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.
Vereinigung Cockpit (VC), the union that represents LUFTHANSA pilots has announced today that a strike is imminent and offered to only provide a 24-hour warning ahead of the walk out.
The latest threat comes after negotiations fell apart between LH and the union. If the strike takes place, it will be the 14th that has been called due to the ongoing battle between union and LH management. The biggest issues continues to revolve around pilot benefits for early retirement, as well as a pay hike. As far as the increase in pay is concerned, the union is looking for a 3.6% increase while Lufthansa has countered at 2.5%.
The union offered no further details in terms of what flights would be targeted should they decided to walk off the job, again.
LH’s management has responded to this latest threat with obvious disappointment but also announced that it was ready to re-engage in talks with the union.
Sounds like a scene from Groundhogs Day doesn’t it?
Vereinigung Cockpit (VC), the union representing the bulk of Lufthansa’s ‘mainline’ pilots, has announced that it has broken off negotiations. This comes after several months of negotiations worked to arrive at long term labor peace.
The big sticking point is VC’s demand that Lufthansa provide an outlet for pilots to choose early retirement and still receive their full retirement benefits, a concept that LH has steadfastly opposed.
Another fly in the union’s ointment is Lufthansa activity around Eurowings. With recent announcements of LH taking on Air Berlin aircraft and routes, as well as the expansion of Eurowings to Munich, the union is claiming this is being done intentionally by LH to reduce mainline demand. The union sees the risk of potential pilot layoffs from mainline which is why it feels LH is not negotiating a solution to early retirement options.
Though no strikes have been mentioned by name, VC has a history of calling ‘warning’ strikes that pop up with little or no notice, and last a few hours at a time. Just enough to disrupt operations and upset an airport full of passengers. These mini-strike are often warning shots in an attempt to force LH’s hand and they typically don’t succeed. So don’t be surprised if something isn’t announced on very short notice over the coming weeks.
Personally, I thought that VC and LH had started to warm up towards one another over the last few months after a tumultuous 2014 and 2015 that saw 13 strikes and hundreds of millions of Euro in losses for Lufthansa.
This of course is addition to the labor woes impacting Eurowings as they try to sort things out with Ver.di.
I’m afraid that history may be poised to repeat itself…….
Late last week, Lufthansa and Vereinigung Cockpit (VC) ‘quietly’ agreed to work towards an agreement that would finally put an end to strikes by Lufthansa pilots.
Over the last few months you’ve noticed relative peace between LH and VC as both sides have been negotiating on several levels to reach an agreement that would protect pilot benefits as well as the Airline’s interest. To that end, there have been several separate groups negotiation a variety of issues. Going forward, both sides agreed to consolidate their efforts into one major push and have committed to having issues resolved and new agreements in place by the end of July.
What does this mean?
As long as both sides agree to work together and not pull any surprises, I suspect that we will have little to no risk of service disruptions due to striking pilots this summer. Odds for a deal have improved dramatically once the union provided concessions to the compensation structure for pilots, while LH committed to expanded career opportunities for pilots.
The only time strikes would be called would be when the union had a temper tantrum and wanted to send a message to the airline and its passengers. It appears that they are well past this, and are finally realizing that the best outcome is to get a deal done.
Hopefully the peace lasts……