Could bad labor relations be a reason to block a potential airline acquisition in Europe? That’s the direction things may be headed, and I must admit, I think it’s a pretty smart argument to make. Let’s start with some background, and then tie it in to current events…
Contrasting Air France & Lufthansa labor relations
Lufthansa Group CEO Carsten Spohr has to be one of the worst airline leaders in the world when it comes to labor relations. The irony is that Spohr is a former Lufthansa pilot, so you’d think he’d appreciate the value in good labor relations. But I guess once he made the switch to management, he lost respect for the profession.
Last week, Lufthansa Group saw back-to-back-to-back strikes, by pilots, then flight attendants, and then pilots again. Rather than trying to negotiate and find common ground, Lufthansa Group management has only made matters worse, by essentially shutting down one of its subsidiaries overnight, to punish employees and play hardball.
It amazes me that Spohr still has his job. He’s not great at labor relations, and he also doesn’t seem great at actually leading the airline group’s flagship carrier in the right direction, given that it’s the least profitable airline in the group.
What’s going on at Lufthansa Group is such a contrast to Air France-KLM. Prior to 2018, labor relations at flagship carrier Air France were horrendous. I mean, in 2015, a protest by employees looked more like January 6, with executives having their shirts ripped off, and scaling a fence to escape.
However, it has been a completely different story since Air France-KLM CEO Ben Smith took over in 2018. Since then, Air France hasn’t seen a single major case of industrial action. Yes, in eight years. That’s beyond remarkable.
I know a lot of anti-union people like to always blame unions for the kind of unrest, and for being unreasonable, while giving management a pass. Yes, unions can be challenging. But I think the perfect counterpoint to that is what we’ve seen at Air France. Air France has gone from worst to first when it comes to labor relations in Europe, so how is that possible?
Well, Smith has a deep respect for employees, he’s a huge aviation geek (which employees very much respect), and he fundamentally views labor and management as being collaborative, rather than at odds with one another. He also understands the value in making strategic investments to make employees happy.
For example, when he started in his role, one of his first orders of business was to eliminate low cost carrier Joon, moving the employees there onto contracts with higher pay. That’s literally the opposite of what we see at Lufthansa Group, where it’s all about forming new subsidiaries in order to cut labor costs, at the expense of existing employees.
Smith’s attitude is essentially “hey, we (management and the employees) want the same thing, which is for the airline to succeed, so how can we come to an agreement where everyone can be happy?” Respect goes a long way, especially in an industry with too many people like Spohr.
Could labor relations play into TAP Air Portugal deal?
Currently, the Portuguese government is trying to privatize national carrier TAP Air Portugal, and both Air France-KLM and Lufthansa Group have expressed interest in investing in the airline group, and are in the running.
However, SPAC, the union representing pilots at TAP, is seriously concerned about the prospect of an acquisition by Lufthansa Group, given the implications for labor relations. I mean, who wouldn’t be?
So Smith is (smartly) trying to capitalize on that concern, and made Air France-KLM’s record on labor relations an argument in favor of such a deal. As he has explained in the context of a TAP deal, and reported by La Tribune Dimanche:
“When I arrived in 2018, my priority was to ease the social climate and establish a level of trust with employees that didn’t exist within the company. The preceding years had been marked by numerous strikes that had cost the company 1 billion euros.”
Honestly, that’s a really good argument. If the Portuguese government has any concern for its employees or operational reliability at the airline, how could they possibly want to enter a deal with Lufthansa Group right now, when the airline can’t even keep its own planes flying?
Bottom line
Both Air France-KLM and Lufthansa Group are competing to invest in TAP Air Portugal. While there are pros and cons to either deal, there’s one obvious con for Lufthansa Group, which is labor relations. How could a government want to partner on privatization with an airline that has a horrendous record on labor relations, to the point that we see the flagship airline grounded for five days straight, with three different strikes?
While Air France-KLM CEO Ben Smith isn’t trashing Lufthansa Group, he’s smartly bringing up how Air France has now had labor peace for eight consecutive years, and that’s causing TAP Air Portugal pilots to increasingly favor a deal with the SkyTeam airline group.
Do you think labor relations could factor into which direction this deal goes?