Lufthansa Joins Germany’s List of Companies in Distress

Lufthansa Joins Germany’s List of Companies in Distress

BERLIN — Lufthansa was once a proud symbol of Germany Inc., standing for the quality and smooth functionality of Europe’s No. 1 economy. But that was before the last week, when a strike by the airline’s pilots stranded more than half a million passengers.

As of Wednesday, 4,461 flights had been scratched over six days, with no end in sight to a dispute over wages for pilots.

The Lufthansa pilots’ union, known as Cockpit, counts just a few thousand members, but they have the power to paralyze the airline as it grapples with myriad challenges, in particular the growing pains of its low-cost Eurowings affiliate.

Lufthansa’s troubles have become Exhibit A in demonstrating how the changes of the 21st century are eating away at decades of cooperation between labor and management that allowed Germany to rebuild and grow after World War II.

Those deals, which have given labor a say in management, have allowed Germany to avoid the crippling strikes and violence seen in Margaret Thatcher’s union-busting Britain, say, or over decades in France.

But Lufthansa is also the latest example of how the fabled efficiency and competence of some major German companies have fallen into crisis.

Volkswagen, Europe’s largest automaker by far, is mired in an emissions scandal and faces tens of billions of euros in fines and legal judgments. The revelation last year that Volkswagen cheated to pass emissions tests in the United States and Europe threatens to undercut Germany’s image as a maker of exquisitely engineered vehicles.

It had already led Volkswagen to announce that it would break a taboo and cut about 30,000 jobs worldwide, including 23,000 in Germany.

In a further threat to the auto industry’s prestige, the scandal has spread to Bosch, the parts supplier based in Stuttgart and another symbol of German excellence.

Bosch is under investigation in the writing of the illegal software Volkswagen used to manipulate results of emissions tests. Vehicles are Germany’s biggest export, and the country’s economy would instantly suffer from any decline in sales.

Germany’s once-mighty banking industry is also struggling to avoid slipping into irrelevance. After the financial crisis in 2008, Deutsche Bank was the only European institution that remained a strong presence on Wall Street.

But the bank has been pummeled by accusations it took part in a wide array of financial malfeasance. The authorities in the United States have demanded that Deutsche Bank pay $14 billion in fines related to its sale of mortgage-backed securities before the financial crisis.

The bank’s shares have fallen about 36 percent in the last year because investors fear its ability to compete could be hobbled for years to come.

For Lufthansa, the fight is ostensibly over wages for its pilots, who earn about 30 percent above the global average, according to Gerd Pontius, of Prologis, the aviation consultant, where he advises more than 50 airlines. The highest-ranked captains easily earn 250,000 euros a year (about $265,000).

While Lufthansa has tried to rebook passengers and keep them moving, impatience is mounting. “Competitors are getting more attractive,” Mr. Pontius said. “The strike really drives passengers into the arms of the competition.”

Philipp Goedeking, an airline consultant based in Frankfurt with the investment company Avinomics, had his own lament. On Wednesday, he flew British Airways to London for a meeting, and paid €1,100 ($1,167) for a return ticket — “really a chunk of change,” he said, as the absence of Lufthansa flights drove him to seek an alternative.

Photo

Lufthansa employees demonstrated against the strike by pilots in Frankfurt on Wednesday, holding signs that read “Solidarity now! Stop the strike,” center, and “End The Strike. Arbitration Now.”CreditUwe Anspach/DPA, via Associated Press

Those are the kinds of costs not reflected in Lufthansa’s estimate that each day of the strike costs the airline from €10 million to €15 million. The damage over all to the German economy is unknown at this time.

Mr. Goedeking said it was once unthinkable that anyone at the airline would go on strike. The motto for what he called a “very, very valuable brand,” used to be, “If it says Lufthansa on the outside, it must be Lufthansa inside,” referring to the quality of work from the ground crews to personnel aboard its planes.

Carsten Spohr, the former pilot who is Lufthansa’s chief executive, knows he has to adapt that motto and squeeze costs.

For Lufthansa, budget airlines like easyJet and Ryanair are advancing in Europe while Middle Eastern and Asian airports have become rivals on long-haul flights. Istanbul; Abu Dhabi, United Arab Emirates; and Doha, Qatar, are taking business away from traditional European hubs like Frankfurt.

Mr. Goedeking noted that Istanbul in particular could prove a threat to Lufthansa when it opens a giant airport about 22 miles northeast of the Turkish capital, probably by 2018.

That will lure customers from Middle Eastern and European hubs, Mr. Goedeking said. “It is perfectly placed,” he added, “right in the path of natural traffic flows.”

For now, nobody wants to rattle the cage and abandon Germany’s hallowed post-Nazi principle of tarifautonomie, or bargaining on wages that is independent of any state interference.

But the German Aviation Association has now added its voice to a growing chorus of business and industry experts that some kind of mediation should be mandatory.

Lufthansa hopes to return to normal service on Thursday, when there is no strike scheduled. Workers have given at least 24 hours’ notice before going on each of the 15 strikes that have occurred since 2014.

The outsize power wielded by the pilots’ union in the Lufthansa strike is testing not only passengers but also the tens of thousands of the airline’s employees who are not pilots.

The mood has grown more heated. Both the pilots and other Lufthansa employees, who are among the 95 percent who have already reached deals with the company, demonstrated outside the airline’s headquarters in Frankfurt on Wednesday.

The pilots might deserve more money, said Dominik Fries, who works in technical operations and was among some 250 demonstrators who were not pilots. “But they shouldn’t get it through a strike,” he said. “They have got to negotiate. This is slowly getting to be too much — they are the drops of water that make the cup run over.”

Christopher Heim, a captain flying Airbus A380s and one of the few pilots willing to talk to reporters, cast the struggle in the light of current politics.

“Right now, we are standing at the forefront fighting for the rights of workers,” he said, predicting that “it’s going to get better for the workers” as government and employers realize from the election of Donald J. Trump in the United States that “right-wing parties are gaining momentum” and “they can’t just hit us as they did.”

By Wednesday afternoon, Lufthansa had made another offer, which the pilots said they would examine.

The offer was late and of little solace to Antonio Bellon, 24, who was huddled in Tegel Airport in Berlin on Tuesday. Mr. Bellon, a student in Hamburg, was trying to get home to Venice. His direct flight on Lufthansa was canceled.

The bus that ferried him from Hamburg had been delayed, he said, causing him to miss a connection in Berlin and forcing him to fly through Zurich.

“The worst part was waiting for the bus in minus 7 degrees Centigrade,” he said. “I don’t think I have ever been so cold.”

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