Scandinavian airline SAS AB (STO:SAS) plans to cut 6,000 jobs, reduce wages, and sell some assets to secure loans backed by the government. However, in order to secure the loans from the governments of Norway, Sweden, and Denmark, along with seven banks, the airline must receive the union’s approval to cut those jobs and wages. The deal would cut pay by up to 17 percent for some workers.
Union members must approve the cuts by Sunday in order for the deal to go through. If the deal is secured, company officials say the package of cuts will improve the airline’s earnings by 3 billion crowns, and the sales of its assets would add 3 billion crowns to its balance sheet. The assets SAS AB (STO:SAS) is planning to sell are its regional airline, Wideroe, and its ground handling unit.
Most analysts do not believe that the struggling airline will be enough to keep it independent. The structure of SAS AB (STO:SAS) is designed to build solidarity among the Nordic countries and create jobs, rather than to generate profit. The structure has made it difficult for the airline to deal with the soaring cost of jet fuel and the need to offer competitive airfare against discount carriers, like Ryanair and Norwegian Air Shuttle.
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One key difference between Norwegian Air Shuttle and SAS AB (STO:SAS) is the fact that Norwegian Air Shuttle has been able to secure staff members from outside the Nordic region at lower costs. However, the structure of SAS requires that its airplanes retain a staff of employees that’s proportional to the airline’s state ownership.
SAS AB (STO:SAS) has not made a full-year profit in five years. If the current plan is approved by union members, it should buy the airline two years of funds. At the end of those two years, the banks and the airline’s major shareholders, which are the Swedish, Norwegian, and Danish governments, will end their support. Officials from the Swedish government have said they tried to sell the airline but failed.