Lufthansa will form a new airline by merging its direct European service outside of its Frankfurt and Munich hubs with its low-fare carrier Germanwings on Jan. 1.
The move will combine domestic German and European point-to-point services.
The new airline, which hasn't been named, will be based in Cologne, Germany. Germanwings has been a wholly owned Lufthansa subsidiary since 2009.
Lufthansa CEO Christoph Franz said the move "has enormous potential to improve efficiency."