Not sure ...
Guys,
We really should approach this fact based...
1) Of course it would be a good idea to maintain AB in place to safeguard some kind of competition for LH on German domestic routes. But even on those, like on the international short haul routes in Europe, competitors are standing clear to step in, in case of an AB failure. As a matter of fact, I think it's fair to say that LH (when they had abundant cash 3 years ago) didn't kill Air Berlin with a domestic price war (which would have been easy and cheap, given the Air Berlin's cash stripped situation) in order to keep EZY from entering the German market in a significant way. In a way, AB has helped to keep real LCC away from LH's home turf and AB shareholders have paid bitterly for that ... funny, no? Also in a way, AB hasn't actually brought more but less (real) competition to the German market.
2) It is true, Mehdorn has a reputation of being a cost-cutter, but is he? Or has he just been making a lot of noise about it. I didn't check his trackrecord at Deutsche Bahn oder Heidelberger, but neither company is now a champion of anything, really. I think it would be worthwhile to do a C/ASK comparison of AB now vs. 2 years ago and we would find that unit cost have actually gone up. Even when eliminating the non-YQ-compensated fuel effect, this is probably true (needs to be checked). What is true anyway, is that AB is nowhere even close to FR or U2 in terms of unit cost, so not a LCC by anyl applicable standard. If anything, Mehdorn has been too hesitant (and probably more curious than professional) in adapting AB's cost base to the level at which it needs to be to address short and medium haul competition (which is called LCC in Europe). Probably, the Etihad flirt (while necessary to keep the company afloat, after the German, Russian and Turkish money had been burnt) has done more bad than good in this context, with their tendency to overspec their own product, no real profit made ever, and a CEO with 1 full and 2 almost airline bankcruptcies to his account.
3) So what are we going to see now? Mr Prock-Schauer has 3 airline economic disasters to his account already: Austrian (well, LH keeps them flying with money, now -- but the outrageous cost base and the failed Eastern European strategy clearly stem from P-S' era), Jet Airways (which admittedly was a difficult job, but where he impoverished IPO-investors in a very similar fashion as Achim Hunold has done with his) and bmi (which he admittedly wasn't at the base of, but did nothing to get them where they needed to be in their UK home market).
I sincerely hope that Prock-Schauer has learnt from his failings and understood that regional aviation markets are headed towards LCC (ultimately in the Middle East as well), and that he now needs to do, what Mehdorn announced, but never got around even starting: which is a serious, painful and impactful restructuring: bring the network and fleet to a size appropriate for AB's markets (we are probably talking 80-90 A/C instead of 130-140, which stay struggle to achieve already); stop the bleeding (i.e. close down) in some of Achim's toys (Niki, Domestic Spain, ...); bring unit costs to a level in line with Easyjet (which, of course, means staff reduction, significant overhaul of ground handling, maintenance and airport contracts, ...); fix the traditional AB charter business (50% of revenues!), which has deteriorated so much over the last years (and nobody in the management to know what to do).
After all that, was anybody still dreaming of lie-flat seats and 1990's style code sharing anti-trust immunity à la James Hogan?
My two cents.