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Friday, June 21, 2024

New airlines take off as SAS heads into battle with its pilots

UPDATED: Mediation is underway between troubled Scandinavian Airlines (SAS) and unions for its pilots in Norway, Sweden and Denmark, which sharpened their demands on Tuesday. SAS’ competitors, meanwhile, are taking off as never before, some of them for the first time.

Darker days seem to loom for Scandinavian Airlines (SAS), even in the middle of summer. PHOTO: Avinor

The risk of a strike grew on Tuesday, with newspaper Dagens Næringsliv (DN) reporting that SAS’ four pilot unions are now rejecting calls for cost cuts and instead demanding higher pay and better working conditions. DN reported that the unions for SAS pilots, operating under an umbrella organization called SAS Pilot Group, sent letters to members in which they state that it’s no longer an option to go along with cost cuts.

That’s bound to make mediation even more difficult. The pilot unions claimed they had offered SAS limited crisis agreements that would have strengthened the airline’s finances considerably, and ensured that this summer’s traffic would be spared cancellations. “But SAS has turned that down, and instead demanded substantial weakening of our rights.”

The unions also claimed they were now in “a new phase” of contact with SAS management, and that efforts to “agree with the company on a cultural change and a joint move forward based on mutual confidence” are now over. SAS management has earlier denied the pilots were so conciliatory.

SAS’ problems with its pilots are already being exploited by competing airlines. Norwegian Air, long SAS’ arch rival, faced even worse trouble than SAS just two years ago but emerged from bankruptcy reorganization and even survived government scoldings over bonuses paid to top executives. It unloaded its troublesome long-haul fleet of Boeing 787 Dreamliners and has returned to its roots as a domestic carrier with re-expanding routes in Europe.

Norwegian Air is airborne again after a few crisis-ridden years. It announced a new labour agreement with its pilots just as SAS’ pilots warned they may strike from June 29. PHOTO: Norwegian Air

Norwegian, which suffered a crippling pilots’ strike of its own in 2015, even seemed to rub salt into SAS’ wounds last week when it announced it had agreed on a new labour pact with its pilots for 2022-2023. Norwegian’s new management stressed how the deal was hammered out “in fellowship” and gives the airline more seasonal flexibility and predictability, exactly what SAS needs as well. Guro Poulsen, executive vice president at Norwegian, even noted how the pilots are one of the airline’s employee groups that have “had to adapt to a new working environment with constant changes” over the past few years, “and we as their employer value the confidence we have had in one another during negotiations.”

The leader of the airline’s Norwegian Pilot Union also claimed he was satisfied with the new labour pact: “The main priority has been to secure jobs … and in addition we’ll have better predictability and possibilities for planning workdays and time off,” said Alf Hansen.

Scandinavian Airlines (SAS) is struggling to remain airborne after the pandemic, huge losses and the threat of another strike by its pilots. PHOTO: SAS

At the same time SAS pilots in Scandinavia are still threatening to strike from June 29, with mediation getting underway in Sweden this week. Norwegian Air quickly responded by halting its sale of “flex” airline tickets to several destinations in Southern Europe that would have allowed passengers aready booked on SAS to hold back-up travel arrangements they could cancel if SAS doesn’t go on strike. “The consequences would be that folks wouldn’t show up and we’d fly with empty seats,” Eline Hyggen Skari of Norwegian told state broadcaster NRK. Norwegian is instead selling tickets to Spain, France and Split in Croatia, for example, that must be paid for at once and are not refundable.

SAS pilots’ strike threat has created enormous uncertainty for thousands of passengers holding tickets for long-awaited summer holidays, and also allowed its rivals to boost their own ticket prices. New Norwegian carrier Flyr, for example, was still offering low fares from Copenhagen to Oslo in late June this week, but fares for flights from July 1 tripled or were unavailable.

There will be a mad rush for transporation from June 30 if SAS’ pilots walk off the job, and summer holidays can be ruined. SAS pilots stand by their demands that around 550 SAS pilots laid off during the Corona crisis get their jobs back at the same terms as before. SAS management, meanwhile, restructured the airline with two new subsidiaries (SAS Link and SAS Connect) where new pilots willing to work for less have taken over their jobs. Former SAS pilots keen on getting their jobs back claim they’d have to accept a 30 percent decline in overall pay and work terms.

SAS management has insisted that pilots need to accept new working terms in order for the heavily indebted airline to survive. One former SAS pilot, who described himself in newspaper Dagens Næringsliv (DN) as now a “happy pilot” for short-haul airline Widerøe in Norway, claims his former colleagues are not greedy or out of touch with reality, but rather are putting their jobs at risk in order to secure more “sustainable” terms for pilots.

Cancellations loom
DN reported this week that mediation is being carried out through separate processes in each of the three Scandinavian countries. Battle lines are drawn, with the pilots claiming they “had no other way out” and SAS officials responding that the pilots were showing “shockingly poor understanding of the critical situation SAS is in.”

Mediation won’t get underway in Norway until just a few days before the June 29 deadline for a settlement. Analysts claim a strike will cost SAS as much a SEK 90 million per day, and make it much more difficult for the airline to secure the new capital it needs from investors. As commentator Anita Hoemsnes wrote, “who wants to invest in SAS when the pilots choose the worst possible time to strike?”

SAS had also already warned, even before the strike threat, that it may need to cancel as many as 4,000 or more flights this summer and early autumn because of a shortage of crews. Airlines and airports all over Europe are suffering the same staffing problems, leading to lots of chaos in the past week.

Among those ready to offer alternative airline service to SAS customers is Flyr, founded by the heir to Norway’s former major competitor to SAS, Braathens SAFE. Erik Braathen has a long career in the aviation business and managed to take off in the middle of the Corona crisis last summer. By the end of the year it was offering domestic service within Norway and to three destinations abroad, and now offers service all over Europe, from Sardinia to Scotland.

Upstart Norwegian airline Flyr now flies to lots of destinations within Norway and around Europe, with traffic growing by the week. PHOTO: Flyr

Flyr’s passenger numbers rose 22 percent in May, with DN reporting that it’s expecting to fill four of five seats this month. Flyr was selling 10,000 tickets a day last week and CEO Tonje W Frislid, who formerly worked for Norwegian Air, is optimistic, expecting load factors of more than 80 percent. Flyr’s fleet will rise to 12 by the end of this year.

The growth is coming despite seemingly all odds. Frislid told DN earlier this year that “there was nothing called Omicron” last fall, nor was there a war going on in Europe. “We were prepared that there could be new waves of (Corona) infection that would drag the market down again, or delay an upturn.” The upstart airline nonetheless managed to raise NOK 1.1 billion fresh in capital and 149,100 passengers traveled with Flyr in May.

Another new airline in Norway was finally starting to fly this week, built up on the remains of Norwegian Air’s fleet of long-distance aircraft. Norse Atlantic Airways, based in the southern coastal city of Arendal, was ready to take off from Oslo to New York’s JFK airport Tuesday night, with plans for route expansion throughout the summer and fall. Its management sees opportunity in all the problems of the older established carriers.

Several of Norse Atlantic Airway’ leased Boeing 787 Dreamliners have been parked at Oslo’s main airport at Gardermoen this spring. Now they’re finally ready for take-off. PHOTO: Norse Atlantic Airways

Fallout from the Corona crisis, which grounded airlines all over the world, has led to new players like Norse Atlantic stepping in. It took over leases on several of Norwegian Air’s Boeing 787 Dreamliners and now boasts a fleet of 15 jets, with destinations including London, Los Angeles, Fort Lauderdale, Orlando, Berlin and Paris.

The first flight from Oslo to New York was due to take off Tuesday evening June 14, arriving the same evening at JFK because of time zone advantages. Flights to the destinations in Florida are scheduled from later this month and in early July, with flights between Oslo and Los Angeles, London Gatwick and on to New York due to start in August. Departures from Berlin and Paris are due after that.

The new airline has been promoting low fares, but they change and can rise all the time depending on destination and seat availability. Like Norwegian, the new airline also lacks back-up aircraft, so if there’s a problem with the Dreamliners like there often was for Norwegian, passengers can find themselves stranded.

Bjørn Tore Larsen, founder and CEO of Norse Atlantic Airways, has high hopes for the new trans-Atlantic carrier built up on leased Boeing 787 Dreamliners that Norwegian Air had to give up. PHOTO: Norse Atlantic

Many travellers remain undaunted and willing to try new start-ups like Flyr and Norse Atlantic. CEO and founder Bjørn Tore Larsen told DN in late May that more than half of those making reservations on Norse Atlantic are coming from the US. Larsen said he and his colleagues were nervous about whether the war in Ukraine would dampen Americans’ desire to travel. “Now we see that it wasn’t affected, and we’re seeing very strong demand,” Larsen said, adding that ticket sales had “exceeded all expectations.”

Larsen also points to advantageous leasing deals secured when Norwegian sunk into financial trouble. He also claims that airline personnel with experience and motivation are available. His airline has already subleased some of its aircraft, though, and didn’t launch route- and ticket sale plans until after the US Department of Transportation granted Norse Atlantic landing rights in January. “As a new company we have flexibility and can enter the market in line with demand, and adjust our course as needed,” Larsen told newspaper Aftenposten last week.

Analysts tend to agree. “Demand (for travel) is on the way up (after Corona) and there’s not nearly enough on offer to meet it,” Jorge Guira, a professor in England who’s studied investments during times of economic crisis, told Aftenposten. “This is the age of opportunity.”

Others agree that new players can survive because there’s lots of available aircraft and quickly growing passenger numbers. The new startups are also better able to be more flexible than the former national carriers that went through the trauma of deregulation, have faced strong labour unions and struggled to adapt to market forces.

High prices for oil and jet fuel, however, affect both new and established carriers, and other problems can still pop up. Flyr, for example, announced last week that around 2,000 of its passengers have been affected by delayed delivery of a new aircraft from Boeing. It was supposed to arrive June 29, but won’t until July 26. Boeing has blamed the delay on delivery problems of its own during the pandemic. Berglund



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