Looming German Airport-Staff Strike Threatens UPS Operations
April 26 2016 - 03:13PM
Dow Jones News
By Laura Stevens and Natascha Divac
FRANKFURT -- Public-sector strikes in Germany targeting airports
are set to disrupt operations at United Parcel Service Inc.
Wednesday, potentially stranding packages alongside passengers as
hundreds of airport employees are expected to walk off the job in a
wage dispute.
UPS's largest European air hub is at the Cologne Bonn Airport. A
company spokesman said UPS has yet to determine what effect the
strike might have on operations, but is taking action to mitigate
delays.
"UPS understands that an anticipated public-sector strike in
Cologne could impact its operations," the spokesman added in a
statement. "We are relying upon our integrated network and will
divert volume from air to road where appropriate."
Services union Verdi, which called the strike, is seeking a pay
increase of 6% for more than two million public-sector employees.
Security staff, ground staff and airport firemen are expected to
participate at German airports, including Frankfurt, Munich and
Cologne.
UPS's pilot union said Tuesday that its members wouldn't cross
picket lines in Cologne. That would affect about 60 flights and
involve nearly 80 crew members. The Independent Pilots Association
is in its fifth year of contract negotiations with the delivery
giant and has recently warned the two groups are nearing an impasse
in federally mediated negotiations.
"Verdi, which represents the ground staff at the Cologne Bonn
Airport, has asked the IPA to withhold our services as pilots
during their 24-hour strike," said the Independent Pilots
Association President, Captain Robert Travis. "We will honor their
strike and not cross the Verdi picket lines."
Although the strike is for the public sector, it would hit
private companies and airlines. Deutsche Lufthansa AG said Tuesday
it would cancel nearly 900 flights Wednesday, affecting some 87,000
passengers.
Verdi representative Frauke Bendokat said airport employees
perform a large share of the freight and package handling that UPS
needs to operate. That includes loading and unloading, aircraft
services and airport security, among other tasks.
"This won't be happening as of midnight," Ms. Bendokat said. She
expects more than 100 staff to participate in the strike at the
Cologne Bonn airport alone.
Analysts said that while the strike wouldn't be good news for
UPS, it is unlikely to have any effect on second-quarter earnings
and would be similar to a severe weather event disrupting
operations for a day.
While the pilot union's participation means that international
flights may be canceled, UPS contracts with a third party for many
of its intra-European cargo flights, said David Vernon, a transport
analyst with Sanford C. Bernstein & Co. UPS likely will take
action to move shipments to other hubs or on to trucks to help
prevent disruption, he said.
"You're probably going to see a little bit of loss of customer
goodwill, " he said. It is unlikely customers will switch to DHL or
FedEx due to a one-day delay, he said. Analysts cautioned, however,
that repeated strikes by airport workers could cause a bigger
headache for the company.
UPS finished a $200 million expansion of its Cologne Bonn hub
about two years ago, giving it the capacity to sort 190,000
packages an hour, according to the company. It employed more than
2,500 people at that time, making UPS the biggest employer at that
airport, it said.
On its website, UPS says that about 35 flights and more than 200
trucks and vans arrive at and depart from the airport each evening,
connecting Europe with the Americas and Asia.
UPS's major rivals won't be hit hard by the strike. FedEx
Corp.'s largest European air hub is in France. Deutsche Post AG's
DHL has a major air hub in Leipzig, Germany, which isn't a target
of Wednesday's strikes. A spokeswoman for DHL said it didn't expect
to be affected.
Write to Laura Stevens at laura.stevens@wsj.com and Natascha
Divac at natascha.divac@wsj.com
(END) Dow Jones Newswires
April 26, 2016 14:58 ET (18:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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