Business | Aviation

Airline SAS aims for final union deal in survival fight

SAS aims to slash costs, secure bank loans

  • Reuters
  • Published: 17:00 November 19, 2012
  • Gulf News

  • Image Credit: AFP
  • Negotiators gather at SAS headquarters at Kastrup Airport in Copenhagen yesterday for the talks with the SAS Group management. SAS revealed a cost-cutting programme, including wage cuts, job cuts and asset disposals, in a bid to secure financing and convince its owners that the company has a future.

Copenhagen/Stockholm: Scandinavian airline SAS on Monday sought a deal with the last union opposing its plans for severe cost cuts aimed at avoiding bankruptcy and securing the airline’s long-term future.

SAS, half owned by the governments of Sweden, Denmark and Norway, said it had secured a deal with seven of eight unions on wage cuts, working schedule changes and pensions and had only the cabin crew union of Denmark to go.

The airline, hit by competition from lower-price rivals, last week announced plans to cut some salaries by up to 17 per cent and lower overall staff to about 9,000 from 15,000 as it shrinks its business. That prompted media speculation SAS faced bankruptcy if it failed to get unions to agree to the cuts.

But even if a deal is reached, analysts have questioned whether the airline can survive on its own in the long term as it faces competition from Ryanair and regional rival Norwegian Air Shuttle, both of which have lower operating costs.

“We have successfully negotiated seven of eight collective (union) agreements, which is gratifying,” SAS Chief Executive Rickard Gustafson told journalists during talks with unions at the main airport in the Danish capital Copenhagen.

“But there remains one union and we must have it on board too. That is a condition for carrying out our plan.”

The airline needs to get agreement from all eight unions as a condition of a 3.5-billion Swedish crown (Dh1.89 billion, $515 million) loan from the governments and six banks.

Progress in the talks sent SAS shares soaring.

By 1024 GMT, the stock was up 25 per cent at 6.95 Swedish crowns. Since the start of 2011, the stock has lost 69 per cent of its value to be worth under 2 billion Swedish crowns.

Gustafson said management aimed to conclude negotiations as soon as possible.

Although the airline had set a deadline of Sunday for an agreement, talks continued all night and into Monday.

SAS has reached deals with unions for pilots from Norway, Denmark and Sweden plus unions for cabin staff in Sweden and Norway.

“It has been a very gruelling process,” said Espen Pettersen, deputy leader of the main Norwegian cabin union.

“We have made big concessions in this agreement. We are not very happy, but we felt we had no other choice but to sign to secure the jobs and the company,” he added.

Raising fears of a possible bankruptcy, SAS told crews on Sunday to ensure aeroplanes were fully fuelled to be able to return home if needed.

The airline was also giving cash to flying staff to ensure they could get access to hotels.

SAS has declined to say how long its cash would last if it failed to secure a loan.

The airline aims to reduce costs by about 3 billion Swedish crowns ($441.05 million) a year. In January-September it had combined payroll and other operating costs of about 30 billion crowns.

Asset sales would strengthen the balance sheet another by 3 billion crowns.

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