Lufthansa and its chief pilot union have agreed to accept the proposals of an arbitrator to set aside a long-running dispute over pay and benefits.
The agreement potentially ends years of strikes by the German flagship airline’s pilots that had cost hundreds of millions of euros in cancelled flights and steadily eroded Lufthansa’s reputation as a reliable airline. The airline's shares were up 1.36 percent Wednesday to €13.02 at 12:30 p.m. local time in Frankfurt.
Lufthansa and the union Cockpit confirmed in a statement that the two sides have agreed to accept the arbitration deal. The union will still have to put it to a vote among its 5,400 members and the results are expected by the end of March.
The arbitration settlement will cost the airline about €85 million ($89.7 million) in additional wages annually. That result is the opposite of what the airline, which has been under pressure to reduce labor costs to keep up with low-cost carriers like Ryanair, had set out to achieve in confronting its pilots.
In exchange, the arbitration deal allows an additional 40 planes to be operated outside of the union-agreed wage deal, effectively meaning Lufthansa can employ pilots on those planes for less. Those planes will likely go to Lufthansa's new low-cost carrier Eurowings.
Neither side is particularly happy with the deal, but both seem willing to put aside their differences for now.
Some 5,400 pilots spread across Lufthansa, its cargo division and low-cost Germanwings airline will see their wages rise 8.7 percent in four stages between now and 2019. Each will also receive a one-time payout of between €5,000 and €6,000. The pilots union Vereinigung Cockpit has been demanding wage increases of as much as 20 percent.
Pilots have staged 14 strikes between April 2014 and November of last year, costing the carrier more than €300 million in cancelled flights. The strike may have also been part of the reason Lufthansa lost its title as Europe's largest airline by passenger numbers to Ryanair last year, though it is still the largest by revenues.
Neither side is particularly happy with the deal, but both seem willing to put aside their differences for now after agreeing to enter into arbitration in December.
In a statement, Lufthansa's head of personnel Bettina Volkers said the airline would continue to work "with all its power" to find ways to reduce costs in future. The union Cockpit in a statement said the arbitration deal was "just barely acceptable" and had required the "maximum compromise."
Christopher Cermak is an editor with Handelsblatt Global in Berlin. To contact the author: [email protected]