Two major airlines, Air China and Deutsche Lufthansa AG have formally joined through a signed cooperation agreement. This partnership between the two Star Alliance member airlines will form a strong competition against another airline alliance, Skyteam.
The agreement will involve revenue sharing between the two airlines and lead to harmonization of timetables. In effect, the two airlines will have more flights between China and Europe.
KLM and Air France took a similar deal with China Eastern Co. and China Southern Co., all members of Skyteam.
The joint venture will also minimize the burden of Air China's dependency on domestic flights. Local routes generate 60 percent of the airline's income.
Lufthansa will also be expected to increase its sales as Chinese travelers to Europe are increasing.
According to the European Travel Commission, Europe received 12.5 million Chinese visitors in 2015. The number is expected to grow by another 7.4 percent in 2016, and China has become the key source of tourism for countries like Italy, France and Germany.
Many European carriers have been facing stiff competition from airlines from the Middle East which have launched new routes to Europe. These carriers are Etihad, Gulf Air and Emirates.
In December 2016, the European Commission challenged the unfair competition from the Gulf carriers but was not successful. Similar moves were taken by American Airlines, Delta and United but efforts did not prosper.
Another private Chinese aviation company, the HNA group, have bought a 13 percent stake in Virgin Australia this year. Most state-owned airlines have not bought any stakes in foreign companies and were only limited to airline catering and logistics companies.
Last year, Lufthansa made a similar deal with Singapore Airlines.
The Lufthansa-Air China flight schedule will commence in the summer of next year.