Daily Management Review

Lufthansa pilots' strike costs approximately € 15 million per day


Lufthansa pilots' strike cost the company approximately € 15 million per day, reported Bild. Thus, the current strike, which began last week, has already caused € 75 million - damage to the concern.

Pilots keep protesting, so Lufthansa had to cancel about 890 flights scheduled for Wednesday. "About 98 thousand passengers were affected", - said the company’s representative. Approximately 1.7 thousand flights will be canceled on 30 November and 1 December.

The strike was initiated by German pilots’ union Vereinigung Cockpit. The protests are going for the second week in a row, and about 3 thousand flights have already been canceled. Vereinigung Cockpit require changes to the existing tariff agreement, wage increase of 22% over five years for pilots of Lufthansa, its subsidiary the Germanwings, as well as for Lufthansa Cargo division.

This is the 15th wave of strikes, lasting April, 2014. In total, the tariff dispute between Lufthansa and Vereinigung Cockpit is resulted in approximately 9.6 thousand flights; overall financial damage to the company amounted to € 300 million.

Such devastation stems from the fact that nine out of ten German pilots of Germany's largest airline are members of Vereinigung Cockpit. The negotiations have been lasting for already two years. Initially, it was only to raise wages by 10 percent.

At the end of 2013, pilots pushed another controversial issue, so-called transition allowance, which is paid to those pilots who have already stopped flying, but have not yet reached retirement age. This benefit was introduced more than half a century ago, when Lufthansa was still a state-owned enterprise. Aged 55, pilots could no longer be able to perform their tasks, and the company continued to pay them even before retirement. The allowance was 60 per cent of final salary of a former pilot; at that, salary of experienced captains reached 250 thousand euros per year.

In addition, Lufthansa airline management sought a more flexible timetable for employment of pilots and increase allowable time of their work. The company explained this step by general trends in the labor market and fierce competition in the airline industry.

Cockpit union demands a pay rise for 5400 pilots by 3.7 percent in the four years retroactively. Management of the air carrier, in turn, offers surcharge of 0.7 per cent of salary for the past six years, reports Reuters.

Meanwhile, Lufthansa is trying to challenge the strike in courts of various states of Germany. After the Labour Court of Frankfurt am Main and Hesse Regional Court ruled in favor of the strike, the airline applied to the Munich court. On Monday, the Labour Court of Munich ruled that the strike on 29 and 30 November "was not illegal." Lufthansa will challenge this decision in the Regional Court of Bavaria.

Indeed, it’s not easy for the respectable German company to withstand competition with the market newcomers. There are many low-budget air carriers, and airlines from some Arab and Asian countries that receive large government subsidies. All this is affecting financial results of the company.

Lufthansa Group's net profit (includes airline of the same name, carrier Swiss International Air Lines, Austrian Airlines and Eurowings) for the first half of 2016 amounted to 429 million euros, which is 55% less than the same period of 2015, when it reached 954 million euros. 

The holding stressed that result in 2015 was much better due to sale of shares in American loukosterov Lufthansa JetBlue Airways for 503 million euros (German group gradually reduced its stake in low-cost airlines for seven years). decrease in net income was not as significant Excluding this transaction.

The current result is evaluated as pretty good. In particular, the company is satisfied with the changes that are directly dependent on its own actions. It is, first, an optimization of the cost structure, and secondly - development of the low-fare carrier Eurowings, which received a new strategy (in accordance with it, this operator will be about twice more economical than other groups of airlines by 2018).

The group’s revenue decreased by 2.1%, to $ 15 billion. The specific costs directly from Lufthansa fell 9.4% against the first half of 2015. At the same time, operating income decreased by 13% to € 2.2 billion. 

source: atwonline.com, bild.de