Lufthansa Reeling From Crash Seeks to End Pilot Walkouts

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Simone Menne, chief financial officer of Deutsche Lufthansa AG, left, Carsten Spohr, chief executive officer of Deutsche Lufthansa AG, center, and Wolfgang Mayrhuber, chairman of Deutsche Lufthansa AG, observe a minute's silence for the victims of last month's Germanwings aircrash during the airline's AGM in Hamburg on April 29, 2015.

Simone Menne, chief financial officer of Deutsche Lufthansa AG, left, Carsten Spohr, chief executive officer of Deutsche Lufthansa AG, center, and Wolfgang Mayrhuber, chairman of Deutsche Lufthansa AG, observe a minute's silence for the victims of last month's Germanwings aircrash during the airline's AGM in Hamburg on April 29, 2015.

Photographer: Krisztian Bocsi/Bloomberg

Deutsche Lufthansa AG Chief Executive Officer Carsten Spohr struck a conciliatory tone with striking pilots, saying the airline has closed ranks after a plane crash that killed 150 people last month.

Lufthansa will offer the Vereinigung Cockpit pilots’ union arbitration on all remaining collective wage agreements as the German carrier seeks to end strikes that have crippled the airline for months. The company reiterated that earnings this year will exceed 1.5 billion euros ($1.65 billion), without the effect from the walkouts.

The Germanwings crash “has changed us and the scars it has left on the company will remain forever,” Spohr told shareholders at an annual general meeting in Hamburg on Wednesday. At the same time, “an aviation group or airline cannot stop, not for weeks, not for days and not even for hours,” he said.

Spohr is seeking to return the company to normal following the deadliest crash in its history when a co-pilot intentionally flew an Airbus A320 into a French mountain, killing everyone on board. Even before the disaster, the company struggled with fallout from the strikes, as well as pressure from low-cost airlines and carriers in the Persian Gulf attacking Lufthansa on its long-haul routes.

Lufthansa rose 2.1 percent to 12.83 euros at 1:07 p.m. in Frankfurt, paring the decline to 7.3 percent this year.

Cost Cuts

The pilots’ walkouts over the past year grounded more than 9,300 flights in the fiercest labor dispute for the airline ever. Expenses from the strikes contributed to the suspension of the dividend for last year as the carrier tries to preserve cash.

“I don’t want to stand in front of you without a dividend again next year” and the target is a payment of 32 euro cents to 81 cents, Spohr said today.

While some shareholder representatives at the meeting said Spohr’s offer to the union was necessary to solve the conflict quickly, others said management shouldn’t soften its position.

“The Cockpit union obviously hasn’t realized the gravity of the situation and continues to make unrealistic demands,” said Ingo Speich, senior portfolio manager at Union Investment. “Stick to your hard line and do everything to reach an agreement as fast as possible.”

Current revenue and operating profit levels “will not suffice in the long run,” Spohr said.

The strikes cost Lufthansa 232 million euros last year, and the damage is estimated at an additional 100 million euros for the first half of 2015, including canceled bookings, Spohr said.

Lufthansa plans to cut unit costs and fuel consumption by modernizing its fleet with 272 new aircraft worth about 38 billion euros at list prices in the next 10 years, Spohr said. In 2016 and 2017 the company will limit investments to 2.5 billion euros a year.

“We have set new priorities for our investments and will, for example, be postponing the construction of our new Lufthansa Cargo Center for at least two years,” said Spohr.

Lufthansa offered the union talks to select a mediator this week, Bettina Volkens, chief of human resources, said in a statement.

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