Lufthansa is a large corporation consisting of many subsidiaries and business units, building a fragmented and difficult to manage group. A basic change in corporate policy is now
becoming apparent, aimed at boosting the company’s value by concentrating on the core business, reducing diversity and divesting a number of non-strategic activities.
Meanwhile, the LH Cargo MD-11F pilots’ displeasure about their unclear professional future is growing.
The working atmosphere at Lufthansa is becoming rougher, mainly because of the management’s plans to increase the value of the company by reducing complexity and streamlining processes. A long overdue measure analysts hold, referring to the stock market which shows Lufthansa shares stagnating over the last five years. They fluctuate between 13 und 15 euros, except for a brief interim high at the beginning of 2019. Persisting sluggishness instead of value appreciation is the bitter truth for the many LH stakeholders.
Streamlining the portfolio
The first to notice the new headwind blowing from the company’s executive level was the catering subsidiary, Sky Chefs. Their European business was recently sold to its main competitor, Gategroup of Switzerland, despite the unionists’ repeated strike actions, opposing the step.
The next candidate to attract potential investors could be the Hamburg-based maintenance division, Lufthansa Technik, which runs 40 stations worldwide and employs 26,000 staff. There are persistent rumors that parent Lufthansa is considering selling a substantial minority stake in its profitable subsidiary but – in contrast to the SkyGates solution – intends to continue sitting in the driver’s seat by retaining the majority share in the company, although this lacks official confirmation.
Not affected by any sales debates, yet in need of fundamental reform, is the airline’s leisure traffic on long-haul routes. Under the project name "Ocean", the management has, for some time now, been working on a new concept aimed at reducing complexity by operating intercontinental tourist routes under a single AOC. Currently, the traffic is split between four carriers: Eurowings, Brussels Airlines, LH CityLine, and SunExpress, a joint venture between LH and TK. They all serve tourist destinations in the Caribbean and elsewhere, a complicated coexistence so far tolerated by the current leadership.
However, this rather confusing concept will soon be a thing of the past. Bundling the intercontinental leisure traffic under a new AOC, as obviously preferred by the management, would not only reduce complexity, but also free LH from the shackles of the difficult and complex group wage agreement.
Grumbling Cargo Pilots
Lufthansa Cargo does not appear to be affected by major corporate changes, although 2019 was a challenging year for the company. Instead, LCAG has a pilot issue. The question is: what will happen to the MD-11 cockpit crews once the last McDonnell Douglas freighter leaves the fleet on 31st December this year? Currently, there are eight aircraft still in daily service. Roughly 200 pilots are affected for which LCAG has no further use. A fraction of them, some 22 pilots, have been retrained to fly the B777F of which LH Cargo operates nine units, but their colleagues’ future careers are still completely unclear, an insider told CargoForwarder Global.
The vast majority of them deliberately chose to fly freighters which guarantees operating long-distance routes. They are not motivated to switch over to Lufthansa’s passenger division, to SunExpress or Eurowings serving short or medium-haul routes, he says.
“The unresolved situation has stirred up a lot of displeasure among the remaining 200 MD-11F pilots.” This all the more since “we have not heard any clarifying words from the management,” the source states.
At the LCAG press department, nobody was available for a comment.
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