Lufthansa CEO Eyes Pay Cuts for Air Berlin Crew in Rescue Plan

(Bloomberg) -- Deutsche Lufthansa AG AG Chief Executive Officer Carsten Spohr said he’s ready to welcome large numbers of employees from insolvent competitor Air Berlin Plc to build up his airline’s Eurowings unit, promoting his company as a safe haven for jobs -- albeit with concessions.

“Those of you who have worked with Air Berlin crews know it: These are top people, and we’ll be very glad to get as many as we can over to us,” Spohr said at an internal staff meeting on Thursday. “Of course we cannot hire these employees on Air Berlin terms, but on Eurowings terms, but we do want to be fair and take into account seniority and experience.”

The comments are a clear sign to unions that Air Berlin employees could secure a future at Lufthansa, but only in exchange for curbs to their paychecks, as the companies begin talks on which assets of the collapsing carrier can shift to its larger rival. Lufthansa is interested in operating about half of Air Berlin’s 140-plane fleet, and the discount Eurowings brand, which is in the process of slashing costs per average seat kilometer by 30 percent by 2020, would be the new home for many of those aircraft and crews.

Air Berlin, which has only posted a full-year profit three times since its shares started trading in 2006, filed for insolvency on Aug. 15 after its main shareholder, Abu Dhabi-based Etihad Airways PJSC, withdrew financial support. Germany’s federal government is providing a 150 million-euro ($176 million) bridging loan, enabling Air Berlin to keep flying for about three months.

Eurowings Ties

Eurowings is already leasing three dozen planes from Air Berlin as part of an earlier effort to preserve the airline. Those aircraft are already part of the 75 that Lufthansa could gain permanently. Spohr has said for months that, before Lufthansa could take over more of the fleet, Air Berlin’s debt burden must be reduced and costs cut, while antitrust authorities would have to approve any deal.

Air Berlin’s insolvency proceedings have already sent its bonds down to about 10 cents on the euro, meaning investors expect to recover almost no funds as the company is broken up. Its stock fell to a record-low 36 cents earlier Friday, though with less than half an hour left in the day’s trading, the shares were up 1.5 percent at 41 cents. The bridge loan suggests German politicians will support a national solution to Air Berlin’s woes, potentially signaling that cartel regulators could take a generous stance on the deal.

Intro-Verwaltungs GmbH, a German investment company run by former aviation entrepreneur Hans Rudolf Woehrl, said Friday that it teamed up with investors for a proposal to buy Air Berlin and keep it intact. Woehrl sold DBA, previously the German arm of British Airways, to Air Berlin in 2006, three years after he bought the unit for 1 euro and turned it around. In 2007, Woehrl sold leisure carrier LTU to Air Berlin for 340 million euros.

Labor leaders may favor that option, following disputes over work contracts at discount airlines including Ryanair Holdings Plc. The Dublin-based carrier especially is subject to union complaints that it violates national labor laws and squeezes workers.

Shifting large parts of Air Berlin to Lufthansa isn’t in the interest of competition, and therefore of passengers, Woehrl said in a statement.

“Breaking up Air Berlin will propel the weakening of the German aviation industry,” as any assets that the Federal Cartel Office prevents Lufthansa from taking over will end up at foreign carriers, Woehrl said.

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net.

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Tom Lavell, Chris Reiter