Skip to main content

The Globe and Mail

SAS airline strikes survival deal with unions

SAS, half-owned by the governments of Sweden, Denmark and Norway, said eight unions had backed wage cuts and changes to working schedules and pensions

Johan Nilsson/Reuters

Scandinavian airline SAS AB attained severe cost cuts with unions on Monday in a deal intended to secure new financing and the airline's long-term survival.

SAS, half-owned by the governments of Sweden, Denmark and Norway, said eight unions had backed wage cuts and changes to working schedules and pensions, after talks missed a Sunday deadline and continued through the night.

The company's shares soared on the deal after media speculation that the airline could have faced bankruptcy if the talks had failed.

Story continues below advertisement

Hit by competition from lower-price rivals, SAS last week said it would reduce overall staffing by about 40 per cent to 9,000 by shedding assets, slash the work force by a further 800 through job cuts and decrease some salaries by up to 17 per cent to get new financing from banks and its main owners.

Even though unions have agreed to the cuts, analysts have questioned whether the airline can survive on its own in the long term as it faces stiff competition from Ryanair Ltd. and regional rival Norwegian Air Shuttle, both of which have lower operating costs.

SAS chief executive officer Rickard Gustafson acknowledged the concessions unions had made.

"These were very big sacrifices and a great amount of responsibility from the unions," he said on Monday, speaking at the company's headquarters at the main airport in Danish capital Copenhagen, where the talks were held.

"We now have a plan for long-term profitability. We have built a strong base," he added.

Kenneth Sivertsen, an analyst at Arctic Securities, questioned whether SAS would continue as an independent carrier.

"Although they are lowering their costs by three billion [Swedish kronor ($443-million)], they will still be a high-cost company," he said.

Story continues below advertisement

"I think they will be taken over. As a stand-alone company they will be squeezed between low-cost airlines and the huge flight carriers, such as Lufthansa and Air France."

One union, the Danish Pilots Union, still has to hold a ballot of members in which one third have to agree to the cost-cutting deal.

An SAS spokeswoman said the airline viewed the vote as a technicality which would not prevent the deal going ahead. SAS expects a result in the next few days.

SAS needed to get agreement from all eight unions as a condition of a 3.5-billion Swedish kronor loan from its shareholder governments and seven banks.

Sweden's Finance Ministry said on Monday the governments would take part in the credit facility, which is also backed by a foundation run by the wealthy Swedish Wallenberg business family, a core SAS shareholder.

Parliamentary approval will be required for the governments to make the loan, SAS said.

Story continues below advertisement

By 1610 GMT, the airline's shares were up 22 per cent. Since 2011, the stock has lost 69 per cent of its value to be worth less than two billion Swedish kronor.

"It has been a very gruelling process," said Espen Pettersen, deputy leader of the main Norwegian cabin union after his group agreed to a deal earlier on Monday.

"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 airplanes 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 three billion Swedish kronor a year. From January-September, it had combined payroll and other operating costs of about 30 billion kronor. Asset sales would strengthen the balance sheet by another by three billion kronor.

Report an error

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨