Can Lufthansa’s New Direction be Based on “Air Canada Rouge?” 

Lufthansa’s new “Five Point Plan” which was issued last week has been the subject of much discussion during the past few days.
CargoForwarder Global in its 2. December issue reported extensively on the programme that Lufthansa has put forward in order to make sure it remains a leading passenger and cargo competitor in the world of aviation. Air Canada’s “Rouge” might be a blueprint for achieving this aim.

Image of Cologne-based and Sun-Express, Germany, operated A330-200 of LH subsidiary Eurowings  /  source: LH
Image of Cologne-based and Sun-Express, Germany, operated A330-200 of LH subsidiary Eurowings / source: LH

Cologne hub as the new catalyst!
The German national carrier has finally made its move with regards to the set-up and operation of its own low cost long haul airline.
Not based in Frankfurt, but moved up to Cologne under the Eurowings banner and using the SunExpress German AOC.
A neat side step as far as “hiring and firing” of cockpit and cabin crews is concerned.
Eventually eight Airbus A330 passenger aircraft will be moving long-haul passenger to various global destinations at much lower seat prices than the mother company from Frankfurt and Munich with the Premium Product.
So will LH in the future need that much long-haul capacity out of FRA & MUC if the newly announced concept takes hold and is a success?

Cargo will have to play an important role on the new departures planned from CGN.
The bellies will have to be filled as much as possible in order to enhance revenues on the passenger sectors.
Michael Goentgens, LH Cargo‘s Press Manager says – “It is very positive if new longhaul routes are created within the LH Group. As LH Cargo we really welcome this additional opportunity for transporting airfreight.” CGN is a good location for cargo particularly due to the many industrial firms that are based in the nearby region of North-Rhine Westphalia State.”

Air Canada’s ‘Rouge’ is an adequate answer to a changed market environment  /  source: AC
Air Canada’s ‘Rouge’ is an adequate answer to a changed market environment / source: AC

Is Air Canada showing Lufthansa the way out of its problems?
When reading the official announcement from the Board Meeting, it’s easy to see that a lot of thought and planning has gone into this new road to success.
But, is it all from the pen of the top LH managers?
And, could this move maybe convince the LH pilots union that they now must come to terms with management on a long term salary solution?

Air Canada, also a Star Alliance member, recently did just that!
The deal, the first of its kind since 1996, runs for a period of 10 years and was achieved without any strike action or arbitration process.
Important to note is that the Canadian carriers pilot’s union stand behind the deal and 84% of the members voted in favour of the new agreement.

Air Canada also created “Air Canada Rouge” a low cost short and medium-haul carrier which operates mainly to tourist destinations in the Caribbean area using a fleet of Boeing 767 and Airbus A319 aircraft.

Strikes are ruled out
Of utmost interest is that the new 10 year pay deal reached between the pilots and the carrier also includes the pilots of the “Rouge” aircraft.
Starting salaries will be around C$50,000 per annum and rising to C$62,000 by the fourth year. These salaries apply to pilots at both Air Canada and Rouge. Senior Rouge pilots will earn less than mainline (AC) pilots, but have higher overtime rates, fly more hours and have the ability to move quicker into the captain’s seat.
This gives for example an Air Canada captain on the Boeing 777 who has over 12 years of experience, to reach a salary of C$300,000 per year.

The deal included a C$10,000 signing bonus for each crew member, two percent guaranteed wage increases, improved pension benefits and a new profit sharing agreement.
Strikes within the period of the agreement are ruled out by both parties so long as the agreement is not hampered in any way by either party.

Is this the way to start negotiations at LH?
It does not necessarily mean that this model should be or could be adapted as such to the present Lufthansa strife between itself and its pilots.
But - the fact that in Canada, the unions and the carrier actually got their act together, sat down and negotiated on equal terms and still were able to introduce Air Canada Rouge into the market without any resistance whatever from the “old pilots” within the carrier - is in itself quite an achievement.

Lufthansa has the green light from the Supervisory Board to go ahead with the mentioned five point plan.
The present strife between the pilots union and the carrier’s management has reached a stage where the travelling public has had enough and if another strike or two comes along, then many will turn their backs on the German carrier for good.
The same applies for the shipping industry, be it in Germany or out in the Far East or the USA. They cannot afford to continue living with the uncertainty of using a national carrier which has become quite unpredictable.

Maybe worthwhile if the union negotiation team and LH management take some time to read through the Air Canada deal with its pilots.
Who knows! - the will to come to terms might be increased.

LH Cargo and ANA Joint Venture takes off.
It’s not all bad news at LH.
The recently published cargo joint venture between All Nippon Airlines (ANA) and Lufthansa Cargo was kicked off last week with the first shipment being booked by Schenker Japan with LH Cargo was flown from Tokyo to London on an ANA flight, thereby saving 16 hours transit time compared to having been sent via FRA.
On the very same day a bulky 1.8 ton shipment booked with ANA was moved on a freighter, LH8385 from TYO to FRA. This, says ANA, gives their customers the possibility to ship volume freight directly from Tokyo to Frankfurt.
ANA and United, as recently published, have also applied for a joint venture routing across the Pacific.

John Mc Donagh

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