Airlines are in the process of making hard decisions when it comes to their size after the peak of the coronavirus passes, but when entry and travel bans could be in place for a considerable amount of time.
Scandinavian Airline System, usually referred to just SAS or Scandinavian Airlines, today announced rightsizing its employee numbers to the new normal by giving notices to 5,000 staff members, of which 1,900 in Sweden, 1,300 in Norway, and 1,700 in Denmark.
You can access SAS here.
Here’s the announcement from SAS:
As a result of COVID-19, demand is expected to be significantly affected during the remainder of 2020 and it will take some years before demand returns to the levels experienced before the outbreak. Consequently, SAS needs to adapt the business to a lower demand environment. As a consequence, SAS will initiate processes to reduce the size of its future workforce by up to 5,000 full-time positions.
The COVID-19 outbreak has removed most of the demand for air travel and thereby the commercial basis for airlines. Currently, SAS is only operating a very limited domestic network in Norway and Sweden. Given the current restrictions, SAS expects limited activity in the important summer season. In addition, it will most likely take some years before demand returns to the levels seen before COVID-19.The workforce in SAS has notice periods with a mean of six months. The uncertainty regarding demand and the time it takes to adapt the organization means that SAS must act proactively. This gives SAS the flexibility to ramp-up the business quickly if demand returns, but also to take further actions if recovery takes longer than currently envisaged.
The potential reduction of the workforce by up to 5,000 full-time positions will be split with approximately 1,900 full-time positions in Sweden, 1,300 in Norway and 1,700 in Denmark. The processes will be implemented in accordance with the labor law practices in each respective country. During this process, SAS will actively engage with its unions and other stakeholders to seek solutions to reduce the number of actual layoffs across the Group, as well as other productivity enhancements.
“COVID-19 has forced SAS to face a new and unprecedented reality that will reverberate not only in the coming months, but also during the coming years. Our ambition is to continue to be the leading airline in Scandinavia and to have a leading role in the Scandinavian infrastructure as a guarantor of national and international connectivity. In order to continue this important societal function, we need to adapt our cost base to the prevailing circumstances. Regretfully, we are forced to adapt our workforce to lower passenger demand. Not least in view of the company’s successful journey in recent years, which has been made possible by the great work done by SAS’s competent and dedicated employees. We will now work intensively together with trade union representatives and others to identify solutions so that as few people as possible are affected. Furthermore, we remain ready to quickly ramp-up operations and reduce the number of affected positions if demand recovers more quickly,” says Rickard Gustafson, CEO SAS.
There will be plenty of pink slips and notices given in the hospitality and aviation sectors in the coming months once the reality of fast V-shaped recovery not taking place has sunk in.
It is quite telling, however, that SAS believes that it will operate roughly half of its mainline schedule in the foreseeable future once the coronavirus peak is over.
The airline currently only flies domestic services in Sweden and Norway. The SAS express carrier CityJet’s Finnish and Swedish subsidiaries filed for bankruptcy week ago (read more here).
SAS competitor in Scandinavia, Norwegian, is trying to negotiate with its lessors and bondholders to get them to accept debt to equity swap. Alternatively, the airline will collapse by mid-May.
SAS went through some tremendous financial difficulties a few years ago but was bailed out. I do not doubt that the airline will survive with the help of Swedish and Danish governments that own 29% of the airline.