Lufthansa Agrees Inflation-busting Pay Deal

May 1, 2013

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Lufthansa agreed an inflation-busting pay settlement with the Verdi union, representing 33,000 workers, ending a dispute which had threatened to drive customers to rival airlines.

While Lufthansa agreed to increase pay by up to 4.7 percent for cabin crew and ground staff, a possible new round of strikes loomed as pilots' union Cockpit demanded the airline respond to its own 4.6 percent wage rise proposals by the middle of May.

Lufthansa is in the midst of a major restructuring called SCORE to quadruple operating profit to EUR€2.3 billion (USD$3.04 billion) by 2015 through job cuts, better purchasing and merging its European short haul with discount unit Germanwings.

Lufthansa board member for personnel Stefan Lauer said on Wednesday the wage deal with Verdi was "fair."

"It is important now that we offer our passengers reliable flight schedules free from disruption," Lauer said in a statement.

Verdi virtually grounded Lufthansa on April 22, the second strike in a month, after rejecting a company offer to lift pay by up to 1.2 percent with no job guarantees.

Analysts estimate that strikes have cost the airline about EUR€15 million.

German inflation eased to 1.2 percent year-on-year in April, slowing more than expected and coming in below the ECB's target of just below 2 percent for the euro zone as a whole.

The new pay deal will be introduced in August. Verdi secured a pledge from Lufthansa not to force lay-offs until March 2015.

The agreement came a day ahead of Lufthansa's first-quarter results which are expected to show its operating loss narrowing by one fifth, thanks to deep cost cuts.

Last November, Lufthansa agreed to increase wages by 3.95 percent for 18,000 cabin crew belonging to a different union.

Cockpit, which has been rebuffed by the airline over a demand for a 5.2 percent pay rise for 2012/13, is seeking a further increase of 4.6 percent next year.

The pilots have not been on strike since a widespread stoppage crippled the airline in 2010.

(Reuters)