True that, but here we're coming again to the differences between airlines and many other industries. Are there many other industries, apart from airlines and cruise companies, where atypical employment practices are widespread to the extent that they become the norm instead of an exception? It might easily be that local contracts are offered to locals only, with everyone else being employed via a crewing agency headquartered who knows where. Therefore, with their status of contractors VS employees, they are the first one to be deemed surplus to the requirements when it comes to cost trimming.
...and it's not like an awful lot of expats are flying for the Lufthansa group, I think? On a similar note, most other Western European legacy carriers hardly employ any foreigners. And they have their own ways and means of keeping foreign applicants away. You want to fly for Lufthansa? Good, but have you got a German criminal disclosure right from your high-school years? You've got an eye on KLM? Great - but how good is your Dutch, are you fluent in both spoken and written speech? BA? How about getting a UK CAA ATPL and a UK driving licence first? And the list goes on and on, with small variations from country to country. If someone who's not their own national by descent happens to work there, he/she is usually an emigrant and even more often - a child of emigrants. So, despite not being "local" genetically, he's been integrated into the society to the same extent as a national, often right from childhood. With that often comes citizenship, a complete local security file and fluency in the language.