Austrian Airlines’ survival will be decided at a supervisory board meeting on Wednesday, after Austrian’s pilots rejected a new wage deal proposed by the carrier’s CEO, Jaan Albrecht. Austrian’s board of directors was unable to finalize a restructuring plan that has been in the making for several months.
With the pilots rejecting the deal, Austrian could now decide to move flight operations to its regional subsidiary Tyrolean in an effort to reduce staff costs. That move, however, needs the backing of parent Lufthansa because it is likely to require significant upfront expenses.
As many as 300 senior pilots at Austrian are eligible to terminate their employment contracts and receive 39 months’ pay as compensation. Depending on how many pilots decide to do so, Austrian’s liquidity could suffer to the extent that it may not be able to avoid a bankruptcy filing without a further cash injection by Lufthansa.
Lufthansa has taken a much tougher stance in running its money-losing subsidiaries recently and made clear that it will only support Austrian further based on a firm commitment from all parties to a sustainable restructuring plan.
Tyrolean’s pilots earn about €7,000 per month, compared with €10,000 at Austrian, with senior captains reaching about €13,000. Austrian’s staff costs have been increasing by about 7% annually through guaranteed inflation compensation and promotions.
Austrian proposed a new wage deal based on the payment system in place at sister airline, which would have been more attractive than the Tyrolean deal. If operations are transferred to Tyrolean, the pilots would receive their current salaries, but pay would be frozen until Tyrolean’s wage scale reaches the same level, which would take several years.
Unlike air crew, Austrian’s ground staff agreed to the fundamentals of a new contract. Austrian also reached fee reductions at Vienna Airport and lower costs at many of its other suppliers.