What Makes a Successful Company
SAS or SOS
SAS is a smaller legacy airline; SOS is the International Morse Code distress signal. In the case of SAS airlines, both were appropriate. Scandinavian Airline System or SAS started in 1946 and have an excellent history including becoming the first airline to use the polar route in 1954 on flights from Copenhagen to Los Angeles. For many years, SAS was making money, buying up smaller airlines: It seemed it was destined to become a super airline. Then things began to change. Other bigger airlines looked at the company as a target; SAS survived takeovers by forming alliances.
Unfortunately, costs kept increasing. In 2008, the company finally failed to turn a profit for the year and started a trend we are all too familiar with. By 2010, it was clear SAS was in deep trouble and profusely bleeding cash. In early 2012, the company could no longer conceal its problems and it became clear to all that bankruptcy was imminent unless drastic action was taken.
Recently, SAS announced it turned a profit for the last quarter of 2013. While it is only a small profit, it is a profit nonetheless. What happened? SAS did not file bankruptcy and managed to slowly pay back incurred debt they needed to stay afloat. How did SAS make it through this extreme tough time? Management and the labor unions sat down and worked out a deal, made compromises and saved the company and employees jobs. Most notably, there were agreements to reduce wages and make some cuts to established pension plans that would eventually bury the company. Management and labor made tough choices to survive and survive jointly.
Make It Work
Epsen Petterson of the Norwegian Cabin Union said it was a grueling process and they were not happy with the initial agreement but felt they had no choice. The negotiations must have been tough. Karl Thorwaldsosson, head of the union trade confederation LO, was quoted during negotiations as saying to management, "This is a crime against all the Swedish model stands for and SAS should be ashamed." But somehow they both resisted attempts to sway public opinion and kept negotiating.
In my opinion, it was the details and attitude of both sides that made the plan work. In reading multiple stories about the grueling process, it appeared SAS management never used bankruptcy as an open threat against the workers. Both sides knew bankruptcy was coming if negotiations failed. Ironically, SAS management was busy behind the scenes instructing SAS crews to ensure planes were always fully fueled during this critical time to make certain all employees got home to their families. Management also provided access to cash for staff in case emergency hotel rooms were needed for employees. Not just management but all employees. Did these actions lead the workers to be more receptive to necessary cuts?
No one openly commented either way but I find employees are often more aware of their surroundings than some in upper management give them credit for. Rumors fly and fly fast, whether good or bad. I believe the actions by SAS management demonstrated they cared and may have helped secure the much needed necessary movement toward a required change. SAS management would certainly need all the good will they could muster. The plan they presented to save the airline required a 15-percent pay cut and an increased work load. Most workers would usually quit and start walking to other airlines but the SAS employees did not. The staff hung in there. Today, Rikard Gustafson, the CEO of SAS, expresses gratitude to the labor unions for working with them to save the airline. Thorwaldsosson is still angry, just less so today.
I wrote a while back about the Hostess negotiations between management and labor negotiations failed as the company went under and employees lost their jobs. While the Twinkie survived, could American management and labor unions have taken a lesson from the Scandinavians on working together?
Often it seems we believe the only way to win is to insure the other side loses. In the case of SAS, both sides initially lost, but the game was not over and it is pretty clear they hope to make this an ultimate win-win scenario. For the sake of what is right and fair to all sides, I hope it does work and SAS returns to be a stable, profitable airline. Business is tough and the competition is tougher. Companies that take care of their workers and workers who care about the companies that feed their families are not as common in today's ultra-competitive world. We need to recognize these success stories and possibly learn from them.