Dispute at LOT Polish Airlines ends in agreement

The crisis at LOT Polish Airlines (PLL LOT) is not surprising, given the financial problems that are currently affecting other airline carriers. Similar to the management of other airlines, PLL LOT’s management has decided to cut costs and reduce employment. The staff’s lack of support for the chief executive has increased the tensions caused by the restructuring plans. However, the animosity was overcome and an agreement ended the dispute in October 2009.

Company background

Established 80 years ago, the company LOT Polish airlines (Polskie Linie Lotnicze LOT, PLL LOT) is owned by three stockholders: the State Treasury with a 67.97% share, a private owner the ‘Silesia’ Financial Society (Towarzystwo Finansowe ‘Silesia’ Sp.z o. o.) with a 25.1% share, and the company’s employees who own 6.93% of the shares. Since 2003, PLL LOT has been a member of the Star Alliance global airline network. Last year, the company had a net loss of nearly PLN 733 million (about €178.6 million as at 17 November 2009). The company also recorded a financial loss in the first quarter of 2009. However, in the second quarter of this year, the airline reported a modest profit.

Details of recovery programme

In order to improve the financial situation of PLL LOT, the company’s management board introduced a scheme to reduce operating costs. The first step of the so-called ‘recovery programme’ was the liquidation of the Centralwings low-cost airline this year, a subsidiary of PLL LOT that has been in existence since 2004. The board also proposed reducing the number of personnel: of the company’s 3,600 employees, 440 are facing redundancy. In fact, the scale of the lay-offs is smaller than first expected, as the envisaged number of employees to be made redundant was previously estimated at 900 workers. During a meeting with the company’s Chief Executive Officer (CEO), Sebastian Mikosz, on 24 September 2009, trade union members were also informed that the employees who are to remain in their jobs will have their salaries cut by 30% by way of a notice of termination amending the contract of employment.

Trade union dispute with management

From the outset, the restructuring plans met with the opposition of the trade unions, which entered into a collective dispute with the management in January 2009. The conflict escalated in June after the collective agreement was terminated by the company. Subsequently, the company’s corporate executive laid off two trade union leaders – namely, the Head of the Trade Union of Flying and Board Personnel (Związek Zawodowy Pracowników Pokładowych), Elwira Niemiec, which is part of the All-Polish Alliance of Trade Unions (Ogólnopolskie Porozumeinie Związków Zawodowych, OPZZ), and the Head of the OPZZ-affiliated LOT Employees’ Trade Union (Zwioązek Zawodowy Pracowników LOT), Grzegorz Kossowski.

After this move, the trade unions’ list of demands grew longer to include a request for the re-employment of the trade union leaders. It also emerged that, although the trade union leaders had received a disciplinary discharge for leaving their workplace, the board’s decision in this respect was illegal because it lacked the consent of the trade unions. The National Labour Inspectorate (Państwowa Inspekcja Pracy, PIP) shared this opinion and applied to the court for disciplinary proceedings to be issued against the employer.

It should be noted, however, that the trade unions at PLL LOT agree on the necessity of company restructuring. This was the conclusion, at least, of the Deputy Minister of the State Treasury, Zdzisław Gawlik, whom the trade union activists met near the ministry building on 28 September 2009. The protesters reiterated their request for their leaders to be re-employed and demanded the dismissal of the company’s CEO.

Dispute ends in agreement

In the end, an agreement was reached between the company’s management and the five trade union organisations operating within PLL LOT on 5 October 2009. It states that the collective agreement will expire on 31 March 2010. Until then, some employee benefits will also be ceased. Moreover, some 400 employees will be laid off under the terms of the recovery programme. In relation to the two fired trade union leaders, their case will probably be decided by the court.

Commentary

The nine-month dispute between PLL LOT’s management and trade unions has ended in a compromise between the two parties. This was made possible by both parties agreeing on the necessity to prevent the company from incurring any further debt. The question remains whether the actions undertaken will be sufficient to recover the financial situation of the company in the current, fast-changing market situation.

Piotr Sula, Institute of Public Affairs (ISP)

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