I think this is totally justified! Wages for FAs will go up, other carriers need more customers, etc. I mean, why not?

 

Lufthansa is starting to act similarly to several disfunctional European governments:

Raise fares (taxes) and demand drops so raise fares (taxes) again and demand drops further and so on and so on and....

Why not attack the OVERALL cost structure as opposed to the lowest paid employees and offer a product/service that is competitive.

 

Fair question. Adjusting the overall cost structure would (rightly) put a spotlight on executive-suite compensation. If senior management wants the FAs and others to accept a new pay scale or cut in other benefits, wouldn't it make sense for senior management also to take a meaningful cut?

 

As oil prices and euro exchange rates are soaring, that increase is very expected sooner than later. In addition, the current labor conflicts will add more pressure on LH management to find another sources for income to compensate for the additional payments to the UFO, of course the only place to achieve that is the customers pockets.

I know for a fact that Gulf carriers are getting their fuel at their home stations at a very favorable discounted prices, unlike LH and other European carriers, whom their governments keep milking them in taxes and other charges that I am afraid it will demise them rather than flourish them.

 

I would get your facts right then. Because this is not true.

 

+1

 

Hmmm. You remind me of some Gulf carriers CEOs who always insist that they don't get any sort of privileges from their governments, like discounted fuel prices and tax breaks to the max, and they compete on their own and they are internally financed and bla bla bla.

 

Fuel discounts don't make sense, since any gulf state can sell anyway at market price and fund the carrier directly. Even if it did, maybe you'd also happen to know for a fact the discount amount? Considering you can only carry as much fuel in the belly, the discount applies one way only. So there goes half the savings. Plus, most of the airlines have fuel cost at about 1/3 of their total cost, so you have to divide any fuel discount in total by ten to get an actual impact on the costs.
Then we get on to tax breaks - sure, you don't get APD when departing from DXB, but you also don't pay it when transferring at LHR, do you? Also, you don't pay income tax on any investments you make in the EU and often can deffer the losses, so can't see where the tax breaks help?
ETS is of course a different thing, but it's relatively new and that argument has been repeated over and over for years.
Financing is another great Western tradition, with low cost loans directly or indirectly (for example through government backed airplane purchase programs).

 

we've had this discussion over and over... airlines buy their fuel centrally and there are various agencies that make sure the contracted fuel is delivered whereever they need to refuel the aircraft at the contracted rate plus a handling charge. So LH gets its fuel at the same cost worldwide +/- s&h, as does EK.

IMO GCC carriers have a great greenfield and financing advantage, and massive advantage in wages, since they started with a clean slate, unlike the (european) legacy carriers who inherited old infrastructure (all the 343 LH has ), terminals (FRAnkenstein), wage contracts etc etc from the state run operations that were privatised only in the 90s. (LH AFAIR was completely free of government intervention only in 1997)

 

Not to mention the fact that Gulf based employees pay no income tax (don't know about social security, but I would be surprised if it existed in the UAE). So EK can pay a lower gross salary and employees could still have a a net salary equivalent to an LH employee. This applies to crews, pilots and groundstaff, which make up a good share of the operating cost!

 

There is absolutely nothing stopping Lufthansa group or any other airline from opening an operating company in UAE. The fact they have different competitive conditions is due to the decision of Lufthansa not to have a base their nor their legal headquarters there. As Lufthansa has been independent 100% from the German government since 1997- it has been their decision for the last 15 years not to do this. This is an excuse full stop.

 

That's oversimplifying things a bit...... I guess you have some experience with doing this, or is it just a figment of your imagination?

 

Which part please is oversimplified?

 

Just to make sure, we're on the same page here. You are suggesting LH should have based their operations in UAE?

Well, first of all not in in any remotely imaginable scenario would a company like Lufthansa ever move their HQs or operations to UAE without causing a political scandal in Germany. The negative PR affects in the german public would probably outweigh (if at all) possible cost savings.

Secondly, I don't know about the specifics of UAE law, but in the EU you pay taxes where you earn your income. So even if, in the highly theoretical case of LH operating under UAE law, the FA for example would have a UAE working contract she would still do the majority of her flying intra-EU and originating ex-DE, since LH is not going to make DXB it's hub. As a consequence she will still pay the same taxes and LH will have to pay the same social security contributions as they do now. Or you think LH will convince all FA's and pilots to move to DXB and provide a shuttle to FRA and MUC? Might be an interesting business case, hehe

So no offense, but what you are saying here makes abosultely no sense. It would have no significant impact on LHs cost structure (unless they would make DXB their hub) and thus was never a viable business case for LH management.

 

Weber in the 90s was very aware of the benefits of moving LH to some tax haven, similar to the then popular move for shipping companies to register their ships in some little island. The idea to register LH in the Isle of Man or Jersey was studied, but didn't fly with the financiers and the government. The flag on the tail of the aircraft, besides some emotional or patriotic feelings, has serious implications on insurance* topics and bilaterals**, so it was shelved.

*the BGS (now BP) would not provide protection in stations like BOG
** India stopped OE-LAZ in *A colors flying on wetlease to DEL for example because it was under AT flag

Weber did register M&M in Bermuda to avoid German laws, for example