SAS tries to calm anxious customers

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Scandinavian Airlines (SAS), which must obtain approval for a massive cost-cutting plan from its employee unions this weekend, was trying to reassure its millions of customers on Friday that it will still be flying on Monday. Fears have risen that the airline faces bankruptcy after all, in turn raising the prospect that frequent-flyer benefits held by SAS EuroBonus members will also be lost.

Scandinavian Airlines (SAS) hopes to avoid permanent grounding after this weekend. PHOTO: SAS

Newspaper Dagens Næringsliv (DN) reported Friday that SAS faces an estimated NOK 1 billion liability in the form of frequent flyer benefits that it owes its most loyal customers over the years. If SAS goes bankrupt, the frequent flyer benefits will be worthless themselves, even though SAS’ EuroBonus program has itself been viewed as an asset that could be sold to raise funds for the troubled airline.

There have been signs that members of SAS’ frequent flyer program EuroBonus have been trying to redeem benefits while they can, DN reported. SAS officials wouldn’t comment.

Like all airlines facing severe financial difficulty, SAS is also faced with declining ticket sales because travelers may worry their tickets will be worthless as well if SAS is grounded. A drop in sales would mean a drop in revenues, compounding SAS’ cash flow challenges and threatening to make bankruptcy a self-fulfilling prophecy.

Tension was high as the leaders of several of SAS’ myriad unions continued to bash the financial rescue plan SAS revealed earlier this week. Various union bosses have said they will not go along with demands for pay, benefits and pension cuts, raising concerns the plan will crash before it gets off the ground.

SAS officials were remaining optimistic. “We expect to be flying on Monday,” Trine Kromann-Mikkelsen of SAS told website “We have put forward a plan, and an agreement should be in place on Sunday.” She claimed that all parties involved “are aware of the seriousness of the situation and know an agreement must be put in place.”

‘Absurd’ executive pay levels still anger union bosses
SAS’ management must win support from employees and their unions to obtain the new financing the airline needs to keep flying, but management officials face ongoing anger over the size of pay and benefits packages of the top executives who are demanding cuts from others.

Even though SAS management from chief executive Rickard Gustafson on down have said they’ll cut their own pay by 20 percent, the unions are far from impressed. Norwegian newspaper Dagsavisen reported Friday that Gustafson’s base salary alone (NOK 8.5 million, or USD 1.4 million) amounts to the salaries of 31 newly employed flight attendants (NOK 270,000). “That’s a pay gap far greater than what folks in Scandinavia view as acceptable,” Tor Grennes of Norwegian Business School BI told Dagsavisen.

SAS executive pay levels, which are three- to four times those at arch-rival Norwegian Air, are being ridiculed by SAS’ union leaders, and that’s not a good omen prior to the unions’ voting for or against the rescue plan on Sunday. Asbjorn Wikestad of the SAS personalklubb in Norway called the executive salaries and benefits “absurd,” adding that “SAS’ CEO is going down from 10 million to 8 million and presents it as heroic,” Widestad said. “What management needs to do is adjust its own greed.”

Norway short-changed
There’s also been discontent in Norway over how SAS will be restructured under the rescue plan. Norwegian passengers make up SAS largest customer base but still are forced to fly through Copenhagen (where SAS is a major employer) while management will be firmly based in Stockholm, noted newspaper Aftenposten on Friday. The Norwegians feel short-changed, with the poorest overall flight selection and employment base even though they’re SAS’ best customers.

An Aftenposten commentator was also among those questioning the potential of the new rescue plan to really turn around SAS once and for all, and make it profitable against ruthless competition from low-fare carriers. The latest batch of SAS executives has been accused of being out of touch with reality, in line with all their predecessors, and that there’s no guarantee the new plan will work.

Some analysts and commentators think bankruptcy may be actually be better than another rescue plan, because it would force an entirely new reorganization of the airline and lead to new ownership that may no longer involve the governments of Norway, Denmark and Sweden.

Views and News from Norway/Nina Berglund

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