March 5, 2015 / 7:43 AM / 5 years ago

UPDATE 3-Norwegian Air's plan to split fails to end pilots' strike

* Norwegian says to create three pilot employer units

* Striking union rejects plan as attempt to divide and rule (Recasts with restructuring of subsidiary, adds detail, background)

By Stine Jacobsen and Terje Solsvik

OSLO, March 5 (Reuters) - Budget airline Norwegian Air Shuttle escalated a confrontation with striking pilots on Thursday, announcing plans to split its Scandinavian unit into three in a bid to keep costs down and help a drive for international expansion.

Unions denounced the plan as an attempt to divide and rule the 650 striking Scandinavian pilots and vowed to keep up a six-day stoppage at Europe’s third-largest budget carrier.

“The company is bleeding and so far 100,000 passengers have been affected,” Norwegian said in a statement, adding costs had to fall and employment rules had to be more flexible. “The alternative is job losses in Scandinavia.”

The airline said it would create three new subsidiaries for its pilots in Norway, Sweden and Denmark in a bid to end the strike by pilots who have until now been employed by a single company..

But the pilots’ union rejected the plan. “What has now happened changes nothing,” leader of the pilots’ union Parat, Hans-Erik Skjaeggerud, said in a statement.

“We mean that (CEO) Bjoern Kjos cannot do what he has now done. As an employer he has no authority to decide over employees who are on strike,” Skjaeggerud said.

The main point of contention has been that the 650 pilots want a collective agreement with the parent group instead of the current deal with its Norwegian Air Norway subsidiary. The company has rejected their demands.

Kjos told reporters pilots’ wages and other terms would be unaffected by the split. Asked if he thought the pilots would accept the offer, Kjos said: “I don’t know, it might be different from country to country.”

Norwegian Air, whose low-cost rivals include Ryanair and easyJet, has set up operations in Spain, Britain and Poland, among other countries, and a long-haul unit to fly to Thailand and the United States. But members of unions in Scandinavia often earn more and have more rights than those abroad.

“Bjoern Kjos is a clever man. He has seen that the airlines which are doing well in Europe are also the ones that keep the employees from gaining influence,” Sydbank analyst Jacob Pedersen said.

The strike has led to a sales decline in March, especially on domestic routes within Scandinavia, the company said.

The company’s shares closed 3.7 percent higher but are still down almost 4 percent since before the strike. (Additional reporting by Joachim Dagenborg and Alister Doyle; Editing by David Holmes and David Clarke)

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