Is Carsten Spohr, who has been head of Lufthansa for almost 10 months, having trouble getting a grip on the challenges facing him? That’s the impression some have, considering developments over the past few weeks. Pilots won’t cooperate and cabin staff are on collision course.
Mr. Spohr cuts a forlorn figure with his plans to push large parts of Lufthansa’s traditional business to a budget-airline platform. But he is pursuing the right course; there is no alternative.
If Europe’s largest airline in both revenues and passengers is to have a lasting future, everyone must walk a thorny path – passengers, investors, and, most of all, employees.
Clearly, this is a difficult situation. Relations between management and workers have never been as tense as they are at the moment. The fierce protest by employees is quite understandable, considering that hardly anything will be left unchanged at the company if Mr. Spohr and his team have their way.
Union officials should wake up to the fact that no amount of strikes will change the reality – Lufthansa must revamp its business structure.
This is much more than an issue about wage agreements or pension plans. Mr. Spohr envisions an entirely different Lufthansa. Alongside the core brand, there would be a low-cost platform. In this new world, there is no room for many of the old privileges. It is, of course, completely legitimate for workers’ councils to attempt to preserve as many of these employee advantages as possible.
But a key responsibility of workers’ representatives is to guarantee the security of as many jobs as possible. This safeguarding should not and cannot mean that everything stays as it was. Union officials must also face these facts and react to changes in the market.
The workers’ representatives are balking at this crucial step. Lufthansa’s management wants to terminate the company’s labor agreement, at least in its current version. Mr. Spohr can do nothing but demand that the contract be reworked.
The airline’s dilemma is well known. It is caught in a squeeze between long-haul rivals from the Gulf or Turkish Airlines on the one hand, and low-cost carriers such as Ryanair and Easyjet on the other. Lufthansa must reduce costs – and personnel spending cannot be exempt.
In the 2013 business year, personnel costs at Lufthansa ate up almost 25 percent of revenues. For Emirates, it was only 12.7 percent, Turkish Airlines 16 percent and Ryanair no more than 9 percent.
Mr. Spohr has no choice but to remain tough, and he is handling the situation cleverly. He is normally an outward-facing manager, known for his winning charisma. But these days, he is barely visible as he focuses on the company’s internal affairs. This shows how seriously he takes the airline’s restructuring.
Union officials should wake up to the fact that no amount of strikes will change the reality – Lufthansa must revamp its business structure. A few years ago, pilots at British Airways tried to do exactly what their colleagues at Lufthansa are doing now. After months of work stoppages, they were the ones who had to back down. The success of the unyielding course led by chief executive Willie Walsh is borne out on British Airway’s 2013 balance sheet. The airline’s operating profit margin climbed to more than 4 percent – almost twice as high as Lufthansa’s and even higher than Emirates’.
The longer unions maintain their blockade, the more they will undermine the wage agreement that is so precious to them. Because with or without the consent of its negotiating partners, Lufthansa management will go ahead and launch its low-cost platform.
Enough pilots are available – at the Eurowings subsidiary or at flight schools where hundreds of trainees complete their instruction every year. That would cause the fleet of the Lufthansa core brand to shrink and dismissals would become possible.
This cannot be in the interest of workers’ representatives. It makes more sense for them to participate in reshaping Lufthansa. The unions certainly don’t have to give in immediately to every demand made by management. But they should be ready to let some cuts be made.
In the end, they won’t have a choice — just as Lufthansa has no choice but to reduce costs.
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