FRANKFURT Pilots at Lufthansa (LHAG.DE) started a two-day walkout on Monday, their ninth strike this year, forcing Germany's flagship airline to cancel close to half of all scheduled flights and leaving thousands of travellers stranded.
The 1,350 cancelled flights will affect 150,000 passengers and wipe several more millions of euros off the airline's earnings, according to analysts.
Lufthansa and trade union Vereinigung Cockpit (VC) have been at loggerheads for months over an early retirement scheme for pilots that was developed decades ago. The most recent round of talks collapsed on Friday.
"The negotiations failed because we just cannot agree on key points ... Lufthansa basically wants to get rid of the collective agreement and have new colleagues receive no more benefits," VC board member Joerg Handwerg told Reuters TV.
VC, representing about 5,400 Lufthansa pilots, is fighting to keep the scheme, which allows pilots to retire at the age of 55 and still receive up to 60 percent of their pay before regular pension payments start at 65.
Lufthansa has said it made concessions in recent talks, including a 5 percent pay rise, but reiterated it would not accept a demand that new pilots, as well as those already with the company, should be able to retire at 55.
The airline is striving to cut costs as it battles stiff competition from budget airlines and Gulf-based carriers.
"If you want to go somewhere on vacation and have it ruined for you, it's not OK. They should sit down and come to an agreement," Lufthansa passenger Elfriede Bretagne told Reuters TV in Frankfurt, at Germany's busiest airport.
Industrial action in the dispute has already wiped 160 million euros ($200 million) off Lufthansa's operating profit, adding to pressure from a stuttering global economy and increased competition.
The carrier lowered its profit guidance for 2015 for a second time this October, and is expanding budget brand Germanwings to better compete with the likes of Ryanair (RYA.I) and easyJet (EZJ.L).
Lufthansa's supervisory board is due to approve plans for the Germanwings expansion at a meeting this week.
Goodbody analyst Mark Simpson said further walk outs in the coming weeks could be even more damaging.
"We see any strike threats in the immediate run up to the busy Christmas period as representing an even more significant risk than those scheduled for today and tomorrow," he said.
At 1500 GMT, Lufthansa shares were down 0.3 percent at 14.31 euros.
The Germany-wide strike is to last from midday (1100 GMT) on Monday to 1159 pm (2259 GMT) on Tuesday for short- and medium-haul flights, as well as from 3 am (0200 GMT) to 1159 pm (2259 GMT) on Tuesday for long-haul flights.
Pilots flying for Lufthansa Cargo will strike from 3 am to 1159 pm on Tuesday. Germanwings flights are not affected.
(Additional reporting by Reuters TV; Editing by Thomas Atkins and Mark Potter)