Germany’s Deutsche Lufthansa Aktiengesellschaft (DLAKY) continues to be in hot waters with the pilots union (Vereinigung Cockpit) announcing that all pilots of Lufthansa’s short-haul and continental flights will go on a 2-day strike effective today. The pilots arrived at the decision following the fallout of talks with management over early retirement benefits.
Per the union, the Germany-wide strike would come into effect from midday (6.00 a.m. ET) of Dec 1 and would stay put till 11.59 p.m. (5.59 p.m. ET) on Dec 2 for short- and medium-haul flights. The strike will also affect long-haul flights scheduled between 3.00 a.m. (9.00 p.m. ET) and 11.59 p.m. (5.59 p.m. ET) on Dec 2.
We note that Lufthansa has been going through tough times. Pilots have already gone on strike eight times this year over disputes pertaining to an early retirement scheme. Strikes at frequent intervals have already set back the company’s operating profit this year to the tune of €160M ($200M).
The latest strike proposal has already led to more than 1,000 flight cancellations at Lufthansa, mainly covering Dec 1 and 2. Lufthansa is looking to bring out a special timetable during the duration of the strike to curb the inconvenience caused to its passengers. According to a report appearing in the Reuters, the management has called for an immediate resumption of talks with the pilots’ union. We expect investors to remain glued on updates regarding the same.
Incidentally, Lufthansa, one of Europe’s biggest airlines, cut its forecast for 2015 operating profit during its third quarter conference call last month, egged by concerns of a downturn affecting the global economy next year. The airline now expects 2015 operating profits to be significantly above the 2014 projection of around €1 billion. Operating profits for 2015 were previously projected at €2 billion. This is the second time in the span of a few months that the guidance has been revised downward. The ongoing labor dispute is certainly not helping Lufthansa’s cause.
Zacks Rank
Lufthansa currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the airline space include Southwest Airlines Co. (LUV), Spirit Airlines (SAVE) and American Airlines Group (AAL). All three stocks carry a Zacks Rank #1 (Strong Buy).
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