Lufthansa Cabin Crew Talks Near Deadline in Decisive Labor Month

  • Parties set June 30 deadline for deal on pay, retirement terms
  • Airline targets separate accord with pilots union by July 31

Deutsche Lufthansa AG faces the specter of a new round of strikes as labor talks critical to restructuring the airline come to a head.

Lufthansa is scheduled Thursday to complete mediation with its flight-attendants union after a failed effort a year ago led to the airline’s longest walkout ever. The company said in May that talks with pilots, who have also held walkouts over the past two years, must produce major progress by the end of July. In response to a series of strikes, Chief Executive Officer Carsten Spohr has stated repeatedly that he can’t compromise on spending-reduction efforts without jeopardizing the carrier’s future.

The unsettled labor relations put Lufthansa in a bind as airlines throughout Europe grapple with a potential drop in demand from the fallout of the U.K.’s vote to exit the European Union. Concerns about a possible recession and lower fares have caused airline stocks to tumble since last week’s U.K. referendum, including a 14 percent slump at Lufthansa. The conflict at the German company mirrors those at competitors including Air France-KLM Group, which has also been hobbled by pilot strikes over cost-cutting moves.

The disputes at Lufthansa center on benefits and pay, and terms for employees shifting between the Eurowings budget unit and other group airlines. Strikes by cabin crews and pilots reduced group operating profit in 2014 and 2015 by a combined 463 million euros ($510 million).

“June 30 will definitely remain the final date” to conclude the talks with flight attendants, said Nicoley Baublies, chief negotiator of the UFO cabin-crew union, declining to provide details. Lufthansa said the negotiations are in their final phase. Failure to reach a deal would reopen flight attendants’ right to strike, which was suspended when the mediation process began late last year.

Lufthansa has worked on a low-cost setup since 2012 to take on discount rivals such as Ryanair Holdings Plc and EasyJet Plc, and Spohr focused the strategy on expanding Eurowings shortly after he became CEO in 2014. The unit has taken over the Lufthansa brand’s European routes that don’t serve its main hubs at Frankfurt and Munich, and it offers point-to-point flights rather than coordinating schedules to enable transfers. Eurowings is set to account for most capacity growth in coming years at Lufthansa, which also owns Austrian Airlines and Swiss International and a 45 percent stake in Brussels Airlines.

A series of strikes in the labor dispute has included a nine-day halt by flight attendants in November that forced the cancellation of 4,700 flights and a three-day walkout by pilots in April 2014, the longest stoppages since the carrier’s post-World War II reestablishment in the mid-1950s.

Cabin crews have suspended strikes due to mediation, while the Vereinigung Cockpit pilots union’s last walkout was in September, when a court ordered a halt to the stoppage. The pilots are “continuing our negotiations with Lufthansa to quickly and jointly find a solution to the conflict,” Markus Wahl, a union spokesman, said Wednesday.

Before it's here, it's on the Bloomberg Terminal.