Lufthansa Reaches Agreement to Close DB Scheme

Seven months after the German airline began negotiations with the pilots’ trade union, it has confirmed it has reached a deal to move their pension to a defined contribution plan.

Deutsche Lufthansa AG passenger jets, Frankfurt, Germany (Alex Kraus/Bloomberg).

Deutsche Lufthansa AG passenger jets, Frankfurt, Germany

(Alex Kraus/Bloomberg).

German airline Lufthansa is moving its pilots into a defined contribution pension from the company’s current defined benefit plan after their trade union today signed terms with the airline.

In a statement late on Tuesday, the company announced that the Vereinigung Cockpit trade union had signed a new collective labor agreement to permit the airline to cut pension liabilities by “a high-three-digit million-euro amount.” The deal is subject to approval by trade union members, who will cast ballots on the issue.

While the airline did not specify the exact cost saving, the company’s 2016 annual report shows that it had previously paid €600 million ($709 million) in pensions contributions each year to “fund German pension liabilities.”

Lufthansa said that it had already agreed to switch the pensions arrangements of ground and cabin staff from a DB system to a DC alternative and that cockpit employees will maintain their accrued benefits to date.


Between now and 2021, the airline plans to increase the minimum retirement age from the current 55 years to 60 years, which is the standard for pilots in the company’s cargo and Germanwings divisions. The company has also agreed to new pay terms with cockpit employees as part of the deal.

[II Deep Dive: The Inconvenient Truth of Defined-Benefit-Pension Portfolios]

In a statement outlining the terms of the deal, Bettina Volkens, chief officer of corporate human resources and legal affairs at Lufthansa, said the agreement underscores a new partnership with the trade union.

“We are jointly creating a sustainable collective bargaining peace until 2022,” she said. “This compromise opens up career prospects for our pilots and makes an important contribution to the competitiveness of our company.”

Lufthansa confirmed it had started discussions with the trade union in March, but the finer points of an agreement had not been nailed down at the time. Vereinigung Cockpit represents more than 5,400 pilots within the Lufthansa group, including its Germanwings, Eurowings, and Cargo units.

The company’s pilots have held a series of strikes since 2014 in protest over their pay and pension terms. In November 2016, the airline was forced to cancel thousands of flights over a two-day period.

In a statement released today in reaction to the signed deal, Vereinigung Cockpit said the deal was the results of “months of intense discussions” between the two parties and that the deal was still “subject to the approval of members” of the trade union.

The news comes a month after rival airline British Airways announced plans to move 17,000 staff to a DC arrangement and close the DB plan to future accrual.