Employee-related concerns continue to haunt Germany’s Deutsche Lufthansa Aktiengesellschaft DLAKY. The largest German carrier is now confronted with the possibility of its flight attendants going on strike, unless the company is able to come up with an acceptable plan by Jun 30 pertaining to the pay and retirement conditions of its cabin crew.
The ultimatum to the company was served by the Independent Flight Attendants Organization (UFO) which represents 19,000 flight attendants of the frequently strike-plagued carrier. We remind investors that in Jan 2015, UFO agreed with the company to seek arbitration to resolve disputes related to the pay and retirement benefits of the flight attendants. However, efforts by mediators to find an amicable solution fell apart. Subsequently, the union rejected the proposal to resume talks with the company.
UFO has now stated that failure on the part of the company to come up with an acceptable solution by Jun 30, 2015 would result in the flight attendants going on strike the following day. Moreover, it warned of further strikes that could last till Sep 16, thus crippling operations through the busy summer season. This would potentially rob the carrier of significant revenues.
We note that Lufthansa has faced a series of strikes in the recent past, over its supposed efforts to reduce costs in a bid to compete effectively with carriers like Ryanair Holdings RYAAY and Emirates.
In Mar 2015, pilots of the company went on a four-day strike following the fallout of talks with management over early retirement benefits. Furthermore, the carrier’s plan to expand low-cost offerings has also come under attack from the pilots. The strike was the 14th such move by the carrier’s pilots since Apr 2014. However, pilots have as of now agreed not to go on strike further till Jul 31, 2015 as the dispute is currently in the hands of mediators.
The ongoing dispute with the pilots has already resulted in massive flight cancellations and loss of profit for the carrier. The latest row with its flight attendants represents a fresh challenge for the company.
Zacks Rank
Lufthansa currently carries a Zacks Rank #1 (Strong Buy). Equally well-ranked stocks in the airline space include SkyWest SKYW and Hawaiian Holdings HA.
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