The Germans are coming!

It appears as if Lufthansa has winds in its sails, or more appropriately, a nice tailwind. The German flag carrier has announced that its partnership with NetJets will cease in mid-2008. The agreement between the carrier and the fractional ownership firm was signed in 2005 and proved that there is a market among LH's high yielding passengers for the added flexibility of executive charter. However, the agreement did not take shape according to plan. Rather than feed passengers into Frankfurt, Munich, and Zurich from outlying locations, 70% of passengers were using the agreement for intra-EU flights. This must have been eating into NetJet's own business and LH acknowledged that demand exceeded supply at times. Now the German carrier will establish its own fleet for executive charter. This is an interesting development as it deviates from the carrier's core competence and product. As a group Lufthansa has been active in nearly all forms of air travel, from scheduled services, cargo, regional flying, and now to executive charter. It is an interesting digression from Virgin's concept as a middle-man for charter services, but no fleet ownership. It will be interesting to note how this adventure will compete with the likes of the VLJ charter concept. Smaller, upstart firms may be able to provide customers with more intimate service, while Lufthansa can promote its extensive global network and entwine the offerings from various companies.

Lufthansa's accounts are booming and the carrier has also just announced an acquisition of 19% of LCC JetBlue. This is the largest investment in the US by a foreign carrier of an LCC. It should be regarded as a testament to JetBlue who straddle both the LCC and FSC borders. Although the company has been struggling operationally and financially, it does have the air of an LCC among the market, but it is attractive enough for Lufthansa to invest in the airline. It remains to be seen whether this purely a financial investment, similar to Iceland Air's acquisitions of easyJet and American Airlines shares, or it is more strategic in nature. Lufthansa already has a close relationship with United Airlines, that competes with JetBlue both with its own brand and with Ted. JetBlue, on the other hand, will soon announce a tie-up with Irish Aer Lingus. One must complement JetBlue on its innovative strategies in the industry