Air France, Lufthansa Hit by Strikes in Fight for Future

Air France pilots embarked on the most disruptive strike since 1998 and Deutsche Lufthansa AG is bracing for another walkout tomorrow as both carriers confront worker resistance to sweeping overhauls aimed at cutting costs.

At Air France 60 percent of pilots walked out today and a similar number will do so tomorrow to protest of plans to expand low-cost operations with flight crews paid less than at the main carrier. At Lufthansa, which has suffered a series of one- and three-day strikes over retirement benefits this year, pilots flying long-haul from Frankfurt will halt work tomorrow.

The strikes at Europe’s two biggest airlines threaten to undermine efforts by management to bring costs in line with discount competitors including Ryanair Holdings Plc, which has just bought new aircraft that will help cut fares even more. Both carriers have lost money on short-haul operations for years and are moving more business to cheaper subsidiaries, a step contested by employees concerned about their future.

“Short-haul operations of both airlines are in quite a lot of trouble and they’re having to cut costs quickly,” said Robin Byde, an analyst at Cantor Fitzgerald.

Essential Trips

Between 65,000 and 70,000 passengers were affected today by outright cancellations or delays, the first day of an action due to run through Sept. 22, Air France-KLM Chief Executive Officer Alexandre de Juniac said at a briefing in Paris.

Another 60 percent may remain grounded tomorrow, with dispute costing the airline between 10 ($12 million) and 15 million euros a day in earnings before interest and tax, Juniac said. The Air France unit, which lost money last year, may continue to do so this year as the dispute derails a previous plan to be profitable.

“We’re telling people who don’t absolutely have to travel to postpone their trip,” Air France Head of Operations Catherine Jude said yesterday in a briefing at the carrier’s Paris Charles de Gaulle airport base.

Pilots are staging the walkout as Air France-KLM seeks to end decades of short-haul losses. Former Dutch charter unit Transavia, which has already been expanded into France will move to bases around Europe with a fleet that could double in size, the company said last week, confirming plans that unions say will prompt job losses and pay cuts at the main airline.

No Substitution

While pilots at the mainline Air France unit fly about 500 to 600 hours a year, their counterparts at the French Transavia unit work 700 to 750 hours, Juniac said. Pilots at the new Transavia Europe unit may be working even longer hours, as Juniac has said costs will be lower at that new operation.

Lufthansa pilots in April staged a three-day walkout, their first since 2010, forcing the airline to cancel 3,900 flights and trimming profit this year by 60 million euros, with bookings taking about six weeks to recover.

Since then, there was a walkout at the company’s Germanwings low-cost arm on Aug. 29 and at Lufthansa’s main Frankfurt hub on Sept. 5. Each lasted six hours, causing a total of 334 services to be canceled. Lufthansa also canceled about 140 flights to and from Munich on Sept. 10 when the pilots walked out at the carrier’s second German hub. So for the year, the total number of flights canceled is 4,400 flights.

Lufthansa has 40 long-haul departures scheduled to leave Frankfurt during the period of the strike tomorrow. While there will be no outright cancellations, the schedule will be amended as Lufthansa changes departure times and deploying pilots in management.

Air France’s SNPL union wants pilots across the company to be paid the same wages and have the same working conditions. De Juniac said Sept. 11 that if pilots don’t accept the company’s strategy, expansion of Transavia’s French unit may be put on hold. Flights could be added through a new Transavia Europe division that might be based elsewhere.

“It’s not just about the cost base, but about market opportunities,” said Cantor Fitzgerald’s Byde. “The future of the airlines is in question and I can’t see management backing down.”

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