SAS launches third phase of restructuring

The Scandinavian airline SAS has been hard hit by the current problems in the civil aviation sector and in April 2003 it announced a new round of cost-cutting and restructuring, following two earlier exercises since 2001. The latest plan will result in 4,000 redundancies among cockpit, cabin and ground staff. In Denmark, most of the trade unions involved have accepted pay freezes and other measures in order to preserve jobs and, in a longer perspective, the company's future. However, agreements have yet to be reached for cabin crew and some white-collar workers.

At a board meeting held on 10 April 2003, the management of Scandinavian Airlines System (SAS) presented a latest, third set of restructuring measures aimed at achieving profitability and competitiveness for the airline, which is based in Denmark, Norway and Sweden (having been founded in 1946 by a merger of these countries' national air carriers). A new round of cost reductions worth up to EUR 8 billion will result in 4,000 job losses by 2005 among pilots, cabin crew and ground staff in the three countries, and at the same time will involve a pay freeze and longer working hours for the remaining employees (SE0304104N). Most of the trade unions concerned have already accepted some redundancies and frozen wages. Exact figures have not yet been published concerning how the redundancies will be spread geographically or distributed among the various groups of employees.

In December 2001, shortly after the 11 September attacks on the USA, a savings plan proposed by SAS management was accepted by the Danish trade unions. In general, it meant a 5%-6% reduction in pay and working time for crew and ground staff in order to maintain jobs at the crisis-stricken company (DK0201124N). However, SAS is now affected by the renewed crisis in civil aviation following the war in Iraq and the outbreak of the SARS virus. The latest round of cost-cutting talks in the run-up to the board meeting on 10 April 2003 saw the conclusion of new agreements with 35 out of 39 local trade unions representing SAS staff in Denmark, Norway and Sweden. In Denmark alone, the management negotiated 20 different local agreement with 10 different unions representing cockpit and cabin crew, ground staff, and employees in administration, sales, and information technology. The results were different according to the strength and position of the unions involved, but the trend is that the flight staff are to face the bulk of the reductions and changes under the restructuring plan.

Pilots accept more working hours

On 9 April, the Danish Airline Pilots’ Union (Dansk Pilotforening, DPF) signed an agreement with SAS management that in most respects meets the latter's demands. Pilots' active flying hours (so-called 'block hours') will be increased from around 490 a year to around 750 - the maximum permitted is 900 hours, which is almost the number of hours worked by pilots in 'low-cost' airline companies. At the same time, the Danish pilots have accepted a pay freeze that over the coming year will mean an actual wage decrease of 2.5%. The pilots are also open to other changes that aim to reduce their 'passive' working time, including time spent at hotels. For example, they are willing to accept that the flight crew should be based in the place from which the flight departs. At present, all overseas routes must be staffed according to the '3-2-2' model - ie three employees from Sweden and two each from Denmark and Norway, which reflects the proportion of SAS shares belonging to the various countries. With variations, this model is adopted on all SAS flights in Europe. It requires many transfers and much staying overnight at hotels - ie 'passive' working time.

The increased number of hours 'in the air' per employee will automatically result in a surplus of pilots, since fewer pilots will share the total flying time. Up to 1,000 fewer jobs have been mentioned, but it is too early to say. SAS cannot yet put exact numbers on redundancies among pilots, because this also depends on how the company manages structural problems in the near future. If no routes have to be cancelled permanently, it is not expected that it will be necessary to make all 4,000 redundancies, and the policy so far has been to save jobs if possible.

Two agreements still missing

Most of the other Danish unions involved have signed agreements with SAS, though these have differed somewhat from those for flight staff. For example, despatchers and managerial staff have accepted a scheme whereby, until the next bargaining round in March 2004, their pay will be increased only if the consumer prices index increases by more than 2.5%, in which case the increase will equal the difference between the actual index and 2.5%. Besides, it has been agreed that the renewed collective agreement for these employees to be signed in 2004 will provide a rise of 1% in the basic wage. The largest union representing SAS staff in Denmark, the General Workers’ Union (Special-arbjderforbundet i Danmark, SiD) accepted only giving up some fringe benefits that cannot really be regarded as 'core' collective agreement issues. SiD has 2,300 members working at SAS, whose pay and pension will thus not be affected.

Two important agreements are still not in place in Denmark. The Cabin Attendants’ Union (Kabineforeningen for Cabin Attendants in SAS, CAU) has so far not signed the deal proposed by SAS. Among the unresolved issues are company proposals to abolish a per diem benefit and freeze pay. CAU has accepted a raise in the annual 'block hours' for cabin crew from 535 to 750. As with the pilots, this increase in each employee's active hours means a surplus of cabin crew. It may be that the future of the 3-2-2 staffing model will represent a problem among the three trade unions representing SAS cabin crew in Denmark, Norway and Sweden. Each fears that its members will have less flying time if the model is abandoned. If the principle of cutting the number of transfers required for cabin crew to board a flight is adopted, the geographical concentration of SAS long-haul departures is important - eg more flights out of Copenhagen could mean fewer flights for Norwegian crew members. On the other hand, SAS wants to strengthen its inter-Scandinavian routes, because of competition from new low-cost airlines. New negotiations began just after Easter.

Negotiations between management and the Danish Union of Salaried Employees in SAS (Luftfartsfunktionærerne, LFF) took an unusual course. Initially, LFF negotiators accepted a proposal from SAS, but after examining the agreements reached with other unions, they recommended their 1,700 members to vote 'no' in ballots held on 14 April. Of those members taking part in the vote, 73% opposed the deal. The main reason was that the other group of salaried employees in SAS, belonging to the larger Union of Commercial and Clerical Employees in Denmark (Handels- og Kontorfunktionærernes Forbund, HK), had been presented with a different proposal that was not so far-reaching as that put to LFF. While LFF initially accepted considerable cuts in costs, involving an actual pay decrease (including cuts in pension and holiday benefits) of 7% by the end of 2004, beginning with 3% in October 2003, the 500 members of HK were 'only' asked to accept a freeze in actual pay. The consequence would be that LFF members would receive lower pay than HK members doing practically the same job in the same workplace. The result of the ballot meant that the LFF negotiators were due to meet SAS management again on 30 April. SAS has informed the press that there is nothing new to negotiate, unless LFF can present a model for savings that correspond to the first agreement.

Commentary

The present third round of cost reductions and company restructuring at SAS is called 'Plan C' by management. During Plan A - ie the cutbacks launched in December 2001 - LFF played an important part as a spearhead in Denmark for a model of wage reductions with the aim of saving jobs, and at the same time showed a willingness to meet the demands from the crisis-hit airline. LFF accepted a wage reduction of 6% and the other groups followed the trend. The LFF negotiators believe that the same expectations were behind the proposal from SAS in Plan C. This could explain the apparently deeper cuts for LFF employees, and also the unusual development of the negotiations, with an agreement accepted but shortly afterwards rejected when the negotiators discovered that other comparable groups in SAS were not to 'contribute' on the same scale. Faced with these facts, the LFF negotiators pointed out that they had already once contributed considerably to the restructuring of the airline and consequently could not recommend that members vote 'yes' in the following ballot. A few days after the LFF members rejected the deal by a big majority, it turned out that HK had made its own agreement dependent on the outcome of the negotiations between SAS and LFF. Consequently, only a small part of the HK agreement has so far come into effect.

The situation in Denmark at the end of April 2003 is thus that the most important agreement with the pilots is signed and negotiations in principle with this group are over. Savings under the pilots' agreement are major and notably the parties have launched a discussion over the future structure of flight procedures. The 3-2-2 model reflects a flexibility problem that has to be dealt with in the light of new competition from low-cost companies that have made simplicity in all procedures from ground to airborne services their motto. Experts in the field state that SAS will have to turn to a more drastic Plan D if it is not to end up like the comparable Air Canada, which has gone into a suspension of payments. Air Canada also presented a Plan C, a third round of restructuring plans, whose aims included cutting 4,000 jobs.

source : Carsten Jørgensen, FAOS