SAS finally gets all of its unions to agree to its 4XNG austerity program

Scandinavian Airlines-SAS‘ (Stockholm) self-imposed deadline looms today ahead of its board meeting. The airline set the deadline with its unions to accept salary cuts up to 17 percent and job cuts from 15,000 to 9,000. So far the unions have not agreed to these drastic cuts according to this update by Reuters. SAS says it needs these cost reductions in order to compete with low-fare carriers such as Ryanair and Norwegian. Norwegian is planning lower-fare Boeing 787 trans-Atlantic flights for next summer.

The company has issued the following statement:

Intense negotiations have taken place over the past few days. Unfortunately no agreement with any of the unions has yet been reached. Negotiations are continuing, and as previously announced, there must be a solution before the SAS Board of Directors meets later today, Sunday. At the meeting, the Board will decide if the conditions for implementing the plan exist. Full implementation of the plan is a condition for the banks and the major owners to provide access to the necessary funding. Until the Board meets, intensive work will continue to reach an agreement on new collective agreements and thus to secure the future of SAS.

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Update: On November 19 SAS announced it has obtained agreement from all of its unions for the new plan. The pilots union is subject to a ratification vote. The company issued the following statement on November 19:

8 of 8 new union agreements have been signed November 19 – The Danish Pilot Union Agreement is conditional upon approval by one third of its members.

4Excellence NG is targeting approximately 3 bn SEK of annual improvement from cost reductions and organizational restructuring and approximately 3 bn SEK increased liquidity from asset sales

New 3.5 bn SEK Revolving Credit Facility from Banks and Core Shareholders to secure financial preparedness conditional on final parliamentary approvals and approval of the Danish Pilot Union Agreement from one third of the members of the Danish Pilot Union.

On November 12 the Board of SAS approved the 4 Excellence Next Generation (4XNG) plan to address the issues facing SAS. The 4XNG plan will improve EBT by approximately 3 bn SEK on an annualized basis and improve the overall cost flexibility through:

· New union agreements for personnel

· Centralization of administration functions

· Reduction of compensation to market levels

· New pension terms

· Outsourcing of Call Centers and Ground Handling

SAS also communicated that it has reached a conditional agreement to increase its existing 3.1 bn SEK revolving credit facility to 3.5 bn SEK and extend the term of the facility to March 31, 2015.

This new revolving credit facility is being provided by seven current lenders and SAS’ core shareholders (The Kingdom of Denmark, the Swedish State, the Kingdom of Norway and KAW) on equal terms. The availability of this new revolving credit facility is subject to final documentation, parliamentary approval where required, and it is conditional on signed union agreements that are a central and integral part of the 4XNG plan.

The condition to have 8 union agreements signed have been fulfilled on November 19, 2012, subject to a ballot approval by one third of the members of the Danish Pilot Union to be finalized in the next few days. The availability of the new revolving credit facility is still subject to parliamentary approvals (where required).

Copyright Photo: Paul Denton. The older and less fuel-efficient aircraft, like this McDonnell Douglas DC-9-82 (MD-82) OY-KHM (msn 49914) landing at Geneva, will be phased out. SAS has a diverse fleet and will have to reduce the number of aircraft types it operates besides obtaining these drastic cuts from its personnel.

Scandinavian Airlines-SAS: