In an unfortunate turn of events, Lufthansa, the German airline giant, is grappling with a double whammy of strikes from both its ground staff and cabin crew. The strikes have left the travel plans of over 220,000 passengers in disarray.
The cabin crew, represented by the German trade union UFO, is demanding a 15% wage hike, resulting in a strike that will affect more than 120,000 passengers this Tuesday and Wednesday. This comes hot on the heels of a similar strike by Lufthansa’s ground staff less than a month ago, which was organized by the labor union Verdi in a bid to secure a 12.5% pay increase and a lump-sum inflation payout.
The ground staff’s strike had already created havoc for over 100,000 passengers, and with no agreement in sight, the situation appears to be worsening. Now, with the cabin crew also joining the fray, the airline anticipates the cancellation of 1,000 flights. This will severely disrupt the travel plans of thousands of passengers at Frankfurt and Munich airports, according to a Lufthansa statement to Fortune.
Impact on Lufthansa’s Business
These strikes are not just causing inconveniences for travelers; they’re also taking a significant toll on Lufthansa’s business. The airline, in its earnings report released last Thursday, revealed that these strikes are likely to dent its first-quarter operating profits. The company is striving to come “as close as possible” to its 8% operating margin target for the full year, down from 2023’s 7.6% figure, according to Reuters.
“The uncompromising strikes by the trade union Verdi are damaging our guests, the company and ultimately our employees,” lamented Michael Niggemann, chief human resources officer and labor director at Lufthansa, in a statement along with the earnings release.
Strikes aren’t just affecting Lufthansa. Germany’s central bank cautioned last month that strikes, including those hitting railway services, could have a negative impact on Germany’s productivity, which is already struggling with an economic crisis.
The Silver Lining Amidst the Chaos
Despite the labor union troubles, Lufthansa had a financially successful 2023. The airline benefited from a robust rebound in travel demand, enabling it to generate revenue of €35.4 billion ($38.66 billion), a 14.5% increase from 2022. Simultaneously, its operating profit surged by a whopping 76% during the same period.
The company saw its passenger volumes grow by 20% last year, and it also declared dividends for its shareholders for the first time since 2019. “The Lufthansa Group has regained its financial strength,” CEO Carsten Spohr proudly stated in a press release.
What Lies Ahead?
While the immediate future may seem challenging, Deutsche Bank anticipates that Lufthansa will witness strong business in the second and third quarters, despite potential first-quarter performance impacts from the strikes. In a note last week, analysts at Deutsche Bank expressed, “We think this is a reasonable update from Lufthansa … there is conviction that respectable 2023 levels of profit and cash generation can be broadly repeated in 2024.”
Despite the turbulence, it seems like Lufthansa is prepared to weather the storm. As it navigates these troubled waters, one thing is clear: the airline’s resilience will be put to the ultimate test.
