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Danish Government Refuses To Continue Subsidizing SAS

Scandinavian Airline System (SAS)

You could choose any major Scandinavian newspaper, so I will just run down my view:

The banks have decided to declare SAS bankrupt, if an agreement with the staff for pay cuts of 25% went through last night. The chairman of the board and CEO flew to Stockholm to meet with the banks for a stay of execution as the last tariff to be handled was the Danish cabin crew.

A bit of history:

The three Scandinavian countries Denmark, Norway and Sweden came out of WW2 in very different ways. Norway had a lot of pilots that flew for the RAF, Denmark had a lot airfields build by the Germans as Denmark was the key base area in the air defence of Berlin – especially for night fighters – and Sweden had a lot of money earned by war profiteering. They formed SAS which later went public, but the states of the 3 countries kept ½ the shares (distributed 2:2:3 for Denmark, Norway and Sweden respectively) and Wallenberg ending up with a 5% holding.

This background led to each staff group having its own tariff agreement with the company. A continuous improvement in staff benefits led to a service level probably well above requirement and high prices to scare the rest of the passengers away.

The cabin is manned according to emergency evacuation requirements of the aircraft used. And as there is/was a lot of domestic flying with smaller aircraft there is an inordinate number of cabin crew. Let’s put it this way: Maternity leave is not their main demand at tariff negotiations.

The situation has been tolerated for several reasons: One of them is that it was a reservoir for reserve pilots during the cold war – though Sweden never was a member of NATO (you have to draw the line somewhere), but now 25 odd years after the cold war and restructuring of the defenses that argument is not valid any more.

The strategic position is that Denmark doesn’t really need domestic flying after the bridges have been built post cold war – that includes a hefty lump of Southern Sweden as Malmø is popularly known as Copenhagen M. Norway is the only country really in need of a domestic airline, so these are to be sold off.

Medium range in Europe there is only basis for one airport in Scandinavia: Kastrup – which is smack in the middle of Copenhagen. Train and tube station at the airport and a freeway connecting both Denmark and the southern part of Sweden. Both Norway and Sweden have their international airports near their capital; but honestly: Who wants to go to Stockholm if they can avoid it?

Long range there is stiff competition from Hamburg, Amsterdam and now Berlin. Copenhagen might be interesting if the landing fees were reduced and the preferential treatment to SAS was abandoned.

How much traffic will disappear from CPH? Well that remains to be seen, but no matter what, there will be a curtailment of traffic as the “domestic” flights to Sweden will have to be curtailed.

The banks have demanded a pay cut of 25% where the pilots are to lose the equivalent of one month’s pay and “flexibility” in flying hours. In English they will have to show up for work occasionally. The other side is that SAS needs new aircraft and financing them will not be easy, given the loss making operation.

The Danish PM, Helle Thorning-Schmidt, has been adamant that unless there is an agreement to the company’s plan the Danish state has not the intention of continued subsidizing for the airline.

The situation is much the same with Spanish Airline, Iberia. El Pais has:

The numbers are also much the same. Iberia merged with British Airways last year and the Spanish employees fear the Spanish part is being dismantled – they could very well be right – most probably are.

There is a steady pressure on both Iberia and SAS from low cost airlines just yearning for landing slots. In Spain’s case you can’t claim that infrastructure has been neglected these last few years. In Scandinavia the European need could be filled by Lufthansa. Surface transport has always been a major competitor to air travel in Europe – and now definitely seems to have the upper hand.

The other problem is that CHP might be an attractive airport to other airlines apart from SAS.