Transport and logistics

Costs mount for Lufthansa as pilot strike enters second week

PUBLISHED : Wednesday, 30 November, 2016, 1:05am
UPDATED : Wednesday, 30 November, 2016, 1:05am

Lufthansa pilots staged another walkout on Tuesday, with neither side showing any willingness to yield in a dispute that has already cost the German airline hundreds of millions of euros since early 2014.

The stoppage hit short-haul flights departing from German cities, forcing Lufthansa to cancel 816 out of around 3,000 planned flights on Tuesday. The pilots have also announced plans to strike on short- and long-haul flights on Wednesday, which will see a further 890 flights cancelled.

The strike is the 15th since the early 2014, and the costs are mounting.

Lufthansa has put the cost of the first two days of last week’s strike at about 20 million euros (US$21 million), but past experience shows the effect on future bookings could cost tens of millions more.

Analysts at Kepler Cheuvreux downgraded Lufthansa shares to “reduce” from “hold” on Tuesday, saying the strike jeopardised the company’s 2016 profit target of around 1.8 billion euros.

Lufthansa says it has to cut costs to compete with leaner rivals such as Ryanair on short-haul routes and Emirates on longer flights, despite a record profit in 2015.

Ryanair, keen to build market share in Germany, has been wooing customers there with what it calls a rescue offer.

“Industrial action is a great opportunity for rivals such as Ryanair and easyJet. They will hope to retain the customers that they may have captured as a result of the strike for the longer-term,” Liberum analyst Gerald Khoo said.

Lufthansa pilots are well paid by industry standards. A pilot at Lufthansa earns on average 180,000 euros a year before tax, though a captain on the highest pay level can earn as much as 22,000 euros a month before tax.

Lufthansa pilots extend strike to Friday for short-haul flights

Walkouts in 2015 by both pilots and cabin crew affected 7,748 flights, costing Lufthansa 231 million euros in lost profit, with around 108 million of that coming from lost advance bookings.

Including last week’s four-day walkout, Lufthansa has cancelled 4,500 flights, still far fewer than the total numbers seen in 2014 or 2015.

Liberum analyst Khoo said the short-term pain from strikes would be worth it for Lufthansa, if the result was a long-term deal that brought suitable reforms.

But both sides seem to be digging their heels in, and the union has rebuffed pleas from Lufthansa for mediation.

Lufthansa has offered to increase the pilots’ pay by 4.4 per cent in two instalments and make a one-off payment worth 1.8 months’ pay. Union Vereinigung Cockpit (VC) wants an average annual pay rise of 3.7 per cent for 5,400 pilots over a five-year period backdated to 2012.

“We are willing to compromise. But if management says there’s no room for manoeuvre, then what good will mediation do? We just don’t believe there’s the will to find a solution,” said VC spokesman Joerg Handwerg.