Comment - Internal Obstruction Ruining Legacy Carriers

The picture went around the world: an Air France manager trying to escape aggressive unionists that had ripped off his shirt after he had turned down their demands. More civilized, but financially even worse were the continuous walkouts of Lufthansa’s pilots in an uphill struggle to conserve most of their privileges. A similar conflict is now threatening Cargolux after the union LCGB now having notified that they will turn down the principle agreement reached on 1 December with the management for a new collective work agreement.

Air France Manager escaping rampaging unionists
Air France Manager escaping rampaging unionists

What’s going wrong with the once proud and successful European legacy carriers? Walkouts of pilots and other staff, mounting conflicts between management and employees, growing distrust between the top-level guys and the “rest”, confrontation instead of consensus. It’s a dramatic climate change taking place within the airlines from formerly normal to meanwhile ice cold, when looking particularly at AF-KL, Lufthansa or – to a lesser degree – Cargolux.

No growth perspective
Fact is, the opposition inside the carriers has grown dramatically with well-organized minority groups fighting for maintaining their privileges and trying to block structural changes their managers decided to implement. Why? Because without radical measures to increase profitability and enhance services the traditional European legacy carriers have no chance to grow any longer. On the contrary.
The aviation world has changed dramatically during – say – the last decade. Low cost airlines popped up like mushrooms, highly state aided carriers from the Arabian Peninsula or the Bosporus are snatching away market shares from their European rivals at unprecedented speed. This, because the business model of these challengers in cargo and passenger carriage is not primarily based on commercial terms, leading to profits at the end of the day but on clear political guidelines to contribute to the well-being in their country of origin.

Diverging cost structures
It is anything but a new finding that the European legacy carriers have come increasingly under pressure by the fast growing Gulf airlines, Turkish Airlines and some other subsidized contenders. Besides mobilizing public sources as required, they enjoy a cost base at their national hubs, which is remarkably lower than that of their European competitors. This is evidenced by the armada of low paid ground personnel coming from Sri Lanka, India or Pakistan and working at gateways like Doha, Abu Dhabi or Dubai. This goes hand in hand with tax benefits and other amenities granted home carriers by their governments.
Are they to blame for taking advantage of these favorable operational and financial conditions? Rather not, with the distinct exception of the way workers are often treated, who are denied of any rights of collective articulation. This, because unions are strictly forbidden in each of the monarchy-led Gulf States.
The unprecedented growth of Etihad, Emirates et alia has meanwhile changed traffic flows considerably, mostly to the detriment of their European competitors. These are fighting their downfall but will lose the battle at the end of the day if they should not manage to reduce their high cost basis in comparison to their Gulf challengers, Turkish Airlines Cargo and some other subsidized competitors.

LH pilots walked out 13 times within the last two years  -  picture hs
LH pilots walked out 13 times within the last two years - picture hs

Preserving privileges
The key question is if the European carrier’s own staff help to secure the future of their companies? Many do, however, some well-organized smaller pressure groups obviously are selfishly resisting major changes. At Lufthansa, pilots went on strike thirteen times within the last two years meanwhile attempting to preserve their many privileges, causing financial losses in the region of 500 million euros. Even worse is the fact that they badly damaged the carrier’s reputation as one of the most reliable airlines worldwide. The result of unsolved internal conflicts: Lufthansa doesn’t grow anymore, but shrinks. This way the pilots’ union VC, hand in hand with UFO, who represents the carrier’s cabin crews that organized a week-long walkout in November, have so far successfully blocked the top management’s plans to restructure the airline in order to regain international competitiveness and achieve growth.

Stagnation is regression
Next door at Luxembourg it is the small union LCGB (Letzebuerger Chreschtleche Gewerkschafts-Bond) that refuses the signing of a new collective work agreement for securing jobs at lower costs. Without the LCGB’s consent, it will be difficult for Cargolux’s management to achieve the growth objectives in 2016 and after. Even worse is the damaged working atmosphere within CV, resulting in distrust and mutual recrimination.
And AF-KL? Not much left to say to their situation. Most of the pressing structural and financial problems remain unsolved with unions fighting tooth and nail to maintain the status quo. But stagnation is regression, at AF-KL, CV or LH. Too bad, that influential and well-organized groups of the carrier’s own staff still don’t seem to have comprehended the signs of the times.

Heiner Siegmund  /  John Mc Donagh

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Comments: 4
  • #1

    Wiegger (Wednesday, 16 December 2015 10:33)

    Cargolux had to paid 300 millions in fines due to price collusion. Two of it's bosses went to jail
    Cargolux has NEVER incurred in operational losses.
    Cargolux workforce was and could be in the future, dedicated, professional, focus and really proud. Management is ruining this spirit, on a daily basis.
    Cargolux has incorporated a new airplane per year since the last seven years.
    Being unionized is a legal right, like going to strike, like it or not

  • #2

    Heiner Siegmund (Wednesday, 16 December 2015 12:02)

    Dear Wiegger
    We appreciate your comment and would like to point out that we have not in any way questioned the existence of unions and the democratic right to strike.

  • #3

    Wiegger (Wednesday, 16 December 2015 15:45)

    Your article is heavily biased: LCGB hasn't signed because of a solid reason, among others, the outsourcing of jobs to China and Italy.
    How would you feel like if something like this happens to you and your family ?
    By the way, LCGB signed today, to the dismay of the pilots. THAT's an article to be written.

  • #4

    Heiner Siegmund (Wednesday, 16 December 2015 16:44)

    Thx again for delivering your personal views.
    The report you recommend and expect will be aired in about an hour.
    On the occasion we like to inform you that LCGB's Executive Secretary, a CV pilot himself, has appraised the agreement. We suppose he speaks in the name of the majority of Cargolux's cockpit personnel.
    In contrast to your assertion, we also point out that the LCGB has verbally agreed to the terms of the new CWA. However, the union hasn't formally signed the deal up to now.