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Austrian Airlines cancels pay talks after staff veto offer

By Angelika Gruber and Georgina Prodhan

VIENNA (Reuters) - Austrian Airlines called off pay talks with cabin crew and pilots on Friday, after its works council rejected a wage offer and reminded the airline it could strike at any time.

The airline, a unit of Germany's Lufthansa, said there was no basis for further talks and withdrew its offer, which it had hoped would break a years-long stalemate and create the certainty needed to allow investments in its fleet.

Employees had on Monday rejected the offer, saying it could lead to a loss in real wages, following a three hour-long meeting attended by about 1,000 staff that caused the cancellation of 34 flights and the disruption of many more.

The works council reaffirmed its mandate to take industrial action up to and including strikes.

"We have an authorization to strike from the staff. We'll see how it goes," flight crew works council chief Karl Minhard told Reuters. "We are still ready to negotiate, but over sensible collective wage agreements."

Lufthansa, which bought the airline from the Austrian government in 2009, had its own labor issues this year when its pilots grounded planes for three days, costing it 45 million euros ($61 million) in operating profit.

Austrian has been at loggerheads with its cabin crew since 2012, when the loss-making carrier eventually transferred its entire flight operations to lower-cost Tyrolean as part of a restructuring after failing to reach a wage deal.

COLLECTIVE AGREEMENT

The move reduced the airline's pension obligations and helped Austrian return to profit last year after five years of losses, but has been challenged in various courts.

The European Court of Justice's (ECJ) advocate general is due to give an opinion next Tuesday on the continued validity of the old collective bargaining agreement. The ECJ follows the advocate general's opinion in most cases.

Austrian had hoped to draw a line under the disputes with last week's offer, which proposed new flight duty rules and salary scales and a new pension fund, but was based on the current Tyrolean collective agreement.

The works council wants the basis for the talks to be the more generous Austrian Airlines agreement.

Currently, Tyrolean staff work according to their previous pay deals, while Austrian Airlines pay has been frozen.

Austrian Airlines said on Friday it was putting on hold a plan to fully integrate its Tyrolean and Austrian units and did not believe the time was right to make large investments to upgrade its fleet and take on new long-haul routes.

"The management of Austrian Airlines does not believe it is an opportune time to make the potential investments of up to 1 billion euros to replace the Fokker aircraft and expand long-haul routes," it said.

"The former collective wage agreement does not provide a sound basis for such investments."

Austrian had signaled its intention to modernize its medium-haul fleet but had not yet ordered any planes.

(Editing by David Holmes)

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