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Sunday, July 14, 2024

Airlines face lots of new turbulence

As Norwegians start traveling again, airlines based in Scandinavia are struggling to reinvent themselves, and survive. Both SAS and Norwegian Air have landed new labour agreements with pilots and cabin crew in Denmark, aimed at cutting costs with more “flexible” crewing, but they’ve met strong resistance in Norway and Sweden that’s now winding up in court.

Lots more flights and travelers are taking off from Norwegian airports, but there’s also lots of grumbling among pilots and cabin crew as the airlines try to cut costs. PHOTO: Avinor

It’s høstferie (autumn holidays) in much of Norway this week and airline traffic has taken off. The boomlet began already last summer, when Norwegian Air, for example, could report that its numbers of passengers doubled both in June and July compared to last summer. Bookings then rose week by week as Corona restrictions began to ease for good.

Norway’s strict Corona containment rules were mostly dropped in their entirety from October 1, perfect timing as week-long school holidays set in. Norway’s gateway airport, OSL Gardermoen, reported that for the first time since the Corona crisis began, as many travelers flew off to foreign destinations as they did to destinations within the country.

“We see that the desire to travel has returned,” Line Haugland of Norway’s airport authority Avinor told newspaper Aftenposten last weekend. “We’re especially seeing an increase in travel abroad and were scaling up for more traffic.” It was still 39 percent below October 1, 2019, but more than double last year’s volume. Airlines and package tour operators are also reporting “explosive” growth in travel bookings. Terje Berge of Finn Reise told news bureau NTB that ticket sales tripled during Norway’s “opening weekend, so it’s clear many are ready for a holiday abroad.”

Demand is there, but the airlines themselves face a bumpy comeback. Both SAS and Norwegian Air suffered mightily during the Corona crisis that forced grounding of most all flights. Governments in all the Scandinavian countries provided loan guarantees and even some capital infusions, in addition to paying the airlines to keep some key domestic routes operating.

As the crisis began to ease, the airlines launched programs to reorganize their own operating structure. Despite the recent boom, analysts warn the business travel market (especially important for SAS) may never return to pre-Corona levels, while the leisure market may not fully come back either. Some travelers remain skeptical about flying abroad, or simply don’t want to have to wear face masks for hours on end. Higher fares may discourage budget travelers, while others don’t think it’s right to fly off on weekend pleasure trips, for example, in the middle of the climate crisis.

The airlines thus feel forced to permanently cut costs through restructured operations and seasonal crewing adjustments, to avoid operating flights with empty seats and slash payroll costs. SAS, for example, has set up two new subsidiaries due to start operating next year, SAS Connect for busy and longer routes using Airbus A320 aircraft, and SAS Link for less heavily trafficked routes with smaller Embraer E195 aircraft.

“SAS’ most important job is to secure that we survive and can grow in the future, and that we do what’s needed to achieve that,” Simon Pauck Hansen, an executive vice president and chief operating officer at SAS, told newspaper Dagens Næringsliv (DN) late last week. The airline recently reported another huge loss on its summer traffic, most of its capital has been lost, and analysts expect SAS’ owners will need to provide more fresh capital by the end of the year.

DN has reported how airline crewing unions in Denmark are thus accepting new labour contracts aimed at allowing both SAS and its arch rival Norwegian Air to grow with the help of cheaper crewing. The alternative, they fear, is that low-fare carriers based outside Scandinavia with notoriously poor pay and working conditions for pilots and crews, will take over the market.

Aid to fly out of the pandemic
The Danish Flyvebranchens Personale Union (FPU) thus decided it was most important to help airlines out of the pandemic and thus ensure a source of jobs for its members, in return for its members agreeing to work for new subsidiaries at less favourable terms but with more job security and working conditions in line with “Danish work culture.” Pay is lower in the new subsidiaries than in SAS’ current operating units, but a Danish captain with seniority will still earn nearly DKK 1 million before overtime, also in a new agreement.

“That’s not exactly social dumping,” FPU leader Thilde Waast told DN. “We would much rather secure jobs and protect time off, so that the employees get a good balance between work and free time.” She said FPU also is keen to secure “good starting pay and Scandinavian working conditions” (as opposed to those offered by low-cost Eastern European or Irish carriers, for example). FPU has also come to terms with Norwegian Air, signing new collective bargaining agreements for pilots and cabin crew in Denmark, where Norwegian Air has based seven aircraft. Danish personnel will, in return, receive locally accepted working terms and FPU is open to discussing seasonal crewing.

“It’s incredibly important that Norwegian survives as a strong player in Copenhagen,” Waast told DN. “Otherwise other low-fare carriers will come in instead.”

This has all sparked sharp dissent and debate in Norway and Sweden, where leaders of unions for pilots and cabin crew accuse their Danish counterparts of all but selling out to the management of SAS and Norwegian Air. Norwegian remains under sharp criticism for paying out large bonuses to senior executives when Norwegian Air emerged from bankruptcy in May, while trying to slash pay and benefits for workers who’d long been laid off.

Some political commentators suggest that the days of powerful pilots’ unions may be over, while others claim the airlines themselves are operating with “an advanced form of union-busting.” Kjell Werner of the media group ANB blasted how SAS pilots and crew who lost their jobs during the Corona crisis must now apply for new jobs in SAS’ new subsidiaries at lower pay and benefits. Others contend that at least the pilots and cabin crew have a chance to get their jobs back.

Court case looms
On Tuesday DN reported that pilot unions in Sweden and Norway are taking SAS to court, claiming the airline is violating regulations aimed at protecting jobs that apply in cases of rehiring. There have been proposals in Norway to further strengthen job protection regulations, while pilots in both Norway and Sweden have filed a legal claim in Sweden against SAS. They want the courts to decide on workers’ rights in complicated cases of corporate restructuring and operations.

Still others are calling on the governments in Scandinavia, which already helped bail out locally based airlines, to provide even more financial assistance to the airlines in the form of more capital or ownership stakes. Norway’s outgoing conservative government refused to acquire a new ownership stake in SAS, while the former left-center government launched the sell-off of Norway’s stake several years ago.

Now a new left-center government may be pressured to change its mind and re-invest, while the airlines themselves want to be able to operate in a way that will allow them to compete against the Wizz– and Ryanairs of the industry, and keep serving the travel market that’s now re-emerging. Berglund



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