FRANKFURT—Lufthansa has presented a new plan on how to grow its core long-haul and connecting traffic business until 2020, but expects significant concessions from unions to implement it. 

Karl-Ulrich Garnadt, CEO of the group’s passenger airline division, and Bettina Volkens, executive board member for human resources, discussed the plans at a town hall meeting at the airline’s main base in Frankfurt. According to the plan, Lufthansa wants to grow its mainline fleet from the current 313 aircraft to 340 by 2020. That translates into an additional 500 jobs for pilots and 1,300 for cabin crew.

However, Lufthansa is prepared to invest in mainline growth again only after significant employee concessions. The executives propose to start negotiations immediately and conclude them by August, in time for approval at its supervisory board’s September meeting. Garnadt and Volkens also made clear that if no agreement is reached, the airline will be forced to shrink the legacy operation and focus growth on the new Eurowings platform.

The airline’s unit costs are around 40% higher than at European low-cost carriers (LCCs) in the direct services segment and around 30% higher than at Turkish Airlines or the three Gulf carriers in the long-haul business. While the airline did not specify a cost-reduction target, Garnadt and Volkens made clear in a letter earlier this month that “our staff costs cannot, of course, be substantially higher than those of our competitors.”

The new Garnadt plan assumes that the airline cannot afford to shrink the mainline-connecting business further if it does not want to take the risk of making its cost base even less competitive. Shrinking the connecting business could result in further losses of market share to other airlines, particularly the Gulf carriers. 

The carrier has not added to the number of aircraft for four years and grew seat capacity essentially by making cabins more dense rather than by adding aircraft. Garnadt and Lufthansa Group CEO Carsten Spohr aim at growing both the direct services/low-cost segment and the legacy operation in parallel.

The company is in the process of transferring all of its direct services European flying under the new Eurowings umbrella. The group will include Germanwings, former regional carrier Eurowings and several new platforms outside of Germany. Eurowings will also operate some long-haul flights initially from Cologne under a Sun Express wet-lease arrangement.

Lufthansa sources say most of the cost reductions can be achieved without touching salaries. They are hinting at “hundreds” of small items each worth several millions in savings annually that add up to a significant amount. Issues include a higher entry level for pilot overtime pay, better rostering and more-efficient crew rotations. Lufthansa is looking at reducing overnight stays at some long-haul destinations, including Tokyo, where crews still stay for two nights. The current early-retirement plan, which allows pilots to stop flying at age 55, is another big savings opportunity.

The plans are likely to face strong resistance from pilot union Vereinigung Cockpit (VC), which has called for numerous strikes over the past year, including industrial action over a two-day period at Germanwings last week. VC has said that it wants to protect the status quo unless it is convinced that concessions will guarantee growth. That is where Garnadt is now trying to take the discussion by offering hundreds of new jobs for pilots. 

By contrast, Lufthansa and cabin crew union UFO have already agreed on a process that is aimed at resolving differences without strikes.