SAS pilots’ strike triggers warning of profit erosion

Bloomberg

A strike by airline pilots across Scandinavia is set to erode profits at SAS AB as investors and passengers await news of a breakthrough in labour talks.
Since starting, the strike already looks set to cause almost 3,000 cancellations, affecting about 280,000 passengers. SAS, in a written comment to Bloomberg, said the development is having a “very negative effect on our customers and the business.” SAS and the pilot unions are trying to reach an agreement on pay levels and working hours.
While the Stockholm-based airline company says it’s still too early to provide an estimate of the cost, analysts have started to do the math. Per Hansen, an investment economist at Nordnet in Copenhagen, says the five days of strikes through Tuesday alone will cost SAS about $53 million, with no guarantee that the pilots will return to work any time soon.
“On top of costs towards compensation, the loss of income from tickets and wage costs for all personnel groups aside from the pilots, SAS is also missing out massively on new ticket sales over the coming one to two weeks,” Hansen said. “No one wants to order a ticket that might end up not being worth anything and where there’s a risk of having to pay more to re-book.”
Meanwhile, other airlines are making the most of SAS’s predicament. Norwegian Air Shuttle ASA has deployed extra aircraft to lure passengers stranded by the SAS pilot strike. Given losses caused by the strike so far, Hansen said analysts tracking SAS are probably going to have to cut their average expectations for earnings per share by about 30 percent.