A one-day strike scheduled for Friday by pilots at Lufthansa Airlines will also affect the company’s freighter subsidiary and inconvenience businesses with goods scheduled for carriage. The more serious threat for shippers and Lufthansa Cargo is future labor action of longer duration that could disrupt supply chains, logistics experts say.
The German-flag carrier said it has canceled 800 flights at its Frankfurt and Munich hubs for Friday, and a handful of flights on Thursday, after the pilots’ union declared a 24-hour strike over a pay dispute. The stoppage comes as many people in Europe are returning home from the end of summer holidays.
“Lufthansa is working with joint forces to return its flight operations to a normal status as quickly as possible. Nevertheless, the effects of the strike may still lead to individual flight cancellations or delays this Saturday and Sunday,” the airline said in a news release.
Vereinigung Cockpit (VC), the association of airline pilots and flight engineers in Germany, represents the interests of about 9,600 cockpit crew members from all German airlines, including 5,000 at Lufthansa and Lufthansa Cargo. The pilots, who are seeking a 5.5% wage increase this year with annual inflation adjustments, last week rejected an offer from Lufthansa’s management after previously voting to authorize a strike.
The sides remain far apart on a new collective bargaining agreement. “Lufthansa is available at any time to continue the talks,” a spokesperson said.
It’s unclear exactly how many pilots will participate in the strike action, but most freighter and passenger aircraft are expected to be grounded on Friday. Lufthansa Cargo said it is automatically rebooking freight shipments on the next available flights.
A one-day work stoppage will be manageable for Lufthansa (DXE: LHA) and freight customers, but supply chain problems will become more serious if VC opts to strike again for an extended period, according to air cargo professionals.
Lufthansa Cargo ranks among the 15 largest air cargo carriers in the world based on volume. It achieved record operating income of $480 million in the second quarter. In addition to managing cargo shipments transported by Lufthansa and sister airlines’ passenger aircraft, it operates 11 Boeing 777 freighters, plus five more via the AeroLogic joint venture with DHL Express. And it recently added an Airbus A321 narrowbody freighter for regional package flights, which are crewed by CityLine.
The strike is taking place during a period of tight capacity for air cargo. Passenger fleets are still smaller than their pre-pandemic size and tit-for-tat sanctions related to Russia’s invasion of Ukraine removed about two dozen large freighters from the market, while reducing efficiency on flights to Asia because Russia closed its airspace.
“Should the Lufthansa pilots go on strike, that would have quite a big impact on capacity,” said Benno Forster, head of airfreight operations and procurement in the Americas for Germany-based logistics provider DB Schenker.
Good planning and capacity management by all parties in the air logistics sector will avoid any serious impact to cargo flows during a short strike, said Glyn Hughes, director general of The International Air Cargo Association.
“Partner carriers and other [options] will be able to support some of the impact, but the key will be customer and carrier communication to prioritize shipments in the system, coupled with flexible and agile disruption management solutions. The key objective will be to reduce the impact on customers as much as possible,” he said.
With relatively easy cross-border trucking in Europe, other carriers such as Air France/KLM, Iberia and Cargolux potentially could absorb some Lufthansa cargo diverted to Amsterdam, Paris, Luxembourg or Madrid. Trans-Atlantic capacity is better than to Asia because airlines have restored many routes to meet strong summer flying demand.
A lengthy strike could also impact joint ventures Lufthansa Cargo has with All Nippon Airways, Cathay Pacific and United Airlines (NASDAQ: UAL).
Michael Niggemann, Lufthansa’s chief human resources officer and labor director of Deutsche Lufthansa AG, expressed frustration with VC’s call for a strike.
“Management has made a very good and socially balanced offer — despite the continuing burdens of the COVID crisis and uncertain prospects for the global economy. This escalation comes at the expense of many thousands of customers,” he said in a statement.
Lufthansa has offered an 18-month contract extension in which pilots would receive $902 more in basic pay per month in two stages, with entry-level workers benefiting the most. An entry-level co-pilot will receive more than 18% additional basic pay over the duration of the agreement, while a captain in the final stage will receive 5%.
An automatic inflation kicker would increase payroll costs for cockpit personnel at Lufthansa and Lufthansa Cargo by 16% over the two-year period proposed by VC, according to the airline. The union also wants a higher base salary plus more sick days, vacation and training, which would increase cockpit payroll costs another 25%. Lufthansa said such increases are not sustainable, especially as the company begins to heal from the lost business and financial damage caused by COVID for more than two years.
In total, the union’s demands would increase flight crew payroll costs by more than 40% to $2.9 billion over the next two years, it claimed.
Management noted that Lufthansa and Lufthansa Cargo have generated the most growth, investment and jobs over the past dozen years compared to other parts of Deutsche Lufthansa Group, which includes catering and maintenance units, and subsidiary airlines Swiss International, Austrian Airlines, Eurowings and CityLine.
By 2024, the group expects 33 new, modern long-haul aircraft, all of which will go to Lufthansa, along with the associated jobs.
Between 2010 and the start of the COVID crisis, the number of cockpit jobs at Lufthansa and Lufthansa Cargo grew by 18%, and by as much as 45% at the Munich hub, according to the company. Lufthansa has hired 700 co-pilots since 2017 and made 400 co-pilots captains.
“We want to continue this growth with our cockpit colleagues at Lufthansa and Lufthansa Cargo,” said Niggemann. “We want to find solutions at the negotiating table.”
Strikes and staff shortages have plagued Lufthansa and other European airlines this summer, forcing thousands of flight cancellations. Frankfurt airport has capped the number of daily travelers to minimize congested passenger terminals and delays as travel picked up faster than service providers could hire enough personnel.
In August, Lufthansa reached agreement with ground workers on a new contract to prevent further walkouts after a one-day strike in July caused about 1,000 flight cancellations and cargo delays.
Cargo personnel changes
In related news, a Lufthansa Cargo spokesperson confirmed that Stephanie Abeler, currently had of sales and handling Midwest USA, based in Chicago, became U.S. and Canada regional head for Lufthansa Cargo, on Thursday. She replaces Bernhard Kindelbacher, who has been reassigned to Frankfurt.