September 03, 2013
Lufthansa is likely to face another bruising labor disagreement after unilaterally terminating pensions and early retirement provisions for pilots and cabin crew.
The move affects around 60,000 employees based in Germany. Lufthansa argues that it can no longer afford to spend up to €400 million ($527 million) annually to address a widening pension deficit that is created by the difference between expected and actual interest rates, and improved life expectancy.
Lufthansa and its pilot union Vereinigung Cockpit (VC) historically have agreed on a mandatory retirement age of 60 for pilots. Pilots can retire at 55, but on average flight crew leave the airline at 58. The company and its pilots have contributed to a transition fund that bridges the time between the actual retirement and 63, which is the earliest possible general retirement age in Germany.
However, Lufthansa argues that the fundamentals for this arrangement no longer exist after a high court ruled that the mandatory retirement at 60 is discriminatory. Lufthansa now wants to phase out the bridge financing arrangement over time saying the employees closest to retirement should be affected the least. New hires likely will have to fly much longer, unless they accept lower pensions.
Lufthansa says that contributions already made to the pensions will not be lost and will be counted against future pay-outs with no deduction. VC, however, says it is “disgusted,” and that it will do everything to defend the status quo.
The union argues that because pilots have started to retire later, Lufthansa already saves money.
Separately, Lufthansa is facing uncertainty over the restructuring of its Austrian Airlines subsidiary after a Vienna first instance court ruled that last year’s transition of operations and employment from Austrian to its former regional subsidiary Tyrolean Airways was illegal.
Should that decision hold, Austrian’s restructuring and future would be in limbo. CEO Jaan Albrecht says the airline is “surprised” by the court ruling, and will appeal the decision.