A few days ago, the Lufthansa employees did something that has become rare. They cleared out one of the large hangars at Frankfurt Airport, put in their newest plane, a number of bar themes and buffets and threw a huge party. Around 2000 people were there that evening, more were not allowed for fire protection reasons. Right in the middle was CEO Carsten Spohr, who also wanted to thank his people with the party for somehow persevering in the hard times of the pandemic and the flight chaos. While the party was rising in Hangar 7, the Vereinigung Cockpit pilots’ union (VC) sent out the next strike announcement – three days at Eurowings, the consequences could be seen last week.
Lufthansa has massive structural problems these days (and very likely in the next few years too): Too small a profit margin, an outdated fleet, an inadequate product, an overly complex group, the ongoing dispute with Fraport about the deficiencies at the most important location. There is also no real debate about whether and how the business model needs to change. And above all, there is the almost toxic relationship between employees and management, which makes improvements in other areas difficult.
First we celebrated, then came the disillusionment
A few days after the party, Spohr was disillusioned again. “It’s banging again at every nook and corner,” he complained at an internal event. “We deal with strikes like we did in France 20 years ago.” What was meant was: far too carelessly, on the backs of the customers. “And then everyone is surprised that the employer draws conclusions from it.” Eurowings, for example, will make a loss in the hundreds of millions this year. “Nevertheless, there’s a strike, that doesn’t happen with so many airlines.”
So: Spohr is now calling for a major cultural change at the latest, a “new togetherness.” He wants “a culture that recognizes what we have.” This is also a culture that allows mutual criticism, “but there must also be a bit of respect.” In such a culture, the pilots would recognize that Lufthansa 2020, although only days away from bankruptcy due to the corona, voluntarily added up to around 8,000 euros a month to every cockpit employee on short-time work, in order to reduce the legally capped short-time allowance to around 90 percent to top up the normal salary. And the board would probably not again unnecessarily terminate a framework agreement that guarantees the pilots a fleet size, as it did at the end of 2021.
One could continue to run Lufthansa as before – with constant strikes and aggressive rhetoric in the internal forums. “But that’s not the Lufthansa I want.” It is “undisputed that something has to happen.” There is some “social opposition”, but at the same time there is little fluctuation, so it can’t be that bad.
Eurowings is negotiating again
As far as the pilots are concerned, there is a very fragile truce at the moment. The Eurowings crews are negotiating again with the management, also because the company permanently canceled five aircraft from the fleet last week as a consequence of the strike and is said to have threatened up to five more if there were further strikes. Since then, the two sides have withdrawn for confidential talks.
At the core Lufthansa brand, every pilot received almost 1,000 euros a month extra to stop strikes for the moment. The two sides want to negotiate a new framework agreement by June, which among other things defines a minimum size of the fleet. And – good news – the sister company Swiss has agreed on a new collective agreement with the crews.
Peace costs money that Lufthansa actually doesn’t have. In the future, she wants to invest 2.5 billion euros in the fleet and better seats. Although she recently raised the profit forecast for 2022 from half a billion to around one billion euros, that only corresponds to a margin of around three percent and is not enough to be able to finance the investments. According to Spohr, the profit must increase to a similar extent as the upcoming investments. “As long as she’s not there, we won’t grow big either.” The UFO flight attendants’ union responded to the higher profit forecast via Twitter: “We are happy for Lufthansa, because where there is a lot, a lot can also be distributed.”
By the way, Lufthansa soon wants to invest in other new machines, smaller short- and medium-haul jets such as the Airbus A220, which can be used profitably on secondary routes. Because in many of the traditional markets that Lufthansa serves via hubs such as Frankfurt and Munich, low-cost airlines have now spread and taken market share from them. The group has to switch to smaller targets.
Should Lufthansa really order a large new fleet of A220s or the competing Embraer E2, the next conflict is imminent. Because then it has to be clarified which flight operations in the group will get the machines.