“Tarifvertrag Krisenbeitrag und Absicherung Kabine”:
Overview of the contract and detailed information on individual points
“Tarifvertrag Krisenbeitrag und Absicherung Kabine”:
Overview of the contract and detailed information on individual points
Dear regional colleagues with bases in Germany,
the “Tarifvertrag Krisenbeitrag und Absicherung Kabine” for Lufthansa cabin crew is being discussed widely on all channels for nearly three weeks. With this admittedly extensive newsletter we would like to give you an overview of the contract and detailed information on individual points.
Those who find this too extensive will also have the chance to get an overview in the form of FAQ, which have already been translated. Though in German, we will also offer further hangouts, podcasts, interviews and newsletters.
In the coming weeks UFO-members will vote on the contract in a ballot, so this newsletter is just a prelude. We would like to give you various opportunities for your questions. So please take a pen and paper to write down your questions, because we are sure that reading the following information will not only answer your questions, but also create new ones.
Please send us your questions as usual to email@example.com and you will receive an answer on the channels mentioned above.
On Facebook, we'll be discussing the contract in the members' forum (Mitgliederforum). Here you can apply for membership. In other external forums we will not be able to always get into details due to past experiences.
Crisis and ensuring package - why?
Some say that now that LH has received a governmental aid-credit a crisis package like ours was not necessary anymore. Even if it seems that we are stating the obvious: The Lufthansa Group is still in an unprecedented crisis and is still (!) fighting for survival.
Between February and May almost all air traffic was suspended, until the end of May there were no flight schedules, in June there was a two-week planning cycle and by the end of October around 380 of the actual 763 aircraft should be up in the air again. That is just half of the original group fleet. The liquidity provided by the state loans is sufficient for the current year. Nobody knows how booking behaviour will develop today; it might turn out just fine, it might also get worse than planned.
The German government's rescue package probably shows most clearly how great the economic hardship is. € 9,000,000,000 are granted in order to enable Lufthansa to rebuild a regular flight program without registering as insolvent. The crisis has already lead to the termination of a thousand jobs of ground staff: Employees of the former decentralized stations cannot transfer to the hubs as promised, fixed-term contracts are expiring, trainees are neither given an apprenticeship nor a job, and probationary terminations are being made wherever possible. Not to mention the job loss at Sunexpress, Germanwings, EW-EU and maybe other companies of the LH-Group.
The threat to our jobs is real. In Lufthansa cabin we are facing an amount of 2,600 full-time employments too many, which corresponds to around 3,800 people. Our aim was therefore to seek voluntary solutions to reduce this over-capacity of staff and to make contributions to rebuilding the business during the crisis period. A contribution in the form of saving money for the company on the one hand and protection against dismissal for the cabin on the other.
All of this had to be achieved at a time when Lufthansa and UFO had to come to terms with each other after a profound and serious conflict. Even though there was a desire for joint action during the negotiations, we were far away from peace at the beginning of this crisis. In fact, we only had a ceasefire.
Overview of the package
We have achieved our primary goal: the cabin is protected against dismissal during the crisis period by a four-year protection. The reduction of staff will be carried out in a socially responsible manner through a comprehensive volunteer programme. In addition, we have succeeded in reaching an initial peace agreement; both sides are assuming their share of responsibility for the past and are striving for a new social partnership.
So much for the good news. On the other hand, in this crisis the cabin is to deliver hard savings of around 13%. The management had originally aimed at savings of between 20% and 25%; the “wish list” that was published in the CRA in the beginning of May is still on our minds.
Although we were able to prevent most of this, it does not change the fact that every Euro we agreed to save hurts. In order not to reduce the monthly income significantly, which is for many colleagues already close to the subsistence level, we have decided to generate the mayor part of the contributions from our Lufthansa pension scheme. See below why we decided to do so. Another large part of the required cost reductions will be achieved through a volunteer programme. Here is a brief list of the agreed contents; explanations of the individual points follow below:
- Four-year protection against dismissal for all LH cabin employees.
- The monitoring has been dissolved without replacement. There will be no more residual claims from the monitoring. The Q2 paper will also be dropped without replacement.
- The dispute about the TV Employee Fund has also been settled. The fund will not be established, and the collective agreement remains terminated. The remaining money left for the fund will be used to increase the volunteer programmes. In particular, the additional funds that will be used to retire in the coming call for applications will serve this purpose. This means that the money has largely been allocated to its intended purpose within the framework of the provision.
- The job cuts identified by LH are to be achieved exclusively by means of a severance pay program supported by LH and a subsidised transfer to care.
- In this context, the company pension (LH-Betriebsrente) can be drawn now already from the age of 63 even without entering the statutory pension scheme.
- The previously limited part-time models (TV Teilzeit) that have been subjected to a quota can be allocated during the crisis contract.
- The crisis contract does not change the MTV.
- We will negotiate a final termination of TV SMK and the transfer of SMK-colleagues into a joint MTV in the coming months.
- Income increases will be suspended once from 01.09.2020 until 31.08.2021, i.e. for 12 months. This refers to the regular step increases.
- The VTV (regulating salaries) will remain closed unchanged until 31.12.2023 at the latest.
- The employer contribution to the AV (Betriebliche Altersversorgung) amounting to 5% of the pensionable salary will be suspended from 01.07.2020 until 31.01.2021, i.e. for 7 months, and will not be made up after the crisis.
- The employer contribution to the ÜV (Übergangsversorgung) amounting to 13.05% of the pensionable salary is suspended from July 01, 2020 to June 30, 2021, that is, for 12 months, and is not made up after the crisis.
- The employer contribution to the pension fund named Versorgungskasse Kabine amounting to 5.75% of the pensionable salary is suspended from 01.01.2021 to 31.12.2023, that is, for 36 months, and will not be made up after the crisis.
- After the end of the legal requirements for short-time work, the number of flight hours will be reduced to 65 hours (VZ = full-time), thus reducing the basic salary and the remuneration allowances (purser bonus, language bonus) by 7.14% until the end of the crisis contract, unless the capacity situation improves. Extra-flight hours will only be remunerated from the 67th hour onwards.
The package in detail
In the following, we would like to explain the individual points of the package including the corresponding backgrounds. It is important for each individual point that it is only valid for the agreed period of the crisis, i.e. until 31.12.2023 at the latest.
Why a crisis contribution from the pension funds?
It was not an easy step for the negotiating team to enter a discussion on the pension fund system, for which we had fought so extensively in 2016. However, there is currently hardly anything that is paid to the cabin during these times of reduced flying that has that much leverage. This is because the LH pension scheme continues unabridged during short-time work, which is a considerable cost factor. During short-time work, a reduction in remuneration would only have a small effect. This is because the employment office then only pays short-time allowance up to the reduced remuneration, which is already lower for each individual due to short-time work and without additional flight hours.
However, we have also decided to pay a contribution from the pension scheme for the period after short-time work. After all, if one receives a significantly lower salary, one can only look for an additional job in order to pay the rent or other obligations. If one will later receive less from the pension scheme than originally and individually planned, one can still decide on his individual possibilities to compensate for the loss of pension benefits. Maybe there are even some who have a little left over from their current salary to make additional provisions for their individual retirement age. By no means all colleagues have such a choice – many are simply dependent on a regular, not excessively reduced salary to meet their current obligations.
In short, those who receive less provision can decide whether they want to try to compensate for this part. Those who receive less salary can no longer take such a decision, because the salary would get too small and you cannot get money out of your individual pension amounts.
Thus, we had the different economic situations of all our colleagues in mind, referring to their range of possible decisions. We know that cuts in pensions can also have a massive impact as a result. But parts of the pension scheme can be reworked in the next few years by colleagues who want to stay with the company. That is what we have agreed on, too. Those who decide to leave with the aid of the volunteer programme will not receive any reductions in pension contributions until they leave the company.
The agreement also includes that ÜV contributions are paid beyond the original maximum payment period of 28 years (336 months). The annual counter on these 336 months "pauses" for the time during which no contributions are paid. You can contribute longer to reach the 336 months.
If the crisis period does last until the end of 2023, the largest part of the contribution is paid via the pension fund (Versorgungskasse). For three years, no contributions flow into this part of the pension plan. Instead, the contributions to the new pension plan continue to run as usual from February 1, 2021 (AV contribution) and from July 1, 2021 (ÜV contribution) and are paid into the pension accounts.
The insurance company for the Versorgungskasse (VKK) has already informed us that we may not be able to suspend the VKK contributions for the entire period due to legal requirements, as otherwise there is a risk of a deterioration in the insurance conditions. Should this be the case, we have already agreed today that the calculated savings volume will then be taken from the other parts of the provision, unless we can find a better alternative at that time. In that case, however, the pension fund would again be serviced at today's conditions; only the specific "pot" from which the crisis contribution is taken would change. The amount calculated remains identical. Should this happen, we will inform you about it in due time.
These are the existing active components of the LH-pension scheme:
1. Pension Fund (Versorgungskasse): 5.75% of pensionable income.
2. AV: 5% of the pensionable salary as employer's contribution rate.
3. ÜV: 13.05% of the pensionable salary as employer's contribution rate.
In order to get an idea of the total amount of reductions in your pension scheme, the contribution reductions can simply be added together, because everything is based on your individual income. So the above percentages can simply be viewed as percentages of your own income. This means that in the crisis period until the end of 2023 there will be a total cut of almost 400% of an individual's monthly income. This means: This item costs each of you a total of almost four monthly salaries. That is a lot. We don't want to belittle it, but at least the amount will be more tangible. If you manage to save four salaries in some way or to make the payments possible by working longer, you know what it takes to fully compensate for these cuts.
Employee fund and volunteer programme
Lufthansa will offer a volunteer programme to reduce the over-capacity of staff. From a catalogue of different possibilities, colleagues can choose something suitable for their own needs. From unpaid leave, more part-time offers to combinations of both part-time and unpaid leave, there will be a survey on how to reduce working hours.
There will also be an offer for those who are thinking of leaving the company anyway. Be it at the beginning of their “flying life”, in the middle of their career or shortly before retirement – there will be severance payments offered when leaving the company.
There will be a special incentive for those who can already apply for their pension now.
Lufthansa has promised to stick to this structural frame of the programme and will publish the volunteer programme in the coming days. The survey is to run until September of this year, so that all those interested can clarify their individual circumstances and take a decision.
The road to this volunteer programme was long. For a long time during the negotiations Lufthansa did not want to offer one, but only to credit involuntary measures. In the end we were able to convince Lufthansa to do so instead of laying off cabin staff. With this solution, we offered to end the dispute over the employee fund. We were unable to agree on how much money was still in the fund, particularly because of the long-standing dispute over the so-called monitoring. On Lufthansa’s side there were demands resulting from the monitoring, but the same applied to UFO’s side. Only a small amount of employee contributions from the 2018 profit-sharing scheme was added to the amount initially set aside by LH itself (at that time approx. € 500 gross per full time employee), so it is not the case that the cabin has financed the fund completely by itself for years and is now re-financing its severance payments or incentives itself. We would also like to remind you that this year everyone has already received € 1500 Euro from it and that our SMK colleagues just last month received another amount; both from the fund money.
With the jointly supported current solution, we end this dispute and LH will use these funds to finance part of the volunteer programme for the eligible colleagues. The offer is not limited, it can theoretically be taken up by all entitled people. If it is used well, LH will pay out many times more than assumedly in the fund; if they go out less, they pay out less. However, from the 20% savings contribution demanded by LH several hundred million will still be missing, but protection against dismissal will still apply. Therefore, LH cannot benefit from this solution inadequately.
In the highly theoretical case that no one participates in the volunteer programme, our savings contribution remains the same. LH cannot re-negotiate anything and bears the additional savings demanded in addition to our 13% on its own.
Anyone who decides to leave the company within the framework of the volunteer programme will not have their pension reduced and will continue to receive the full AV, ÜV and Versorgungskasse contributions until actually leaving the company.
With this solution, we can compensate those who wanted to leave in the next few years and who have currently smaller amounts in their pension accounts due to the drop in stock market-related returns. By leaving earlier, they help to reduce over-capacities in the cabin. For these colleagues, we believe that the mentioned voluntary programme includes a fair offer from which the individual and the entire collective workforce can benefit.
Some members have already rightly told us that the money in the fund is intended to compensate for the disadvantages caused by conversion from the old pension scheme to the new pension scheme with the bargaining result of 2016. That was also the case. By removing these sums, those members who have already left will make their contribution to protecting those who want to stay in the company. No one foresaw this crisis, and this decision was also very difficult for us. In the end, though, this overall package was and is a prerequisite for the long-term preservation of jobs and their conditions. Sadly, this crisis stops at nobody.
By abolishing the fund itself, the profit-sharing-part of each individual employee will be paid out in full in future. The amounts for the small residual profit participation have not yet been negotiated. There is still a certain volume available for the future.
Due to the abolition of the monitoring, the profit-sharing cannot be reduced in the future. For further details on profit sharing, see below.
Protection against dismissal and crisis clause
During the term of the contract, termination of employment for operational reasons is excluded until June 30, 2024.
For a very long time Lufthansa was not willing to establish a strong protection against dismissal and until shortly before concluding the agreement, the negotiations had almost failed several times because of this single point. A success was only achieved by the so-called crisis clause, which has already been subject to a lot of discussion. Contrary to many assertions, the protection against dismissal cannot be ended "just like that" with a two weeks’ notification since there are high hurdles to terminate the crisis contract.
In short, this clause functions as an insolvency protection. In order to be able to apply it, two objective criteria must be met simultaneously:
1. the minimum liquidity must fall below the level presented to the banks and authorities in a specific and fixed calculation called the “Alpha Case”, and
2. there must be a staff surplus of 2,000 full-time positions (around 3,000 heads) at the same time as the liquidity problem occurs.
One of the two is not enough. If both criteria are met, we will negotiate with LH for six weeks about further ways to avoid dismissal; including the possibility of an arbitration board. Only then, if we do not agree anything, the crisis contract, including the continuation of all the agreed savings in it, can be terminated by LH.
On minimum liquidity: Lufthansa had to submit its minimum cash requirements to banks and authorities in order to apply for the € 9 billion. This calculation is called the “Alpha Case”. Included in the contract as the bottom line of cash, it provides us with an objective criterion of economic performance which LH cannot change. In other words, the minimum liquidity requirement means that if this scenario is not met, the discussion of recent weeks will arise, again, and Lufthansa would once again face insolvency. In the coming months, Lufthansa must therefore do everything possible in its own interests to ensure that she does not fall below this lower limit.
Regarding the over-capacity of staff: Should further aircraft be decommissioned due to the development of the crisis, resulting in a personnel surplus of at least 2,000 full-time jobs, the second condition for the termination of the crisis and protection contract would be fulfilled. The current personnel surplus is due to the removal of 18 long-haul aircraft (2019 = 110) and 11 short-haul aircraft (2019 = 193), including 6 of the particularly labour-intensive A380s. A further, significant reduction in the fleet would therefore be necessary to meet this condition. However, a personnel surplus will not arise if Lufthansa pushes aircraft to another company in the next few years, operates them at MUC or FRA and thus produces a surplus at LH. This is also written down.
We fully understand that a one-sided possibility to terminate a contract that protects us against dismissal is not self-explanatory. However, two things became clear: In order to be able to avert insolvency from within itself, the LH Group Management Board stuck firmly to its ability to make decisions in case this crisis gets massively and objectively worse.
We share this interest, because protection against dismissal would simply disappear in the event of insolvency. Due to the objective criteria and the clear goal to avert insolvency, we were able to go along with this clause. We must and will take care of this if the economic situation should indeed develop much worse than we all hope.
If Lufthansa were to make use of its right to terminate the contract, all savings contributions would of course cease as well. This also protects this clause from abuse. Because in an even more acute economic situation, the costs would rise again, which would make the problem even worse. The crisis clause is and remains the very last resort.
As soon as the voting of the UFO-members starts, we will also publish a common understanding between the social partners Lufthansa and UFO on the interpretation and application of the agreed crisis clause. This is to avoid future disputes about the content of what has been agreed upon and to provide additional binding information for you.
No increase of salary and suspension of pay-step increase
Part of the cabin crew contribution comes from an agreed zero increase until 31.12.2023. Since this applies to the beginning of 2020 we will thus not receive any salary increases for four years. The collective contract on salaries will also be concluded until 31.12.2023. However, if the economic situation improves more quickly than currently foreseeable and the crisis agreement therefore comes to an end earlier, we can terminate the collective contract with a three months' notice and enter into salary negotiations.
In addition, the step increases will be suspended for 12 months. This means that everyone will remain in their pay grade for one year longer, starting from September 2020.
Collective Contract VTV - Table 1: Opt-out
For all those colleagues in table 1 of the VTV, there are some different regulations: In the first three years, there are no ÜV contributions, so they cannot be suspended. Colleagues with level 4 and higher can choose whether they want a reduced salary and in return receive pension scheme contributions or whether they continue to receive only salary. For this reason, it was legally not possible to find a uniform regulation here. For this reason, the total amount of ÜV crisis contributions is not suspended in table 1. This means that the so-called opt-out allowance will not change for the colleagues affected.
Reduction in flying hours
As soon as the legal requirements for short-time working allowance are no longer met, flying hours will be reduced from 70 to 65 hours (full-time) with a simultaneous reduction in basic salary of 7.14%.
Provided that the federal government sticks to its plan, the legislator will pay short-time work compensation for 24 months. For Lufthansa this would be the case up to and including February 2022. If the government maintains its current maximum entitlement to short-time work compensation of 18 months, the legal requirements for short-time work would cease to apply at the end of August 2021. Only then would the reduction in flying hours take effect. This period also has nothing to do with an actual agreement to implement short-time work. It is solely up to the legal requirements as to when the flying hours will be reduced. As long as Lufthansa can apply for short-time work, this measure will not come into effect.
Technically speaking, the reduction is a "completely normal" part-time work of an additional 7.14%, which also affects all allowances.
As we do not expect to return to a normal level of capacity during this period, the line for additional flying hours has been lowered for this period. This way, we are giving an additional contribution to restarting business. Up to 67 flight hours (part-time pro rata) are then paid for the reduced basic salary. From the 68th hour onwards, overflight hours are initially compensated at 100% and from the 70th hour onwards, as before, at 120%. In the period from March 2022 to December 2023, the current basic salary will be reached with a utilization of 72 flying hours.
This contribution to the crisis is fully included in the 13% savings volume.
When things go better than expected
It is currently assumed that the crisis will be resolved by the end of 2023. It has been agreed that the crisis contributions will cease earlier if the crisis is over sooner than expected.
As soon as Lufthansa shows a positive EACC for the first time, the crisis contributions will end automatically. The EACC (Earnings After Cost of Capital) is the key figure with which Lufthansa also shows its sustainable profit on the stock exchange. This is the gross profit (EBIT) minus the cost of capital, i.e. especially interest on loans. As soon as a single euro is reported here in an annual report, all contributions to overcoming the crisis are eliminated. The ÜV contributions are then paid backdated exactly to the month from which this "first Euro EACC" was earned in a positive business year.
This key figure cannot be subsequently changed by the group. In addition, the management uses this key figure in this crisis. Due to the interest on government aid and loans, this is the only way to determine whether the income and profit are sufficient to cover all costs. This also provides us with an objective frame of reference to determine whether our contribution to the crisis is still needed or not.
In addition, the crisis contributions will no longer be required if a dividend is paid out to shareholders. This case too is objectively verifiable and of such weight for the Group's market value that it is protected against abuse.
End of the four processes Lufthansa and UFO had previously agreed on
Apart from the crisis contract, we previously had many other open questions with LH. It was only at the end of January that we agreed on four procedures to solve the underlying conflict and all its elements.
In conciliation and moderation procedures (Schlichtung/Moderation)1, the many open tariff issues were to be clarified. However, most of these issues have been effectively dropped as a result of the crisis, because we simply had to focus on job security measures for now.
The so-called conciliatory proceedings (Güteverfahren) for clarifying issues that had arisen between Lufthansa and UFO and UFO officials as a result of the conflict was ended without result with this conclusion.
The mediation will also not be continued.
Legally and contractually, the conciliation with Matthias Platzeck and Frank-Jürgen Weise must now be concluded. We had another meeting with the two mediators on 8 July 2020. The two will decide on some minor issues that have not yet been resolved. It will then be up to us, at the latest after the end of the crisis, to pick up where we left off and then, in hopefully profitable times, negotiate the necessary improvements.
As soon as the publication of the crisis contracts is completed, we will prepare for the voting of the UFO-members. We will provide you with the contracts, offer further FAQ, virtual information stands etc. and ask you to vote from mid-July on whether the agreements will be implemented in this way. If the majority of UFO members agree, then (August 15th) this last hurdle is taken.
We are confident that this will be successful. But even if you vote against it by a majority, this "no" will be implemented and the agreements with LH will be terminated and reversed immediately. How to proceed in such a case will then have to be discussed by the board and the bargaining commission in coordination with the other UFO bodies.
Long-term issues – profit sharing – SMK/MTV
We will continue to negotiate autonomously on a few issues after the conclusion of the voting. For example, there is still no solution for the TV SMK and the transfer of the SMK colleagues to the unrestricted MTV2 regulations. This will also be negotiated in the coming months, as well as an improved profit-sharing for the period after the crisis – we are convinced that LH will then earn good money again. Our aim is to conclude a contract on this before the end of the crisis, so that the cabin staff get a larger share of the cake, after we have given a lot during this crisis.
Interference fire? – Bonus payments? Other unions?
Shortly after singing the crisis contract the paperwork has been leaked. Individual points of the contract were picked out without any explanation from UFO or Lufthansa and these matters were discussed incoherently or even torn to pieces. We deliberately did not take part in these discussions. We are therefore even more surprised that a federal board member of ver.di has spoken out in the press against the UFO crisis package. Ver.di itself has not yet delivered a solution for thousands of endangered jobs in the LH group. We very much hope for the affected colleagues at LSG, LH Technik, administration and the other ground services that protective agreements by ver.di will follow.
In addition, last week, salary components guaranteed by employment contracts and collective bargaining agreements were paid out outside the cabin, which are linked to the result for 2019. This has naturally led to displeasure. The disgruntlement is understandable, but these are not bonuses that are simply paid on top, but rather significant salary components to employees not under a “tariff-construct”, therefore a non-payment would not have been legally possible without the consent of each individual employee concerned.
These colleagues will automatically no longer receive these payments for the coming years, without the need for a crisis agreement, until good profits are made again. Depending on the occupational group, this will lead to a loss of income of a third or more. We do want to oppress the resentment, which is understandable; among other things because the cabin has not received a profit sharing for 2019 because of the dispute between LH and UFO over the monitoring process. Nevertheless, we wanted to clarify the background of these payments to other groups of employees.
There was therefore no basis for these groups of workers to reduce or withhold payments. But there is no job security there either.
Ask us further questions
Together with Lufthansa, we have agreed on FAQs, which LH has published in the CRA.
We are aware that many of you will have more detailed questions that are neither answered by FAQ nor by this newsletter. We are still working on answering all your questions in the different formats as accurately as possible so that you can make a qualified decision in the ballot. Please continue to send your questions to firstname.lastname@example.org, where we will collect and bundle them to answer them in the different formats.
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