SAS strikes survival deal with unions

Mon Nov 19, 2012 1:21pm EST
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By Johan Ahlander and Anna Ringstrom

COPENHAGEN/STOCKHOLM (Reuters) - SAS (SAS.ST: Quote) has won union backing for big cost cuts, in a deal intended to secure new financing and the Scandinavian airline's long-term survival as it fights low-cost competitors.

SAS, half owned by the governments of Denmark, Norway and Sweden, said on Monday eight unions had agreed wage cuts and changes to working schedules and pensions.

Its shares closed up 23 percent at 6.90 Swedish crowns.

Talk that SAS faced bankruptcy if the talks failed hit its stock last week after it said it wanted to cut overall staffing about 40 percent to 9,000 by shedding assets, reduce the workforce by a further 800 with job losses and trim salaries up to 17 percent to get financing.

Fears of a possible bankruptcy were heightened on Sunday when SAS told crews to ensure airplanes were fully fuelled so as to be able to return home if needed. The airline also gave cash to flying staff to make sure they could get hotel rooms.

"We now have a plan for long-term profitability. We have built a strong base," chief executive Rickard Gustafson said on Monday. "These were very big sacrifices ... from the unions."

While unions have agreed the cuts, analysts questioned whether SAS can survive on its own in the long term against stiff competition from regional rival Norwegian Air Shuttle (NWC.OL: Quote) and Ryanair (RYA.I: Quote), both of which have lower costs.

"Although they are lowering their costs by 3 billion crowns, they will still be a high-cost company," Arctic Securities analyst Kenneth Sivertsen said. "I think they will be taken over. As a stand-alone company they will be squeezed between low-cost airlines and the huge flight carriers, such as Lufthansa (LHAG.DE: Quote) and Air France (AIRF.PA: Quote)."   Continued...

A ground staffer carries warning cones between two SAS Boeing 737 aircrafts parked at Arlanda airport's Terminal Five, north of Stockholm November 13, 2012. REUTERS/Johan Nilsson/Scanpix