Ryanair is set to fly more passengers than Lufthansa for the first time this year, heaping pressure on the German carrier to make a success of Eurowings, its latest attempt to crack the low-cost market.

Lufthansa has already tried its hand at budget flying with the short-haul Germanwings service, which is now being merged into the new Eurowings business.

While Germanwings, whose brand was set to be phased out even before the crash of one of its jets last year, is set to turn a profit for the first time, its costs are still seen as too high to compete with easyJet or Ryanair, which carried 101m passengers last year, against Lufthansa's 108m.

Through a combination of employing staff on more flexible contracts that reflect seasonal demand, replacing regional jets with larger A320 planes that can seat more passengers, and keeping onboard frills to a minimum, Lufthansa hopes to bring costs at Eurowings down to around those of easyJet.

"Eurowings is crucial for Lufthansa. The Germanwings experiment didn't work because it wasn't sufficiently low-cost, but Eurowings should have greater labour flexibility and lower unit costs," according to Chief Financial Analyst at CAPA-Centre for Aviation Jonathan Wober.

The stakes are high. Budget air travel in Germany, which has long lagged other markets, looks set to take off.

And a successful Eurowings could help Lufthansa push through the cost cutting and labour reforms that have been crucial in helping other traditional carriers, such as British Airways' owner IAG, to thrive in a highly competitive market.

Poor start to the low-cost model for Eurowings

But the initial signs have not been encouraging. Eurowings has had to fork out hundreds of euros a piece to passengers in compensation after a spate of delayed long-haul flights, including one from Cuba delayed for 68 hours.

"It's not gone too well to be honest, but now we are doing everything we can to stabilise the operation," a spokesman said, adding the future of Eurowings was not in question.

Currently, low-cost carriers have only a 25% share of Germany's short-haul market, against around 50% in countries such as the UK, Spain and Italy.

High costs at German airports and the dominance of Lufthansa and Air Berlin, which control about 60% of the short-haul market to and from Germany, have held back the likes of Ryanair and easyJet.

But with Air Berlin cutting routes as it struggles to return to profit and Lufthansa moving some routes to Eurowings, German airports - keen to keep passengers coming through their shops and restaurants - have become more willing to do deals with low-cost carriers.

Alongside Europe's two largest low-cost carriers, IAG's Vueling, Air France-KLM's Transavia, Wizz Air and Iceland's Wow Air are among those expanding.

"German airports ... are actively working with us and others, saying please can you come in here," Ryanair CEO Michael O'Leary said on the sidelines of an event in Amsterdam last month.

Ryanair targeting strong growth in Germany

Ryanair aims to grow its market share in Germany to 15-20% over the next five years, from around 5% now.

The robust German economy, low unemployment and low oil prices are also driving expansion and serving as a magnet for low-cost players, Euromonitor senior travel analyst Nadejda Popova said.

CAPA analyst Wober said making Eurowings work could help Lufthansa apply some low-cost concepts to its mainline brand as it battles to bring down the cost base there too.

That is a strategy CEO Willie Walsh has used to great effect at his IAG, which groups former state-run flag carriers Aer Lingus, British Airways and Iberia with budget carrier Vueling, acquired in 2013.

"Vueling gives us a new dimension, an aggressive and established low-cost base, a low-cost culture. That brings great value to IAG," Mr Walsh said in Dublin last month.

Lufthansa, which has faced a serious of strikes by pilots and cabin crew at its main brand over the last two years, is looking for 4,000 new employees this year.

That includes 240 new pilots, of which 140 are for Eurowings.

"It's a way of saying to existing staff that management will get on with it, find other people and on more flexible contracts," Mr Wober said.