Lufthansa’s 100th Birthday Bash Leaves Little Cause for Cheers

Deutsche Lufthansa AG’s 100th anniversary bash this week had all the elements of a picture-perfect party. The sun was out, flight attendants in polished vintage uniforms greeted guests, and Chief Executive Officer Carsten Spohr beamed on stage with German Chancellor Friedrich Merz.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Deutsche Lufthansa AG’s 100th anniversary bash this week had all the elements of a picture-perfect party. The sun was out, flight attendants in polished vintage uniforms greeted guests, and Chief Executive Officer Carsten Spohr beamed on stage with German Chancellor Friedrich Merz.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.But overshadowing the mood was one of the most disruptive labor disputes the German carrier has suffered in a decade, with waves of back-to-back strikes from pilots and cabin crew crashing down on the company. Just a short distance from Spohr’s party, workers were protesting, their chants competing for attention with the music blaring at the centennial event. Many flights to the Frankfurt hub were canceled, sabotaging plans for some guests to attend.It didn’t take long for Lufthansa Chairman Karl-Ludwig Kley to address the split-screen reality head-on. Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.“It is almost paradoxical how labor disputes at our company are being played out in a constant loop,” Kley told the audience, before turning to the chancellor: “I urge you to start a discussion in the government on codifying strike laws before this turns into an even greater competitive disadvantage for Germany.”Lufthansa is enduring one of its toughest labor strifes in recent memory, straining the patience of tens of thousands of passengers and pitting management against workers. Less than 48 hours after the party ended, the situation escalated further, with Lufthansa throwing down the gauntlet by deciding to effectively shut down its regional CityLine unit, leaving hundreds of workers facing an uncertain future.“This is a fight against their own people,” said Harry Jaeger, labor union UFO’s head of collective bargaining.While the move was long planned, it was accelerated amid the persistently higher fuel costs linked to the Iran war and — not least — the impact of strikes. CityLine crews have staged repeated walkouts over the lack of a social plan covering severance terms. They were part of broader industrial action by pilots and cabin crew at Eurowings and Lufthansa over separate disputes.In March, more than 100,000 passengers were affected by strikes, according to Fraport AG, the operator of Lufthansa’s main Frankfurt hub — a number likely to be exceeded this month with a total of six strike days so far. The labor unrest, combined with fallout from the Middle East conflict, is shaping up to be one of the most turbulent periods in years for Europe’s largest airline group — just as it seeks to boost profitability in a crowded regional market.The tensions stem from deeply rooted issues. Pilots union Vereinigung Cockpit demands higher company pensions, while Lufthansa says it can’t afford increases. A more-entrenched problem — though not an official reason to strike — is the company’s shift away from the cost-intensive flagship airline to newer units such as City Airlines and Discover, where crew costs are as much as 40% lower.“This is no longer a classic wage dispute, it’s an existential conflict over the future of Lufthansa’s core workforce,” said Linus Benjamin Bauer, founder of aviation consultancy VAA & Partners. “When you systematically redirect growth elsewhere, you can’t be surprised when those affected interpret it as an existential threat.”The challenges come on top of aircraft delivery delays that forced Lufthansa to keep older, fuel-guzzling planes in service, as well as setbacks in its premium-product strategy. The in-house designed Allegris seats faced certification delays in the US, forcing some new Boeing Co. 787 Dreamliner aircraft to fly for months with largely cordoned-off business-class cabins. Competition with Middle Eastern carriers such as state-owned Emirates and Qatar Airways has intensified in recent years. Lufthansa and other European airlines have long complained about what they lament as an uneven playing field, pointing to longer routes to Asia to avoid Russian airspace, while rivals such as Emirates and Chinese carriers continue to pass through the vast landmass. Plans by Emirates — before the Iran war broke out — to start flying to Berlin this year added to those concerns as fears mount that Lufthansa will lose more of its lucrative long-haul business on routes to Asia to those Middle East rivals.The war in Iran has provided a unique opportunity to claw back some business from Emirates and Qatar, which were forced to reduce operations as the airspace over the Gulf closed. Lufthansa has added frequencies to routes in Asia and Africa and has seen strong demand, but the pilots’ strikes have undercut its ability to benefit from the disruptions. Once tensions in the Gulf ease, rivals are expected to return aggressively with lower fares.Taken together, it’s looking to be a year of discontent when Lufthansa was meant to stabilize its operations and progress to an operating margin goal of 8%-10% for the latter part of the decade. It has announced efficiency measures including cutting 4,000 administrative jobs by 2030, bundling functions across hub airlines and telling employees this week to halt hiring for non-operational roles, curb business travel requiring overnight stays and end external consulting contracts as they expire.To make things worse, higher fuel costs are weighing on Lufthansa despite its hedging strategy. And concerns over potential fuel shortages are rising, with industry group BDL calling on Berlin to introduce emergency measures to avoid disruption during the peak travel season. Airports across Europe could start to face shortages as early as June, according to the International Energy Agency.At least one bright spot came Friday, when pilots union Vereinigung Cockpit told members in a letter that it will refrain from further strike action for now while reviewing the situation.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.