SAS Unions Agree Cost-Cutting Plan as BA Moves Closer to Strike
March 12, 2010, 5:37 AM ESTBy Ola Kinnander and Steve Rothwell
March 12 (Bloomberg) -- SAS Group, the Nordic region’s biggest airline, reached a deal on cabin-crew cost cuts that remove a hurdle to a $700 million rights offer, as flight attendants at British Airways Plc moved closer to a strike.
SAS jumped as much as 9.3 percent in Stockholm trading following the agreement with crew and pilot unions to shave 500 million kronor ($71 million) from annual costs. Sweden, Norway and Denmark, which own half of the company, had made a union accord a condition for backing a 5 billion-krona stock sale.
British Airways faces its first strike in more than a decade after talks with representatives of its 12,000 cabin crew broke down two days ago. The Unite union, which holds a mandate to call a strike, will announce the “latest developments” at a news conference scheduled for 11 a.m. London time.
“Labor disputes are becoming an almost every-day occurrence for airlines,” said Jacob Pedersen, an analyst at Sydbank A/S in Aabenraa, Denmark, adding that SAS’s deal is key to its future. “The alternative would have been devastating because it would have put a stop to the capital increase.”
SAS, which plans to sell shares from April 15 to April 29, was trading up 6.3 percent at 2.85 kronor as of 10:39 a.m. in Stockholm, reducing the decline this year to 29 percent.
The carrier had a 2.95 billion-kronor loss in 2009 as sales fell 15 percent to 44.9 billion kronor, it said Feb. 9 when announcing the rights offer, sending the stock down 28 percent.
Crucial Accord
“These new agreements with the unions are crucial for the ongoing rights issue and the negotiations were very intensive,” SAS Chief Executive Officer Mats Jansson said in a statement. Jansson will seek shareholder approval for the share sale at the company’s annual meeting on April 7.
At British Airways, CEO Willie Walsh is seeking to slash personnel costs after the company racked up a record 245 million-pound ($371 million) loss in the nine months to Dec. 31.
Relations with Unite soured in November, when BA cut crew numbers on long-haul flights without union agreement after 1,000 flight attendants agreed to leave and 3,000 more went part-time.
Unite Assistant General Secretary Len McCluskey will address today’s press conference, spokeswoman Pauline Doyle said in an e-mail, without specifying what the topic will be.
The union has until March 15 to announce a walkout after winning backing from workers in a month-long poll that ended Feb. 22. McCluskey said March 8 that a strike was an even bet.
“It’s a battle for hearts and minds,” said Andrew Lobbenberg, an analyst at Royal Bank of Scotland Group Plc in London with a “buy” rating on British Airways. “BA is trying to force through serious change.”
--Editors: Chris Jasper, Kenneth Wong.
To contact the reporters on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net; Steven Rothwell in London at srothwell@bloomberg.net
To contact the editor responsible on this story: Kenneth Wong at kwong11@bloomberg.net.
