Finnair to Outsource Cabin Services

Finnair has confirmed that it will proceed with cabin service outsourcing as a means of helping to achieve its cost reduction target.

The company is planning to outsource cabin services on a total of approximately 20 long-haul and short-haul routes in the next two years.

The aim is to outsource 1–3 routes within this year.

The timetable for the implementation of the plans and the related impacts on personnel will be determined in stages as negotiations with potential partners move ahead.

On 27 March, Finnair announced it was starting employee consultations concerning cabin personnel. The consultations, which were concluded on 26 May, were focused on Finnair’s plans to increase the use of outsourcing in cabin services in long-haul and short-haul traffic. The measures are part of Finnair’s cost reduction program commenced in 2011. Finnair sought EUR 18 million in permanent annual cost reductions primarily through negotiations with cabin personnel, but the negotiations did not lead to the desired result.

The need for reductions in own personnel over the next two years in relation to the outsourcing plans is approximately 540 man-years, as discussed in the employee consultations. The personnel reduction options include redundancies, shifts to part-time work, temporary lay-offs, or combinations of these. The method of implementation will depend on the progress of route outsourcing and will be determined in more detail as route-specific decisions are made.

“Finnair has once more met with representatives of the Finnish Cabin Crew Union SLSY in an effort to find a common cost reduction solution that would make it possible to avoid outsourcing. SLSY offered 2,9 million euro permanent, instant savings as well as 4,8 million euro savings that would be achieved within a 20 year time period. This is mainly the same as SLSY’s previous offer. In addition, as a new element, SLSY proposed approximately 4 million euro temporary savings for a period of one year. In exchange, SLSY required two year protection againts lay-offs. Unfortunately, this is too far from the savings that Finnair requires. We cannot continue with our current cost structure, which is why we need to make instant, permanent changes to it. We proposed a solution that would see EUR 12 million of the cost reductions implemented immediately and the remaining EUR 6 million over a longer period of time. Even this compromise did not lead to an agreement,” said Ville Iho, Finnair’s Chief Operating Officer.

“Partnership negotiations concerning outsourcing are proceeding well. We expect to conclude our first agreements in the third quarter and outsource our first routes in the fourth quarter. There are potential partners in Finland, elsewhere in Europe, as well as Asia. Each instance of route outsourcing requires careful negotiation and planning to ensure the best possible service quality and compatibility with the rest of our operations. For this reason, we will be proceeding with outsourcing in stages,” Ville Iho added.

Finnair has also announced it is examining the possibility of setting up a Finnish subsidiary that would produce cabin services for Finnair Plc. Finnair will move ahead with setting up a subsidiary.