Frankfurt Investors are concerned about the chaos at Lufthansa. “The Lufthansa management said it wanted to rely heavily on private travelers. That’s exactly what you’re scaring away by leaving them hanging at the airport,” criticizes Patrick Schuchter, portfolio manager at Union Investment. There hasn’t been a clear strategy for years, the spread of the brand from premium to cheap doesn’t work.
Ingo Speich, Head of Sustainability and Corporate Governance at Deka Investment, also asks the strategy question. “Until now, the mantra of leadership has been premium. Now the fifth star is gone, a real turning point,” he says, referring to the loss of the “Five Star Airline” seal of quality.
The investors find clear words of criticism immediately before the special meeting of the Lufthansa Supervisory Board. The committee wants to provide information on Wednesday about the tense situation in flight operations and the economic consequences. The meeting takes place under pressure from the employees on the Supervisory Board. Lufthansa employees are dissatisfied with the crisis management of Carsten Spohr, who mainly focused on job cuts during the pandemic.
Employees, customers and investors are feeling the effects: “Hansa” has already canceled a good 3,000 flights due to staff shortages. This depresses the mood on the stock exchange – with increasing passenger numbers, the price falls. The Lufthansa share has lost 27 percent of its value since this year’s high in February.
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The Kühne Holding now also sees the Lufthansa management as having an obligation. The logistics entrepreneur Klaus-Michael Kühne joined Lufthansa in March and currently holds around ten percent of the shares. Nobody could have foreseen these enormous changes caused by the pandemic, says Karl Gernandt, Executive Chairman of Kühne Holding: “The management is therefore particularly challenged to act adaptively to the situation.” As a long-term investor, Lufthansa stands by its side as a partner.
Momentous decisions by the Lufthansa leadership
The current disaster is partly due to problems with partners such as the airports. The airport operator Fraport cut 4,000 jobs during the pandemic, but is now desperately looking for 1,000 employees again.
But Spohr and his fellow board members also made bad decisions with far-reaching consequences. The CEO is now self-critical. Under the pressure of the high losses, the savings were exaggerated in one place or another, he recently wrote to the employees.
>>Read more: Flight chaos: Lufthansa Supervisory Board holds extraordinary meeting
The Lufthansa leadership wanted to use the crisis to make the group leaner. The central point was a reduction in staff up to the “New Normal”, according to the company environment. Spohr suggested to employee representatives very soon after the start of the pandemic that they introduce “collective part-time work” as an alternative. But they had refused.
As a result, every fourth Lufthansa employee has now left the company. The management really wanted to cut staff with the aim of being able to bring them back after the crisis at lower costs, criticizes Gerald Wissel from the aviation consulting company Airborne Consulting: “That failed terrifically. Lufthansa will not entirely succeed in getting the necessary staff of the required quality at low costs.”
The management could have used the short-time work more to keep more staff. “Then you wouldn’t have had to lay off any employees. Incidentally, this also applies to some airports,” says Wissel.
In addition, the recovery of the industry was misjudged. A look at North America, for example, would have been enough to see that the boom, when it comes, will be violent. By spring at the latest, it was clear that the desire to travel would return with power in Europe as well. Spohr himself reported in early May that bookings in a week in April were above the 2019 level for the first time since the beginning of the crisis.
Nevertheless, cabin staff are still on short-time work and are not trained for the job. The management had to recognize much earlier that the recovery was coming faster than forecast, says Wissel: “That was foreseeable from a certain point in time, and the training for the staff could have started in good time, for example. But they probably wanted to put pressure on the employee representatives.”
At the beginning of the crisis, Spohr pulled the “brake” very quickly and violently. The Lufthansa fleet was to be reduced by 100 jets, and 10,000 employees related to the operation of the aircraft were to leave the company. “The management managed the group well at the beginning of the crisis,” Speich from Deka acknowledges this achievement.
The problem: the workforce was reduced accordingly, but the fleet was not shrunk as planned. Although 83 aircraft have left the Lufthansa Group’s “fleet” since the beginning of the pandemic, 33 jets were added at the same time. Spohr recently conceded to the workforce that the incorrect assessment of how many aircraft there would be in 2022 and 2023 had consequential errors.
Fleet not shrinking as planned
Not only were 200 pilots laid off at Germanwings, which has since been discontinued. At the end of the month, another 300 pilots will leave Lufthansa. You accepted the volunteer program. Now Spohr hopes to persuade some of them to stay. Even the Airbus A380, which has already been retired, is to be reactivated. However, the management had urged its pilots to voluntarily leave with an extra bonus.
The management has not yet achieved another goal. During the crisis, it wanted to negotiate a social partnership with competitive collective agreements with employee representatives. But old conflicts and mutual distrust still determine the talks – fueled by decisions by the top management.
The termination of the so-called Perspective Agreement (PPV) by the management has been causing unrest since the end of 2021. A compromise had been negotiated years ago. The pilots gave up, but the management agreed to operate at least 325 jets in the core Lufthansa brand.
The termination overshadows the wage negotiations that have just started. Spohr recently admitted at a staff meeting that it was not necessary if the fleet planning had been a little more optimistic at the time.
The plan to launch a new airline with the internal name “Cityline 2.0” next spring is also controversial. Employee representatives see this as an attempt to circumvent existing collective agreements.
The new airline also contradicts the management’s promise to streamline the structures with the many airline operations – a demand from many investors. Lufthansa must further reduce complexity, says Deka representative Speich. It makes it extremely difficult to react quickly and flexibly in crises.
“Management wanted to make Lufthansa smaller. There’s not much left of that,” sums up Schuchter from Union Investment: “They want to fly 90 percent of their capacity again next year, but the workforce has been significantly reduced. Now you can see the collapse of the company.”
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