Lufthansa Cancels Flights as Pilot Strike Begins

Deutsche Lufthansa AG pilots Wednesday began a two-day strike that is grounding more than a quarter of its flights on the first day and poses the latest threat to the German flag carrier's growth outlook.

The airline said it would suspend 876 of its 3,000 scheduled flights Wednesday, affecting about 100,000 passengers. Fifty-one of the airline's intercontinental flights will be canceled, including at least seven U.S.-bound flights one day ahead of the busy Thanksgiving holiday.

The labor action is related to a protracted dispute with pilots over employment terms. Lufthansa has been trying to cut costs by shifting pilots to its lower-cost budget unions, which pilots oppose. Another key point of contention is early retirement packages for pilots.

The union representing 5,400 Lufthansa pilots late Tuesday said it would extend the walkout through Thursday, threatening about as many connections.

The strike is a further profit headwind for Lufthansa, which this year has had to contend with weaker ticket prices because of a glut of seats for sale. Terrorist attacks in Europe also weakened demand, particularly on lucrative Asian routes. The airline, which began the year hoping for earnings growth, has since moderated its expectation to adjusted earnings before interest and taxes roughly on par with last year's €1.8 billion ($1.9 billion).

The German carrier faces stiff competition in Europe from lower-cost rivals such as Ryanair Holdings PLC, Europe's largest airline by passengers carried. Ryanair is expanding heavily in Germany and this month announced it would set up a base at Frankfurt Airport, Lufthansa's principal hub. Lufthansa's long-haul business is also under pressure from rivals with lower labor costs.

Wednesday's strike is the latest to affect Lufthansa. In November last year, roughly 4,700 of the carrier's flights were canceled in a one-week strike amid a similar dispute with cabin crew union UFO. The two sides have since settled their dispute, although cabin crew at Lufthansa's discount units remain at odds with management.

Flights operated by Lufthansa subsidiaries Eurowings, Germanwings, Air Dolomiti, Austrian Airlines, Swiss and Brussels Airlines won't be affected by this week's strike, the German company said. Austrian and Swiss airlines are currently reviewing options to add German flights to their normal schedule.

The pilots union, Vereinigung Cockpit, called for a 24-hour strike Wednesday to enhance pressure in the dispute. Lufthansa asked a German labor court to issue a temporary injunction against the strike, but the court denied the motion Tuesday. Lufthansa's appeal of the verdict failed.

Friedrich Geiger contributed to this article.

Write to Robert Wall at [e-mail] and Ulrike Dauer at [e-mail]

(END) Dow Jones Newswires

November 23, 2016 05:15 ET (10:15 GMT)

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