Germanwings will from July 1 next year allow business customers to exclude options such as priority check-in, catering a la carte, a second piece of luggage and use of first-class lounges, aiming to appeal to the more frugal mood among many employers.

"Business travelers now are being ordered to fly economy class by their companies," Chief Executive Thomas Winkelmann said on Thursday. Excluding costly options could allow executives to still take a business class seat without being bumped down to economy.

Lufthansa is switching some of its short-haul operations to Germanwings, excluding flights out of hubs Frankfurt and Munich.

The move is in line with a trend among European airlines, with Air France-KLM (AIRF.PA) increasing its use of Transavia and British Airways parent IAG (ICAG.L) planning to convert most of Iberia's short-haul operation to low cost arm Iberia Express.

Carsten Spohr, Lufthansa board member for the airline's Passengers business, told reporters that out of the more than 900 million euros savings his division would contribute to the group's cost-cutting programme, 200 million would be from Germanwings.

As part of a revenue-boosting drive in the Passengers division, Lufthansa said it would also launch "premium economy" for intercontinental flights. Its price category would be lower than business class but higher than economy.

A "high two-digit" million euros investment is planned for the premium economy and 30 million for the new Germanwings, Lufthansa Chief Executive Christoph Franz said on Thursday.

Lufthansa said Germanwings will offer three different prices, starting from 33 euros one way for "basic", covering only the ticket, to "best", from 199 euros to 399. "Smart", the category in the middle, would be priced from 53 euros. (Reporting by Marilyn Gerlach; Editing by David Holmes)

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