Lufthansa has announced that it has reach an agreement with Vereinigung Cockpit (VC) that will finally put pilots under contract with a new labor deal. This announcement comes on the heels of negotiations that had taken place between LH, VC and an outside mediator in February 2017.
This finally puts to rest a labor squabble that has lasted since 2014 and has cost Lufthansa €500 million and forced passengers to endure 14 strikes.
Though minor details are yet to be worked out, the sides agreed to the following key points:
- Lufthansa will NOT outsource jobs to pilots who are not covered under the new agreement. Previously, LH suggested that up to 40 aircraft could be manned by cockpit crew that would be exempt from any labor agreement.
- Pilots will receive a pay increase of 11.2% retroactive to 2012 and prorated through 2022. They will also get a one time bonus of 1.8x their monthly salary.
- Lufthansa has promised to maintain a minimum fleet size of 325 aircraft, thus ensuring opportunities for hiring new pilots to enter Lufthansa’s Pilot Training Program, as well as creating opportunities for advancement of current pilots to move on to flying larger aircraft as their careers develop. The target of 325 aircraft needs to be reached or maintained by 2022.
- Lufthansa will be able to recharacterize the pension liabilities currently on it’s balance sheet. This accounting maneuver will result in an improved balance sheet to the tune of 100s of millions of Euros and be accretive to Lufthansa’s balance sheet for 2017. Pilots have agreed to convert their pension to a Defined Benefit Plan.
Once the deal is voted on and approved by pilots, it will be in force until May 2022.
Lufthansa announced yesterday that they’ve agreed in principal to the recommendations that came out of mediation sessions with Vereinigung Cockpit. Now it’s up to the Union to vote on the recommendations. The vote is expected to take place by late March.
In summary, here is what the deal looks like:
- Pilots will get a retroactive pay raise of 2% going back to January 1, 2016, and an additional 2.3% pay raise effective January 1, 2017.
- On January 1, 2018, an additional raise of 2.4% will be paid, and yet another raise of 2% on January 2019.
- A one-time ‘bonus’ will be paid that will amount to €5000-€6000 per pilot.
- The deal would be in effect until 2019.
Keep in mind this is only one part of the multi-faceted labor issue. The harder portion of reaching complete labor peace involves figuring out how pensions will be earned and paid. So we’re not quite out of the woods yet.
Lufthansa, though agreeing to the proposal, did come back with a response that suggested consequences are in the offing as a result of this deal. With the deal expected to cost Lufthansa at least €85 million annually, LH has suggested that it may use cabin crew on 40 aircraft that are not subject to the agreement. Most likely this would come from the pilots being ‘acquired’ through the Air Berlin deal that sees LH operating AB aircraft on their routes beginning this year. They are not subject to this agreement and would be one easy option to help mitigate at least some of the increase in labor cost.
Union representatives suggested that this deal may not be an easy one to sell to their members due to the issue revolving around the 40 aircraft that would have cockpit crew not covered by the agreement.
Also as part of the agreement and announcement, LH has indicated that no jobs will be impacted due to this arrangement.
While knocking on wood, there is hope that labor peace will exist between Lufthansa and Vereinigung Cockpit (VC) through the Holidays.
In comments coming out of Frankfurt, it appears that both sides have agreed to a new series of mediation in an attempt to finally bridge the gap between the union and the airline. So I’m cautiously optimistic that the union will not pull any stunts that seek to hurt passengers during one of the busiest travel season of the year.
Obviously past mediations have yielded nothing but more strikes and passenger grief but there’s always hope of reaching a deal. Just like there’s hope of winning the lottery.
The labor dispute will enter it’s fifth year in 2017. Pilots have been working without a new deal since 2012 and I suspect that trend to continue for the foreseeable future.