Airline workers accept further wage cuts

Cabin crew and pilots at Scandinavian airline SAS have accepted a big wage cut after difficult negotiations. A new collective agreement between unions and management has also had a negative impact on employee benefits and conditions. SAS had made it clear that the crisis-hit airline would not survive if unions did not accept the management’s terms. Employees have not received a wage increase for 10 years, and in fact have accepted several cuts and increased working hours.

Background

Scandinavian airline company SAS, partially owned by the governments of Sweden, Denmark and Norway, has not made a full-year profit since 2007. Several times during the past decade the employee organisations have made concessions in their wage and working conditions.

At the end of 2012 the SAS management unveiled a ‘do-or-die’ plan, which the unions had to approve by 19 November 2012 for the airline to receive bailout money from the governments of Norway, Sweden and Denmark as well as the company’s other investors.

Main features of the plan

The new plan to be implemented is called 4Excellence Next Generation (4ENG) (153Kb PDF). The key elements of the plan to streamline the company include:

  • administration to be centralised and moved to Sweden, with Norway and Denmark retaining their essential local functions;
  • a total of 800 admin employees to be made redundant in Norway, Denmark and Sweden;
  • changes to the pension schemes, with every employee having a defined contribution plan in the future;
  • SAS becoming less dependent on bank loans by selling some of its assets, including its subsidiary Widerøe, and negotiating with external parties to take over its ground handling operations in Scandinavia.

SAS’s banks and main owners gave their support to the plan. However, they said they would only offer lines of credit if new collective agreements were signed. The idea behind the new agreement proposal was that:

…from now on all cabin crew and cockpit crew will receive the same conditions, fully reflecting the conditions offered in the market in terms of pay, pensions and working hours.

This meant considerable changes for workers, with new and fewer pay grades being introduced. These new agreements meant basic pay could be cut by up to 15%.

Pension schemes at SAS were also reformed, and aligned to the typical Scandinavian labour market. The agreement stipulated that anyone in a defined benefit plan (the company pension scheme) would be transferred to a defined contribution plan. This type of plan is a normal labour market pension, where the employee contributes around a third of the amount set aside for a pension.

Under the new arrangement, the rules governing working hours for cabin and cockpit staff will be standardised. Full-time employees are to work a maximum of 195 days a year. The maximum number of scheduled working hours will not exceed 47.5 hours a week. Although employees can work overtime, their working hours can never exceed the limit of 60 hours set by the authorities. Any overtime is paid.

The base for flight crew will now be the base that they fly out from. This means that they will no longer be able to include flight time from their home base to the base they will fly out from as part of their working hours. If employees do not want to change their base, they can remain at their home base and fly the routes that operate from there.

The company will be able to make more use of available staff. The company’s flexibility, for example, to change an employee’s destination or check-in time has been increased and it can therefore adapt its traffic to the conditions at any given time.

A joint set of rules will apply for allowances, which will be adapted to the rules set by the Swedish Government. A number of other conditions will also be adjusted, including rules for meal breaks, accommodation and stand-by times.

In order to underline the seriousness of the situation and the initiative, SAS decided to give information about the proposals directly to its employees. They told workers about the background to the agreements, and their content. This information was given to employees before the agreements were to be signed with the unions, which put a certain amount of pressure on the employees.

The proposals could only be approved on behalf of the Danish Airline Pilots’ Union by a members’ vote. Leaders and negotiators of the Cabin Attendants Union (CAU) were free to accept or refuse the agreement on behalf of their members.

Negotiations take place at threat of closure

The unions in Norway and Sweden accepted the new conditions relatively easily. In Denmark collective bargaining between SAS and the unions is traditionally a little more difficult. Sweden and Norway do not have the same interest in maintaining SAS as Denmark. This is because of the significance of Copenhagen Airport, which is the most important airport in Scandinavia. If SAS, as the biggest customer, went bust, many other jobs and subcontractors in the airport would be affected. Besides this, Danish unions are very well represented in SAS as well as at Copenhagen Airport. The threat of closure was therefore not the best starting point for new negotiations.

The deadline for agreement was set for 18 November 2012. On that day the board of SAS met again in order to take a decision on the background of the signed agreements.

Only four months earlier the unions had signed a new agreement making significant concessions. The feeling was that the 4ENG plan was just another cost-cutting plan among several over the last decade. A further problem was that SAS had not given due notice to terminate an existing collective agreement.

The unions had a week to consider their position. The drama of the situation was underlined daily by stories in the press. This put significant pressure on the unions and their members.

Interference from Minister of Finance

All eight unions were gathered together with four negotiators from SAS in the SAS administration building in Copenhagen Airport. One by one the unions accepted the conditions and the last to comply with the demands was the CAU, representing Danish cabin crew members.

Negotiations continued on 19 November 2012, one day after deadline. During the meeting the President of the CAU, Helge Thuesen, received an email from the Minister of Finance, Bjarne Corydon, saying that it was of ‘absolute importance for the survival of SAS that the Danish personnel now follow all others in SAS’.

That day the parties reached an agreement.

Cabin crews accepted a cut in wages of 8.3%, agreed to work up to 47.5 hours a week instead of the current 44 hours, with a maximum 13-hour duty period. The rest of the demands – on such issues as pension rights – were accepted by all.

There was a great deal of protest from unions and confederations about the interference of the Danish finance minister. Although there are no specific rules dealing with the issue, collective bargaining in Denmark is seen as entirely a matter for the social partners. The unions and the confederations described his intervention as an attack on the Danish labour market model of free negotiation. They said it amounted to untimely pressure being put on the negotiators by a state which also happened to be one of the owners of SAS.

Commentary

Concession bargaining, as it has taken place at SAS, is uncommon in the Danish labour market, even if the recent large bargaining rounds have not brought any real wage rises. In reality the SAS unions did not have much choice. SAS would have had to close if they had refused to sign the new agreement. Airline analysts said that SAS probably could only have continued operations for another month then bankruptcy would have been inevitable.

However, it is not the first time that cabin and cockpit crew at SAS have had to take a pay cut and give in on working conditions. The past 10 years has seen SAS launch several cost-cutting plans. In this period the employees have not had one single wage increase and, in fact, their wages have been going down. This latest attempt to rally the understanding of the employees had to be orchestrated in a dramatic fashion to persuade them that this time the ‘wolf was definitely coming’.

There was another weighty reason for some of the unions to accept the ultimatum. Since the profitable days of SAS in the 1970s, pilots and some cabin crew members in Sweden have had ‘golden’ company pension agreements, much like those enjoyed by civil servants. If SAS went bankrupt it is likely that the pensions of those employees would be seriously affected, as would the pensions of SAS employees already in retirement.

Carsten Jørgensen, FAOS, University of Copenhagen

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