Lufthansa sees rapid growth of Gulf airlines slowing

Lufthansa believes the rapid growth phase of Gulf airlines is coming to end, which could help to ease some of the pressure in a highly competitive industry, its chief executive said on Wednesday.

Speaking after signing catering and maintenance deals with Abu Dhabi-based Etihad, Lufthansa CEO Carsten Spohr said there were signs Gulf rivals were reaching the limits of their recent growth.

“I’ll leave that to the airlines in this region but I think this industry needs to see a healthier relationship between (supply) and demand. And I am optimistic we will see this in the years to come,” he said.

Lufthansa has long been critical of the rapid growth of Gulf carriers, which include Emirates and Qatar Airways as well as Etihad, saying the fact they are state backed creates an unfair playing field.

Spohr said he “stands firm” on that view.

European airlines such as Lufthansa have been cutting costs and revamping their cabins to try to cope with competition from the Gulf carriers on long-haul routes.

But some Gulf carriers have recently also struck a more cautious tone. Etihad, for example, is reviewing its network of equity stakes in carriers Air Berlin, Alitalia and Air Serbia.

“The equity stakes continue,” outgoing Etihad Aviation Group CEO James Hogan said at the same event. “The chairman has been very clear that the investment in those equity airlines continues in terms of strengthening the partnership.”

Hogan and Spohr were speaking after Etihad signed a $100m deal to take catering services from Lufthansa unit LSG, and said it would explore options for maintenance services from Lufthansa’s Technik unit.

The catering deal is for four years and will see LSG provide services at 16 cities outside of Etihad’s hub at Abu Dhabi.

“I think finding smart partnerships, like Etihad has now done with us, and limiting growth … will play a bigger role in the next 12 months than in the last 10 years,” Spohr said.

The move follows a fledgling code share arrangement signed by the two airlines last year, agreed after Lufthansa said it would lease 38 crewed planes from Air Berlin, in which Etihad owns a 29 percent stake.

Lufthansa said on Wednesday they were working on further ways to cooperate, such as in cargo and on more code shares next winter.

“It is just the beginning of something which I could see becoming a significant size in the future,” Spohr said.