Lufthansa responds to Air Berlin at new Berlin airport, but success far from guaranteed

As Berlin's airport fragmentation ends with a new airport to open in Jun-2012, Germany's two biggest carriers are pursuing different strategies for the long-awaited airport, yet the strategies are forcing each other to respond. Air Berlin dominates short-haul traffic from the capital yet has high costs and low yields, indicating its transformation from LCC to hybrid carrier has not been followed by the market, whose premium passengers remain with Lufthansa, who has long been under-represented in Berlin, Germany's largest city.

Air Berlin is banking on traffic feed, in particular from its oneworld members, to boost profitability, an outcome that may prove to be elusive as carriers continue to favour Frankfurt with its financial centre and accompanying premium traffic. Lufthansa will defend its market share from Air Berlin's chance of success with an equally ambitious measure: slashing costs by a third to better compete on short-haul traffic while continuing to ignore Berlin's long-haul traffic opportunities that Air Berlin has seized on. Each carrier wants the success the other has achieved, but neither are on a firm path to realise their ambitions.