French Alps Crash Heavy Blow to Lufthansa's Image
The deadly crash of a jet belonging to low-cost carrier Germanwings deals a body blow to the image of its parent company Lufthansa, already battling a bitter labor dispute and ferocious competition from budget rivals, analysts said on Wednesday.
"These are very hard days, undoubtedly one of the hardest days in the history of Lufthansa," the airline's finance chief Simone Menne said, after the group held a minute's silence for all 150 people aboard Germanwings flight 4U 9525, which went down in the French Alps en route from Barcelona to Duesseldorf.
Lufthansa chief executive Carsten Spohr, who only took over at the helm of the company last May, had already described Tuesday's crash, which the German carrier has described as "inexplicable", as a "dark day" for the company.
Staff were still reeling from the shock on Wednesday, with some Germanwings crews saying they were not in a position to fly.
But in addition to the tragic human toll, the accident could have a drastic impact on the company's strategy, aviation analysts said.
"The crash is a tragedy and means a sharp hit for Lufthansa," said DZ Bank analyst Dirk Schlamp.
"Lufthansa stands for technical competence and reliability and the crash could lead to a substantial damage to its reputation. Moreover, the crash could endanger the company's low-cost concept, too," he said.
- Bad press -
In the past, Lufthansa, which celebrates next month its 60th anniversary, has enjoyed an impeccable reputation.
But in recent months, it has suffered bad press as a result of a long-running industrial dispute with its pilots.
The Lufthansa group includes premium airlines such as Austrian Airlines and Swiss.
But Spohr is fighting hard to expand Lufthansa's low-cost business and take on rivals such as Ryanair and Easyjet, and fierce competition from airlines in the Gulf.
As part of the strategy, Spohr wants Germanwings and its other discount airline, Eurowings, to handle most of the group's short- and medium-haul flights taking off and landing in Germany outside the two main hubs of Frankfurt and Munich.
An overhaul of the pilots' costly pension provisions is one of the key factors to the success of that strategy.
And Lufthansa wants to scrap an arrangement under which pilots can retire at 55 and receive up to 60 percent of their pay until they reach the statutory retirement age of 65.
But pilots are fighting tooth and nail to hold on to their benefits and have staged more than a dozen walkouts in the past 12 months in an increasingly bitter dispute.
Grounding hundreds of aircraft and stranding hundreds of thousands of passengers, the strikes cost Lufthansa an estimated 232 million euros ($254 million) last year alone, hitting 2014 profits.
And there is still no end to the dispute in sight, even if unions have said they will put it aside for now following the crash.
- Strategy in danger? -
Gerald Wissel, who heads the Hamburg-based Airborne Consulting, said Spohr's low-cost ambitions could now be in jeopardy.
The pilots of the doomed Germanwings aircraft had more than 10 years experience and 6,000 hours of flying with an Airbus A320 under their belt.
And if it emerged that a pilot error had caused the crash, "everyone will then start asking whether Germanwings undergo the same stringent tests as Lufthansa pilots," Wissel told the business daily Handelsblatt.
Until this week, Germanwings has had a clean safety record since it was set up in 2002.
"We've never had a total loss of aircraft in the company's history until now," a company spokeswoman told Agence France-Presse on Tuesday.
Lufthansa, too, is regarded as an extremely safe airline.
The last fatal crash involving one of its jets was when an A320 that caught fire on landing near Warsaw in September 1993, killing two people and injuring 54.
Its most serious accident happened in Nairobi in November 1974, with a total of 59 deaths.
The A320 jet that went down Tuesday in France was bought by Lufthansa in 1991 and been in constant service since then, passing to Germanwings in January 2014.
Spohr insisted Wednesday that it was in "perfect condition."
Source: Agence France Presse
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