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Lufthansa reaches crisis deal with union to cut costs

BERLIN (Reuters) - German airline Lufthansa said on Wednesday it had reached a new deal with trade union Verdi to cut 200 million euros (£178 million) in costs in return for making no compulsory redundancies in 2021.

FILE PHOTO: Lufthansa planes are seen parked on the tarmac of Frankfurt Airport, Germany June 25, 2020. REUTERS/Kai Pfaffenbach

Lufthansa warned last week it would burn through more cash in the fourth quarter than in the third and that further restructuring measures would weigh on its results as it struggles to cope with the effects of the COVID-19 pandemic.

The airline and its subsidiaries, Eurowings, Swiss, Austrian and Brussels Airlines, are slashing their schedules, fleet and staff, with air travel not expected to recover to pre-pandemic levels before 2025. It aims to cut 22,000 full-time jobs.

“We have taken a first important step towards reducing ground staff personnel costs,” HR head Michael Niggemann said in a statement. “However, we cannot slow down our efforts in continuing to work on crisis-management measures.”

The deal with Verdi comes after months of talks that were repeatedly broken off. Verdi accused the company of seeking to cut jobs even after it took a 9-billion-euro government bailout.

Lufthansa said 24,000 ground staff would forgo their usual Christmas bonuses in 2020 and 2021 as well as vacation bonuses until the end of 2021. The company will also cut the amount it tops up government payments to staff working short-time.

Together these measures will cut personnel costs by up to half in 2021, depending on the total hours worked.

In return, Lufthansa promised not to make forced layoffs in 2021, while offering partial retirement and voluntary redundancy programmes. It will continue talks on long-term cuts in labour costs from Jan. 1, 2022 when government compensation ends.

Verdi said its members still had to vote on the deal.

Earlier on Wednesday, the Vereinigung Cockpit union representing Lufthansa pilots offered to contribute 450 million euros to cost cuts by extending until June 2022 a deal to trim salaries and pensions that currently ends at the end of this year.

The airline has around 5,000 pilots, many of whom are currently receiving short-time compensation.

Reporting by Emma Thomasson; Editing by Hugh Lawson, Mark Potter and Pravin Char

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