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Airlines that made Record Profits May Spark Labor Strife

30.10.2015 | 17:36

Air France-KLM Group & Deutsche Lufthansa AG reported surging third-quarter earnings on declining fuel prices & robust summer traffic. The downside for the carriers is that the growth could undermine efforts to push through restructuring plans with workers.

The gains, while a relief to investors, pose a risk to management moves to win union cooperation for cost-cutting strategies. The two airlines, Europe’s biggest, are reorganizing to confront low-cost competition at home & Middle East rivals on intercontinental routes. Both companies have been hampered by strikes for more than a year as employees protest reorganization measures.

“How do we explain to our staff that we need to carry on making big efforts while the group delivers such strong results?” Air France-KLM Chief Financial Officer Pierre Riolacci said on a conference call with analysts today. The company “is getting better, but it’s not doing well” & “that’s what we keep telling our staff.”

Airlines worldwide are poised to report record full-year earnings for 2015. Paris-based Air France-KLM delivered its best third-quarter profit numbers in at least a decade on Thursday, while German competitor Lufthansa raised its 2015 forecast after operating profit in the three-month period surged 51 percent.

Route Risk

The final phases of Air France-KLM’s Transform 2015 restructuring program are still awaiting agreements from the Air France brand’s pilots on productivity measures, Riolacci said. Unless the employees reach a deal with the airline by early 2016, it will scale back the routes network & fleet & fire people to reduce the workforce, he said. Until now, the airline has limited job cuts to not replacing people who quit or take early retirement. Some 1,000 positions are slated to go in 2016.

Lufthansa’s nine-month operating profit jumped 71 percent, even with the costs of pilots’ strikes early this year plus a two-day walkout in September that was halted by a German court. The German company said Thursday that fourth-quarter demand and ticket pricing are eroding & Chief Executive Officer Carsten Spohr told journalists on a call that he’s seeking employee cooperation to revive growth.

 

Source: For the full article visit Bloomberg.com