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Sunday, August 14, 2022

Strike threatens SAS’ future

SAS pilots’ decision to strike on Monday can spoil the airline’s efforts to recapitalize and keep flying. Airline analysts warn that the airline as of now “is not a good investment object,” since investors usually want to earn money. 

The vast majority of SAS flights will be grounded for as long as the its pilots’ strike lasts. PHOTO: SAS

Espen Andersen, an assistant professor at the Norwegian Business School BI, is among those stressing that SAS is now in an extremely demanding financial situation. It needs fresh capital to keep operating after the pandemic grounded it and most other airlines, but it’s still struggling to compete with low-fare airlines that also have much lower costs. He thinks SAS’ future may now depend on a bailout by the Danish government.

“I was surprised the pilots went out on strike,” Andersen told Norwegian Broadcasting (NRK) after 900 of them decided to walk of the job early Monday afternoon. That’s forcing the cancellation of the vast majority of SAS flights and will be stranding or upsetting travel plans for an estimated 45,000 passengers a day.

“I had thought they’d come to terms,” Andersen continued. The pilots must realize that their airline is in financial trouble, he said, and now their strike will not only halt the recovery expected from summer holiday travel but also add to SAS’ costs.

In addition to disrupting the important summer travel season, the airline that once billed itself as “the businessman’s airline” has lost much of the short-haul business travel market. The Corona crisis showed how business meetings can also be conducted digitally at much lower cost, cutting deeply into what had been SAS’ most important market.

The closure of Russian air space because of Russia’s war on Ukraine has also forced SAS and other intercontinental carriers to fly around Russia. That adds greatly to costs, while demand for such flights has declined.

“SAS is being hit hard in all three markets,” Andersen pointed out. That won’t attract investors, nor will the pilots’ ongoing labour conflicts. The current strike is the third at SAS just in the past five years.

‘Huge, life-threatening crisis’
Jacob Pedersen, chief of analysts at Sydbank in Denmark, also sees a bleak future for SAS, telling Danmarks Radio that SAS has now “been thrown out in a huge, life-threatening crisis.”  SAS’ own CEO, Anko van der Werff, agrees. Asked whether he thinks the airline will survive, he responded “How in the world can a strike in the high season, while we’re looking for investors, help us?”

Frode Steen, a professor at the Norwegian business school NHH (Norges Handeslhøyskole), told newspaper Dagens Næringsliv (DN) that the pilots’ strike “was the last thing SAS needed now.” He also thinks it will be even more difficult for SAS to attract fresh capital that’s needed after pandemic, not least since SAS’ last strike three years ago cost the company SEK 650 million. SAS itself wrote in a report to stock exchanges on Monday that the strike will have “a negative effect” on the company’s liquidity and financial situation. Its share price fell sharply just after the strike was announced.

Jacobsen thinks the strike may prompt the Danish government, which already is among SAS’ largest shareholders, to come forth with more capital for the ailing airline, since it’s the dominant airline at Denmark’s main airport in Copenhagen. Neither the Swedish nor Norwegian government is willing to inject more capital into SAS, but both may offer to convert debt to shares.

While the pilots claim they’re trying to salvage the Scandinavian business model of providing secure jobs at good pay, others think they’re gambling that the Scandinavian governments will ride to the rescue. “This is an extremely bad day for terribly many travelers, but also for SAS and SAS’ future,” Pedersen told NRK.

newsinenglish.no/Nina Berglund

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