Lufthansa says it struck a deal with pilots’ union Vereinigung Cockpit

In an announcement on Wednesday, Deutsche Lufthansa AG (ETR: LHA) said it had reached an agreement with pilots’ union Vereinigung Cockpit (VC) that will slash costs by up to £406.37 million and secure jobs for 15 more months.

Shares of Lufthansa closed roughly 3.5% up on the intraday chart on Wednesday. At £8.90 per share, the German airline is currently more than 40% down year to date in the stock market. If you want to invest in the stock market online, you will need a reliable stockbroker – here’s a comparison of the top few to make selection easier for you.

Lufthansa secured state-backed stabilisation package in March

Global airlines, including Lufthansa, are currently struggling to cushion the economic blow from the 2^nd wave of the Coronavirus pandemic. The COVID-19 crisis has so far infected more than 78 million people worldwide and caused over 1.7 million deaths.

The German flagship airline secured £8.13 billion of stabilisation package from the government in March to combat the pandemic that has brought demand for global travel and tourism to a near halt this year. Lufthansa signed a new industry-leading distribution agreement with Sabre last week.

In a statement in November, CEO Carsten Spohr of Lufthansa had warned that the air carrier might be pushed into cutting 1,000 pilot jobs in Q2 if it fails to strike a wage deal with unions. As per the agreement on Wednesday, the Berlin-based company will reduce working hours in the upcoming year under the state-backed Kurzarbeit scheme.

The deal with VC can potentially be extended further

The deal with VC, that can potentially be extended further to the end of June 2022, also enables Lufthansa to resort to corresponding pay cuts on shortened working hours and suspend collective salary increases. According to the German airline:

“Lufthansa is ruling out layoffs of pilots for operational reasons at Lufthansa, Lufthansa Cargo, Lufthansa Aviation Training and a subgroup of Germanwings pilots until March 2022.”

Earlier this year in July, Lufthansa said it will cut 20% of leadership positions to minimise costs amidst the Coronavirus pandemic. The German air carrier had warned of an excess of 22 thousand full-time positions.

Lufthansa performed fairly downbeat in the stock market last year with an annual decline of more than 15%. At the time of writing, the German flagship air carrier has a market capitalisation of £5.08 billion.