Airline SAS's survival talks with unions extended into Monday

Sun Nov 18, 2012 7:13pm EST

* SAS aims to slash costs, secure bank loans

* Tough competition from discount, regional airlines

By Johan Ahlander and Anna Ringstrom

COPENHAGEN/STOCKHOLM, Nov 19 (Reuters) - Troubled Scandinavian airline SAS and its labor unions on Monday pushed on with talks aimed at ensuring the group's survival and avoiding bankruptcy after a midnight deadline for a deal passed.

The Scandinavian airline, hit by competition from lower-price rivals, last week announced plans to cut some salaries by up to 17 percent, reduce overall headcount to about 9,000 from 15,000 and reduce costs.

The airline, half-owned by the governments of Sweden, Denmark and Norway, had said a deal with unions on wage cuts, changes to work hours and pensions must be reached by Sunday.

But talks, which began on Thursday, carried on at the main airport in Danish capital Copenhagen after the midnight deadline passed.

"What we can say is that we are still in intense negotiations," said SAS spokeswoman Elisabeth Manzi, who is based in the Swedish capital, Stockholm.

"We can't say right now how long we will be in these negotiations ... Our hope is, of course, that we will reach these agreements and that we fly as usual," she added.

At Copenhagen's airport, negotiators could be seen shuttling in and out of company headquarters for food and drink while the lights blazed in several rooms on the three floors of the building.

Analysts have questioned whether the measures will anyway secure the independence of the airline in the long term as its structure was designed more to secure jobs and Nordic solidarity than generate profits.

It has long found it difficult to compete with discount carriers like Ryanair and regional rival Norwegian Air Shuttle.

SAS management has said that if the cost cuts are carried out, the airline has a sound base for the future.

A Swedish newspaper reported that SAS directors had met banks in Stockholm late on Sunday, but SAS would not confirm that report.

Increasing fears aired widely in Scandinavian media that the lack of a deal might lead to an immediate bankruptcy application, the spokeswoman said the airline had told crews to ensure airplanes were fully fueled so as to be able to return home if necessary.

The airline was also giving cash to flying staff to ensure they could get access to hotels if there was a bankruptcy.

"Due to the fact that this is a very serious situation for SAS right now it is our responsibility as a company and employer to secure our assets, regarding staff as well as planes," Manzi said.

However, she declined to say how long SAS's cash would last if the loans with the banks were not agreed to.

The labor unions said they met all of the airline's demands.

"We have compromised with SAS on all parameters - wages, pensions and productivity," Lars Bjorking, chairman of the Danish Pilots Union, said in a statement on behalf of the Danish, Swedish and Norwegian pilots' unions.

The governments and six banks have said they will lend SAS about 3.5 billion Swedish crowns ($515 million) if the airline can secure a deal with the unions to slash costs.

SAS expects cost cuts to improve earnings by 3 billion crowns while asset sales would strengthen the company's balance sheet another by 3 billion crowns.

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