Lufthansa Adds Another Subsidiary

When people think of Lufthansa, the first thing that comes to mind are the gleaming white airplanes with a crane on the tail taking passengers to places in Germany like Frankfurt and Munich. What many don’t realize, however, is how massive the airline is when considering all of its subsidiaries as part of the Lufthansa Group.

Lufthansa offers its own airline services and also owns many airlines across Europe such as Austrian Airlines, Swiss International Air Lines, Brussels Airlines, and Eurowings along with a handful of smaller airlines. When combined with all of its subsidiaries, Lufthansa is the second-largest airline in Europe.

A lot of this growth came through consolidation with other major airlines in Europe, such as Austrian and Swiss Air Lines. The rest of the growth has come from the establishment of subsidiaries by Lufthansa. One would think that the airline would simply expand existing Lufthansa services instead of creating entirely new subsidiaries but Lufthansa tends to prefer to create new airlines to take advantage of a major cost saving: labor.

Time and time again, we have seen Lufthansa create a new subsidiary to effectively side-step labor collective bargaining agreements with mainline Lufthansa staff. This strategy allows the Lufthansa Group to create airlines with lower cost structures than the mainline arlines to compete with low-cost carriers in Europe such as Ryanair and easyJet.

One More Subsidiary

This past week Lufthansa announced yet another airline to take skirt around their labor agreements with Lufthansa staff. The new airline will be called Lufthansa City Airlines and will begin operations in the Summer of 2024.

The plan is for the airline to operate smaller Airbus jets, provided by Lufthansa, out of Frankfurt and Munich and will primarily serve as feeder flights for Lufthansa’s long-haul mainline operations. Lufthansa is very bullish on the growth of the German long-haul market.

Lufthansa City Airlines will start hiring this November and is encouraging employees of Lufthansa CityLine, and existing subsidiary, and former employees of the now defunct Lufthansa subsidiary Germanwings to apply to City Airlines.

Unhappy Unions

This move has drawn much attention from the labor unions that represent Lufthansa employees. They’re calling the creation of this airline and focus on hiring existing group employees a legal sleight of hand. The union claims this move allows Lufthansa to reduce costs by hiring employees at the new airline that are already part of Lufthansa Group under far less advantageous contracts.

Unions are likely used to this by now given all the new subsidiaries that pop up often. It’s the next thing on their plate after having obtained 17 percent pay raises for Lufthansa pilots over the summer after months of negotiations and strikes.

Lufthansa insists that future employees at the airline will have competitive contracts as recruitment kicks off next week.

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Hemal Gosai

Hemal took his first flight at four years old and has been an avgeek since then. When he isn't working as an analyst he's frequently found outside watching planes fly overhead or flying in them. His favorite plane is the 747-8i which Lufthansa thankfully flies to EWR allowing for some great spotting. He firmly believes that the best way to fly between JFK and BOS is via DFW and is always willing to go for that extra elite qualifying mile. Hemal's opinions are his own and do not reflect those of his employer.

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