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Lufthansa Flights Hit By Strike Over Cost-Cutting Plan

Published: April 22, 2013 | 4:07 pm
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(CNA)-Deutsche Lufthansa Chief Executive Officer Christoph Franz Monday faced the biggest test to his resolve to push through a wide-ranging cost-reduction plan as the German airline’s domestic and international flights were all but completely grounded by a strike by ground crew, causing travel chaos across Germany, reports Wall Street Journal.

Mr. Franz had announced in late 2011 that the airline planned to realize 1.5 billion euros ($1.96 billion) in savings over the next three years partly by shrinking Lufthansa’s workforce by 3,500.

A shake-up of senior management is also on the cards at the airline after Mr. Franz last month signaled that chief human resources officer, Stefan Lauer, could be replaced, a move widely seen as an effort by the CEO to stamp his authority on the restructuring program which he argues is vital to prevent Lufthansa’s debt from spiraling out of control. The airline has EUR22 billion earmarked for orders of new aircraft by 2025. At the same time, Lufthansa is fighting to reverse a decline in its profit margins in the face of high fuel prices, fierce competition from budget carriers on its domestic routes and from Middle Eastern and Asian airlines on many long-haul routes.

Jochen Rothenbacher, analyst at Equinet Bank, said he estimates that the cost of Monday’s strike will amount to around EUR20 million in operating profit. Strikes by Lufthansa employees and airport workers cost the airline EUR33 million last year.

Lufthansa Monday canceled 1,720 flights, including nearly all flights within Germany and Europe after wage talks broke down last week, prompting Ver.di’s strike call. In addition to long-haul cancellations, only 20 of 1,650 short-haul flights were set to operate Monday, and only 32 altogether, Lufthansa said.

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