SAS: New SEK 2 Billion Cost Program to Generate Sustainable Competitiveness

“The measures we are implementing under Core SAS are ahead of schedule and are generating a significant earnings effect. Despite this progress, additional measures are required to manage the unique, fierce competition in today’s highly challenging market. Accordingly, it is essential that we now completely close SAS’s cost gap with our competitors. This is a matter of competing on equal conditions and, ultimately, about the survival of SAS,” says Mats Jansson, President and CEO.

In June, the SAS Group commenced negotiations with all of the Group’s 39 trade unions to further reduce the cost gap compared with SAS’s most effective competitors, which after the implementation of Core SAS now amounts to about SEK 2 billion. Despite having been successful in some areas, an agreement on the reduction of payroll expenses was not reached with all of the Group’s trade unions.

Since a significant portion of the cost gap of SEK 2 billion primarily comprises salaries, pensions and allowances for cabin personnel, management will immediately initiate collective-agreement negotiations and demand a 10-20-percent payroll and pension reduction among flight deck and cabin personnel. Based on the autumn’s negotiations, management will introduce a principle of optimizing production to make greater use of the most cost-efficient production resources regardless of production location or nationality. In addition, the SAS Group will further enhance the efficiency of the Group’s administration by reducing personnel in its production companies, central Group and corporate functions, and in SAS Ground Services and SAS Tech.

(c) Centre for Asia Pacific Aviation. Date posted: 13-Aug-09