Why Did Lufthansa Partner with Cathay Pacific?

Lufthansa and Cathay Pacific announced a partnership yesterday that has left many asking questions.

I outlined details of the partnership here, but the elephant in the room remains: why didn’t Lufthansa with a Star Alliance partner like Singapore Airlines or Air China that also serve Australia and New Zealand? Spoiler: they already do.

Star Alliance to Australia and New Zealand

In addition to Auckland-based Air New Zealand, a number of Star Alliance partners in Asia serve New Zealand and Australia:

• Singapore Airlines
  • Auckland
  • Christchurch
  • Wellington
  • Adelaide
  • Canberra
  • Sydney
  • Melbourne
  • Brisbane
  • Perth
  • Cairns (on Silkair)
  • Darwin (on Silkair)

• Air China
  • Auckland
  • Melbourne
  • Sydney

• ANA
  • Sydney

• Asiana
  • Sydney

• EVA
  • Brisbane

• Thai Airways
  • Auckland
  • Brisbane
  • Sydney
  • Melbourne
  • Perth

Lufthansa Already Partners with Air China, ANA, and Singapore

Lufthansa already has not only codeshare, but joint venture agreements in place with Air China, ANA, and Singapore Airlines.

For example, Lufthansa and Singapore share revenue on flights between Frankfurt/Munich/Zurich and Singapore. Lufthansa codeshares on all Singapore’s flights to Australia and New Zealand while Singapore codeshares on the following Lufthansa flights–

You can see, the partnership is already deep. While the Air China and ANA JVs focus on their domestic and regional networks instead of Australia or New Zealand, the notion that Lufthansa somehow abandoned its Star Alliance partners is false.

Three Reasons Lufthansa Partnered With Cathay Pacific

So why Cathay Pacific? Why not another partner?

1. Both carriers are hungry for additional business and see value in this partnership

Cathay Pacific reported poor financial results last year (due to fuel hedging) and Lufthansa’s is struggling to compete in a crowded field. Think of it this way: this relationship is about connecting passengers. Many of Cathay Pacfic’s passengers don’t just fly to CX gateways in Europe, but beyond. With the Lufthansa Group’s vast network of flights from hubs in Vienna, Frankfurt, Munich, and Zurich there is great opportunity for connecting passengers. The oneworld alliance is weak in Central Europe: Air Berlin is dying. Lufthansa figures, if these Cathay longhaul passengers have to connect somewhere, why not on us?

Cathay Pacific employees a similar reasoning. Lufthansa doesn’t serve Australia so why not try to collect some of that connecting traffic instead of sending it all via Singapore? After all, Lufthansa sends an A380 to Hong Kong each day and many of the passengers are continuing south. If they are loyal to Lufthansa but we can offer a slightly better timed schedule to Australia or New Zealand than Singapore, we both stand to gain. In fact, if we show them how good we are, maybe they’ll fly Cathay Pacific all the way next time.

2. Star Alliance’s presence is secondary in the busy Hong Kong market

While the bulk of the Star Alliance carriers fly into Hong Kong, no Star carrier is based there. This inherently lends itself to cross-alliance cooperation and does not come at the expense of another national partner. While Singapore would rather not let passengers have the option of connecting via HKG, the relationship is not deeply undermined just because of additional choice. It’s not like Lufthansa is partnering with Korean Air at the expense of Asiana…

3. Both carriers are fighting the same competition

While Cathay Pacific and Lufthansa may themselves be battling on a limited number of routes, they face a common competitive pressure: fierce competition from Gulf and low-cost carriers. This closer relationship isn’t the manifestation of “if you cannot beat them, join them”. Instead, it is a concerted effort to provide easy connectivity and high-quality service in an effort to offer advantages that its competition cannot, namely keeping everything one ticket with easy transfers and reciprocal frequent flyer benefits.

Do Alliances Matter Anymore?

Yes, alliances still matter. I understand why you might think otherwise looking at the tangled web of partnerships that exist today. Lufthansa just partnered with Etihad and now Cathay Pacific. Singapore partnered with Virgin Australia. Cathay Pacific with Air Canada. Qantas with Emirates. The list goes on.

The point is, and always was, that airlines will do whatever makes the most sense for them. But this latest Lufthansa – Cathay partnership merely shows the evolving role of alliances in a world of connectivity and fierce competition.

Alliances still provide a beacon of stability, staple of quality, and promise of consistency that consumers greatly value. The ability to upgrade on partners, access partner lounges, and collect and redeem miles while flying on a breadbasket of carriers is one the greatest marketing triumphs in aviation history. While joint-venture agreements and side partnerships will only increase, alliances still provide great value to consumers and carriers.

CONCLUSION

Many asked why Cathay Pacific instead of Singapore yesterday. The answer is clear — Lufthansa wanted both, it made sense to pursue both, and alliance loyalty does not mandate monogamy. Partnerships benefit customers and both Cathay Pacific and Lufthansa customers will see greater value in more choice.

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