Lufthansa have a long history of trying to shut out or kill off competition by setting up subsidiaries in non core sectors and it seems to me that while they have been successful to keep home grown competition in check, or in the case of Air Berlin expediting their self inflicted demise, they haven't been entirely successful financially.
Perhaps they should have followed BA's lead in playing to their strengths (FRA and MUC) and feeding full service business through those hubs, leaving independents and leisure carrier to fight over the many, quite substantial regional airports.
The strength and militancy of the Cockpit and Verdi unions cannot help either.