Airline's deal to end pilot strike dents prospects of making profit

OSLO/STOCKHOLM: SAS reached a deal with unions to end a week-long strike by pilots that has grounded 380,000 passengers in a costly conflict that has dented the Scandinavian airline’s prospects of making a profit this year.

SAS Chief Executive Rickard Gustafson said the airline and the unions agreed on a 3.5 percent salary increase in 2019 as part of a new three-year collective agreement.

Flights would resume as soon as possible, but it would likely take up to 24 hours before operations were entirely up and running again, he said.

SAS had canceled more than 4,000 flights as of Thursday after pilots went on strike on April 26 over wages and working conditions.

“I can with relief inform our customers and our staff that we now can put this conflict behind us. We have tonight signed a new collective agreement with our four pilot unions,” Gustafson told a news conference late on Thursday.

Shares in the flag carrier, which remains part-owned by the governments of Sweden and Denmark, fell 2.75 percent by 0820 GMT after racking up gains on Thursday as expectations grew for a resolution of the conflict.

Sydbank analyst Jacob Pedersen said that while SAS had gained in competitiveness relative to rivals in recent years, the strike and resulting wage deal were a step in the wrong direction.

“SAS could be on the brink of losing their competitiveness if this agreement is not counteracted by more savings,” he said, estimating that the strike would cost the airline about 500 million Swedish crowns ($52 million) in lost revenue.

Close to bankruptcy in 2012, SAS sold assets and cut wages and thousands of jobs in return for a life-saving credit facility. It has been profitable in the last four years, but fuel costs are rising and overcapacity is still squeezing the sector.

Pilots had been seeking around a 13 percent pay hike, to make up for the 2012 wage cuts, a level SAS said would have led to dire consequences for the airline.

“The agreements between SAS and the pilots’ unions concern predictability of scheduling, job security and salaries. In addition, the previously canceled agreements concerning collaboration and career paths have been reintroduced,” SAS said in a statement.

The Swedish Airline Pilots Association said the key target had been to ensure the job security of its members.

“The fact that our most important demands have won approval, and the final result of the agreement have made it possible for us to recommend the deal to our members,” it said.

Analysts have estimated the stand-off could cost SAS as much as $10.5 million a day, threatening to wipe out the airline’s annual profit in less than two weeks.