Deutsche Lufthansa AG, Europe’s second- biggest airline, said personnel expenses cannot remain above those of its competitors after a round of cost cuts failed to offset the impact of declining ticket prices.
Yields slid more than 3 percent in 2014, while unit costs fell only “slightly,” management board members Karl Ulrich Garnadt and Bettina Volkens wrote in a letter to staff. That’s left Lufthansa’s cost base still 30 to 40 percent higher than at rivals such as EasyJet Plc or Turkish Airlines, they said.
“In the long term our staff costs cannot be substantially higher than those of our competitors,” the letter, obtained by Bloomberg News, said. “There is no easy answer to this. Ultimately, we too have to be measured against the yardstick our competitors set every day.”
Germany’s Vereinigung Cockpit pilot union staged 10 strikes last year that cost Lufthansa about 200 million euros ($227 million). Profit gains have also encouraged cabin crew and ground-staff — who have contributed to lowering expenses in recent years — to demand more in upcoming negotiations.
Lufthansa has no plans to fire cockpit crew, it said in the letter, and has reached an agreement with pilots over pay. Terms won’t be communicated before deals are also reached in other areas including retirement benefits, it said today.
The UFO union, which represents cabin crews, last month said it will seek an 8 percent pay increase in upcoming talks, while ver.di on Feb. 2 said it wants a 5.5 percent raise for ground-staff and at Lufthansa’s cargo and maintenance units.
This article was written by Richard Weiss from Bloomberg and was legally licensed through the NewsCred publisher network.