‘Final call’ issued for SAS rescue

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Workers at Scandinavian Airlines (SAS) are being asked once again to bear the brunt of massive cost-cutting to keep the long-troubled carrier flying. “This is our ‘final call,’ if there’s still to be an SAS,” claimed the airline’s chief executive Rickard Gustafson, who’s agreed to cut his own pay as well.

SAS is desperately trying to avoid permanent grounding. PHOTO: SAS

He and other top SAS executives have been under heavy criticism for maintaining their own high salaries and lucrative pensions while demanding that employees reduce their own. The new SAS rescue plan calls for pay cuts, layoffs and poorer pensions with executives slashing their own compensation, too.

Gustafson said Monday morning that his pay will be cut by 20 percent while other executive paycuts will amount to “between 15-17 percent.” Management positions will also be cut, with SAS administration consolidated in Stockholm.

He said pay cuts for employees will amount to a “maximum” of 12 percent on average.

The governments of Norway, Sweden and Denmark are poised to take part in new financing for SAS if employees agree to the cuts. “This demands a lot of the employees, but it’s absolutely necessary,” said Norway’s government minister for business and trade, Trond Giske.

Gustafson called it SAS’ “last chance” for airline to restructure itself with a  “completely new platform for the future.” It’s the only way, he claimed, for SAS to re-emerge as a “strong and competitive” carrier in a turbulent and tough airline industry.

In addition to the pay and staffing cuts that will result from a “centralization” of administrative functions (which now are spread over Stockholm, Copenhagen and Oslo) SAS confirmed it will sell off its profitable short-haul carrier Widerøe along with other remaining assets such as real estate near key airports, call centers and ground services.

SAS, like many traditional, long-established airlines, has continued to bear the costs of relatively heavy administration and internal bureaucracy built up over decades, along with dozens of strong labour unions that have demanded expensive wage and benefit pacts. New low-fare airlines that have started up in recent years have few of those costs and pay far less to their employees, allowing them to offer low fares that SAS has been forced to meet.

That’s led to heavy losses and looming pension obligations that in turn made SAS’ banks reluctant to continue to supply credit alone. Now the banks will be joined by new lines of credit involving the governments of the three Scandinavian countries that collectively still own half of SAS’ shares. The state aid reportedly has been approved by European competition authorities.

Employees will be asked over the next few weeks to accept new collective bargaining agreements that reportedly will contain pay cuts of around 15 percent plus staff cuts. Existing pension plans will be replaced with cheaper ones that will cut SAS’ liability and benefits for workers. If the unions don’t go along, the airline will face bankruptcy.

SAS’ pilots seemed positive to the plan Monday morning, while other union leaders were critical. Crisis meetings will be held over the next several days.

Meanwhile, there was some good news from SAS, which clearly led to its banks and the Scandinavian governments’ decision to offer conditional new credit: SAS doubled its pre-tax profits in the third-quarter, to SEK 568 million from SEK 276 million in the same quarter last year. Operating profits were also up, to SEK 863 million from SEK 500 million.

Views and News from Norway/Nina Berglund

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