Legacy carriers have long struggled to find an answer to the threat of fast-growing carriers such as the Big Three Persian Gulf airlines and Turkish. “If you can't beat them, join them,” has been one answer. But in at least one prominent case, that strategy appears not to have worked out.

In a stunning move—given that the two airlines once had a close alliance relationship—Lufthansa terminated its code-sharing agreement with Turkish Airlines, effective March 31, 2014. While there will still be frequent-flier reciprocity between the two airlines—as required by Star Alliance rules—the terms are being cut back and will be much less attractive to travelers.

A statement from Turkish says “we do not approve the unilateral decision of Lufthansa,” which it hopes will be “reconsidered.” Lufthansa sources confirmed the decision was taken because an excessively large number of its customers have used Turkish flights to accrue miles on Lufthansa. Turkish also has not slowed its expansion into secondary markets in Germany, which has been particularly painful for Lufthansa. In fact, Turkish recently started services to small secondary markets such as Friedrichshafen and will be the first major airline to fly to Kassel's new airport next year.

The shifts within Star Alliance will be closely watched by Oneworld: The British Airways/American Airlines-led group has just admitted Qatar Airways, an equally ambitious carrier that is expanding fast and will have a new, better home airport next year. The decision to integrate Qatar as a member has been contentious for a long time. The move has been heavily supported by International Airlines Group (IAG) CEO Willie Walsh, an admirer of Persian Gulf carrier expansion.

Turkish has used the geographic location of its Istanbul hub to its full advantage. Unlike the Big Three Persian Gulf carriers, the airline can serve all of Europe using narrowbodies, reaching into much smaller markets that would historically have been important sources of connecting traffic for Lufthansa and its European partners. Air travel between Turkey and Germany is also more or less fully liberalized, allowing Turkish to fly to any destination in the country. Istanbul plans to open a new airport in about four years that will eventually expand to serve 150 million passengers annually.

Lufthansa was once one of the driving forces behind bringing Turkish Airlines into the Star Alliance in April 2008. But five years later, the relationship between the two airlines has hit rock-bottom. Turkish continues to grow at double-digit rates—20% in 2012—while most European airlines are not adding capacity at all.

The measure to reduce the relationship with Turkish to the minimum required for all Star carriers also includes all other Lufthansa Group carriers: Austrian, Swiss and Brussels airlines. Lufthansa is also cutting back the benefits Lufthansa Miles & More customers can access by earning miles on Turkish Airlines flights. Effective Jan. 1, Miles & More members will only get one-fourth of the status miles when they fly on the partner airline.

Lufthansa officials say a lot of its premium customers have used Turkish for long-haul flying because of lower fares and a superior onboard product. The German carrier, which is now introducing lie-flat seats in its long-haul business class, saw the need to protect its own services by making rolling up mileage on Turkish much less attractive. The termination of code-sharing also indicates the agreement has been more beneficial to Turkish than Lufthansa.

The three global alliances require their members to recognize each other's frequent-flier programs to gain loyalty of business travelers and convince them to stay with one alliance. But the exact terms and conditions of those program relationships are subject to negotiations between the individual airlines. Some carriers exclude the cheapest booking classes from mileage accrual and make redemption less attractive on services of partner airlines. While airlines charge each other when customers burn their miles, redemption rates are often less attractive than if the seats had been sold.