If you have to go bankrupt first, you can do it in style
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Espen Andersen
Associate Professor, BI
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Frode Steen
Professor, Norwegian School of Management
And SAS does not disappoint.
Chronicle
This is a chronicle. Opinions in the text are at the writer’s expense.
It’s summer, it’s sunny, and it’s flight chaos. Again.
First a warm-up with an aircraft mechanic strike no one really understood. Then the main exercise: The pilots in SAS strike for job security and predictability.
SAS management points to poor finances and relentless competition. Passengers and authorities are asking whether SAS is really in a special position anymore, despite its history and an attractive, declining customer base.
But if you want to go conk first, then you can do it in style. And SAS does not disappoint.
Scandinavian working life and international competition
The core of the conflict is simple to describe, but difficult to analyze.
The pilots want a return to “old” SAS. A company where everyone was employed, with strong (though very fragmented) trade union power. People talk nostalgically about Janne Carlzon, the company’s charismatic leader from 1981 to 1993. But without mentioning that he took SAS from a public monopoly to a global service competition, surfing in a time of jumble where lobster and champagne could be costed.
The management wants a model that is now standard in all other airlines:
Staffing companies that allow the relocation and rental of pilots and more flexible employment and rotation schemes. They point to enormous debt and fierce competition, but communicate this in a way and with demands that one is not used to in a Scandinavian work situation.
It’s a little reminiscent Norwegian in 2015 and SAS itself in 2012.
When Norwegians went from being a Norwegian to an international company, the Norwegian pilots wanted both Norwegian salary levels and previous seniority with them out of Norway. In 2013, SAS’s unions did not understand that once the equity has been used up, they are in fact negotiating with the creditors. The management does not have much to give, because there is nothing left. At that time, the last union did not give up until SAS was 30 minutes from bankruptcy.
Corona, Teams and War
In recent years, the aviation industry has collapsed. Men for SAS Pandemics, technology and war have presented particular challenges. SAS operates on three brands:
- Business travel within Europe
- Holiday travel
- Long business trips (preferably via Copenhagen)
SAS’s main income has always been the short-distance business market. Routine trips between the big cities in the Nordics and Norway, middle managers, consultants and technicians with gold cards and breakfast in the Eurobonus lounge.
This market is perhaps the one that has been hardest hit by the corona pandemic. Once everyone has learned video conferencing, there is simply a much rarer reason for the plane to meet customers or colleagues. A meeting at once takes an entire working day by plane, but only once on video.
The long-distance market is on hiatus due to the war in Ukraine (closed Russian airspace) and the coronavirus in China. And the holiday market? Well, the pilot strike seems to be spinning it, this year at least.
Trade unions with traditions and a little more
The pilots claim they are fighting on behalf of a Scandinavian model with orderly relations and trust between the parties. And they are in principle right in that. But the timing suggests a somewhat more nuanced picture. Couldn’t they have finished this before the holidays?
And the salary level – pilots in SAS are not paid less than Ryanair. I do not fall when pension, sick pay, holiday pay and working conditions are included. Nurses, for example, have long training, complicated working hours and great responsibilities, and they can only dream of the pilot’s working conditions.
To us, it seems that the pilot is more annoyed with the SAS management than with the situation and the proposals themselves. And as with Norwegian: One demands the right to bargain for subsidiaries and thus that the management implements a consolidation of trade union power that the trade unions themselves do not have. Why can’t just the pilots form a union in the subsidiaries and merge these with them in the parent company?
And by the way, why are there two pilot associations like that to begin with?
Management without cost control and musicality
For us economists, it is easy to sympathize with the management here, but they do not make it easy for us.
In an international context, an annual salary is 12 million for a «turnaround specialist» quite normal. But in the Nordics it sounds hollow – what about a shift to something more success-based? Norwegian director Bjørn Kjos had a completely different legitimacy in the discussion with their pilots in 2015.
But more importantly, there is a bit of talk about the cost of flying staff. The pilots’ claims of a (still) inflated administration are not unfounded.
The ability to communicate is also disadvantaged. Demand for a 10-year strike break is unparalleled, and the hostility of the pilots to the customer can be difficult to reverse if a solution is found.
Break, Danish takeover, or bankruptcy?
SAS would be in trouble even without a pilot strike. But something you have to go crazy about, and then you can do it in first class. The parties have had long talks and postponed the strike deadlines several times. This suggests that different are not too big. But here it is also about pride, principles and perhaps politics.
Then we’ll see. Maybe Danes will buy SAS to save Copenhagen / Malmö as a business center. Maybe you come to an agreement. Or maybe SAS goes bankrupt and the pilot gets the blame, something that shifts the spotlight away from the role of management as a whole.
Either way, it’s something déjà vu all over it. With a SAS that does not seem to understand that they are not an airline in a special position – and that their most valuable asset is the customers, represented by the Eurobonus database.
I wonder if those bonus points are worth anything after the summer?