SAS chief joins salary cuts as company battles for survival

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SAS Group chief executive Rickard Gustafson will take a 20% income cut as part of the wide-ranging changes intended to turn the ailing Scandinavian company around.

The company says its "existence" is dependent on collective agreements being reached "in the near future" for the new '4XNG' restructuring programme, writes Christian von Essen from Stockholm.

Some 800 positions will disappear as SAS centralises administration. "Sales and other key functions will still be local, but this way we can cut lots of double and triple work," says Gustafson.

"Higher management will cut their salaries by 15-17%, and I will personally reduce my own income by 20%."

He cannot give exact numbers on localised job cuts but estimates some 200-300 positions will be lost in Norway.

Outsourcing of ground-handling and call centres, to reduce fixed costs, will affect 5,000 people, who will have to be re-employed by third parties.

"This measure will shift SKr5 billion from fixed to variable costs," says Gustafson. "We have been handling ground services for other airlines as well, which has made us more vulnerable."

Terms will be tougher for SAS Group personnel. Air crew will see their salaries reduced by 12%, Gustafson adds: "They will all be employed by SAS, and there will be no contract pilots at SAS."

Pensions will be shifted from a defined-benefits plan to defined-contributions plan.

SAS Group will also sell Norwegian airline Wideroe - one of its better-performing divisions, which has just posted its second-best nine-month earnings figure - as well as real estate in Oslo and Copenhagen.

Gustafson says the company has complete backing from banks and shareholders, and will be able to secure credit if the plan is carried out. But it requires full agreement from unions over the next week. If this fails, the future is highly uncertain for SAS.

"Our credit providers have said that they will support the plan," says Gustafson. "We've had a good dialogue with the unions. Now we are facing an intense internal dialogue as well."

While there are no guarantees, he says, the company intends this round of lay-offs to be the last. He stresses that everyone needs to work hard to make the plan work.

"I know we ask for a lot, but there is no other way. This is our final call. We have been given one last chance to start again."

SAS's revenues at the nine-month point reached SKr32 billion and the company more than halved pre-tax losses to SKr193 million. SAS was profitable at pre-tax level for the quarter to 30 September, posting a surplus of SKr568 million.