Could unfavorable labor relations be a factor in obstructing a potential airline acquisition in Europe? That’s the direction things might be heading, and honestly, I believe it’s a compelling argument to make. Let’s begin with some context, and then connect it to current developments…
In this post:
Comparing Air France & Lufthansa labor relations
Lufthansa Group CEO Carsten Spohr ranks among the least effective airline leaders globally regarding labor relations. Ironically, Spohr is a former Lufthansa pilot, so it would be expected that he’d value robust labor relations. However, it seems that upon transitioning to management, he lost appreciation for the profession.
Last week, Lufthansa Group faced consecutive strikes, first by pilots, followed by flight attendants, and then by pilots once again. Instead of negotiating and finding common ground, Lufthansa Group management exacerbated the situation by essentially shutting down one of its subsidiaries overnight, aiming to punish employees and adopt an aggressive stance.
It’s astonishing that Spohr is still employed. He struggles with labor relations and also doesn’t appear to lead the airline group’s flagship carrier appropriately, considering it’s the least profitable airline in the group.
The situation at Lufthansa Group starkly contrasts with that at Air France-KLM. Before 2018, labor relations at flagship carrier Air France were dreadful. For instance, in 2015, an employee protest resembled January 6 events, with executives having their shirts torn off and scaling fences to escape.
However, since Air France-KLM CEO Ben Smith assumed leadership in 2018, the narrative has shifted dramatically. Air France hasn’t experienced a single major instance of industrial action in the past eight years. That’s quite remarkable.
Many anti-union individuals often place the blame for unrest on unions and deem them unreasonable, while letting management off the hook. Yes, unions can be difficult. Yet, the situation at Air France serves as a perfect counterpoint. Air France has transformed from worst to best concerning labor relations in Europe; how did this happen?
Smith possesses profound respect for employees, he’s a dedicated aviation enthusiast (which is highly regarded by employees), and he fundamentally perceives labor and management as partners rather than adversaries. He also recognizes the importance of strategic investments to enhance employee satisfaction.
For instance, upon starting his role, one of his initial actions was to dissolve low-cost carrier Joon and transition the employees there to contracts with better pay. This is the complete opposite of the approach seen at Lufthansa Group, which focuses on creating new subsidiaries to reduce labor costs at the expense of existing employees.
Smith’s philosophy is essentially, “hey, we (management and the employees) share the same objective, which is for the airline to thrive, so how can we find a mutually beneficial agreement?” Respect carries significant weight, especially in an industry with too many individuals like Spohr.
Air France has significantly improved its labor relations
Could labor relations influence the TAP Air Portugal deal?
At the moment, the Portuguese government is attempting to privatize national carrier TAP Air Portugal, and both Air France-KLM and Lufthansa Group have shown interest in investing in the airline group, positioning themselves in the competition.
However, SPAC, the union representing TAP pilots, has serious concerns regarding a potential acquisition by Lufthansa Group, given the implications for labor relations. I mean, who wouldn’t be worried?
Therefore, Smith is (wisely) trying to leverage that concern and has highlighted Air France-KLM’s track record on labor relations as a supporting argument for such a deal. As he explained in relation to a TAP deal, according to La Tribune Dimanche:
“When I arrived in 2018, my primary focus was to improve the social climate and build a level of trust with employees that had been absent. The previous years had been characterized by numerous strikes that cost the company 1 billion euros.”
Honestly, that’s an excellent argument. If the Portuguese government cares at all about its employees or operational dependability at the airline, how could they consider a partnership with Lufthansa Group right now, when the airline struggles to maintain its own planes in the air?
Could poor labor relations jeopardize a significant deal for Lufthansa?
Bottom line
Both Air France-KLM and Lufthansa Group are vying to invest in TAP Air Portugal. While there are advantages and disadvantages to either deal, there’s one clear downside for Lufthansa Group: labor relations. How could a government want to collaborate on privatization with an airline that has a terrible labor relations record, to the extent that we see its flagship airline grounded for five consecutive days due to three different strikes?