Lufthansa Signals Shift Toward Collaborative Labor Relations After Years of Strife
Lufthansa has long struggled with labor relations, and it has cost the airline dearly. Over the years we've seen endless strikes at the airline, and in the end, management seems to lose. It's amazing how executives at the airline make the same mistake over and over, while expecting different results. The irony is that Lufthansa Group CEO Carsten Spohr is a former pilot, so you'd think he'd be on the side of labor. But it's clear that as soon as he crossed over to management, he's had a certain disdain for those who keep the airline running (at least that's what his actions reflect). Well, could Lufthansa finally be turning over a new leaf? Management seems to be suggesting so , but only time will tell if this is just talk, or if there's meaningful action behind it. Lufthansa wants to work with labor on long term solutions This is Lufthansa's 100th anniversary, so it's supposed to be a year of celebration. Instead, this spring we saw employees stage back-to-back-to-back strikes , as both pilots and flight attendants had industrial action that grounded the airline for roughly a week, costing the company hundreds of millions of dollars. This also caused Lufthansa's CityLine subsidiary to be shut down overnight. While we haven't seen formal strikes since then, the contract negotiations are ongoing, so additional industrial action isn't yet off the table. However, for the first time that I can remember, it seems like Lufthansa management is actually acknowledging that it needs to change its approach with labor. In talking about labor relations at the carrier, Lufthansa's Chief Human Resources Officer, Michael Niggemann, said that "we need to talk with each other again, instead of about each other." He also said that "it's important that we not only find solutions to the current collective bargaining disputes, but also create a solid foundation for cooperation in the years to come." Those are certainly the right words, so let's see if there are any actions behind that. Slightly more concretely, it seems that the two parties have agreed on a framework by which they'll arbitrate labor disputes, with the union representing pilots informing members that negotiations will be used to find solutions, rather than industrial action. Generally Lufthansa's labor relations issues have come down to a lack of goodwill and cooperation between management and the unions. Despite being the "flagship" airline, Lufthansa is the lowest margin airline in Lufthansa Group. How you want to analyze that depends on your perspective: Management keeps creating new airline subsidiaries due to this lack of profitability, arguing that the labor contracts for Lufthansa directly are too expensive Labor unions argue that Lufthansa is the least profitable airline because the airline group keeps outsourcing flying, so of course what's left is of limited value, since the flagship brand is being "sacrificed" Lufthansa's 100th anniversary hasn't been great for labor Air France-KLM is to "blame" for Lufthansa's new approach Why is Lufthansa suddenly taking a new approach to labor relations? I mean, logically one would assume that management would come to the conclusion that it's good for business to be on good terms with employees. But it's probably not quite that straightforward. I suspect Lufthansa Group management is also realizing that as we increasingly see consolidation among European airlines, labor peace is an important point of differentiation . I think there's one man and airline group that is putting this pressure on Lufthansa Group — that's Ben Smith at Air France-KLM. Prior to 2018, labor relations at Air France were horrendous. I mean, in 2015, a protest by employees looked more like January 6, with executives having their shirts ripped off, and scaling a fence to escape. However, it has been a completely different story since Smith took over in 2018 . Since then, Air France hasn't seen a single major case of industrial action. Yes, in eight years. That's beyond remarkable. I know a lot of anti-union people like to always blame unions for the kind of unrest, and for being unreasonable, while giving management a pass. Yes, unions can be challenging. But I think the perfect counterpoint to that is what we've seen at Air France. Air France has gone from worst to first when it comes to labor relations in Europe, so how is that possible? Well, Smith has a deep respect for employees, he's a huge aviation geek ( which employees very much respect ), and he fundamentally views labor and management as being collaborative, rather than at odds with one another. He also understands the value in making strategic investments to make employees happy. For example, when he started in his role, one of his first orders of business was to eliminate low cost carrier Joon, moving the employees there onto contracts with higher pay. That's literally the opposite of what we see at Lufthansa Group, where it's all about forming new subsidiaries in order to cut labor costs, at the expense of existing employees. Smith's attitude is essentially "hey, we (management and the employees) want the same thing, which is for the airline to succeed, so how can we come to an agreement where everyone can be happy?" Respect goes a long way… maybe it's a lesson that Spohr and his team are finally learning? Bottom line Lufthansa management claims it'll take a new approach to labor relations, increasingly trying to collaborate with unions to find long term solutions. This is such a departure from what we've seen at Lufthansa over the past couple of decades, so I'm skeptical, but it would certainly be great to see. I think Air France has put the pressure on Lufthansa when it comes to showing the power of good labor relations, given how much the labor situation at Air France has transformed. What do you think — will Lufthansa management actually turn over a new leaf with labor relations, or is this all talk?