On the surface, the European airline industry doesn’t look much changed from 20 years ago: National flag carriers such as Air France, British Airways, Iberia, KLM and Lufthansa dominate a handful of giant hub airports. Dig a bit deeper, and you’ll see that the market has shifted in a big way. Over the past decade or so, 10 legacy airlines across the region have combined into three huge groups, a consolidation that makes the market look a lot like the U.S.
But while restructuring at American Airlines, Delta Air Lines and United Continental Holdings has led to record earnings in recent years, the Europeans remain far less profitable. Their workforces remain restive and strike-prone, they face a web of restrictions from regulators in multiple countries, and for reasons of national pride, the airlines in the big groups continue to operate as separate brands – with many of the associated costs.
Nowhere is the difficulty of changing course clearer than at Lufthansa, which in late November was able to halt a strike that grounded 4,500 flights only after management offered a bonus topping €20,000 ($21,200) per pilot and a 4.4 percent raise and dropped demands for concessions on benefits. The walkout and others over the past three years have cost it more than $500m, and executives say there’s not a lot more they can give. “Walk with us and stop defending old-fashioned contracts,” Harry Hohmeister, the management board member responsible for the Lufthansa brand, told the pilots at a rally at Frankfurt Airport on Nov. 30. “Help us create our future.”
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