The strategic split of a giant: Why Lufthansa created a new airline

Countries & Cities · Published 14 October 2026 Swipe more like this →

In short: Lufthansa didn't just launch a new subsidiary; it engineered a structural bypass. By creating Lufthansa City Airlines, the group sought to insulate its core brand from rising labor costs while maintaining a competitive short-haul network. It is a masterclass in corporate restructuring that sparked a fierce industrial dispute.

Founded in 2022 and beginning operations on June 26, 2024, Lufthansa City Airlines was designed to bolster the group's German hubs at Munich and Frankfurt. The airline serves as a feeder network for long-haul growth, utilizing aircraft like the Airbus A319 and A320neo. While the public rationale focuses on competitiveness, the move was deeply tied to labor economics. CEO Carsten Spohr noted that while the new airline would have the second-highest pay agreement in Germany, it was designed to save the group approximately one to two million euros per year compared to mainline operations.

The creation of the carrier became a flashpoint for industrial conflict with pilot and cabin-crew unions. The core dispute centered on the replacement of Lufthansa CityLine. Management argued that CityLine could no longer operate larger aircraft due to a 95-seat restriction in collective bargaining agreements, while its smaller fleet was reaching technical limits. However, unions like Vereinigung Cockpit accused the move of being an impermissible circumvention of existing contracts, arguing that the airline was a vehicle to bypass higher wage standards and secure concessions on leave, pay, and roster stability.

The transition reached a definitive conclusion in April 2026. After negotiating a three-year collective labor agreement with the ver.di union, Lufthansa Group permanently removed all 27 operational aircraft of Lufthansa CityLine from its program on April 18, 2026. The group cited high kerosene costs and the technical age of the remaining Canadair jets as primary drivers for the retirement. By the end of 2026, the new airline's fleet is projected to reach 25 aircraft, including the introduction of the Airbus A220.

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