Lufthansa Moves from Pension Plan to DC Plan for Pilots

Deal in effect through 2022, ends company’s longest collective bargaining dispute

German airline Lufthansa has reached a comprehensive labor contract agreement with its pilots’ union, Vereinigung Cockpit, that includes converting from a defined benefit to a defined contribution pension system.

 “This is not only the end of the longest collective bargaining dispute in our company’s history, it also creates a sustainable deal that will last until 2022,” said Bettina Volkens, head of legal affairs and human resources at Lufthansa.

The agreement provides a one-time balance sheet reduction through the conversion of the pension schemes. In return for the cost-reducing elements of the agreement, Lufthansa agreed to allow at least 325 of its planes to be staffed by pilots on the new collective agreement, which runs until June 2022. Lufthansa has also scrapped plans to staff 40 newly acquired aircraft outside the group-wide collective bargaining agreement.

A reciprocal agreement to refrain from industrial action for the duration of the talks has also been reached, and is set to be formalized in a collective bargaining agreement that extends until 2022. Additionally, the deal calls for the gradual increase of the retirement age for transitional benefits to 60.

“The change in the pension system for our cabin crews, which we now also agreed on for our cockpit crews, has had a sustainable positive effect, strengthening our balance sheet and making us less dependent on volatile interest rate developments,” said Lufthansa Chief Financial Officer Ulrik Svensson. “This shows how important it is to have viable and forward-looking collective labor agreements.”

According to Lufthansa’s annual report, the contribution of €600 million ($645 million) that was made annually in the past to fund German pension liabilities was suspended in 2016, and will be used to implement new wage agreements in 2017. It also said that contributions to the German defined-contribution program of €1.9 billion are planned for 2017.

The airline said that more details of the collective bargaining agreements are to be agreed on during the year.

By Michael Katz