SAS launches sweeping turnround plan
By Kevin Done, Aerospace Correspondent
Published: February 3 2009 09:06 | Last updated: February 3 2009 12:53
SAS Scandinavian Airlines said on Tuesday it was planning a SKr6bn (€558m, $718m) rights issue as it launched a drastic restructuring aimed at shrinking its activities and pulling the group out of heavy losses.
Under the “Core SAS” programme, the group said it would be cutting 3,000 jobs in addition to the approximately 5,600 jobs that would be removed through disposals or outsourcing deals. The group’s workforce will be reduced by up to 40 per cent from around 23,000 to 14,000
SAS is fighting to survive as an independent airline group within the rapidly consolidating European aviation industry. It said it had made a SKr6.3bn net loss last year including SKr4.9bn arising from last week’s disposal of its beleaguered Spanish subsidiary Spanair. It had made a net profit of SKr636m a year earlier.
The restructuring will lead to a 25 per cent reduction in turnover and a 30 per cent reduction in the fleet.
The airline’s share price fell by 19 per cent to SKr35.00 in afternoon trading.
SAS is planning to dispose of many of its subsidiary airlines and holdings outside the Nordic region including Spanair, AirBaltic, Spirit, Air Greenland, its 20 per cent stake in BMI British Midland, Estonian Airways, Skyways, Cubic and Trust.
Some of the sales have already been agreed, including the deal to dispose of Spanair, the heavily loss-making Spanish carrier to a group of Catalan investors for a nominal €1, and the completion of the sale of its 47.2 per cent stake in AirBaltic to the Latvian carrier’s management.
Around 3,000 of the 5,600 jobs that will be cut through disposals will be accounted for by the sale of Spanair, in which SAS will retain a 19.9 per cent stake and remain the industrial partner.
SAS said it would also close or outsource parts of its cargo, engineering and ground handling operations.
The group is abandoning its disastrous expansion strategy of the last two decades, which took it into loss-making ventures in Spain, the UK and the Baltic states, as it seeks to concentrate on its home region and in particular on its business passengers, once among its key strengths.
SAS said it was planning to reduce its network by eliminating unprofitable routes and further reducing capacity. It said it would cut around 10 per cent of its short-haul fleet within Scandinavian Airlines and 18 per cent of its long-haul fleet.
The latest cost-cutting programme was aimed at achieving savings of SKr2.7bn in the three years to 2011, while recently agreed labour reforms were expected to lead to further annual savings of SKr1.3bn.
The four shareholders controlling 57.6 per cent of the company – the Swedish, Danish and Norwegian governments, as well as the Wallenberg family – have indicated that they would support the rights issue subject to certain conditions.
Three banks – JP Morgan, Nordea and SEB – had agreed conditionally to underwrite the rest of the share issue. JP Morgan and SEB Enskilda would be the financial advisers.
As part of the organisational upheaval, SAS is abandoning its attempt to decentralise its management structure. The experiment with three independent subsidiary airlines in Sweden, Norway and Denmark and a separate long-haul business unit, is to be given up in favour of a return to a centralised management system.
Mats Jansson, SAS chief executive, said: “2008 will probably go down in history as one of the most challenging and turbulent years that the entire aviation industry has ever experienced.”
Copyright The Financial Times Limited 2009
