Lufthansa CEO: state-owned carriers 'global game-changer'

WASHINGTON Tue May 20, 2014 6:19pm EDT

U.S. President Barack Obama (C) talks to international business leaders at a meeting in the Roosevelt Room of the White House in Washington May 20, 2014. Seated from L-R are: Senior Vice President of Hankook Tire Byeong Jin Lee, CEO of Lufthansa AG Carsten Spohr, President of Umicore USA Ravila Gupta, Obama, Executive Vice President of Ford Motor Company Joe Hinrichs, and CEO of GlobalFoundries Sanjay Jha. REUTERS/Larry Downing

U.S. President Barack Obama (C) talks to international business leaders at a meeting in the Roosevelt Room of the White House in Washington May 20, 2014. Seated from L-R are: Senior Vice President of Hankook Tire Byeong Jin Lee, CEO of Lufthansa AG Carsten Spohr, President of Umicore USA Ravila Gupta, Obama, Executive Vice President of Ford Motor Company Joe Hinrichs, and CEO of GlobalFoundries Sanjay Jha.

Credit: Reuters/Larry Downing

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WASHINGTON (Reuters) - Deutsche Lufthansa AG (LHAG.DE) is recovering from a pilot strike in April and views competition from state-owned carriers as one of its biggest challenges, its new chief executive told Reuters in an interview on Tuesday.

Carsten Spohr, in Washington to attend a meeting with President Barack Obama and other executives about foreign investment in the United States, took over as head of Europe's largest airline by revenue earlier this month.

"The biggest challenge for a chief executive of a European airline, just as for my counterparts in the United States, is running privatized companies in an industry where government- owned airlines are gaining more and more market share," Spohr said in one of his first interviews since becoming CEO.

"That's the global game changer to our industry we need to find the right answers to."

Spohr's predecessor, Christoph Franz, often spoke out against Gulf carriers like Emirates, Qatar Airways and Etihad Airways saying their state-owned status meant they do not compete on a level playing field with privatized carriers.

Those airlines have grown rapidly in recent years, adding routes and planes as they seek to fly more passengers through hubs in Dubai, Doha and Abu Dhabi.

Lufthansa's relationship with its pilots is also a challenge. The recent three-day pilots' strike led to a drop in passenger numbers and cargo volumes, but Spohr said traffic had bounced back since then.

"We are looking for a summer in line with our expectations," he said.

Spohr declined to comment on the status of talks with the union about pay and benefits.

"Obviously we have come back to the negotiating table, which is the right place to put the discussions," he said.

"We all know how important this is for the labor side, for us, so I think there will be a constructive element in this."

NORTH AMERICA

North America is Lufthansa's biggest market outside Europe. At the release of its first-quarter results the airline said routes to the region were not performing as well as previously.

"This year there's a little bit more capacity on the markets. We need to see how the summer goes," Spohr said.

Still, Spohr said the North Atlantic was not a big concern.

"The U.S. economy is picking back up. We see more investment in the United States, not just from our side, from our customers, creating more traffic," he said, adding he hoped a trade agreement being negotiated between Washington and the European Union would also help his business.

Low-fare airlines are also putting pressure on Lufthansa, but Spohr said the airline was in good shape in that area through its wholly owned subsidiary Germanwings, a low-cost carrier based in Cologne.

"We have increased the size of our subsidiary Germanwings, which is very successfully acting against other low-cost carriers in Europe, so I think we have found answers there."

(Additional reporting by Victoria Bryan in Berlin; Editing by Ros Krasny and Eric Walsh)

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