Relations between Lufthansa management and its pilots have taken a turn for the worst after recent comments by the carrier's chairman Wolfgang Mayrhuber about the need for deeper cost cuts.
Mayrhuber surprised the powerful Vereinigung Cockpit (VC) union, which represents the bulk of the carrier's mainline pilots, by warning that future growth could be concentrated at lower-cost affiliates rather than at Lufthansa, if cuts are not deep enough.
"Following that comment the atmosphere has changed completely," says the VC. The two groups have been in discussions on a new contract since the beginning of the year. The old one expired in June.
Up to then, talks had been making progress, with the union saying it was close to accepting a deal that included a pay freeze, retirement scheme, pay reduction for new pilots and crucially productivity increases of 10-20%. Job cuts are not on the agenda. "The only price we ask for is that all pilots keep their jobs and that if the airline is going to grow it would be with Lufthansa pilots," says the VC. "We are willing to offer lower salaries and conditions, but we must have job security."
"Lufthansa wants to grow but the question is how," says the carrier. To obtain profitable growth it has to reduce costs, and if this is not achievable at the mainline carrier it will have to be with its partners like germanwings and Lufthansa CityLine.
The pressure being applied by Lufthansa has affected a pilot deal now in negotiation between Thomas Cook Airlines, in which Lufthansa has a 50% stake, and the VC. An agreement similar to that being discussed with Lufthansa was ready to be signed, but the VC has postponed it.
The labour negotiations are a major part of Lufthansa's Action Plan to save €1.2 billion ($1.5 billion) by 2006. The labour content of these savings is €300 million. In the first six months of the year, the carrier says it achieved savings of €320 million out of its 2004 target of €430 million.
Good progress has been made in cutting costs at external providers, such as in distribution, and at internal providers, such as Lufthansa Technik and LSG Sky Chefs. These have reached 90% and 96% of their respective targets in the first half. However, savings in staff costs have not gone as well, with 49% of the target achieved.
In the production area, which includes the restructuring of its regional operations, higher aircraft utilisation and more efficient ground processes at Frankfurt, the carrier made 67% of its target.
Source: Airline Business
