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Lufthansa Presents Cost-Cutting Plan to Ground Staff
German flag-carrier Lufthansa has reached a preliminary 200 million euro ($237 million) savings deal with Verdi, the union that represents ground staff at the airline, Reuters reports. The deal applies to roughly 24,000 staff at Lufthansa, Lufthansa Technik and Lufthansa Cargo.
The deal will waive Christmas and vacation bonuses, continue the state-led reduced-hours program currently in place, and reduce the top-up of short-time working compensation from 90% to 87% in 2021. The airline says these measures will save up to 50% in personnel costs in 2021 depending on total hours worked.
In return, Lufthansa will offer staff employment protection throughout 2021 as well as partial retirement and voluntary redundancy packages to incentivize working fewer hours.
The offer still needs to be approved by Verdi’s members before it can take effect. Lufthansa and Verdi have been negotiating for months — and talks were repeatedly called off — so the two parties’ relationship is already tense. But if Verdi’s members approve this latest plan, it will mark a major turning point that will help Lufthansa plan’s to weather the coronavirus crisis in 2021.
“With this crisis package, we have taken a first important step towards reducing ground staff personnel costs and can avoid forced redundancies for 2021,” said Lufthansa Chief Officer for Corporate Human Resources Michael Niggemann. “However, we cannot slow down our efforts in continuing to work on crisis management measures in order to agree on good solutions for employees after short-time work ends.”
Lufthansa warned last week it could lose more money in the fourth quarter of 2020 than it did in the third quarter. The winter season typically sees a drastic drop in airline passenger counts in Europe, so seasonal dips in addition to the coronavirus’s travel impacts are setting up all European airlines for a tough season.
Lufthansa is still working on finalizing long-term labor cost-cutting agreements. Vereinigung Cockpit, a union representing Lufthansa pilots, agreed on Wednesday to contribute 450 million euros to cost cuts by slashing salaries and pensions through June 2022. The union has a similar deal currently in place that ends at the end of the year.
This announcement comes a couple of weeks after Lufthansa announced it will ground more planes than originally planned during the winter season as a new coronavirus wave surges across Europe and the world, stopping travel plans in their tracks. An additional 125 aircraft will be grounded across Lufthansa Group airlines, and much of the group’s administrative staff are on a government-sponsored reduced-hours plan to cut costs.
Lufthansa is planning to offer 25% of its fourth-quarter 2019 capacity this year. It lost 1.26 billion euros last quarter.
In A Holding Pattern
Like all airlines, Lufthansa is virtually stuck in a low-capacity, money-losing position until public confidence can be revived enough to induce higher travel demand.
Most expect that will not occur until a vaccine for the coronavirus is released. Earlier this week, American pharmaceutical corporation Pfizer announced that preliminary data proves its coronavirus vaccine is 90% effective, a remarkably positive result. That number is expected to drop slightly as more results are analyzed, but the result is still outstanding.
Pfizer hopes it can get emergency approval to begin distributing the vaccine in December, which, if granted, could see the first doses sent out in late December or early January. Notably, Pfizer’s vaccine was developed in partnership with BioNTech, a German biotech firm.
This could help the vaccine see similar expedited approval or distribution in Germany – since BioNTech can work with the German government to distribute the vaccine and has a vested interest in distributing the vaccine in its own country – if the vaccine’s effectiveness stands in additional results, which could help Lufthansa’s recovery if more Germans are vaccinated and can fly sooner, at least domestically.
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