Short- and long-term effects of labour disputes in airlines: an investigation into the Lufthansa labour dispute 2014-2017

How much labour action and it’s subsequent negative influences (loss of brand value, customer’s loyality, profits for that time, etc) are worth sustaining for a company, until this would exceed the intended savings of lower labour cost?. The background of this is, that with a few recent airline labour disputes, there were some public discussions on whether there were actually savings in the end or the decisions of the management have been more emotional than rational. (Lufthansa over 4 years intermittend strikes, Avianca with a two-week full strike, …) The objective of this thesis is to analyze The effect of labour actions applied by an airline -mostly in order to obtain long-term savings- in customer’s buying behaviour and loyalty as well as negative development of brand value. How labour disputes within the airline affect to the company's savings and benefitsThis thesis investigates the short- and long-term effects of labour disputes in airlines. First off, an overview of the airline market and pilot working conditions is given, alongside with some examples of labour disputes and strikes. The thesis then concentrates on the dispute between the pilot union “Vereinigung Cockpit” and Lufthansa between 2014-2017. Short-term effects are analyzed in form of a Cost/Benefit analysis, making out all the savings achieved by implementing a new collective labour agreement as opposed to its costs. Different from comparable studies, the entirety of expenses, not only the costs of the strikes themselves are minded. Long-term effects include the observation of brand equity, booking numbers and profits. It is proven that the short-term effects are very positive, resulting in substantial savings. Long-term effects include a crucial loss of brand equity, which however does not seem to have an influence on the company’s performance as measured by its adjusted EBIT, capacity and booking numbers. This suggests that brand equity might not be the driving force for customer buying decisions in traditional network airlines such as Lufthansa