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SAS unveils massive cost-cutting bid

SAS unveils massive cost-cutting bid

Published: 12 Nov 2012 08:27 GMT+01:00
Updated: 12 Nov 2012 08:27 GMT+01:00

Scandinavian airline SAS announced plans on Monday to slash 3 billion kronor ($445 million) in costs, with at least 800 jobs to be cut in what the company's CEO has labelled "the final call" for the troubled airline.

The airline announced on Monday that ground service and a Norwegian subsidiary will be sold, following a crisis meeting over the weekend.

Furthermore, 800 jobs at the airline will be slashed, according to the TT news agency, and negotiations have already begun for salary reductions.

"The Board has given its unanimous support to this plan and recommends that all of the company’s employees support it as well," SAS wrote in a statement.

The plan will result in annual savings of around 3 billion kronor and will also see some of SAS’s assets being sold for around 3 billion kronor. The company explained that this will make SAS less dependent on external lenders in the future.

"This truly is our 'final call' if there is to be a SAS in the future. We have been given this final chance to make a fresh start and to carry on these fundamental changes," Rickard Gustafson, President and CEO of SAS, said in a statement.

"I know that we are asking a lot of our employees, but there is no other way. I hope that our loyal and dedicated employees are willing to fight for the survival of SAS and for our jobs.

"If we do this, we will be able to invest in new aircraft in the long term and to further develop our operations. This will ensure that SAS will continue to play an important role for millions of people in Scandinavia in the future,” he said.

The SAS CEO told the TT news agency that most salaries will be cut by around 15 percent, while he plans to take a 20 percent pay cut.

The divestments and job cuts shave 6,000 positions from SAS payrolls. According to Gustafson, the airline will have around 9,000 employees following implementation of the savings package.

The savings plan announcement coincided with the delayed release of SAS's third quarter results, which showed the airline increased profits by nearly 300 million kronor to 568 million kronor.

Income increased by a half a billion kronor to 11.1 billion kronor.

Meanwhile, the Swedish government, which owns just over 20 percent of the airline, making it SAS's largest single shareholder, signaled on Monday is has no plans to provide additional capital to the struggling carrier.

"As a responsible owner, the government is willing to create the conditions for a limited time that will allow SAS to carry out the comprehensive changes called for by the business plan," Financial Markets Minister Peter Norman said in a statement.

Norman added however, that responsibility for implementing the changes "rests with SAS" and that agreeing to extend a loan does not entail any fresh injections of cash from the Swedish state.

In addition, the government is looking to sell its stake in the crisis-ridden airline.

"The government's ambition is to continue to look for another owner for SAS," the government said.

"The new business plan makes SAS more attractive for a potential buyer, and thus increases the possibilities for the state to reduce its ownership stake in the company."

The airline's problems have persisted in recent years and the firm has struggled to keep up with competitors. High salaries, pensions liabilities and an ageing fleet have all contributed to the company's perilous state.

The last time the firm's problems came to a head, in 2010, cabin staff backed down and accepted lower pay and conditions. A savings package carried out between 2009 and 2011 meant 4,600 jobs disappeared from the airline.

SAS shares climbed 8 percent in opening trading on the Stockholm stock exchange on Monday, climbing to a price of around seven kronor per share.

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Your comments about this article

10:29 November 12, 2012 by B Slick
Yes, massive cost cutting but that does NOT mean cutting the pay to the gang who sit in the SAS head office. I have flown on SAS but never booked directly with them because there pricing is not just a little more than the other airlines, there prices are SKY HIGH! So lets just let SAS go broke and stop pumping fresh blood into a dead body!
11:30 November 12, 2012 by Beavis
typical moronic response from the SAS management team- those are the guys and gals who need to be FIRED for mis-managing the airline, not letting go of the 800 useful staff. The solution to SAS's cashflow problem is so SIMPLE a 10 year old could point it out. Your short haul european lights are WAY WAY too expensive (with London route as an exception) Offer competitive (not 1980s!) pricing structre. During May to September SAS flights for example between Dublin-Stockholm for example is on average 2500kr one way, and in July it goes up to 5000kr one way! You can fly London to Sydney for that! Fix your pricing and return to profit, otherwise cease to exist!
13:57 November 12, 2012 by Migga
SAS is trying to compete on an international market with scandinavian prices, won`t work.
15:50 November 13, 2012 by mickeyonemore
Having worked at SAS technical site in Stockholm for years now on the shop floor,the amount of staff upstairs going into offices is criminal.Totally top heavy all with their pc's etc etc.The is a total shortage of Maintenance staff for the amount of aircraft operated,it's quite staggering to watch how many personal are going into work in the offices.Managers have managers to manage other managers.The whole system needs revamping seriously,as in my opinion sooner or later the will be accidents on the mechanical side due to lack of maintenance staff having to cut corners.The standard of Maintenance is high,but this problem of top heavy office staff just doesn't start and finish with Stockholm,it's down at Copenhagen and Oslo.
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