Austrian Airlines dealt setback by EU court ruling
By Shadia Nasralla and Angelika Gruber
(Reuters) - The European Court of Justice dealt a setback to Austrian Airlines' cost-cutting plans on Thursday by ruling that earlier collective wage agreements still apply after it transferred flight operations to a lower-cost unit.
The ruling addressed a dispute over whether Austrian Airlines, owned by Germany's Lufthansa , could unilaterally cancel a previous labour agreement when it transferred its flight operations in 2012 to its Tyrolean Airways carrier.
The court said on its website that previous agreements hold after a transfer and apply until a new collective agreement was reached. The case now reverts to an Austrian court which is expected to adopt the ECJ verdict.
The transfer of about 2,000 pilots and flight attendants to Tyrolean, where contracts are less generous, was a key element of restructuring the loss-making Austrian Airlines embarked on after its 2009 takeover by Lufthansa from the Austrian state.
Staff who have been at Tyrolean since before the transfer of operations now work according to their original Tyrolean pay deals, while the more generous Austrian Airlines deals have been frozen.
"FULLY VINDICATED"
The airline's works council wants the basis for talks to be the old Austrian Airlines collective wage agreement, while the company wants to negotiate on the basis of the less-generous Tyrolean contracts.
"We were fully vindicated," Austrian Airlines works council head Karl Minhard told Reuters, adding the next step will be to find a solution acceptable to all parties after management's approach to planned cost cuts turned out to be a "belly flop".
Austrian Airlines said the legal situation, the exact amount of payments and the timeframe for these were not entirely clear, but added it had set aside a double-digit million euro amount -- so between 10 million and 99 million euros (7.95 million and 78.74 million pounds). It would focus on resolving the problem outside of the courts, it said.
The transfer itself of operations to Tyrolean is being assessed in another case at a Vienna court, which Austrian Airlines does not expect to be finished before the end of the year.
"Austrian Airlines expects the court proceedings to be resumed due to the decision made by the ECJ, and maintains its legal standpoint that the transfer of flight operations to Tyrolean was lawful," the airline said.
Austrian Airlines said its board had decided to develop "alternative scenarios" which it will present to the Supervisory Board in early October, fuelling speculation about its future, and the possibility it might operate more like a discount airline.
"The judgement handed down in Luxembourg makes it difficult for us to defend our position as a quality airline against the competition," said Chief Executive Jaan Albrecht.
Lufthansa declined to comment on the European court ruling. Its shares closed up 0.4 percent at 13.625 euros.
(Additional reporting by Peter Maushagen in Frankfurt; Editing by Michael Shields, David Clarke and Pravin Char)
