Lufthansa Scraps Majority of Flights as Pilot Strike Looms

Mar 31, 2014 12:14 pm ET

(Updates with analyst’s comment in fourth paragraph.)

March 31 (Bloomberg) -- Deutsche Lufthansa AG, Europe’s second-largest airline, will cancel 3,800 flights this week, affecting 425,000 passengers, as it braces for a three-day strike by pilots seeking better wages and retirement benefits.

The cuts, slated for April 2 through April 4, represent the vast majority of flights for those days, the Cologne, Germany- based airline said in a statement, calling the labor disruption among the most severe in its history. The stoppage will cost the carrier, which has its main hubs in Frankfurt and Munich, tens of millions of euros, with only about 500 flights operating, Lufthansa said.

The Vereinigung Cockpit pilots’ union is open to further talks “if Lufthansa were to approach us with a suitable offer,” after the airline’s proposal was “not improved” during a meeting yesterday, Markus Wahl, a spokesman for the labor group, said today by phone. As of mid-March, Lufthansa was seeking to more than triple operating profit by 2015, and wanted pilots to accept pay raises tied to financial performance.

“It’s a significant number of cancellations, given that an even split over the three days would represent well over half their average daily capacity,” said Jack Diskin, an analyst at Goodbody Stockbrokers Ltd. in Dublin.

Lufthansa fell 0.2 percent to 19.02 euros at the close in Frankfurt. That pared the stock’s gain this year to 23 percent, valuing the company at 8.77 billion euros ($12.1 billion).

Airport Strike

The schedule disruption will be the second for Lufthansa in as many weeks. The airline canceled one in three flights on March 27 in an unrelated walkout by German airport employees seeking higher pay.

The pilots’ strikes have been expected over the last couple of weeks and at least won’t overlap significantly with the Easter weekend, Diskin said. A walkout during the holiday, which this year takes place April 18 through 21 in Germany, would have been far more damaging to the airline because traffic is significantly higher.

Pilots at Lufthansa’s Germanwings division will also hold a strike, though employees at subsidiaries Swiss International Air Lines, Austrian Airlines, Brussels Airlines, Eurowings, Lufthansa CityLine and Air Dolomiti won’t participate.

‘Good Offers’

“I regret that the pilots’ union has not been able to come to agreement with us by means of negotiation,” Bettina Volkens, the head of personnel at Lufthansa, said in a statement. “We made good offers both for remuneration and future agreements on early retirement from flying.”

During the last major pilots’ strike at Lufthansa, two- thirds of all flights by the airline were scrapped on Feb. 22, 2010, though a planned four-day walkout was curtailed. In April 2013, the airline suspended almost its entire timetable for a full day as a pay strike by employees in catering, freight and maintenance crippled operations.

Lufthansa said today that it will seek to balance the fallout from the strike by using pilots and aircraft from the brands not affected by the walkout. A majority of Lufthansa’s cargo operations on the affected days will ]be canceled.