Coordinated market economy/liberal employment relations: low cost competition in the German aviation industry

Abstract

This paper examines the German low cost airline industry by analysing how the growth of low cost competition has influenced the industry's pattern of employment relations. The paper highlights the role of Lufthansa, as both the traditional flag carrier and the leading site of employment relations within the German aviation sector. The paper explains how Lufthansa has positioned itself to face low cost competition by, among other initiatives, creating its own low cost subsidiary (Germanwings). Competitive pressures, stemming from the liberalization of European aviation and demand for low cost travel, have produced a marked divergence in this industry from the typical pattern of German employment relations. The paper explains this divergence by situating the case study within the varieties of capitalism literature.

Keywords:

• employment relations
• low cost competition
• varieties of capitalism

Acknowledgements

We would like to thank the journal's anonymous referees for their helpful comments on an earlier version of this paper.

Notes

1. In 2009 more than 50% of the average fares are between €60 and €100 (DLR 2009a, p. 5). The average fare for Germanwings is €108, for Ryanair €47 (DLR 2009b, p. 3).

2. The Company's collective agreement for ground personnel and flight attendants includes a bonus of 10% of one monthly salary related to the performance of the company. Performance related pay for pilots covers 20% of the yearly basic salary (Bispinck 2001, p. 423f).

3. In May 2007 Cockpit (VC) commenced a campaign to bargain a collective agreement with Air Berlin. The pilot's union views Air Berlin's acquisition of DBA as a means to incorporate collective belonging (from DBA) into Air Berlin (Süddeutsche Zeitung 2007).