Lufthansa Faces Increased Competition in Germany & Portugal

Deutsche Lufthansa is facing increased competitive pressure on two fronts: a new route granted to Emirates in Germany and a bidding war for TAP Air Portugal. The German government has approved Emirates to fly to Berlin Brandenburg Airport (BER), a move Lufthansa publicly opposes, citing concerns over competitive distortions and the shifting of economic value.

The agreement, reached following a visit by the President of the United Arab Emirates, allows Emirates to add a fifth German destination to its network, limited to a maximum of seven flights per week. The government stipulated that Emirates can only operate flights between Germany and the UAE, prohibiting connections to third-party countries. Lufthansa argues this will divert revenue and jobs to the Gulf region and exacerbate issues with domestic routes connecting German metropolitan areas to major hubs. The airline’s statement indicated the decision would further “intensify competitive distortions.”

Separately, Lufthansa is locked in a contest with Air France-KLM for a 44.9% stake in TAP Air Portugal. Portugal’s government expects to decide on the winning bid in mid-October, after requesting both parties to revise their offers. An additional 5% of TAP shares are reserved for employees, with the Portuguese state retaining a majority holding. Lufthansa has a history of acquiring European airlines, fully owning carriers in Switzerland, Belgium, and Austria, and currently holds a minority stake in Italy’s ITA Airways with an option to increase it to 90%.

The approval of Emirates’ Berlin route and the TAP Air Portugal bid underscore a shifting landscape in European air travel. Lufthansa’s objections to the Emirates expansion, while unsuccessful, highlight its strategic concern about Gulf carriers expanding their presence within the European market. The outcome of the TAP Air Portugal bid will be pivotal, potentially giving Lufthansa a significant foothold in the Iberian Peninsula or allowing Air France-KLM to strengthen its position in Southern Europe.

The Emirates agreement limits the airline to seven weekly flights and restricts connections to third-party countries, which is a condition designed to protect Lufthansa's hub-and-spoke model. The TAP Air Portugal situation, however, is more straightforwardly a competition for market share. The number of passengers, revenue, and profitability changes within TAP Air Portugal over the next reporting period will be the most telling indicators of the success of any acquisition.