Turkish Airlines and Lufthansa, still allies?

Turkish Airlines (THY) has objected to a decision from Germany’s Lufthansa taken in a Dec. 12 Vienna board meeting of Star Alliance, which both companies are members of, THY sources confirmed yesterday. A spokesman for THY told the Hürriyet Daily News that they thought what Lufthansa was trying to do was "not fair" and not in harmony with the alliance’s “spirit of cooperation.”

The THY reaction comes after a recent statement by Lufthansa that it plans to end the current codesharing agreement by the end of March 2014, and to reduce the frequent flyer miles accumulation of Turkish passengers on Lufthansa services to 25 percent. Lufthansa say the agreement with THY is no longer profitable for them.

Such a plan would have a deterrent effect on all Star Alliance passengers using Turkish Airlines, despite the CEO of THY, Hamdi Topçu, stating that his company does not think it will be affected very much." Topcu says their objection is "a matter of principles." Star Alliance is one of the three big airline clubs in the world, which link their resources, routes and capabilities with each other in order to compete better. The other two are SkyTeam and OneWorld. 

But why on earth would Lufthansa, one of the best known airlines in the world, think its interests are put in jeopardy by its partner Turkish Airlines?

The answer lies in the aggressive growth of THY over the past 10 years. The company has increased its turnover from $1.5 billion in 2003 to $14 billion in 2013, its number of planes from 61 to 233, its number of destinations from 101 to 244 (as of yesterday, thanks to a new route to Chad). It is now the world’s number one in terms of direct flights to the most destinations. From Istanbul, where it is based, the frequency of flights to those destinations has increased too. Every day there are three flights to New York, five to Moscow, and eight to London.

”When we opened our route to Houston, people teased us” Topçu said. “But as soon as the second flight was added, we were fully booked. Now it is our best business class flight. All Texans travelling to the Middle East fly with us, since our service quality is superior to many airlines in the world and our ticket prices are competitive.”

From Istanbul, New York is a 10 hour flight west. The same time east is Beijing, and the same time south is Cape Town. To have direct flights to almost everywhere from Istanbul was a major factor in the decisions of some international companies to move their regional offices to the city. This led to special deals with THY, including a number of German companies.

The unique geographical location of Istanbul caused THY to restructure its flights, and to focus on long range destinations and buy bigger planes in 2010. Then problems started to surface with Europe’s traditional airlines. As long as THY was busy only with regional flights and was leaving long range flights to its elder sisters in Europe, such as British Airways or Air France, there was no direct competition. But when German passengers started to fly with THY to, for example, Hong Kong or Tokyo, and spend the flyer miles they collected from Turkish Airlines on domestic Lufthansa flights; and with THY now having direct flights to 12 German cities (planned to go up to 17 next year); and with 30 percent cheaper ticket prices on average, things started to turn sour for the German carrier. 

The row is not only about miles, ticket prices and market shares. The European Union took special precautions in order not to let some national airlines be sold to companies of non-EU states. THY's plans to buy Polish Airlines was stopped after that. The attempts of the Portuguese to sell their national carrier to Turkish Airlines also failed because of that legislative barrier. 

Will the problem be solved in a future Vienna board meeting of the Star Alliance? Perhaps it won't be so easy. The Lufthansa-THY row is an example showing that the competition in air travel today is nothing less than political competition too.