Lufthansa ends any idea of buying Alitalia, warns of end of low cost fares, APD hits UK long haul again

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Lufthansa Group yesterday announced that it would no longer seek an investment in Alitalia as long as there was any involvement by the Italian Government or any entity it set up to manage its partial ownership of the airline.

The new Italian Government, a bizarre and unlikely to last mix of right-wing and left-wing political parties, is unlikely to sell off the whole airline, when it actually decides what its policy is.

Lufthansa also warned that 2018’s low price fare bonanza is basically impossible to sustain with sharply rising fuel costs, estimated to cost it $850m in 2019 and $900m more in 2020.

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Lufthansa are not the only ones warning that low cost fares are over, especially at the bottom end of the market. Norwegian’s CEO has been same the same thing, as the company finally gets to grips with cutting its aircraft purchases and concentrating on trying to make money.

Warnings on consolidation – which continues to dominate the theme of European airlines came from Ryan Air, Norwegian and Lufthansa. Ryan Air has already cut back Laudamotion’s bases, Lufthansa is reducing some capacity to the far east and China, as that market has weakened with a reduction in Chinese demand for overseas travel.

Lufthansa also stated it’s intention of continuing to be at the forefront of airline consolidation – still seemingly setting its eyes on Norwegian.

The UK market is still in limbo not knowing what’s happening with the Brexit arrangements and then having an inflation increase on Airport Departure Tax (APD), which outraged the entire long haul industry who had begged for a cut in Monday’s budget.

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Short haul (under 2,000 miles) will not see any increase, but the worlds highest aviation tax brings in $4 billion a year to the UK government. It will now cost £78 in Economy, £172 in Premium Economy £515 in business and first just in APD, never mind any other charges. Private jets will be charged £586 per passenger. The savvy UK traveller may find its a lot cheaper to fly anywhere via a stop in another country, that way you only pay the short haul tax which starts at £13 rising to £26, and £78 in business.

 

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