Aug. 28 (Bloomberg) -- Deutsche Lufthansa AG’s main cabin crew union is planning unlimited strikes and may walk off the job as soon as tomorrow after wage negotiations at Europe’s second-biggest airline broke down overnight.
The Unabhaengige Flugbegleiter Organisation halted talks when Lufthansa failed to guarantee beyond next year that employees won’t be transferred to cheaper contracts at a low-cost airline, union head Nicoley Baublies told journalists at Frankfurt airport. Lufthansa’s most recent offer would result in less pay over time, he said, an estimate the carrier disputed.
Lufthansa, which employs 120,000 people worldwide, has begun a 1.5 billion-euro ($1.9 billion) savings program dubbed Score after completing a package that cut 1 billion euros from expenses through 2011. The Cologne, Germany-based company has already announced plans to scrap as many as 4,500 administrative jobs and catering-division positions.
A walkout “will have a massive impact” on earnings, though if the airline “can really cope with the strikes, they need to get the proposals through,” Peter Oppitzhauser, a Zurich-based analyst at Credit Agricole with an outperform recommendation on Lufthansa stock, said by phone.
Based on analysts’ earnings estimates and effects of previous strikes, each day of a work stoppage would potentially cut full-year operating profit by 4 percent, Oppitzhauser said.
Lufthansa fell as much as 2.5 percent to 9.67 euros and was trading down 1.7 percent at 2:40 p.m. in Frankfurt. That pared the stock’s gain this year to 6.1 percent.
UFO said Aug. 8 that 81 percent of its members voted in favor of a walkout after earlier talks faltered. The union will call “limited strikes” in the short term and lay out plans for open-ended work stoppage in coming weeks, Baublies said today. UFO will announce shorter-term walkouts some hours in advance, he said.
The company will be able to act rapidly to offset any job action, Peter Gerber, personnel chief at the main Lufthansa passenger brand, said at a separate press conference.
A maximum 1,200 of Lufthansa’s 1,800 daily flights would be affected, since some regional flights are operated by units such as Air Dolomiti and Austrian Airlines, said Boris Ogursky, a spokesman.
UFO is seeking a 5 percent pay raise backdated to the start of this year, according to Dirk Vogelsang, the union’s chief negotiator. Lufthansa’s proposal of a 1.5 percent annual increase over several years would lead to a reduction in pay of 1,300 euros a month after inflation, Baublies said.
“When Lufthansa is concurrently paying its shareholders dividends, and the management hasn’t made any salary-reduction efforts, you can’t expect cabin crew to take a cut for three years,” Vogelsang said.
The airline was ready to offer a raise totaling 3.5 percent over time, and “all employees would have received more money under the terms of our offer,” Gerber said.
“In the context of the difficult competitive environment, which is particularly the case in Europe, we expect a contribution from all employees as we attempt to establish ourselves on a competitive footing,” he said. “That means that we had planned for a staggered delay in wage increases.”
Lufthansa paid a dividend of 25 cents a share for 2011, when it posted a 13 million-euro loss. The company transferred employees at Austrian Airlines to cheaper contracts at regional unit Tyrolean Airways at the start of July as part of its spending reduction strategy.
UFO’s discussions with Lufthansa, under way since last year, have also failed to resolve a dispute over the carrier’s demand that flight attendants assigned to its Berlin hub work 9 percent more hours than employees elsewhere for the same wages. Frankfurt airport is the company’s main operating base.
The pay dispute contrasts with an agreement that the Ver.di union reached with Lufthansa on Jan. 26 to secure a 3.5 percent raise for 33,000 ground, cargo and technical employees.
About 19,400 flight attendants are affected by the wage talks, according to UFO, which has declined to specify how many members it has at the airline.
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