Finnair has threatened to outsource some operations to lower cost countries after cabin crew launched a strike that left thousands of passengers stranded and ended the company’s hopes of returning to profit this year.

The Finnish airline, known for its strong long-haul network between Europe and Asia, grounded more than 100 flights on Tuesday, with a further 200 cancellations expected on Wednesday, after cabin crew walked out in a dispute over pay and conditions.

Mika Vehvilainen, chief executive, warned union leaders that Finnair’s current cost structure was unsustainable.

“It is tragic that parties are striving to hold on to old terms and conditions in an industry that is changing dramatically and irrevocably,” he said.

The airline had launched a strategic review to determine if some operations could be carried out “in locations with a lower cost level,” he added.

Analysts said the comments were intended to increase pressure on unions to compromise as Finnair tries to strike a favourable deal with cabin crew that would set a precedent for crucial negotiations with pilots planned for next year.

Finnair is one of several European airlines facing labour problems as the industry struggles to reduce its bloated cost base. Cabin crew leaders at British Airways this week announced plans for a fresh strike ballot after a series of costly stoppages this year.

Finnair said it would lose up to €2.5m ($3.2m) a day during its strike and warned investors to expect a full-year operating loss, having previously forecast a small profit.

Analysts said this indicated the airline was expecting protracted disruption.

The Finnish cabin crew union said one of the main sticking points was time off after long-haul flights and accused Finnair of making “unreasonable” demands.

The airline, 56 per cent owned by the Finnish government, has invested heavily in its long-haul network to promote its Helsinki hub as a gateway to Asia. By next summer, Finnair plans to fly 74 flights a week to 10 Asian cities.

There have been signs that the strategy could be working, with revenues up 26 per cent from last year in the third quarter to produce the company’s first quarterly profit for almost two years.

Pasi Vaisanen, analyst at Nordea, said the challenge was to maintain a competitive European network to feed its long-haul routes.

Source: http://www.ft.com/cms/s/0/26e65f4c-fcaf-11df-bfdd-00144feab49a.html#axzz16qyWZ7yU