Finnair: Finnair’s Savings Negotiations with SLSY Proved Unsuccessful – Discussion on Savings Continues in the Ongoing Employee Consultation Negotiations

Regulatory News:

Finnair’s (HEX:FIA) saving negotiation with the Finnish Flight Attendants' Association (SLSY), which were agreed upon as a part of the national Finnish Employment and Growth Pact on 15 November 2013, has proven unsuccessful. Savings negotiations with the Finnish Aviation Union (IAU) and the Trade Union PRO concerning the technical personnel still continue. Finnair targets more than EUR 30 million savings in the personnel costs of these three personnel groups as a part of its wider EUR 200 million cost savings program. The deadline for savings negotiations is today 28 April 2014.

Finnair was prepared to offer SLSY, IAU and PRO’s members protection for layoffs for the next two years if permanent savings had been achieved in full. SLSY members were also offered protection against further outsourcing for the next two years. Following the unsuccessful negotiation with SLSY, Finnair is now pursuing the targeted savings in the cabin crew costs in the employee consultation negotiations commenced on 2 April 2014 and is looking for alternative operating models to lower its costs.

"I am deeply disappointed that we failed to reach savings agreement with SLSY. Unfortunately our and SLSY’s views on the magnitude of the savings and how they should be implemented were too far from each other: Finnair is looking for savings of EUR 18 million, and SLSY’s proposal totalled EUR 7.5 million, out of which only EUR 2.7 million would have materialised during the current CLA period. The situation is very difficult for Finnair and its employees. Unfortunately, now we have to discuss alternative measures to achieve savings and create a competitive cost structure. I nevertheless hope that we can find a better solution in the ongoing employee consultation process," says Finnair's CEO Pekka Vauramo.

"Achieving the targeted savings is of paramount importance in safeguarding the future of Finnair and restoring its profitability. Our preferred option was to find savings together with our staff in negotiations. I am extremely disappointed that SLSY wasn’t ready to agree on permanent savings that would have safeguarded Finnish jobs. Our proposal to SLSY would have guaranteed protection against layoffs for the coming two years and a pay level corresponding to SLSY’s generally binding Finnish collective labour agreement. Our proposal also included several items that would have generated savings without impact on pay levels," Vauramo says.

”We have progressed today in the saving negotiations of technical personnel. Their employee representatives have shown strong commitment to the negotiations and I hope, that we find a positive negotiations outcome in these negotiations,” continues Vauramo.

Savings negotiations concerning PRO civil aviation clerks ended today without agreement on saving.

Employee consultation negotiations continue

Finnair continues employee consultation negotiations that commenced on 2 April 2014 and concern the employees working in administrative and support functions as well as cabin crew. The negotiations impact eight different employee groups.

The administrative and support employee consultation negotiations focus on productivity improvements. The estimated reduction need in administrative and support functions is approximately 140 employees.

Cabin crew’s employee consultation negotiations discuss the wider use of outsourcing in the cabin service of its long-haul and short-haul traffic. In the initial stage, Finnair plans to outsource the cabin personnel of three long-haul routes at maximum during this year. In the next stage, Finnair would outsource the cabin service of more than 10 routes. Due to the planned outsourcing the reduction of approximately 540 cabin attendants would be required in the coming years.

Finnair is also examining the possibility of setting up a subsidiary that would produce cabin services and sell them to Finnair.

Finnair will communicate the outcomes of the employee communication negotiations, both concerning the staff reduction and plans to outsource cabin personnel for certain routes, once the negotiations are concluded, at the earliest after mid-May 2014.

Saving negotiations with Finnair pilots, white-collar employees and engineers

The deadline for savings negotiations with the Finnish Airline Pilots' Association (SLL) is 13 June 2014. The targeted annual savings in SLL's negotiations total EUR 17 million, and the savings are sought primarily from renewal of working time and compensation structures.

Finnair's white-collar employees and engineers’ (FYT and FIRY) collective agreements are valid until 30 June 2014, and negotiations for new collective agreements are currently in progress. The key objective is to increase the weekly working hours of office and operational staff closer to the general Finnish level.

Finnair continues to pursue savings in all cost categories. Its target is to permanently reduce annual costs by 200 million euros by the end of 2014. The point of reference for the cost reduction target is the company’s unit cost level in 2010. By the end of 2013 Finnair had reached annual savings of EUR 155 million.

Finnair Plc Communications

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