German airline Lufthansa has long been struggling to match its rivals' rock-bottom costs. Chief executive Carsten Spohr, now ten months on the job, is fighting on several fronts and trying to find new areas to expand the business.
Now, added to the protracted dispute with pilots, he faces the ire of shareholders who, if the Lufthansa management has its way, will have to go without any dividends from 2014.
Disastrous news of a loss of 723 million euros (821 million dollars) came just a day after a employees' meeting in Frankfurt, one that had been meant to launch the company into a new era.
Spohr and fellow executive board member Karl Ulrich Garnadt, seeking to reassure employees, called for an "alliance of growth and employment" but did not go into any specifics.
Their simple message was this: If we succeed in reducing costs, then growth will once again be possible in the core company, Lufthansa Passage. By 2020, the executives said, the fleet could be expanded by 27 planes and 1,800 crew members.
Though no concrete cost-cutting measures were recommended, some employees came away hopeful. Nicoley Baublies, head of Ufo, the union for cabin crew, said the executives had cleared up many nasty rumours about job cuts ahead.
Less sanguine about the prospects is the pilots union Vereinigung Cockpit (VC). "I didn't hear anything new," one VC spokesman said after the meeting. A long-running wage dispute between Lufthansa and its pilots remains resolved.
And, things could become problematic with the more amenable Ufo union members if pensions and transitional benefits of thousands of cabin personnel are slashed. Negotiations on the issues have already collapsed once.
Afterwards, the union and Luftansa were not even able to agree on a mediator and instead named two polar-opposite politicians - Herta Dauebler-Gmelin of the centre-left Social Democrats and Friedrich Merz of the centre-right Christian Democratic Union - as co-mediators.
The pilots are especially against the moves made by Spohr to boost discount offers in order to compete against cheaper competitors such as Ryanair and EasyJet.
For example, under the aegis of the discount operator "Eurowings," crews of the German-Turkish carrier SunExpress are to fly routes around the world - at wages that are 30 to 40 per cent below those of established Lufthansa crews.
SunExpress chief Paul Schwaiger says that recruiting personnel is no problem. "There are enough pilots in Europe," he says.
But pilots are not the only ones to doubt whether any money can be made with new services on long-haul flights. They point out the example of British Airways that has long since quit the competitive short- and medium-range routes and now is lucratively connecting London-Heathrow with the rest of the world.
Like its even more greatly suffering competitor Air France/KLM, Lufthansa must continue to save. Last year the company outsourced to IBM some of its computer centres. In doing so, it incurred additional costs of 200 million euros.
Other factors in Lufthansa's meagre business figures have been erroneous speculation in insuring its kerosene prices and rising pension costs.
The savings efforts are set to continue. The business publication Manager Magazin reported that corporate consultant McKinsey has presented Lufthansa's board with a plan for a comprehensive reorganisation of its management.
The report said that while Lufthansa until now had strongly pushed the autonomy of its subsidiaries Swiss and AUA, under the McKinsey proposals management is to be clearly more centralised.
Comments
Comments are closed.