Tue, Nov 20, 2012 - Page 15 News List

SAS secures pilot backing for cuts, deadline expires

Bloomberg

SAS Group’s plans to eliminate jobs and shrink the business won the backing of unions representing pilots and the bulk of cabin crew as Scandinavia’s biggest airline fights to stay afloat.

The Stockholm-based company said deals had been reached with seven of eight unions. A Danish flight-attendant group was still holding out, hours after a midnight deadline set by the company for a deal expired.

SAS is targeting 3 billion kronor (US$440 million) in cost cuts as it seeks an extension of credit lines. Contingency plans for a collapse in talks had seen planes outside Scandinavia refueled ready to return to base, while crews on outbound flights were ordered to carry enough cash to meet expenses.

“They must reach agreement with everybody or the banks won’t agree to the new credit facility,” Oslo-based Arctic Securities analyst Kenneth Sivertsen said. “Presale of SAS tickets is dropping dramatically, which means a cash hit, and suppliers of fuel and food may start requesting payments upfront.”

SAS Group, which has 1,085 daily flights and serves 128 destinations, is the latest European carrier to struggle for survival. Malev Zrt in Hungary and Spanair SA, which used to be owned by SAS, both collapsed earlier this year as Europe’s sovereign debt crisis and high oil prices weighed on airlines.

SAS had set a deadline of Sunday to reach deals with unions, and the carrier could be in for “a very rough landing” unless there was an agreement by today, Sivertsen said.

“The future will be very uncertain for us if the union talks don’t fall into place,” SAS spokeswoman Elisabeth Manzi said on Sunday, declining to say whether the company would file for bankruptcy protection if unions did not accept the cuts.

SAS aims to eliminate office jobs and sell assets including a ground-handling unit and Norwegian brand Wideroe to reduce the payroll by more than 7,000 workers, it said on Nov. 12.

The company, part-owned by the governments of Sweden, Norway and Denmark, has been unprofitable on an annual basis since 2007 and currently employs about 15,000 people. The stock has lost almost 40 percent of its value over the past 12 months, leaving it with a market capitalization of 1.84 billion kronor.

“The core problem is they have higher costs than several low-price carriers that have entered the Scandinavian market,” Stockholm-based Danske Bank Markets senior credit analyst Louis Landeman said, citing the example of Norwegian Air Shuttle ASA.

“Also, unlike the bigger airlines in Europe, SAS has few of the longer flights where there’s more money to be made. They’re just not earning enough cash,” he said.

SAS has already scrapped 300 office jobs this year as part of an earlier project to cut 5 percent from spending and lift earnings by 5 billion kronor through next year.

Talks are under way with potential buyers for the handling business, which employs 5,000 people, and “all options” are being considered for Wideroe, based in Bodoe in northern Norway, where the workforce totals 1,400, chief executive officer Rickard Gustafson said on Nov. 12.

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