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Lufthansa cabin crew deal to cut pension liabilities by 'high triple-digits'

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Lufthansa Group’s pension scheme liabilities are set to shrink by “a high triple-digit-million” amount after members of the company’s cabin crew trade union agreed to new collective labour agreements.

In a statement, the German flag carrier said a “sizeable majority” of the airline’s cabin personnel voted in favour of the new agreement negotiated by their trade union earlier this summer, formally ending a long-running industrial dispute.

The new collective labour agreement entails changes to the remuneration structure and a shift from a defined benefit (DB) to a defined contribution (DC) pension scheme. 

Lufthansa said the deal will enable it to reduce the group’s occupational pension obligations by “a high triple-digit euro amount” and provide the group with annual savings in the “mid-double-digit-million-euro region”.

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“The vast majority of this will impact on group results for the current year, where it will have a correspondingly positive effect on the annual EBIT (but not on the adjusted EBIT) result,” said Lufthansa.

As at 31 December 2015, Lufthansa had group pension liabilities of €10.8bn, representing a 63% increase on year-end due to the fall in the discount rate, from 2.8% to 1.6% as at 30 June 2016.

In its half-year report published earlier this month, Lufthansa said that higher pension obligations put its investment grade rating granted by Standard & Poor’s at risk.

“In the long term the switch from a defined benefit to a defined contribution system will reduce the burden,” it noted.

In return for the cost concessions obtained by Lufthansa under the deal, cabin crew pay will increase and the staff will have guaranteed employment until 2021.

Also, employees that do not draw so-called transition benefits by retiring before the earliest state pension age can have these counted toward their occupational pension entitlement. This was not possible under the system that is being replaced.

The deal to which the cabin crew and Lufthansa have agreed is a proposal developed by a mediator, Matthias Platzeck, the former premier of the German federal state of Brandenburg.

The new arrangement for pensions and transitional benefits will remain in effect until the end of 2023, the expiry date for the collective labour agreement.

“However, this does not mean that the new pension scheme will be changed, amended or replaced by a new set-up after 2023,” a spokeperson told IPE.

Pension entitlements accrued by active members prior to the transition to the new system coming into effect will remain valid, he added.

The shift to a DC scheme has already been agreed for Lufthansa’s ground personnel, leaving pilots as the only labour group with which the company has not yet reached a settlement.

In its half-year report the airline said that “important matters have still not been agreed with the Vereinigung Cockpit pilots’ union” but that “constructive, confidential talks are currently taking place”. 

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