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This case forms part of a series with ''The European Airline Industry on a Collision Course'' (303-136-5) and ''European Airline Industry: Ryanair in 2003'' (303-138-1), but can be used independently. The case describes the strategy of Lufthansa as a major network carrier in Europe. It also describes the entry of low cost carriers in the German market. The case describes the strategies used by other incumbent airlines in defending against the entry of ''low cost carriers'', ranging from imitation, to entry pre-emption and deterrence. This case can be used to explore the following themes: (1) how an incumbent can respond to industry entrants with distinct advantages; (2) the constraints that limit competitive responses by incumbents; and (3) whether and when entry pre-emption and deterrence is a viable strategy.