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Aviation

Lufthansa launches new budget airline to keep costs in check

German carrier Lufthansa has announced it will pool European flights with its Germanwings budget carrier after a re-launch of the low-cost airline in 2013. The move comes as Lufthansa grapples with mounting costs.

Lufthansa's new low-cost carrier would have about 90 planes and start operations in January 2013, the German airline group said in a statement released late on Wednesday.

The new division, whose name has yet to be decided, was scheduled to run all domestic and European short-haul flights outside of Lufthansa's main hubs Frankfurt and Munich.

Lufthansa Chief Executive Christoph Franz said he expected "significant efficiency gains" from the new budget carrier, which would be based at Cologne-Bonn Airport.

"Our aim is to once again fly these services profitably under the umbrella of a single company," Franz said.

In Germany and Europe, the German airline is facing stiff competition from low-cost carriers such as Ryanair and Easyjet. Under a major restructuring program, Lufthansa aims to save 1.5 billion euros ($1.94 billion) by 2014, slashing more than 3,500 jobs.

However, the airline saw net profit slump 24 percent to 229 million euros in the second quarter of 2012, and is currently locked in a fierce labor dispute with its cabin staff, who demand a pay rise of 5 percent and guarantees against outsourcing.

Lufthansa shares gained significantly in early trading Thursday, as investors welcomed the launch of the new budget airline.

Robert Czerwinsky, analyst with DZ Bank, rated the airline's shares as a clear buy.

"The launch of the airline in the face of strong opposition from labor unions means good news for investors," he told news agency Reuters.

uhe/sej (Reuters, AFP, dapd)

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