Lufthansa's Earnings at Risk as Strikes Grip Germany
Lufthansa, Germany's largest airline, faces a threat to its earnings this quarter due to continued strikes by ground staff and airport workers. With previous walkouts already causing over $100 million in losses, the airline is concerned about the impact of ongoing industrial actions on its financial performance.
Germany's largest airline, Lufthansa Group, has issued a warning about the impact of ongoing strikes by its ground staff and airport workers on its earnings for the current quarter. Earlier walkouts this year have already cost the company more than $100 million.
The company, which owns Lufthansa, Austrian Airlines, and Eurowings, stated on Thursday that it anticipates a larger operating loss in the first quarter of 2024 compared to the same period last year, citing the industrial action as a contributing factor.
Empty tracks and platforms at Berlin central station during a train drivers' strike on January 24.
Empty tracks and platforms at Berlin central station during a train drivers' strike on January 24.
Chris Stern/CNN
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Lufthansa's ground staff strikes have caused the company nearly €100 million ($109 million) in direct costs, according to chief financial officer Remco Steenbergen at a press conference on Thursday.
The strikes have discouraged many customers from booking flights, especially last-minute ones that are usually more profitable, leading to a significant loss in sales for the company.
The challenging beginning of the year comes after a successful 2023 for Lufthansa Group, with an operating profit of approximately €2.7 billion ($2.9 billion) - the third-highest in its history, showing a 76% increase from 2022.
Frankfurt airport was closed due to strikes. On the same day, thousands of the airline's ground staff went on strike, leading to the cancellation of flights. This strike was coordinated with a walkout by security staff, resulting in the closure of Frankfurt airport, which is known as one of the busiest hubs for international air travel.
The airport announced on its Facebook page that the industrial action will lead to significant disruptions, flight cancellations, and closed security checkpoints throughout the day.
Similarly, security personnel at Hamburg and Dusseldorf airports have also joined the strike.
The Verdi union, representing 25,000 Lufthansa ground staff, called for a strike starting early Thursday until Saturday morning. They are seeking a 12.5% pay increase or a minimum of €500 ($545) more per month for the workers after negotiations with Lufthansa failed.
Lufthansa announced on Wednesday that 80% to 90% of its flights could be affected on Thursday and Friday, potentially impacting over 200,000 passengers.
Marvin Reschinsky, a negotiator for Verdi, expressed disbelief on Monday at Lufthansa's financial success, questioning how employees on the ground, earning hourly wages as low as €13 ($14), can afford to live in Germany's most expensive cities.
In its results announcement on Thursday, the airline group revealed that it will be paying dividends to shareholders for the first time since 2019.
Lufthansa's head of human resources, Michael Niggemann, mentioned on Monday that the company is ready to quickly negotiate with Verdi. He also mentioned that they have already made an offer in response to the union's demands.
During Thursday's press conference, Niggemann highlighted the significant economic impact caused by the strikes, emphasizing that all customers are affected by them.
The recent strikes add to a series of protests in Germany, known for its worker-friendly laws. Earlier this year, train drivers went on strike for better pay.
The travel disruptions caused by these strikes have worsened the already bleak situation for Europe's biggest economy. In 2023, Germany experienced its first economic contraction since the start of the pandemic, due to expensive energy costs and low demand for its products domestically and internationally.
Germany is expected to have the slowest economic growth among major economies this year, with a predicted expansion of only 0.5%.
In addition, GDL, the German trade union for rail workers, announced that its members will be on strike on Thursday and Friday. Germany's state-owned rail operator, Deutsche Bahn, anticipates that this industrial action will greatly affect its operations.
Chris Stern in Berlin and Olesya Dmitracova, Eve Brennan and Rob North in London contributed reporting.
Editor's P/S:
The ongoing strikes by Lufthansa ground staff and airport workers have dealt a significant blow to the airline's earnings, with an estimated operating loss for the first quarter of 2024. This financial setback comes at a time when the company was poised for a strong recovery following a successful 2023. The industrial action, driven by demands for better pay, has disrupted operations and discouraged customers from booking flights. The ripple effects have extended beyond Lufthansa, exacerbating economic challenges for Germany, which is facing a slowdown in growth due to energy costs and reduced demand.
Despite the financial implications, the strikes highlight the growing discontent among workers in the face of rising living costs. The Verdi union's demands for a substantial pay increase underscore the challenges faced by those on the front lines of the aviation industry, who have struggled to maintain their purchasing power in an inflationary economy. The situation underscores the need for a fair balance between the financial health of companies and the well-being of their employees. As negotiations continue, it will be crucial to find a resolution that addresses the concerns of all parties and minimizes further disruption to air travel.
