Lufthansa offers humility, higher pay to pacify pilot conflict

Bloomberg

Deutsche Lufthansa AG sought to defuse an escalating pilots strike by offering an improved wage deal as well as a show of humility.
The German airline proposed a 4.4 percent raise plus a bonus that will exceed 20,000 euros ($21,200) per pilot on average, dropping a demand for employee concessions on benefits. In a move away from more unbending rhetoric of the past week, it also admitted to some fault from years of negotiations.
“We need a new togetherness,” Bettina Volkens, the company’s human resources chief, said Wednesday at a protest march organized by the Vereinigung Cockpit union at Frankfurt airport. “For both parties, so much trust has been destroyed in the past years, and both sides have made mistakes. We want a deal. We want a strong Lufthansa.”
Lufthansa is willing to increase pilots’ wages 2.4 percent for 2016 and 2 percent in 2017, in addition to the bonus retroactive to 2012, and will seek arbitration on those terms without a link to other issues, executives said. The carrier previously offered the raise only if pilots would accept changes to pensions and other perks. The union has demanded a 20 percent pay boost for the period from 2012, when the last contract expired, through 2017.
Pilots gathered at the airport, Lufthansa’s main hub, to mark the last day of a week-long series of walkouts that led to 4,500 flight cancellations, sparked hostility from other employees and put the carrier’s earnings targets at risk. The works council representing ground crews, who reached a pay and pensions accord a year ago, held a counter-demonstration nearby that met the marching pilots with chants, whistles and calls for them to agree to arbitration amid concerns the better-paid group is jeopardizing jobs.
“This is not about pilot-bashing, but our people are angry, and rightfully so,” Ruediger Fell, a ground-crew works council leader in Frankfurt, said in an interview. “The raise demanded by our pilots is what our workers earn in a month, and the company will try to make up for that spending elsewhere.”
The strike is part of a long-running conflict over wages, working conditions and the role of low-cost unit Eurowings as Chief Executive Officer Carsten Spohr reorganizes Lufthansa to face discount competitors in its home region and expansion by long-haul carriers based in the Persian Gulf. The latest round of walkouts began on Nov. 23 and, while it’s slated to end Wednesday, the company scrapped 40 flights Thursday because planes are in the wrong locations.
This month’s strikes will cost as much as 100 million euros, according to Mark Simpson and Jack Diskin, analysts at Goodbody Stockbrokers. That could put Lufthansa’s full-year goal to match 2015’s 1.82 billion-euro operating profit into question.
Vereinigung Cockpit is demanding the equivalent of a 3.7 percent raise a year. That compares with increases ranging from 1 percent to 2.2 percent agreed to by ground employees and the Lufthansa brand’s flight attendants in exchange for concessions on pensions and other benefits. Vereinigung Cockpit President Ilja Schulz said before the Lufthansa managers spoke that the union’s target was “not excessive.” Joerg Handwerg, a union spokesman, couldn’t immediately be reached for comment on Volkens’s remarks, which contrasted with a tougher stance taken earlier by other executives.
Karl Ulrich Garnadt, the head of Eurowings, said at the pilots’ rally that Lufthansa employees must stand together to fight what he called the joint enemy rather than each other. “The opponent is not the management board, and the opponents are not the pilots. The opponent is outside,” he said. Ryanair Holdings Plc, Europe’s biggest discount airline, “is the one that is attacking us, even here in Frankfurt. Ryanair is taunting us, and more so with every day of strikes,” Garnadt said, referring to a seat sale that the Irish carrier termed a “rescue” to stranded Lufthansa passengers.