Labor Turbulence

Lufthansa Faces Costly Strike

Standing around at Frankfurt airport November 6 Boris Roessler DPA
Thousands of passengers can expect to see their flights canceled at the Frankfurt and and Düsseldorf airports.

One of Lufthansa’s longest running labor feuds, which began with a three-day walkout of its union cabin crew in 2012, could stretch this time over seven days – at a cost of up to €20 million, or $21 million, a day.

The cabin crew union UFO announced a one-week strike, beginning at 2 p.m. local time with nine-hour walkouts at the airline’s key hubs in Frankfurt and Düsseldorf.

“We failed to reach an agreement with Lufthansa on Thursday and will go on strike,” Nicoley Baublies, the head of the cabin crew union, told Handelsblatt Global Edition.

The strike, however, will exclude Sunday to minimize the impact “on private travelers,” he added.

The stoppage is expected to cause widespread cancellations of its European services. Lufthansa has already reserved more than 2,500 hotel rooms for stranded passengers.

The walkout will affect only the premium Lufthansa brand and not the airline’s lower-cost brands, including Germanwings, Eurowings, Austrian Airlines and Swiss.

“We failed to reach an agreement with Lufthansa on Thursday and will go on strike.”

Nicoley Baublies,, head of the cabin crew union UFO

Lufthansa, Europe’s second-largest airline, and its cabin crew have been unable to agree on retirement benefits and pensions. Negotiations broke down on Thursday after the cabin crew union, representing about 19,000 flight attendants, rejected the airline’s latest offer.

Lufthansa offered a proposal that it claimed would have met all of the union’s demands for current employees and said it would introduce a new scheme for new hires.

One of the union’s major demands is that both current and future employees be treated the same.

“Lufthansa and the cabin crew union have been in talks since their collective wage agreement expired nearly three years ago,” Jochen Rothenbacher, an aviation analyst with Equinet Bank, told Handelsblatt Global Edition. “There is no short-term solution in sight because Lufthansa won’t budge – it needs to reduce costs and employees will continue to fight for their pensions and wages.”

The carrier is striving to curb spending to sustain earnings amid growing competition from budget airlines in the region and full-service rivals from the Middle East. Staff with its low-cost brands like Eurowings earn less and have different pension schemes.

The flight attendants’ dispute mirrors the one Lufthansa has with its pilot union, which has staged more than a dozen strikes over the past 18 months over early retirement and the carrier’s low-cost expansion plans.

The pilots’ strike in September ender after a German court ruled that the actions were an illegal move against the airlines’ plans to remain competitive and expand its low-cost units, notably Eurowings.

So far this year, Lufthansa has taken a €130 million hit from strikes.

The flight attendents’ three-day walkout in 2012 cost the carrier an estimated €33 million, leading to more than 1,500 flights being canceled. The series of pilot strikes last year, by comparison, hit the airline harder with more than €350 million in costs and nearly 10,000 cancelled flights.

The airline has been negotiating with various staff groups to cut costs and reduce its pension burden by moving to defined-contribution from defined-benefit schemes. But talks over pensions and early retirements, which amount to more than €6 billion in costs, have repeatedly met with opposition from staff eager to protect their pensions.

On Thursday, the airlines also held talks on pensions with the labor union Verdi, which represents about 33,000 ground, cargo and other cabin crew members. Those talks also ended without a deal, with the next round of negotiations scheduled for November 10.

“For Lufthansa, the strikes are not only about costs, which are essential but don’t endanger the company’s existence; they’re also about the airline’s image,” Mr. Rothenbacher said. “It’s fatal for Lufthansa when passengers permanently worry after booking a flight that it could be canceled.”

So far, Lufthansa’s image hasn’t suffered, he noted, adding: “Its customers are loyal, but the question is – for how long?”

Investors appear to like the airline’s tough stance on costs. Lufthansa shares were trading at €13.98 at 2 p.m. Frankfurt time, up 3.14 percent from the opening price of €13.45.

 

John Blau is a senior editor at Handelsblatt Global Edition. To contact the author: blau@handelsblatt.com

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