Finnair has signed an agreement with Norwegian crew management company OSM Aviation to outsource cabin services on approximately 20 long- and short-haul routes over the next two years after union talks failed to hit its €18 million ($24 million) cost-cutting target.
The move is part of Finnair’s €200 million ($263 million) cost-savings program, which was launched in 2011. The Finland flag carrier had hoped to hit its €18 million cost-saving target through negotiations with cabin crew union SLSY in May, but negotiations failed.
In the first phase, OSM Aviation will provide cabin service for Finnair’s routes to Hong Kong and Singapore from the first-quarter 2015.
Finnair is aiming to slash €60 million from its labor costs under the second phase of its cost-savings plan, but so far it has only reached a firm agreement on €6 million.
“Our savings actions have been slowed down because two of the most difficult labor agreements—with our pilots and cabin crew—have not [reached agreements],” CEO Pekka Vauramo said during a briefing on its second-quarter results, in which the carrier posted a net loss of €23.9 million, reversed from a €18.1 million net profit in the year-ago quarter. “We will cut 540 [cabin crew] full-time equivalents by transferring them through outsourcing,” Vauramo said.
Finnair has been trying to negotiate cost savings with its cabin personnel since 2011.
“We have done our utmost to find cost savings together with our personnel, but the long path of negotiations ended with no result [in spring 2014],” COO Ville Iho said. “The costs of the terms and conditions of our cabin crew far exceed the level of the general collective labor agreement of the Finnish Cabin Crew Union. As a loss-making company, we cannot continue to pay a Finnair premium. We must get our costs to a competitive level. Unfortunately, we were not able to do this through negotiations with the union, and that is why we must now—on certain routes—change our role from providing a service to buying a service.”