Germanwings plans to increase its fleet to 87 aircraft by the end of 2014, making the revamped carrier the country’s largest low-fare airline.

The carrier on July 1 officially assumed Lufthansa’s non-hub short-haul flying, and is running the group’s operations out of bases in Stuttgart, Cologne, Nuremberg and Hamburg. Berlin will be added next winter, while Frankfurt and Munich will be served by Lufthansa’s own narrowbody and regional feeder fleets.

The transition to Germanwings has been described by management as the group’s last attempt to return its loss-making European network to profitability. Lufthansa historically has absorbed yearly losses in excess of €300 million ($392 million) in the direct services division, which it has so far cross-subsidized with profits made from its long-haul network.

Decoupling direct services from hub flying is the biggest single initiative of Lufthansa’s Score restructuring program, which aims at improving profitability by €2.3 billion by fiscal 2015.

Recently, Lufthansa has launched several attempts at improving the efficiency of short-haul operations—including a highly loss-making experiment in the Berlin market—but so far has failed to achieve any significant improvements.

Carsten Spohr, CEO of Lufthansa’s passenger airline division, has made it clear that unprofitable Germanwings services will not enjoy the same kind of support that Lufthansa provided in its former network, and stressed that he is prepared to shrink the airline if needed.

These statements are directed, in part, to German unions, who have fiercely fought this transition. The UFO cabin crew union is launching a strike vote for the Germanwings staff on July 5, demanding significantly higher pay.

Germanwings’ pilots are already paid salaries comparable to Lufthansa mainline crews, and they are more productive. Overall, Germanwings still enjoys a 20-30% unit cost advantage over Lufthansa.

The low-cost carrier currently operates a fleet of 38 Airbus narrowbodies, which is planned to grow to 64 Airbus-family aircraft within the next 18 months. That will be complemented by 23 Bombardier CRJ900s operated by Eurowings on secondary routes.

On July 1, Germanwings introduced its new three-tier pricing system—”Basic,” “Smart” and “Best.” Basic fares do not include meals or drinks, and passengers have to pay extra for checked baggage.

The Smart fare is equivalent to a regular economy fare, and includes a free baggage allowance. Best is fully flexible and includes meal service similar to a business-class product.