Airline SAS inks deal with first unions in survival talks

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By Johan Ahlander and Anna Ringstrom | November 19, 2012 12:42 PM EST

Scandinavian airline SAS reached agreements with two Norwegian unions on Monday and pushed on with talks with other unions in a bid to ensure the group's survival and avoid bankruptcy.

The airline, hit by competition from lower-price rivals, last week announced plans to cut some salaries by up to 17 percent, lower overall headcount to about 9,000 from 15,000 and reduce costs.

The airline, half-owned by the governments of Sweden, Denmark and Norway, had said a deal with unions on wage cuts, changes to work hours and pensions must be reached by Sunday, but talks were extended into Monday.

SAS spokeswoman Elisabeth Manzi said SAS had inked deals with Norwegian cabin crew unions SNK and NKS, and it was still in talks with the remaining six unions.

At Copenhagen's airport, where the talks were being held, negotiators could be seen shuttling in and out of company headquarters for food and drink while the lights blazed in several rooms on the three floors of the building.

"We are happy to have reached an agreement with the first union," SAS Chief Operating Officer Flemming Jensen told journalists outside the office regarding the first deal, with SNK. "We have had a very narrow negotiating mandate and this agreement is of course within those frames."

Analysts have questioned whether the measures will secure the independence of the airline in the long term as its structure was designed more to secure jobs and Nordic solidarity than generate profits.

It has long struggled to compete with discount carriers like Ryanair and regional rival Norwegian Air Shuttle .

"What we can say is that we are still in intense negotiations," said Manzi, who is based in the Swedish capital, Stockholm.

"We can't say right now how long we will be in these negotiations ... Our hope is, of course, that we will reach these agreements and that we fly as usual," she added.

SAS management has said that if the cost cuts are carried out, the airline has a sound base for the future.

Amid fears aired widely in Scandinavian media that the lack of a deal might lead to an immediate bankruptcy application, the spokeswoman said the airline had told crews to ensure airplanes were fully fuelled so as to be able to return home if necessary.

The airline was also giving cash to flying staff to ensure they could get access to hotels if there was a bankruptcy.

"Due to the fact that this is a very serious situation for SAS right now it is our responsibility as a company and employer to secure our assets, regarding staff as well as planes," Manzi said.

However, she declined to say how long SAS's cash would last if loans with the banks were not agreed to.

The labour unions said they met all of the airline's demands.

"We have compromised with SAS on all parameters - wages, pensions and productivity," Lars Bjorking, chairman of the Danish Pilots Union, said in a statement on behalf of the Danish, Swedish and Norwegian pilots' unions.

The governments and six banks have said they will lend SAS about 3.5 billion Swedish crowns ($515 million) if the airline can secure a deal with the unions to slash costs.

SAS expects cost cuts to improve earnings by 3 billion crowns while asset sales would strengthen the company's balance sheet another by 3 billion crowns.

(Reporting Johan Ahlander and Anna Ringstrom, writing by Patrick Lannin and Anna Ringstrom; Editing by Gary Crosse and Chris Gallagher)

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