Lufthansa Pledges Fleet Growth in Exchange for Labor-Cost Cuts

Deutsche Lufthansa AG pledged to expand the fleets based at the airline’s two main hubs provided that company spending comes down, part of the German carrier’s effort to entice pilots into ending a labor dispute.

Lufthansa will station a combined 340 airliners in Frankfurt or Munich by 2020, 27 more than today, translating into 1,300 additional jobs in the cabin and 500 in cockpits, the company said in a statement Thursday. Conditions would include that unions abstain from staging further walkouts and reach an agreement on achieving “competitive cost structures” at Lufthansa by the end of June.

“We know we can’t immediately compensate for cost disadvantages we have against EasyJet or Turkish Airlines,” Karl Ulrich Garnadt, head of the Lufthansa passenger brand, said in the statement. “But we need to find a start on how to adjust development of our costs to market trends and to again bring them to eye-level with competitors.”

Pilots staged 10 strikes last year, causing thousands of flight cancellations and cutting profit by about 200 million euros ($227 million), in a protest focused on the Cologne, Germany-based airline’s transitional terms for retirements. Cockpit crews also halted work at Lufthansa’s Germanwings unit for two days a week ago.

“Our joint future cannot be determined by typical collective labor agreement after all that has happened in the past few months,” Chief Executive Officer Carsten Spohr said in an employee newsletter. “We need an alliance for growth and employment to again build mutual trust.”

The company is Europe’s second-biggest airline, after Air France-KLM Group. Both remain burdened by a cost structure that hurts their ability to compete, and their efforts to reduce spending have led to conflicts particularly with pilots. Air France’s French arm lost money in 2014 because of the longest pilot strike in the airline’s history as group profit fell almost 15 percent, the Paris-based company said today.

Spokesmen at the Vereinigung Cockpit union weren’t immediately to comment on Lufthansa’s statement.

Lufthansa, along with the Germanwings and Eurowings units, capped its fleet last year at about 400 aircraft, down from an earlier target to operate as many as 480 planes. It has transferred aircraft to Germanwings, which operates European flights outside of the two main Lufthansa hubs, and plans to assign point-to-point operations across the region to Eurowings with a fleet of Airbus A320 aircraft. It’s also expanding the SunExpress joint venture with Turkish Airlines to operate some long-haul routes.

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