In news from Vienna, Lufthansa has called on the Austrian government to waive the air ticket tax that Austria attaches to each ticket.

Lufthansa’s CEO Christop Franz has asked Austria to completely abolish the air ticket tax to help Austrian’s competitiveness but the request apparently fell on relatively deaf ears. Austria’s Ministry of Finance responded predictably by saying there’s no room in the budget for such a cut and went as far as to suggest that it is Lufthansa’s responsibility to manage it’s business model. I can see this becoming the proverbial political “hot potato” should Austrian continue to struggle to the point that Lufthansa one day decides to stop the subsidies. Right now it looks like the beginning of a “Game of Chicken” between carrier and government.

As part of the recently announced capital injection of 140 million Euros, Lufthansa expects to reorganize Austrian based on the existing arrangements that are in place for Austrian subsidiary Tyrolean unless Austrian’s worker council agrees to substantial austerity measures.

Reading through the comments of various German and Austrian media, it looks like Lufthansa expects upwards of 300 pilots to leave Austrian should the carrier need to reorganize. Apparently each pilot is entitled to severance that would range between 30 and 60 thousand Euro, costing Lufthansa up to 18 million Euro in pilot severance alone. Lufthansa also left open the possibility of layoffs at Austrian to help curb expenses.

Lufthansa has stood by Austrian and is committed to its success. It had said that the capital injection will allow for new long-haul aircraft, modernization of current cabins, new Airbus aircraft to help standardize their fleet and construction of Vienna’s new Skylink Terminal. Lufthansa has no desire to turn Austrian into a regional carrier, but I think that may not be a destiny that they can control. Without the support of labor and government, it becomes a difficult road for Lufthansa and Austrian to navigate.