Lufthansa’s New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits
Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - New Carrier Aims to Compete on Long-Haul Routes
Lufthansa's newly announced low-cost carrier Eurowings Discover is aiming to compete in the lucrative long-haul market when it launches in 2024. The airline will focus on routes to Asia and North America, going head-to-head with established players like Emirates, Singapore Airlines, and Cathay Pacific.
For Lufthansa, the creation of Eurowings Discover represents an opportunity to capture a larger share of the growing budget long-haul segment. While full-service carriers dominate transcontinental routes, there is increased demand from leisure and budget-conscious travelers for cheaper fares on these marathon flights. Eurowings Discover will allow Lufthansa to tap into this market without diluting its premium Lufthansa brand.
Early indications show Eurowings Discover casting a wide net across Asia, Europe, and North America. Proposed destinations include Bangkok, Seoul, Tokyo, Anchorage, Denver, Las Vegas, Cancun, and Halifax. Flying older Airbus A330s, the carrier will be able to service routes up to 12 hours in length.
Industry analysts note Eurowings Discover faces stiff competition from established players in Asia and the Middle East. Carriers like Emirates and Singapore Airlines have honed the budget long-haul model over decades. Their hub airports offer seamless connections through vast route networks. Matching this level of service poses a major challenge for Eurowings Discover.
However, the Covid-19 pandemic may have leveled the playing field. As major airlines downsized, trimmed routes, and deferred aircraft deliveries, opportunities emerged for new entrants. The crisis forced even top-tier Asian carriers to rethink their business models. This disruption could allow Eurowings Discover to gain a foothold.
What else is in this post?
- Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - New Carrier Aims to Compete on Long-Haul Routes
- Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Pilots Face Lower Wages, Reduced Benefits
- Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Unions Cry Foul Over "Social Dumping"
- Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Launch Delayed to 2024 Amid Labor Disputes
- Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Lufthansa Defends Eurowings Discover as Vital to Future
- Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Carrier Will Offer Flights to Asia and North America
- Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Analysts Question Viability Against Established Rivals
- Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Consumers May Benefit from More Competition, Lower Fares
Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Pilots Face Lower Wages, Reduced Benefits
One of the most contentious aspects of Lufthansa's new Eurowings Discover subsidiary is the worse pay and benefits being offered to pilots compared to the mainline carrier. This strategy of creating a lower cost base has sparked fierce criticism from pilot unions who accuse Lufthansa of "social dumping."
According to union officials, Eurowings Discover pilots will earn around 40% less than their counterparts at Lufthansa. A senior captain's salary could be as low as €150,000 per year, compared to €270,000 at the parent airline. First officers face an even starker differential, with Eurowings Discover salaries potentially 50-60% below Lufthansa wages.
These salary reductions reflect the differing collective bargaining agreements between the airlines. As a new entity, Eurowings Discover is not bound by Lufthansa's existing agreements. The carrier will negotiate separate contracts with substantially lower pay scales.
Benefits are also being trimmed for Eurowings Discover staff. Health insurance contributions will no longer be covered in full, while paid vacation days will be fewer. Retirement plans are less generous as well. Even seemingly minor changes like complimentary uniform cleaning have been scrapped in pursuit of cost savings.
According to pilots, these measures represent unacceptable "social dumping" by Lufthansa. In their view, Eurowings Discover salaries are not living wages that reflect the skills and demands of piloting long-haul aircraft. Some have accused Lufthansa of taking advantage of desperate pilots impacted by the pandemic downturn.
However, Lufthansa maintains lower wages are needed for Eurowings Discover to be competitive in the low-cost long-haul segment. Labor costs make up a substantial portion of operating expenses. Keeping these costs down is essential when battling lean carriers like Norwegian Air.
Analysts concur that the union backlash is unsurprising but wages must align with Eurowings Discover's budget positioning. Major long-haul competitors have already wrung out labor costs, pressing Lufthansa to follow suit. This ongoing dispute will be a critical issue as Eurowings Discover moves towards launch.
Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Unions Cry Foul Over "Social Dumping"
The sizable wage differentials between Lufthansa and Eurowings Discover have spurred strong criticism from pilot unions. They accuse Lufthansa of engaging in an unethical practice known as “social dumping” to lower operating costs. But what exactly constitutes social dumping in the aviation industry?
At its core, social dumping refers to companies exploiting differences in labor laws and standards across countries or entities. Typically a parent company creates a subsidiary in a location with weaker worker protections and lower pay. They then shift jobs to that subsidiary to take advantage of lower costs.
Critics say social dumping cheats workers and creates unfair competition. It pressures all companies to drive down standards to remain competitive. They argue aviation is a highly globalized industry where social dumping enables a regulatory “race to the bottom.”
Pilot unions contend Lufthansa is effectively social dumping through Eurowings Discover. Although both airlines are German-based, their differing legal status lets Lufthansa bypass its own collective agreements. With no obligation to match Lufthansa salaries and benefits, Eurowings Discover can hire pilots at far lower cost. This creates an unlevel playing field.
Union officials argue the 40-60% pay disparity between pilots is so great that it undermines a fair wage. In their view, Eurowings Discover salaries do not adequately value pilot skills, experience, and responsibility. Cutting corners on wages risks the long-term integrity of the profession.
They also highlight the precarity of pilot livelihoods during the pandemic. With limited openings available, many lack the leverage to negotiate fair compensation. This desperation makes them vulnerable to inadequate wages that unions label exploitative.
However, Lufthansa maintains Eurowings Discover wages are consonant with the low-cost market it is entering. Labour costs must align with competitors like Norwegian Air that have already squeezed costs. Paying above market rates would render Eurowings Discover unviable.
The dispute illustrates the tension between corporate efficiency and worker equity. Lufthansa is acting legally in establishing differential pay scales across its brands. But unions question the ethics behind social dumping. They want policymakers to close loopholes that allow the practice.
Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Launch Delayed to 2024 Amid Labor Disputes
Lufthansa originally slated Eurowings Discover to launch in 2021, but has pushed the timeframe back to 2024 due to ongoing clashes with pilot unions over wages and benefits. This delay underscores the challenges facing Lufthansa as it attempts to expand its low-cost long-haul operations amidst fierce labor opposition.
Unions have leverage to stall Eurowings Discover’s launch through strikes and other actions. With binding contracts still under negotiation, pilots could refuse to commit to the new airline if disputes are not resolved. This uncertainty has hampered Lufthansa’s ability to firm up launch plans and start selling seats.
Rather than risk operational chaos, Lufthansa opted to push the launch timeline back. This gives more space for contract talks, while sidestepping the risk of Eurowings Discover being stillborn if sufficient pilots do not sign on.
However, the delay comes at a cost. It prevents Lufthansa capitalizing on pent-up leisure travel demand as pandemic restrictions ease. Missing the summer 2022 peak season forfeits revenue opportunities. It also allows rival carriers to continue gaining share of the low-cost long-haul segment.
There are strategic benefits to the delay as well. It provides time to resolve thorny wage and benefit issues before large-scale hiring begins. If contracts improve, Eurowings Discover may have an easier time attracting experienced pilots. And with its own pilots still partially furloughed, Lufthansa benefits from delaying the ramp up of new capacity.
Analysts concur the revised 2024 timeline is likely prudent given the labor climate. Attempting to accelerate Eurowings Discover’s launch despite fierce union resistance would be an uphill battle. This could force Lufthansa into a damaging standoff with employees just as demand rebounds.
However, some experts question whether further delays could be forthcoming. If contract disputes remain unsettled, pilots may continue resisting the venture. And pressure from unions and politicians around “social dumping” concerns is unlikely to abate.
To get Eurowings Discover off the ground on schedule, Lufthansa needs to achieve labor peace. This requires both sides making concessions. Pilots must accept that Eurowings Discover is a fundamentally different business requiring flexible contracts. But Lufthansa must also offer wages that pilots view as fair and commensurate with their role.
Navigating these opposing interests will test Lufthansa’s executive team. But establishing a sustainable long-term cost base is crucial to viability in the budget long-haul market. A few more years of delays to get it right is preferable to a failed launch.
Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Lufthansa Defends Eurowings Discover as Vital to Future
Lufthansa argues that launching Eurowings Discover is an essential strategic move to secure the airline's future competitiveness in the growing budget long-haul market. While acknowledging pilots' concerns, executives contend that Eurowings Discover's lower cost base is imperative for success in this price-sensitive segment.
The parent company points to nimble competitors like Norwegian Air which have honed the low-cost long-haul model over the past decade. With sparse amenities, dense seating, and ultra-lean operations, these carriers have steadily eroded the legacy stranglehold on long-haul flights. Lufthansa suggests that ignoring this structural shift would be commercial negligence.
Eurowings Discover will allow Lufthansa to pivot towards budget travelers without diluting the premium branding of its core service. Passengers associate Lufthansa with luxury cabins, spacious seats, and indulgent in-flight service. Maintaining this level of quality has inherent costs that are unsustainable for bargain-basement fares. Offloading no-frills operations to Eurowings Discover preserves Lufthansa's upmarket reputation.
Some analysts concur that Lufthansa is astutely positioning itself for the future aviation landscape. With rising incomes globally, an enormous new middle class will emerge seeking affordable long-haul travel options. Legacy carriers catering exclusively to the wealthy risk missing this boat. Launching Eurowings Discover gets Lufthansa's foot in this door early.
Critics counter that Lufthansa risks damaging its prestigious brand through association with Eurowings Discover. But the company feels passengers understand the two brands are wholly separate entities targeting distinct segments. Those desiring a luxury experience will continue booking classic Lufthansa. Budget travelers open to stripped-down service will opt for Eurowings Discover. This diversified approach provides something for everyone.
Lufthansa also disputes claims of unethical "social dumping" through Eurowings Discover. The parent company stresses all jobs are based in Germany under the same national labour laws. However, Eurowings Discover wages align with its unique low-cost operations rather than Lufthansa's premium offering. Management argues that matching Lufthansa's compensation scales would immediately render Eurowings Discover financially unworkable.
While hoping to eventually achieve wage parity between brands, Lufthansa believes measured start-up salary structures are needed at Eurowings Discover. This will establish the low-cost cost base vital for competing across the budget long-haul marketplace. With Covid-19 pressuring Lufthansa's finances, doubling down on premium travel would be an epic miscalculation, executives warn.
Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Carrier Will Offer Flights to Asia and North America
Eurowings Discover’s route network will be expansive, linking key destinations in Asia, North America, and Europe. The focus appears to be major leisure and cultural hubs that align with budget-minded traveler preferences.
On the Asian side, Bangkok, Seoul, Tokyo, and several major Chinese cities are slated for service. These capital cities offer a compelling blend of history, cuisine, nightlife and shopping that caters to backpackers and adventure travelers. Partnering with local low-cost carriers like AirAsia could feed traffic from secondary cities around the region.
In North America, spots like Anchorage, Denver, Las Vegas, Mexico City and Cancun make the initial cut. Sunspots and tourist playgrounds will likely dominate here, given Eurowings Discover’s leisure positioning. However, I’d expect eventual expansion into major urban centers once the operation matures.
Why does the route network matter for Eurowings Discover? Firstly, it signals the new airline casting a wide net geographically. Rather than narrowly focusing on certain regions, Eurowings Discover wants a truly global presence from the outset. This bold approach could help it scale quickly.
Secondly, the destination mix indicates a strategic focus on leisure and holiday travelers. That aligns with the typical customer profile for low-cost long-haul carriers. Places like Bangkok and Cancun are tried and tested vacation spots for Europeans seeking an exotic getaway.
Finally, avoiding premium business centers like New York and Tokyo reveals a very different vision than parent Lufthansa. Eurowings Discover is not looking to poach corporate accounts but rather tap the growing middle-class demand for affordable far-flung adventures.
This route strategy has precedent. Norwegian Air – an ultra low-cost long-haul pioneer – started with a similar leisure-focused U.S. network centered around Florida and the West Coast. It took years before business-oriented East Coast routes were added.
Based on this blueprint, Eurowings Discover’s Asia and Americas nonstop flights will cater squarely to casual travelers not hung up on lavish amenities. Those willing to sacrifice some comfort for a cheap fare to Bali or Hawaii are the target.
Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Analysts Question Viability Against Established Rivals
Industry analysts concur that Eurowings Discover faces an uphill battle competing with entrenched players in the low-cost long-haul sphere. While parent Lufthansa boasts financial muscle and aviation expertise, Eurowings Discover must prove itself against carriers who have spent years honing budget transcontinental operations.
The Asian market presents a particularly stiff test. Singapore Airlines’ Scoot and AirAsia X have thriving short and medium haul networks that can feed their long-haul flights. Major Middle Eastern airlines like Emirates and Qatar leverage massive hubs offering seamless connections through vast route maps built over decades. Matching this connectivity and scale starting from scratch is a tall order.
Eurowings Discover’s unit cost economics also appear less favorable than key rivals. With just a handful of A330s planned initially, Eurowings Discover lacks the benefits of scale and fleet commonality. Competitors flying 50+ next-gen A350s and 787s enjoy lower operating costs from bulk discounts and streamlined maintenance. Their huge fleets translate into schedule flexibility and optimal aircraft utilization as well.
Some analysts suggest Lufthansa might have been wiser to acquire an existing player like Norwegian Air when it was restructuring. Though complex, absorbing operations and aircraft could have given Eurowings Discover a running start. Instead they face building from the ground up while rivals continue gaining share.
However, industry upheaval from Covid-19 may work in Eurowings Discover's favor. Major players have downsized, trimmed networks, and deferred new aircraft deliveries to conserve cash. This reduces established capacity and creates openings for new entrants. The crisis forced even leading Gulf carriers to rethink their business models.
The timing for Eurowings Discover's long-haul push could be fortuitous after years of market saturation. Securing good aircraft lease rates and pilot contracts may be easier with less competition. Lingering travel hesitancy also means carriers must be aggressive on pricing to stimulate demand. This allows Eurowings Discover to enter with bargain fares despite its unknown brand.
Some expect Covid-19 to permanently depress business travel as videoconferencing substitutes for in-person meetings. This accentuates the importance of leisure flyers who will lead the recovery. Eurowings Discover’s low fares and focus on leisure destinations dovetail nicely with post-pandemic travel patterns.
Ultimately aviation is now a more fluid market than when Lufthansa first conceived Eurowings Discover pre-Covid. While established players retain strengths through scale and experience, their competitive advantages have eroded. This leaves an opening for new entrants while forcing reinvention.
Lufthansa's New Low-Cost Carrier Eurowings Discover Takes Flight in 2024, Draws Union Backlash Over Pay and Benefits - Consumers May Benefit from More Competition, Lower Fares
While Eurowings Discover's long-term viability remains uncertain, the carrier's entry could bring a silver lining for consumers in the form of more competition and lower fares. This is welcome news for budget-conscious travelers who have lamented rising ticket prices and limited options, especially on intercontinental routes.
In my experience, new entrants often spur improved deals and services as airlines vie for market share. When Norwegian Air launched transatlantic flights with introductory $99 fares, legacy carriers rapidly matched prices and expanded bare-bones basic economy offerings. Similarly, JetBlue's Mint business class cabins pressured American and United to upgrade amenities and dining.
Consumers stand to benefit again as Eurowings Discover takes wing. Its low-cost base means Eurowings can likely undercut fares from full-service competitors, at least initially. With Lufthansa's financial backing, the prices could be a bargain. This is a boon for travelers coveting far-flung trips who've been priced out until now.
And make no mistake - demand is there if the fares are right. Masses of millennials and middle-class families across regions like Asia crave affordable, no-frills long-haul holidays. Instagram feeds are filled with envy-inducing snaps in Bali, Phuket, and Cancun. Providing transportation to deliver those dream vacations is what Eurowings Discover aims to do.
By offering seat-only fares, Eurowings Discover may effectively discount tickets on certain routes by hundreds of dollars. That might enable a Bangkok trip for $650 compared to $850 on legacy lines. A Los Angeles getaway could tally $500 instead of $700. For cash-strapped wanderlusters, those savings add up quickly.
And lower fares need not mean a lesser experience. Passengers willing to forgo some pampering can enjoy the core of long-haul flying - safely and comfortably getting from A to B. For many, an empty bank account trumps an empty belly on a 12-hour flight. As evidenced by packed low-cost carriers like Ryanair, people gladly exchange perks for affordability.
To be sure, Eurowings Discover is not a panacea for all travel budget woes. Those desiring a truly luxe journey will pay up for iconic airlines like Singapore and ANA. Moreover, initial routes seem targeted at backpackers and adventure-seekers, not business flyers.