* Eurowings announces 32 new routes from Munich next year
* Eurowings more complex with Air Berlin, Brussels deals
* Investors worry integration may distract from cost cuts
By Victoria Bryan
BERLIN, Dec 21 Eurowings outlined plans for new
routes from Munich on Wednesday, maintaining its rapid expansion
but raising concerns that the budget airline owned by Germany's
Lufthansa is not paying enough attention to cutting
Lufthansa has made Eurowings its main focus in the battle
with market leaders Ryanair and easyJet for
leisure passengers in Europe and a vehicle for consolidation.
And it is set to become Europe's third largest low-cost
carrier after deals to rent 33 crewed planes from Air Berlin
and to take over Brussels Airlines lifts its fleet to
180 planes from 93 by 2018.
Eurowings said it would fly to 32 destinations from Munich,
traditionally a Lufthansa hub, from summer 2017, including
tourist destinations in Italy, Greece, Portugal and Spain, as
well as London and Paris.
CEO Karl Ulrich Garnadt also said Eurowings plans long-haul
routes from Munich from 2018. The airline, which also spans
Germanwings, already flies to destinations such as Cuba and
Thailand, but only from Cologne.
Experts are concerned the Eurowings structure is too complex
and that the integration of various different airlines could
distract it from bringing down its unit costs.
"They've made a big commitment to the Air Berlin wet lease
and the question is whether gaining that market share will be of
tangible value," independent consultant John Strickland said.
Eurowings aims to reduce unit costs to easyJet levels and
wants to bring them down to 5.8 euro cents by 2020, a 28 percent
reduction over 2015 levels. But analysts say this is not enough,
with easyJet at 4.39 cents in 2015 and Ryanair at 2.08 cents.
Lufthansa is also weighing up taking over the rest of
struggling Air Berlin, a source told Reuters, confirming earlier
German media reports.
Air Berlin is part-owned by Etihad, which last week signed a
code share deal with Lufthansa and said it was exploring further
options for cooperation.
Lufthansa could use the additional Air Berlin planes and
slots to prevent Ryanair and easyJet from expanding too quickly
in Germany, Union Investment fund manager Michael Gierse said.
But he expressed concern that rapid expansion could make
Eurowings fall behind on costs.
"They want to reach the level of easyJet, but it's a tricky
path. There's airports in Europe, such as Brussels, where
Ryanair has even ousted easyJet," said Gierse.
Eurowings said it wanted to be profitable in 2017 after
start-up losses in 2016, and confirmed its cost targets, adding
it had ensured "competitive" rates for the Air Berlin lease.
"Our hands are full. We don't have much capacity to handle
anything else in 2017," Garnadt said when asked whether
Eurowings could take on more of Air Berlin.
(Reporting by Victoria Bryan and Peter Maushagen; Additional
reporting by Jens Hack in Munich; Editing by Alexander Smith)