The Lufthansa Group finds itself caught between necessary austerity measures to increase competitiveness and growing resistance from the unions. At the Annual General Meeting, CEO Carsten Spohr defended the strategy of increasingly shifting short-haul flights to subsidiaries with more favorable cost structures.
This measure, criticized by the unions as "internal corporate destructive competition," is intended to enable the company to offer additional destinations and survive in the fiercely competitive European market. While Spohr emphasizes the necessity of this austerity program, the loss-making core brand Lufthansa is threatened with new strikes, as the pilots' union Vereinigung Cockpit (VC) demands urgent collective bargaining.
Outsourcing of flight operations defended as a strategic necessity
Carsten Spohr argued to shareholders that the establishment and expansion of airlines such as Discover Airlines and Edelweiss outside the core Lufthansa brand represented a “strategic necessity.”
These companies could economically serve additional destinations due to their lower cost structures. Spohr also highlighted the role of Eurowings, which successfully offers tourist flights outside of the Frankfurt and Munich hubs with a fleet of around 100 aircraft. In the future, the new company, City Airlines, will also operate feeder flights to the two major Lufthansa hubs. This strategy aims to strengthen the competitiveness of the entire group and operate successfully in various market segments.
Unions see “annihilating competition” and threaten strikes
The unions Vereinigung Cockpit (for pilots) and Ufo (for cabin crew) have been criticizing for years the increasing outsourcing of flight operations to subsidiaries, some of which have no or lower wage agreements. Joachim Vázquez Bürger, chairman of Ufo, described the resulting competition within the group as "internal competition of annihilation." This strategy undermines working conditions and standards at the core Lufthansa brand.
The Cockpit Association is calling on the Lufthansa Group to begin collective bargaining negotiations on retirement and transitional benefits for the core brand's approximately 4.800 pilots this May. If these negotiations fail, renewed strikes at the loss-making parent company are threatened. VC spokesman Frank Blanken emphasized the urgency of the negotiations and warned of possible "appropriate reactions" should the employers delay the talks. The tense situation between the Group's management and the pilots' unions could thus lead to further industrial action, which could significantly impact Lufthansa's flight operations.
Burdens on the core brand and demands on politics
The core brand Lufthansa was the only Group company to report a loss last year. Carsten Spohr cited delayed aircraft deliveries and particularly high site and personnel costs in Germany as the main reasons. In light of these burdens, the Lufthansa CEO called on the new German government to reduce government spending on aviation security and air traffic control.
It is not in the government's interest for Lufthansa to increasingly shift its growth abroad. High costs in Germany are reducing the core brand's competitiveness internationally.
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