not solve Lufthansa’s financial problems. Lufthansa operates more costly than Turkish Airlines, and that’s the reason passengers preferable to fly Turkish Airlines. Moreover, Turkish Airlines is operating nonstop from its hub in Istanbul to secondary cities in Germany. As mentioned, in order to gain win-win situation, Lufthansa need to retain its codeshare on Turkish Airline’s flight from Istanbul to secondary German city and sell each other seats on their website with the same and agreeable price (this would apply on overlapping routes from Munich/Frankfurt to Istanbul).

Appendix

Table 1: Turkish Airline’s and Lufthansa’s frequencies on Germany - Turkey .

Route	Turkish Airlines	Lufthansa
Istanbul (IST) – Munich	28	21
Istanbul (IST) – Frankfurt	28	22
Istanbul (IST) – Berlin/Tegel	28
Istanbul (IST) – Bremen	7
Istanbul (IST) – Friederichshafen	4
Istanbul (IST) – Düsseldorf	28
Istanbul (IST) – Cologne/Bonn	7
Istanbul (IST) – Hannover	14
Istanbul (IST) – Leipzig	7
Istanbul (IST) – Hamburg	21
Istanbul (IST) – Nuremburg	7
Istanbul (IST) – Stuttgart	21
Istanbul (SAW) – Frankfurt	7
Istanbul (SAW) – Düsseldorf	7
Ankara – Munich		14
Ankara – Frankfurt	3
Izmir – Munich	7
Total frequency	217	64
Grand Total		281