Airline SAS says survival at stake as pilot strike grounds flights

2/2 © Reuters. FILE PHOTO: CEO of Scandinavian Airlines (SAS) Anko van der Werff poses for a photo during an interview in connection to the company's interim report release, in Stockholm, Sweden, May 31, 2022. TT News Agency/Fredrik Persson via REUTERS 2/2

By Anna Ringstrom, Essi Lehto and Supantha Mukherjee

STOCKHOLM (Reuters) -Wage talks between Scandinavian airline SAS and its pilots collapsed on Monday, triggering a strike that puts the future of the carrier at risk and adds to travel chaos across Europe as the peak summer vacation period begins.

The action is the first major airline strike to hit when the industry is seeking to capitalise on the first full rebound in leisure travel following the pandemic.

It follows months of acrimony between employees and management as the airline seeks to recover from the impact of lockdowns without taking on costs it believes would leave it unable to compete.

At the same time, employees across Europe are demanding wage rises as they struggle with surging inflation.

A strike could cost SAS nearly 100 million Swedish crowns ($10 million) per day, Sydbank analyst Jacob Pedersen calculated, and the company's future ticket sales will suffer. Shares in SAS were down 4.7% by 1511 GMT.

"A strike at this point is devastating for SAS and puts the company's future together with the jobs of thousands of colleagues at stake," SAS Chief Executive Anko van der Werff said in a statement.

"The decision to go on strike now demonstrates reckless behaviour from the pilots' unions and a shockingly low understanding of the critical situation that SAS is in."

Sydbank's Pedersen said the strike could erase up to half of the airline's cash flow of more than 8 billion crowns in the initial four-to-five weeks alone in a worst-case scenario, and was bound to leave "deep wounds" among affected travellers.

"SAS has too much debt and too high costs, and is thus not competitive. SAS is in other words a company flying toward bankruptcy," he said in a research note.

TRADING BLAME

Union leaders blamed SAS.

"We have finally realised that SAS doesn't want an agreement," SAS Pilot Group chairman Martin Lindgren told reporters. "SAS wants a strike."

Lindgren said the pilots were ready to resume talks, but called on SAS to change its stance.

The unions said nearly 1,000 pilots in Denmark, Sweden and Norway will join the strike, which is one of the biggest airline walkouts since British Airways pilots in 2019 grounded most of the carrier's flights in a dispute over pay.

Further disruption looms as British Airways staff at London's Heathrow airport in June voted to strike over pay.

In addition, Spanish-based cabin crew at Ryanair and easyJet (LON:EZJ) plan to strike this month to demand better working conditions and workers at Paris' Charles de Gaulle airport stopped work at the weekend to demand a pay rise.

Sofia Skedung, 38, arrived at Stockholm's Arlanda airport to find the SAS flight she and her family were booked on for a charter trip was cancelled.

"I was going to go with my family to Corfu on holiday for a week, which we really had looked forward to since we haven't travelled in a really long time," she said as searched the departure hall in vain for SAS staff.

"Everything is very, very confused here," she added.

BUSIEST WEEK

Loss-making SAS is seeking to restructure its business through large cost cuts, raising cash and converting debt to equity.

"This is all about finding investors. How on earth is a strike in the busiest week of the last 2.5 years helping find and attract investors?" van der Werff told reporters.

The airline, which is part-owned by the governments of Sweden and Denmark, estimated the strike would lead to the cancellation of around 50% of scheduled SAS flights and impact around 30,000 passengers per day, roughly half its daily load.

Denmark has said it is willing to provide more cash and write off debt on condition the airline brings in private investors as well, while Sweden has refused to inject more money.

Norway sold its stake in 2018, but holds debt in the airline, and has said it might be willing to convert that into equity.

Denmark's Finance Minister Nicolai Wammen in an e-mailed comment to Reuters said he hoped the parties would reach a solution as soon as possible.

The collective agreement between the airline and the SAS Pilot Group union expired on April 1. Months of negotiations, which began last November, have failed to conclude a new deal.

Pilots were angered by SAS' decision to hire pilots through two new subsidiaries - Connect and Link - instead of first rehiring former employees dismissed during the pandemic, when almost half of its pilots lost their jobs.

A strike would include all pilots from parent company SAS Scandinavia, but not Link and Connect, a union that organises the 260 pilots attached to the two units. Neither would it affect SAS' external partners Xfly, Cityjet and Airbaltic, the company has said.

SAS had already cancelled many flights ahead of the summer, part of a wider trend in Europe, where, in addition to the upheaval of strike action, operators have responded to staff shortages created by slow rehiring after the pandemic.

($1 = 10.3436 Swedish crowns)