Lufthansa, the German national carrier, cut the cost of its domestic flights yesterday in a move designed to head off a challenge from Ryanair.
The airline plans to sell 10 per cent of tickets on domestic flights, up to 200,000 seats, for €98 including all taxes. Flights bought over the internet will cost €88.
"Customers looking for cheap prices need no longer just look to Ryanair," said Mr Ralf Teckentrup, head of Lufthansa network management and marketing.
The carrier hopes the new pricing strategy will primarily win over customers from Ryanair and Deutsche Bahn, the national train company. "We don't just want to cut our prices but also improve our business model," he said.
More than 94 per cent of long-distance traffic in Germany is by road or rail, something Lufthansa believes its pricing system will change. The low-price tickets will not be subject to the usual "Saturday night stay" rule and advance booking conditions. Customers will also earn air miles and arrive in major airports rather than the regional airports favoured by Ryanair.
Lufthansa hopes the move will increase capacity by 5 per cent, particularly on weekend and evening flights when planes run at a loss. The company plans to extend the pricing model to Britain and Turkey in October, followed by other European destinations.
It is a surprising about-face for the national carrier, months after the company's chief executive said Lufthansa was "not interested" in competing with Ryanair.
Its first foray into the low-fares market, offering a cheap fare to Frankfurt, was outlawed by Germany's Federal Cartel Office, which said Lufthansa was selling tickets below cost to bankrupt a low-cost competitor on the route.
But the national carrier faces growing competition in the German market from TUI, the world's largest travel agent, which plans to introduce its own low-cost airline.
"Naturally you have to react to the actions of your competitors," said Mr Teckentrup yesterday.
Deutsche BA, the German subsidiary of British Airways that is likely to be swallowed by EasyJet, called the offer "a bad copy of the pricing system we introduced in March".
Lufthansa will step up its war on Ryanair in the autumn when it introduces its own low-cost airline called "germanwings".
Meanwhile, the two companies locked horns once again in a Cologne court yesterday. The airlines disagree over whether Ryanair's statement that "Lufthansa does not want competition" in an advertisement is a breach of Germany's unfair competition act.
A Lufthansa spokesman said the company was confident of winning the latest court battle with the Irish airline. "The judge in court yesterday asked Ryanair lawyers why they had come before him again, that he was not going to change his opinion," said Mr Thomas Jachnow, press spokesman for Lufthansa.
A ruling on the matter is expected on September 17th.
